Where can one invest a LIRA in GIC's? | Page 2 | GIC discussions | Discussion forum

Yes, I think the two charitable systems are both the same thing. Maybe the nomenclature has changed. I'm not up on this.

My experience with RIFs is that an FI will take money out of a compounding GIC and out of the principal if needed to meet legal requirement of withdrawal. As the value declines over time (depending on rate of return and your age), it cn sometimes be difficult to figure out where exactly they took the money from, but they will take it. It's probably the same with LIFs.

A LIF is a RRIF with extra conditions, like a ceiling on the annual withdrawals.

The brokerage RRIF accounts are not the same as the depositary RRIF's from banks, credit unions, and trust companies.

Brokerage RRIF are trusts that hold regular GIC's, stocks, bonds, and whatever. A brokerage RRIF cannot extract funds out of a bond or regular GIC the RRIF trust holds, before the bond or GIC matures or pays interest.

The GIC's in a depositary RRIF are not the same as regular GIC's. Those special RRIF GIC's have special terms and conditions that allow early access to accrued interest and principal for the RRIF withdrawals.

The trustee of the brokerage RRIF could be forced to do something nasty in order to withdraw the minimum. Some possibilities were discussed earlier.

Subsequent to that earlier discussion, I learned that CRA requires any source tax withholding to be out of the source. The trustee is not allowed to take required tax withholding from elsewhere.

There will be complications for an in-kind withdrawal if, for example, the minimum is $4,200 and the $20,000 worth of bonds are in $1,000 denominations. Four $1,000 bonds withdrawn in-kind would not be enough. Five bonds would be $5,000 and be $800 more than the minimum. Source tax withholding would be required on $800.

This is from the Declaration of Trust of BMO InvestorLine Self-Directed RIF's in the March 15, 2023 set of BMO InvestorLine self-directed client agreements:

5. Payments

Payments must begin no later than the first year after the calendar year in which the Plan is established.
…
A payment cannot be greater than the value of the Fund [the assets of the BMO InvestorLine Retirement Income Fund] immediately before the time of the payment. Where there is insufficient cash in the Fund at any time to make a payment, the Trustee [BMO Trust Company] or the Agent [BMO InvestorLine Inc.] shall make reasonable requests for instructions from the Planholder regarding which assets of the Fund to liquidate in order to realize sufficient cash to make the payment. If, after making reasonable requests from the Planholder at the last address provided by the Planholder, the Trustee or the Agent does not receive satisfactory instructions from the Planholder within a reasonable time, the Trustee may, in its discretion, liquidate part or all of the Fund in order to realize sufficient cash to make the payment. Any such liquidation shall be made at such prices as the Trustee may in its discretion determine to be the fair market value of the assets at the time; in the case of assets which are illiquid or which have no readily ascertainable market value, the Trustee may in its discretion sell the assets to the Agent for the Agent’s own account, at such price as the Trustee considers fair and proper.

The brokerage trusteed RRIF's work as one expects.

If one is required to or wishes to make a $3,000 withdrawal, one needs to make sure there is $3,000 to withdraw in cash or in kind. If part of the $3,000 is in kind, then the cash part of the withdrawal needs to be large enough to cover the source tax withholding.

No arbitrary rules in trusteed RRIF's about tapping accrued interest or principal from oldest/latest, lowest yielding/highest yielding, or largest/smallest GIC's first.

Norman1 said

NCC1701Z said
…
The annuity is tempting but I can't seem to get past the lack of an estate value and I don't think we'll be living into our 90's to get a decent return.…

I'm not tempted by the 7.2% per annum payout from the life annuity on the $100,000.

The 7.2% payout is not anywhere close to 7.2% per annum return. Basically just getting your own money back until 14 years afterwards:

Year Cash Flow Per Annum Return 1 -$100,000 -100.0% 2 +$7,200 -92.8% 3 +$7,200 -69.3% 4 +$7,200 -49.8% 5 +$7,200 -36.2% 6 +$7,200 -26.6% 7 +$7,200 -19.7% 8 +$7,200 -14.7% 9 +$7,200 -10.9% 10 +$7,200 -7.9% 11 +$7,200 -5.6% 12 +$7,200 -3.7% 13 +$7,200 -2.2% 14 +$7,200 -0.9% 15 +$7,200 0.1% 16 +$7,200 1.0% 17 +$7,200 1.7%

Year Cash Flow Per Annum Return 18 +$7,200 2.3% 19 +$7,200 2.9% 20 +$7,200 3.4% 21 +$7,200 3.8% 22 +$7,200 4.1% 23 +$7,200 4.4% 24 +$7,200 4.7% 25 +$7,200 4.9% 26 +$7,200 5.1% 27 +$7,200 5.3% 28 +$7,200 5.5% 29 +$7,200 5.7% 30 +$7,200 5.8% 31 +$7,200 5.9% 32 +$7,200 6.0% 33 +$7,200 6.1%

I think one needs to consider whether or not the longevity insurance is needed. Insurance is usually a lousy investment.

