5 types of RRIFs

The type of RRIF you open will depend on the types of investments you plan to hold.

1. Guaranteed interest RRIF

You can investInvest To use money for the purpose of making more money by making an investment. Often involves risk.+ read full definition in GICs and Canada Savings Bonds, which pay fixed rates of interest over the termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition that you choose. You can open this type of RRIFRRIF See Registered Retirement Income Fund.+ read full definition at most financial institutions.

It may be a good choice if you:

  • have a low tolerance for risk,
  • want to protect your principalPrincipal The total amount of money that you invest, or the total amount of money you owe on a debt.+ read full definition,
  • want a safe, steady income, and
  • are willing to accept lower growth.

In general, the longer the term of the GIC, the higher the interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition. It’s worth shopping around to compare interest rates.

2. Mutual fund RRIF

You can choose from a variety of mutual funds — ranging from conservative money market funds to more aggressive funds that invest in equities. You can open this type of RRIF at most financial institutions. It may be a good choice if you are looking for higher returns and are comfortable with more risk.

3. Segregated fund RRIF

Segregated funds are similar to mutual funds. You open this type of RRIF at an insurance company. The key difference is that the insurance company guarantees between 75% and 100% of your original investment if you hold your investment for a certain amount of time — usually 10 years.

It may be a good choice if you:

  • want to grow your savings faster than with GICs, and
  • do not want to take on as much risk as with mutual funds (mutual funds do not guarantee your principal).

You’ll pay higher fees for these funds than for mutual funds. This is to cover the cost of the insurance protection.

Some insurance companies now offer a “portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and mutual funds.+ read full definition RRIF.” This combines a mix of GICs and segregated funds in a single RRIF.

4. Self-directed RRIF

You can hold many different kinds of investments in a self-directed plan. Examples: GICs, mutual funds, ETFs, segregated funds, stocks and bonds. You open this type of RRIF at an investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition firm.

Choose a self-directed RRIFSelf-directed RRIF A retirement plan that you use to create income after you retire. You can choose from a wide range of investments or work with an advisor. There are rules about how much you take out each year, and you don’t pay tax on the money that stays in your plan.+ read full definition if you:

  • want a wider range of investment choices,
  • are a knowledgeable investor,
  • feel comfortable making all the investment decisions yourself, and
  • want to be able to change the investments you hold in your RRIF as your needs change or the markets shift.

5. Fully managed RRIF

If you have a lot of retirement savings or a complex financial situation, consider a fully managed RRIF. A professional money manager will create and manage a custom portfolio to fit your financial goals and situation. This process is known as discretionary investment management.

You’ll have access to a similar range of investment options as with a self-directed RRIF. You can open this type of RRIF at many financial institutions, but there is usually a minimum amount required to qualify.

You can have as many RRIF accounts as you like. But you must withdraw a minimum amount from each of your RRIFs each year to meet the minimum withdrawal requirement.

Take action

Open a self-directed RRIF if you’re a knowledgeable investor and you want more flexible investment optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition.

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