Guide
Annuity vs RRIF
Reviewed by The Retirement Beast editorial team · figures verified against CRA / Service Canada · Updated
When you turn savings into retirement income, you face a fundamental choice: a guaranteed cheque you cannot outlive, or a flexible pool you control. Most retirees benefit from some of each.
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An annuity converts a lump sum into guaranteed income for life but gives up flexibility and estate value. A RRIF keeps your money invested and accessible, with a mandatory minimum each year, but the income is not guaranteed. Many retirees use an annuity to cover essential spending and a RRIF for the rest.
On this page
- The core trade-off
- Where the annuity wins
- Where the RRIF wins
- Taxes and estate
- The “annuitize the floor” hybrid
- FAQs
The core trade-off
Both are ways to draw down registered savings, but they sit at opposite ends of a spectrum. An annuity trades a lump sum for certainty: an insurer pays you a set amount for life, whatever markets or your lifespan do. A RRIF keeps you in control: you choose the investments and (above the minimum) the withdrawals, but you also carry the market and longevity risk.
Where the annuity wins
- Longevity protection. The income cannot run out, no matter how long you live.
- Simplicity. No investment decisions, no withdrawal math, no sequence-of-returns worry.
- Behavioural calm. A guaranteed cheque is easier to live on than a fluctuating portfolio.
Where the RRIF wins
- Flexibility. Take more in some years, less in others (above the minimum), and change investments.
- Estate value. Whatever is left can pass to a spouse or your estate; a plain annuity may leave nothing.
- Upside. Strong markets grow a RRIF; an annuity payment is fixed at purchase.
- Inflation. A RRIF can be invested for growth; most annuities are not indexed unless you pay extra.
Taxes and estate
Registered annuity and RRIF payments are both taxable income and, from 65, generally qualify for the pension income amount and pension income splitting. A RRIF rolls to a surviving spouse tax-deferred; otherwise its full value is taxed on the final return. A life annuity can be structured with a guarantee period or as a joint-life annuity so income continues to a spouse — protection that lowers the monthly amount.
The 'annuitize the floor' hybrid
The most common planner recommendation is not either/or. Use CPP, OAS, and a modest annuity to cover your essential, must-pay spending with guaranteed income, and keep a RRIF (and TFSA) for discretionary spending, flexibility, and the estate. That way you get longevity protection where it matters and keep control everywhere else. Model the RRIF side in the RRIF guide and your overall income in the cash-flow projection.
Frequently asked questions
What is the difference between an annuity and a RRIF?
An annuity converts a lump sum into a guaranteed income for life (or a set term) from an insurer — you give up control and access for certainty. A RRIF keeps your money invested and under your control, with a mandatory minimum withdrawal each year, but the income is not guaranteed and can run out.
Is an annuity or a RRIF better?
Neither is universally better. An annuity wins on longevity protection and simplicity; a RRIF wins on flexibility, estate value, and upside. Many retirees 'annuitize the floor' — buying an annuity to cover essential spending and keeping a RRIF for everything else.
Are annuity and RRIF payments taxable?
Yes. Payments from a registered annuity and from a RRIF are both taxable income and, at 65+, generally qualify for pension income splitting and the pension income amount. TFSA-funded annuity income is tax-free.
What happens to the money when I die?
A RRIF can pass to a spouse tax-deferred or to your estate (taxed on the final return). A plain life annuity may stop at death unless you added a guarantee period or joint-life option — features that lower the monthly payment in exchange for estate protection.