By the end of the year in which you turn 69, you will have to decide what to do with your RRSP. A straight withdrawal will rarely be the best option. So how do you decide between RRIF's and Annuities?

Whether RRIF's or annuities will pay more in the long run will depend on a number of factors, including your age and interest rates.

With today's low interest rates, the key factor in determining which option is best for you is your tolerance for risk. If you are risk adverse and are only interested in guaranteed investments, then a life annuity is probably your best bet. Life annuities include both return of capital and interest payments.

Annuities work best if you are over age 60 (regardless whether the money is registered or not) and in a low interest rate environment. Under these conditions, inclusion of capital repayments dramatically increases the income. As a result, registered annuities will almost invariably give you a higher retirement income than a RRIF, without any fear of running out of money.

On the other hand, RRIF's may be more attractive when you are able to obtain higher rates of return. At present, the only way to achieve higher rates of return is by investing in stocks or equity funds, which is why the client's risk tolerance is part of the equation.

There are a few other factors influencing the decision to purchase either investment vehicle:

• With RRIF's you retain control over the investment decisions but with annuities you surrender control to the insurer.
• Income flexibility is greater with RRIF's as the monthly payouts can vary. Annuity payments are fixed and cannot be changed.
• Inflation protection is easier to obtain when using RRIF's, as investments can be changed to match the inflation environment.
• An investor can transfer their RRIF from one financial institution to another and change the RRIF's profile. Once established, the annuity is "locked-in" for the period and cannot be moved to another insurer.
• A very important consideration as we get older is that RRIF's require ongoing management decisions. Annuities require no decision making.

Running out of money is one of the greatest dangers facing seniors today. Therefore, when planning retirement, you will have to ensure that you do not use up your capital too quickly. In today's low interest rate environment, it would likely be unwise to take a higher income than the government requires.

Here is something else you may want to consider if you are only taking out the minimum prescribed by the government: Clients should withdraw additional sums from their RRIF's in order to fund a long term care insurance policy or to fund a joint-last-to-die insurance policy to pay taxes due upon death. These strategies have proven to be very effective at protecting against estate depletion.

Each situation is different and a review of your retirement situation with a financial advisor is a good place to start.