What is an annuity?
An income annuity is a simple way to turn a portion of your savings into regular income – for a fixed period or the rest of your life. It’s up to you.
No matter how the markets fluctuate or how much interest rates change, you’ll continue to receive payments that can help cover your essential expenses or support your retirement lifestyle.
You can put a portion of your retirement savings, like RRSP, into an annuity. It can cover your basic needs so the rest of your money can be used to live the retirement you want – taking that dream vacation, for example.
How does it work?
Work with an advisor, your retirement planning partner, to determine when you want to retire and how much regular income you’ll need.
- Make a lump-sum payment.
- Choose to receive income payments for life or a set period of time.
- Choose to receive income for one person or a couple.
- Choose to receive monthly, quarterly, semi-annual or annual payments.
- Customize your annuity with different options that fit your needs.
- Start receiving a retirement paycheque.
How is your income guaranteed?
Similar to a pension plan, an annuity can be thought of as pooling money from thousands of Canadians.
- The insurance company invests the money conservatively.
- The company’s expertise allows it to estimate how many people in this group are likely to live beyond the average life expectancy and how many may not.
- It’s this variability in life span, combined with conservative investments, that allows the insurance company to guarantee your income for life.
Are income annuities a fit for you?
Income annuities can be the right choice if you are:
- Near or in retirement
- Looking for a secure financial paycheque for as long as you live
- Worried about outliving the money you’ve saved
- Interested in receiving steady income regardless of how the financial markets perform
- Seeking a steady income stream to cover basic expenses
- In need of income until your Canada/Quebec Pension Plan (CPP)/(QPP) and Old Age Security (OAS) and employer pension begins
- Willing to convert your savings into a guaranteed income stream
What types of annuities are there?
Lifetime income for you from a single-life annuity
- Similar to a pension plan for one person
- Provides income payments for life
Lifetime income for a couple from a joint annuity
- Similar to a pension plan for a couple
- Pays a regular income for as long as you or your partner lives
- When one spouse dies, the survivor continues to receive income payments
Regular income for a specific period from term annuity
- Pays a regular income to you
- Provides income payments for a certain number of years, indicated by you