Q&A: Wants retirement income

Question: I am 65 years old and I have a locked-in RRSP worth approximately $60,000. I would like to have a small income from this but do not want to buy an annuity. I read some where that it’s possible to buy into a fund and get a monthly income as long as the fund is generating some income (say 7%). If the fund does not increase in a given  month then no money is paid that month. Do you have any information on such a fund? – G.A.

Gordon Pape’s Answer: There are many funds that pay income on a regular basis. These include bond funds (interest income), dividend funds (usually dividend income but not always), income trusts funds (a combination of dividends, capital gains and return of capital), as well as some balanced funds. For purposes of an RRSP or RRIF, you may want to choose a fund that is low risk. Any tax advantages should be ignored since they are lost inside a registered plan.

There are also a number of royalty income trusts that offer good cash flow to investors. One that I have recommended in my newsletters is North West Company Fund (TSE: NWF.UN). It is very steady and since the income does not benefit from any tax advantages it is ll suited for an RRSP or RRIF.

As well, there are systematic withdrawal plans for mutual funds that can be used for cash flow purposes.

However, fund distributions are never guaranteed. They can be suspended under extreme economic circumstances. That actually happened in the case of some money market funds several years ago when short-term interest rates took a sharp, sudden jump. If you don’t want to take that chance, remote though it may be, stick with government bonds.

Since there are so many options, I suggest you discuss your situation with a professional financial advisor to decide which would be best for you. – G.P.

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