New Type of Retirement Investment Introduced

Another significant item in the federal budget was the introduction of the Advanced Life Deferred Annuity (ALDA).

An ALDA will allow a taxpayer to allocate up to 25% of the qualified retirement investment plan to an annuity.

The payments from the annuity do not have to begin until the person has reached the age of 85. Such a transfer would allow seniors to reduce the annual amount that they have to withdraw from a Registered Retirement Income Fund (RRIF), providing an additional deferral of taxes on the transferred amount.

This will also allow the taxpayer to save money for later in retirement when their medical expenses could be significantly higher.

The lifetime maximum on these allocations will be $150,000 in the first year. The maximum will be indexed to inflation annually, and rounded to the nearest $10,000.

2020 will be the first year that a taxpayer will be eligible to purchase an ALDA.

If a taxpayer over-contributes to an ALDA, they will be assessed a penalty of 1% per month on the value of the excess portion of the investment.

However, if the value exceeds the 25% limit in a year because the total assets have declined in value, the taxpayer will not be assessed a penalty.