Question from Ontario
Should I use my RPP money for an annuity?
This question comes from a lady who was awarded $225,000, half of her ex husbands Registered Pension Plan at her divorce. She is 60 years of age and wants to know whether she should buy an annuity or hang onto the capital for a few more years.
This lady has no intention of remarriage, so it is only she that can make use of it, not her children, relatives or beneficiaries.
And that is because tax has not been paid on the capital, which will be due on any balance remaining at her death. Funds remaining due at her death under a guarantee period are collapsed into a present day lump sum, taxed and distributed. if you think that means there won't be much left , you have understood the situation correctly.
So hanging on to the capital makes no sense. The marriage didn't work but an annuity brings it own certainty.