Guaranteed income (annuity) vs flexible withdrawals (RRIF). A detailed comparison to help you decide which approach — or what combination — is right for your retirement.
A life annuity is a contract with an insurance company. You give them a lump sum (from your RRSP, RRIF, or non-registered savings), and they guarantee you a fixed monthly income for the rest of your life — regardless of how long you live or how markets perform.
Shop around — annuity rates vary between insurers. A 1% difference in annuity payout can mean tens of thousands of dollars over a 20-year retirement.
A Registered Retirement Income Fund (RRIF) is the account you convert your RRSP to at age 71 (or earlier if you choose). It holds the same investments as your RRSP and requires annual minimum withdrawals but allows any amount above the minimum.
With a RRIF, the capital remains yours — you continue to own the investments, and your estate receives whatever is left when you die. For the full RRIF guide, see RRSP to RRIF Conversion and our RRIF Calculator.
| Feature | Life Annuity | RRIF |
|---|---|---|
| Income guaranteed? | Yes — for life | No — depends on investments and withdrawals |
| Longevity risk | Zero — income never stops | Portfolio can be depleted if you live a very long time |
| Investment risk | Zero after purchase | Portfolio subject to market volatility |
| Flexibility | None — cannot change income or access capital | Full — withdraw any amount above minimum |
| Estate value | None (single life) or some (with guarantee period) | Remaining balance goes to beneficiaries |
| Inflation protection | Only if indexed (costs more) | Potential if portfolio grows |
| Minimum withdrawal | N/A (your annuity payment is fixed) | Required annual minimum |
| Impact if you die early | Insurance company keeps unused capital (unless joint/guarantee) | Full balance passes to heirs |
| Management required | None after purchase | Ongoing investment decisions required |
| Tax treatment | Same — fully taxable income | Same — fully taxable income |
Annuity rates move with interest rates — when rates are high, annuities pay more. With the Bank of Canada rate having risen significantly in 2022–2024, annuity rates improved substantially compared to the low-rate environment of 2015–2022.
Approximate 2025 single-life annuity payout for a 70-year-old with $300,000:
| Annuity Type | Monthly Income (approx.) | Annual Income |
|---|---|---|
| Single life, no guarantee | ~$1,950–$2,100 | ~$23,400–$25,200 |
| Single life, 10-year guarantee | ~$1,850–$2,000 | ~$22,200–$24,000 |
| Joint life (60% to survivor) | ~$1,650–$1,800 | ~$19,800–$21,600 |
| Single life, 2% indexed | ~$1,600–$1,750 | ~$19,200–$21,000 |
Rates vary by insurer and individual health. Get quotes from multiple insurers.
Many financial planners recommend a hybrid strategy: use an annuity to establish a guaranteed income floor (covering essential expenses) while keeping a RRIF for discretionary spending, flexibility, and legacy.
Example Hybrid Strategy:
This approach eliminates the fear of running out of money for basics while maintaining flexibility for discretionary needs.
| Situation | Lean Toward |
|---|---|
| Excellent health, likely to live 90+ | Annuity (longevity insurance value) |
| Poor health, shorter life expectancy | RRIF (capital passes to estate) |
| Risk-averse, anxiety about markets | Annuity |
| Comfortable with investing | RRIF |
| No/minimal other pension income | Annuity (provides baseline) |
| Large DB pension already covers basics | RRIF (flexibility for extras) |
| Large estate planning goals | RRIF |
| Simplified finances priority | Annuity |
Whether you choose an annuity, RRIF, or both — starting with free banking means more money stays in your account. KOHO has zero monthly fees and earns cashback.
Code 45ET55JSYA for a bonus.
Get KOHO Free