Mr. Chen, aged 72, wants to convert his Registered Retirement Income Fund (RRIF) into an annuity to ensure a predictable income stream for the rest of his life. Which of the following statements properly describes this RRIF conversion option and its implications?

Question: Mr. Chen, aged 72, wants to convert his Registered Retirement Income Fund (RRIF) into an annuity to ensure a predictable income stream for the rest of his life. Which of the following statements properly describes this RRIF conversion option and its implications?

Answer options: ✅ "He can convert a portion or all of his RRIF into a prescribed annuity, providing consistent, guaranteed income for life, but forfeiting potential market gains."

• "Converting a RRIF to a life annuity removes any taxation on the income received, as the funds were already taxed upon contribution to the RRSP."
• "RRIFs must be converted into a specific type of term-certain annuity that only pays out until age 90, as per CRA regulations."
• "Converting a RRIF to an annuity means the funds are no longer considered part of his estate upon his death, regardless of beneficiary designation."

Correct answer: "He can convert a portion or all of his RRIF into a prescribed annuity, providing consistent, guaranteed income for life, but forfeiting potential market gains."

Explanation: Annuities provide guaranteed income. Converting an RRIF to a life annuity ensures a predictable income stream for life, removing investment risk but also foregoing any future market appreciation. The income received from a life annuity purchased with RRIF funds remains taxable, as RRIF withdrawals are fully taxable.