I’ve heard people say that a RRIF is simply an extension of an RRSP. Not true!

The two plans are linked in that both are designed for retirement savings. But their goals are different, which means the strategies involved must be too.

The purpose of an RRSP is to build a tax-sheltered cash reserve that will form part, or even all, of your retirement capital. This requires careful management of the risk/reward balance in the portfolio. A GIC-based plan will preserve your capital, but it won’t generate much return.

Using GICs or other cash-based securities as part of a RRIF makes sense, however. Now the goal is cash flow, to cover the annual withdrawals, and preservation of capital. Growth is no longer the major concern.

This means RRIFs…