The Rural Voice, 1990-01, Page 18Would you
like to discuss
How to use your RRSPs
to produce retirement income?
PROFESSIONAL INSURANCE
REPRESENTATIVES
WATKINS, DAUGHERTY
& ASSOCIATES
LICENSED INTERMEDIARIES
FOR
sjs
IMPERIAL UFE
Estate Planning, Business
Insurance, Group Benefits,
RRSPs, RRIFs, Annuities,
Disability Insurance,
Retirement Planning,
Equity Funds
The Imperial Life Assurance Company
of Canada
305 King Street West, Suite 609
Kitchener, Ontario N2G 1B9
LUCKNOW:
LISTOWEL:
KITCHENER:
528-3514
291-5040
744-5281
SALES
SERVICE
FARM
EQUIPMENT
• Ayton
GREY
COUNTY
Ayton Bev Schenk 519-799-5584
Hanover Larry Eller 519-364-1599
Chatsworth 519-794-2181
"Where Price and Quality Meet"
16 THE RURAL VOICE
WISE MOVES
Financial Strategies for Farmers
Bob Watkins
"Wise Moves" is a series of articles pro-
vided by Watkins, Daugherty & Associ-
ates. Taking as a case study the farm of
"Martin Wise," financial experts Richard
Daugherty and Bob Watkins outline vari-
ous ways that farmers can enhance their
financial planning and security.
Your questions and comments are wel-
come: telephone Bob in Lucknow 528-
3514, Richard in Listowel 291-5040, or
Kitchener (Imperial Life regional office)
744-5281.0
HOW TO USE RRSPs
I had a call from my father a
week ago to say that he was con-
cerned because money was getting a
little tight. He has been retired for
five years now and living on savings,
the Canada Pension Plan, and Old Age
Security.
He said he has $45,000 sitting in
an RRSP but he does not want to cash
it in because he would have to pay
income tax on it. However, he is
running out of time because he will
have to use it by the end of next year
when he turns 71.
I thought it would be best if he
talked to somebody knowledgeable,
so I arranged a meeting with our in-
surance representative. Our represen-
tative told Dad that he did not have to
cash in his RRSP. Instead, he has the
choice of rolling the money into
another type of tax-sheltered plan that
pays him a retirement income.
He can choose tither a Registered
Retirement Income Fund (RRIF) or a
Registered Annuity. The "rollover"
will be tax free. Of course, he will
have to pay tax on the income.
If Dad rolls his RRSP money into
a RRIF it will continue to cam tax-
sheltered interest. He can choose the
monthly income that he needs pro-
vided that it exceeds a minimum set
by the government. The advantage of
Richard Daugherty
a RRIF is that if Dad needs extra
money he can withdraw it from the
plan. The disadvantage is that the
income stops at age 90. Dad asked
what would happen to the remaining
money if he died before age 90, and
the representative told him that it
would go to Mom.
Mom and Dad are very healthy
people and the representative ex-
pressed concern that they might both
outlive the income provided by a
RRIF. For that reason, he suggested
that Dad roll his RRSP into a Regis-
tered Annuity. With an annuity, the
income can be guaranteed to continue
for as long as either one of them is
alive. Usually, this income is bigger
than that provided by a RRIF. How-
ever, an annuity does not allow for a
lump -sum withdrawal.
Either one of these alternatives
ensures that Mom and Dad will enjoy
guaranteed additional income in re-
tirement and that they will not have to
pay a large amount of tax when Dad
surrenders his RRSP.
By the way, did you know that you
can significantly reduce the amount of
income tax you will pay in retirement
by arranging to split your income with
your husband or wife? One way to
accomplish this is to make contribu-
tions to a spousal RRSP.0