The Benefits of Annuities in Canada

Annuities! Some people love ‘em, some people hate ‘em, many people don't understand ‘em. Yet, these oft-misunderstood insurance products are worthy of your consideration when planning for retirement. So, what exactly is an annuity? Simply put, it's a financial product designed to provide a reliable income stream - a guaranteed paycheque for life. Among the trio of annuity types in Canada – term certain annuities, variable annuities, and life annuities – we'll delve into the latter, similar to a personalized pension plan.

When it comes to purchasing annuities in Canada, it's important to note that they're exclusively available through life insurance companies and not every company extends this option. Recent times have seen annuities grow in appeal, a trend fueled by escalating interest rates and the advancing age of the population. Primarily, those aged 60 and above find annuities increasingly appealing, a significant demographic in the Canadian populace.

For those seeking a guaranteed income stream that lasts as long as you live, life annuities present a compelling choice. You can use registered or non-registered funds to buy a life income annuity; when you do this, in some cases a portion of the guaranteed income is paid to you tax free. Life annuities can be structured to provide income for an individual or a couple, ensuring financial security throughout retirement.

Your annuity income depends on many factors such as:

• Current interest rates

• The amount you deposit

• Your age and gender

• Guaranteed period

Let's try and clear up any misconceptions you might have about annuities and explore the reasons why you should consider purchasing one for retirement in Canada.

1. Guaranteed Lifetime Income:

One of the primary advantages of purchasing an annuity is the assurance of a guaranteed lifetime income. Annuities provide you with a stable and predictable stream of payments, which can alleviate the stress of the risk of outliving your savings. With increasing life expectancies, having a consistent source of income ensures you can maintain your desired lifestyle throughout retirement.

2. Protection from Market Volatility:

The Canadian financial landscape can be subject to market volatility, which could potentially impact the value of your investments. Annuities, however, offer protection against market fluctuations. When you purchase an annuity, you're transferring the investment risk to the insurance company. This can be particularly appealing for individuals who are risk-averse and want to safeguard their retirement funds from economic downturns.

4. Tax Advantages:

Annuities also come with potential tax advantages. Income from a registered annuity is 100% taxable. However, with non-registered annuities, a portion may be considered non-taxable. This can be particularly beneficial for retirees seeking tax-efficient income sources in retirement.

6. Customizable Features:

Annuities can be customized to meet your unique retirement goals. You can choose options such as joint and survivor annuities, which continue to pay out to a spouse or partner after your passing, ensuring their financial security as well. Additionally, you can opt for inflation-adjusted annuities to combat the effects of rising living costs over time.

7. Peace of Mind:

Retirement should be a time to enjoy life without unnecessary stress. Annuities provide peace of mind, knowing that you have a reliable income source, regardless of economic conditions. This stability allows you to focus on pursuing your passions, spending time with loved ones, and making the most of your retirement years.

As you plan for retirement, don't overlook the potential benefits of purchasing an annuity. The combination of guaranteed lifetime income, protection from market volatility, tax advantages, and customizable options make this insurance product a compelling choice for securing your financial future. We’re happy to talk to you more about annuities, it is our goal to help our clients retire with confidence, knowing that your financial foundation is strong and sustainable.