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The 2019 Federal budget introduced the concept of the Advanced Life Deferred Annuity [ALDA]. This product is the biggest change in the Canadian retirement planning landscape in quite some time. Starting in 2020, an Advanced Life Deferred Annuity could be an investment option available to anyone with a Registered Retirement Savings Plan [RRSP], Registered Retirement Income Fund [RRIF], or similar registered plans such as a Defined Contribution pension plan.
Choosing an Advanced Life Deferred Annuity would permit up to 25 per cent of an individual’s registered investment accounts to be used to purchase an annuity that begins payments at the very latest by the end of the year in which they turn 85. There would be a lifetime maximum investment into such a plan of $150,000 that would be indexed to inflation and rounded to the nearest $10,000. Withdrawals from an ALDA would be fully taxable, and upon death any remaining funds in such an account would become fully taxable to the owner unless left to a surviving spouse, common law partner, or financially dependent child or grandchild.
While not necessarily for everyone, an Advanced Life Deferred Annuity could be an important option for the right retiree. For those retirees with significant registered savings, being able to defer up to 25 per cent of those savings to age 85 would reduce minimum required RRIF withdrawals during one’s 70s up until age 85 when the Advanced Life Deferred Annuity payments start. If high registered retirement income has the adverse consequence of Old Age Security clawback, then the Advanced Life Deferred Annuity might solve the problem for you. Look for further announcements about this new retirement annuity proposal.