Remember that the government only represents about 30% of our retirement income, the company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. As you reach your retirement year and decide to convert your RRSP in RRIF. In this article, we will discuss major types of RRIF.
There are 4 types of RRIF
1. Saving account
Saving account is most conservative investment. It is guaranteed up to $100,000 by Canadian deposit insurance corporation (CDIC) and pay very little interest.
2. Guaranteed investment certificate (GIC)
a)Under GIC you investments in your RRIF account are lock in a short period of time.
b) Interest is little better than the saving account.
c) Investments are guaranteed up to $100,000 by CDIC.
d)Interest return although better than saving account. It is vulnerable to inflation and changes in interest rates.
3. Mutual fund
Because of lower of interest rate environment, mutual fund become major attraction to RRSP holder. There are more people convert their RRSP to RRIF than 3 other types combined. The advantage of mutual mutual RRIF contains
a) Many options to choose from.
b) Mutual fund are managed by professional manager.
c) RRIF management/administrative expenses are paid from within the RRIF plan. Paying fees from outside the RRIF could lead to de-registration with taxable consequence.
d) More growth potential than saving account and GICs.
e) Diversification with many fund and sectors in your RRIF account.
Remember, your money invested in mutual fund is not guaranteed
4. Self direct RRIF account
a) You create the strategy of investment in your own.
b) Depend on your risk, you may invest all your money in equity, such as technology stock or blue chip stock.etc. Potential growth is high,as well as risk.
c) Fee of self direct RRIF account are deducted from your account.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
Kyle J. Norton