Let's Talk About Retirement Income
December 18, 2013
Ivon T Hughes
Below is a Facebook post by Rob Carrick of the Globe and Mail. The post discusses peoples opinions of two types of reliable sources of income Annuities vs Guaranteed Minimum Withdrawal Benefits (GMWB).
Click "Comments" for a list of peoples opinions and thoughts.
When GMWB's were introduced, the product had some attractive features if the buyer was alert enough to understand what he was actually signing up for. Now however, most of the companies have totally dropped these plans or, at least, dropped attractive features.
Turning to annuities, what I find is that most people compare them to investment funds, GIC's and the like. This is comparing completely different products.
What some people don't realize is that they may already be receiving annuity payments.
Consider these scenarios:
1. If you are receiving a work pension, that is an annuity
2. If you are receiving an old age pension, that is an annuity
3. Any continuous government payment is an annuity
So an annuity is just a regular income. And if you buy a private one, you are guaranteeing that you will receive that payment for the rest of your lifetime.
All the talk about low interest rates, lack of flexibility and other concerns are not reasons to buy or not buy. The best reason to buy the annuity rests with you and your lifestyle. You are guaranteed an income till you die without worrying about interest rates or stock market returns. If you wait then you absolutely need your annuity rates to rise to compensate for the wait.
One item not mentioned in the post was longevity which obviously is a concern for those issuing these annuities. The longer people live the lesser the payment will become though. I have not seen any great change yet.
Another consideration is your health. If you are waiting to spend your savings, remember that if you or your partner fall ill, you may not have all the time you need together to enjoy the benefits.
About the Author:
Ivon T Hughes is a leading expert in life annuities in Canada. His website LifeAnnuities.com is a recognized authority on annuities. He's also an established insurance and investment broker, licensed across Canada through The Hughes Trustco Group since 1972. Recently, he's been redefining how annuities are sold in Canada.