Payout Annuities are a frequently overlooked option in improving retirement income, reducing the risk of volatility, and preserving assets.

Structured properly an Annuity, in concert with a thoughtful Retirement Income Strategy can preserve assets, achieve a better and higher sustainable income, improve financial flexibility and if desired, can result in more money for you and your family.  

What is a Payout Life Annuity?

Simply it is a contract between an insurance company and you, to provide you with a guaranteed income, in exchange for you giving the insurance company your money. Once contracted it cannot be changed. 
Advantages of a Payout Life Annuity for You 
You will be able to count on regular, guaranteed income during your retirement? With a life annuity, you’ll get payments at set intervals for your entire lifetime. 

Features of an Payout Life Annuity

• Guaranteed periodic income for life 
• Shelter from market fluctuations 
• Worry-free investment management 
• Eligibility for pension income tax credits 
• A reliable supplement to your Registered Retirement Income Fund (RRIF) 
• Protection of your annuity payments through Assuris. 
• Leveling taxable income in the case of a prescribed annuity

You can choose from the following payment options

• Indexed annuity: To offset inflation, each year your payments will increase by a set percentage (from 1% to 4%) as indicated on your contract application. 
• Joint-life annuity: After you die, your spouse will continue to receive annuity payments for life. 
• Guarantee: Depending on the type of annuity and the type of guarantee, a portion of your capital will be protected. 
• Adapted annuity: Provides guaranteed income for life if your life expectancy is reduced due to an illness. 
How can an Annuity Help? 

Strategies for using a Payout Annuity

The Problem with RIF’s LIF’s and LRIF’s

The Government sets the rules and determines what, when and how much must be paid out each year. Throughout your saving lifetime, you will be told to maximize your RSP savings. Frequently, tax driven advice will recommend preserving these tax-sheltered assets for as long as possible. Consequently, you may be advised to reduce your non-RSP savings first in your early retirement years.

However, what does this result in and why is this a problem?

• • • The Payout Percentage of RIF’s, LIF’s, and LRIF’s must increase each year.
    • Investment Risk must increase to achieve these higher payout rates.
    • After Age 71 you cannot stop these payments.
    • Portfolio capital will decline.
    • Requests for Lump Sum withdrawals can add to your tax burden and eliminate the future income these assets can produce.
    • Your income in your later years will decrease.
    • Upon your death, if you have a sizable RIF, LIF or LRIF portfolio left and no spouse to leave it to, the tax rate could be 54%.

The Payout Annuity Solution

The guaranteed payment eliminates the erosion of income problem with RIF’s LIF’s and LRIF’s as you age.

The insurance company in calculating your income will factor in life expectancy. They will add your money into their total pool of annuity money and average out an income. This shared pool results in a higher income for each Payout Annuity Client. Frequently an income 25-30% higher than what your RIF, LIF or LRIF can sustain.

The higher guaranteed income may reduce or eliminate the need to use other savings such as Investments, TFSAs, or Line’s of Credit to make up for the shortfall of reducing RIF, LIF and LRIF income.

Structured properly an Annuity, in concert with a thoughtful Retirement Income Strategy can preserve assets, achieve a better and higher sustainable income, improve financial flexibility and if desired, can result in more money for you and your family.

Still Curious?