People have no choice with life insurance as they can't self-insure that risk of passing away with young dependent children.

People usually don't have a choice with house insurance either as the mortgage terms and conditions require the insurance.

Be wary of proposals from life insurance salespeople about buying life insurance to donate to a charity. Charities need funding today, not years or decades from now, when one dies. People should resist redirecting what could be significant monthly charitable donations to, instead, a life insurance policy in the charity's name.  

No kidding. Very simple math will also show $100k divide by $7200 = roughly 14 years, basically they act as a safety deposit box for your money, earning absolutely zero return on ur deposited money too.

A RIF does require a minimum amount to be withdrawn every year. But, there's no requirement for that minimum be withdrawn in a single withdrawal.

In the Scotia iTRADE application form, one can chose the minimum amount to be withdrawn over monthly, quarterly, or semi-annual withdrawals as well as a single annual one. The declaration of trust allows changes to withdrawal amount. Not sure about the base date for the withdrawals. If no, one can transfer the RIF to another RIF with the new desired base date for subsequent years.

No real need to align GIC maturity dates. The brokerage RIF can park cash in a brokerage ISA until the next monthly, quarterly, or semi-annual withdrawal for the minimum.

I looked into charitable annuities. They don't look great either. Essentially, one "overpays" for the annuity through a charity. Charity gets the "overpayment" and issues a receipt for that. Rest of the money goes towards the annuity.

This is from Charitable Gift Annuities: A Gift That Gives Back showing a 48% gift "overpayment" portion:

Of the $100,000 you provide to the charity, about $52,000 is used to buy the annuity from a tier-one life insurance company. The life annuity provides a return rate [not rate of return] of about 5 per cent [of the $52,000, not of the $100,000], much higher than the banks are currently paying on a 10-year GIC. That translates to $2,600 [not $5,000] a year until the second spouse dies. The remaining $48,000 of the original $100,000 is a charitable donation, and the donor receives a charitable receipt for that entire [$48,000] amount. That results in approximately $24,000 of tax savings, assuming a 50 per cent tax bracket.

The gift portion needs to be at least 20% of the total.

My take would be to donate $48,000 to the charity and invest the $52,000 somewhere else. I haven't seen any evidence yet in my family tree of the longevity needed to make a life annuity worthwhile.

I discussed life annuities with one senior relative. She nixed the idea when I explained there would be no residual at the end. She passed away some years later. Didn't make it to her 80th birthday. So far, the odds don't look good for my part of the gene pool.

You can usually save some money if you do an annual withdrawal and leave it to close to the end of the year.
I have the FI put the withdrawal towards income tax, so I usually never see it. I also usually take additional discretionary withdrawal, and some or all of it goes directly to CRA also. I can make reasonable estimates as to how much tax I will owe.
Tax payments made out of RIFs can be paid into tax account late in the year, thus postponing, reducing or eliminating need for quarterly payments or other deductions. Thus, you can keep all the money until near the end of the year, earning income. Unless you absolutely require the monthly income, I prefer late-year and all t0 CRA. All the banks and CUs I have dealt with have been happy to arrange this although they seem to find it odd that someone wouldn't need to keep as much as possible.

The Charitable Annuities don't all do 48%. I was looking at one the other day that was 30%. I think it was the Anglican Diocese of New Westminster in Vancouver but not sure. I brought it up specifically because OP said he couldn't swallow the idea of having nothing left in it after he's gone (and won't care anyway by then). It's an option, and your favourite charity will thank you for your generosity. It suits people who were planning on leaving something in their will, allows the charity to get some money sooner while you keep the guaranteed income. Might be good for an organization addressing climate change if one could be found as that is an emergency that may not wait until you are dead. It's important to remember that it IS a charitable gift; it's not meant to necessarily compete on rates
so you can keep it all for yourself.

In any event, OP has lots of ideas to chew over.

Everyone envies the DB plan as it’s always partly funded by the employee. So most think of it as ‘free money’. I never paid into a DB plan for the bank I worked for, happily surprised it’s worth something when I leave. They contributed amount up to CPP maximum earnings each year on my behalf, and top up was only optional back then ! Of course those types of plan don’t exist anymore.