Question: I'm 15 years away from retirement and have been building my investments both in Europe and Canada. By age 65, I expect to have a total of $500,000 in my Canadian RRSP and locked-in RRSP (LIRA) accounts, based on an annual growth of 5% of my portfolio.

What is completely unknown to me is what this amount would offer me in terms of monthly income from a RRIF, before and after tax, if it were to be paid out for the rest of my life. I assume it will be dependent on interest rates.

Answer: Let's start with a review of life expectancy. At age 65, the tables suggest a male is expected to live a further 16 or so more years, while a female has slightly more than 20 years left. I typically add five years to these figures to be on the safe side, for a planning horizon of 21 and 25 years, respectively.

You won't have to convert your RRSP to a registered retirement income fund and begin making withdrawals until age 69.

However, your LIRA has different rules, depending on where you live; for example, there is a maximum withdrawal formula tied to your age. Hopefully, by the time you retire 15 years from now, those rules will be closer to RRIF rules for income withdrawal purposes, as the RRIF allows the most flexibility of the registered accounts.

All funds withdrawn from your registered accounts are taxable income for you just like a salary.

I have estimated some monthly income figures (see Table 1) based on obtaining the maximum payment from the accounts for a fixed number of years.

The starting account value is assumed to be $500,000 and the rates of return shown are constant for the entire period. The value of the registered accounts will have been fully depleted by the end of the period shown.

Of course, this is only one option available to you, and results are highly dependent on the investment returns obtained within the accounts.

Depending on the amount and type of other income you will receive, your marginal tax rate could vary between 30% and 45%. For most provinces, the tax on the first $30,000 of income is much reduced, as the personal exemption, age exemption and provincial tax credits for the initial tax bracket reduce your tax payable. I am assuming today's tax provisions will hold 15 years from now when you retire.

Table 1. RRIF Income Estimates

* All income figures rounded

Source: KCM Wealth Management Inc.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.