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Pensioners worried about outliving their savings can now use cash from registered accounts to buy a life annuity
An advanced life deferred annuity (ALDA) is an insurance product you can use to defer some of the income you’ll receive from certain registered plans. You can buy an ALDA with funds from:
You can transfer up to 25% of the assets held in these plans directly into an ALDA, up to a maximum of $170,000 in 2024. The maximum amount is CPI-indexed and adjusted each year to account for inflation.
ALDAs are designed to help people reduce the risk of running out of money during retirement. Because payments are guaranteed for life and don’t begin until you reach age 85, they provide peace of mind that your income will continue for as long as you need it. If you’re married, you can choose to have the payments made to your spouse after your death.
ALDAs can also reduce the tax burden on your retirement savings. Income you would have started receiving at age 71 is deferred until the end of the year in which you turn 85, when you’re likely to be in a lower tax bracket. Moving retirement income into the future may also reduce clawbacks from your Old Age Security (OAS) and Guaranteed Income Supplement (GIS) payments.
The name ALDA was coined 20 years ago by Moishe Milevsky, a finance professor at York University in Toronto. In 2021, legislation was passed to make these products possible, and the first ALDA was launched in December 2023 by Desjardins.
Example: “By using funds from her RRSP to buy an advanced life deferred annuity (ALDA), Mey reduced the amount of her retirement savings that would be subject to the RRIF minimum drawdown. The value of ALDAs is not included in the minimum drawdown calculation.”
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