An Annuity’s Taxable Portion Explained

Often my clients, who buy non-registered life annuities, ask me to explain why the lowest premium on a quote table attracts a less taxable portion than the highest premium.

And now I have a definitive answer (I hope).

The greater the capital you invest into such a life annuity, the greater the return of capital you will receive in each life annuity payment. Thus the taxable portion of each payment is lower!

Posted in retirement | Tagged , , , , , | Leave a comment

Should you consider an annuity?

My comments to “Should you consider an annuity?” by Kevin Press at

Mr Press has emphasized perhaps the most important element in the purchase of annuities today.

As the largest seller of life annuities in Canada, in which we specialize at, we find that that most people seem to believe that it is 1-5 year GIC rates which set the scenario for the payouts which is not true at all.

And even if long term bond rates do rise,there is still no guarantee that annuity rates will go up. And of course you are getting older and losing time to enjoy the income.You might want to read ” Retirement Income; income that lasts a lifetime ” which you can find here. Hopefully it will give you some ideas.

Posted in retirement | Tagged , , , , , , , , , | Leave a comment

Forcing seniors to outlive their savings

From the C.D. Howe Institute: Outliving Our Savings: Registered Retirement Income Funds Rules Need a Big Update

Click here for the full pdf report: Outliving our Savings

Posted in retirement | Tagged , , , , , , | Leave a comment

Change RRIF drawdown rules: C.D. Howe

In this article “Change RRIF drawdown rules: C.D. Howe” from Investment Executive not only makes some good points but raises a big issue I have been discussing with my clients over the last 2 or 3 years.

We are living longer but not necessarily better in the sense that sitting staring into space is not really a lifestyle.

Most people know diddly squat about finances. They’ve been paid a salary all their lifetimes,taxes have been deducted at source,pension monies have been allocated and generally they’ve been in a financial warm blanket.

Now it,s all over and they’ve got a lump sum,payments from which to replace their salaries.

Well it,s not that simple.Now they have to make decisions on their own and they are paralyzed as they have never had the experience of handling hundreds of thousands of dollars at one time.Their financial experience has been limited to not spending too much on food and buying GIC’s with their savings.

Now comes along this great whack of money and they need to make some decisions.Reading books only confuses them as it is their situation which concerns them,not examples.

But they find out they have 2 real choices; a RRIF or an annuity.And the RRIF has a built in fail system if you live too long.But with no real grasp on your finances during your lifetime,you are certainly not going to become a wizard in your retirement and make meaningful comparisons.

So you buy your RRIF, perhaps not realizing that you are being forced to withdraw capital as well as interest to meet the minimum your capital is not earning enough money to meet that payment each year.

But I disagree with making the minimum payments smaller or allowing withdrawals at will as most people will not have the skills to manage money as they age.If they didn’t have the skills growing up,they,re not going to become smarter when they age.Allowing withdrawals at will is really the 2 foxes and the hen deciding on what to have for dinner.

Posted in retirement | Tagged , , , | Leave a comment

Use Annuities To Protect Yourself From Yourself

In this very recent issue of Forbes magazine  there was an enlightening article on life annuities, “Use Annuities To Protect Yourself From Yourself.

The author, Jeffrey Brown, makes several good points but one that really struck me as relevant was the comment on the mental ability to make correct financial, or indeed, other decisions, later in life.

“Half of the 80-year-old population is not in a position to make important financial decisions. So how does a retiree protect their future older self against their own bad future decisions including, but not limited to, becoming the victim of fraud?”

While, as a life annuity broker, I have not written much if anything on this topic, it is certainly a subject I have brought up with my older clients and sometimes their children.

As is well known in Canada, at retirement, Canadians can choose RRIF’s or annuities as a vehicle to provide life income. But it is only a life annuity that guarantees that income for the lifetime of the annuitant. With a RRIF, the retiree can choose GIC’s of various length, mutual or segregated funds invested in different securities or other approved vehicles. But there is no guarantee of capital appreciation. Indeed the RRIF capital gets worn down by the increasing mandated withdrawals, just as the need for a more fixed income starts to be apparent

Yes, at 60 or 70 you can handle investment decisions but with age and possible illness, but will you be capable later on?

Posted in retirement | Tagged , , , , , | Leave a comment

Running Out of Money? How Life Annuities Provide Income for Life

Retiring today is not as simple as it was for previous generations. Most new retirees and those about to retire are not counting on pensions with potentially unlimited numbers of payouts. Instead, most people in this situation are counting on limited funds available in RRSPS, Group Pensions and their savings to last them as long as necessary.  Continue reading “Running Out of Money? How Life Annuities Provide Income for Life

Running out of money?

Posted in retirement | Tagged , , , , , , | Leave a comment

Saving enough isn’t the only worry in retirement

My comments on “Saving enough isn’t the only worry in retirement” by Craig Sebastiano | May 15, 2014  from Benefits Canada.

This article highlights the needs for individuals to look after their own retirement needs.

If a majority of the population is depending on the government for retirement income, then we’re all in great danger. The old shibboleth of having a better pension if you wait till you,re older is trotted out but health is not mentioned at all.

And health should be the major decision=maker of how and when to start your retirement pension.

Posted in retirement | Tagged , , , , | Leave a comment

How living longer can hurt your retirement planning

My comments on a recent article in the Toronto Star  “How living longer can hurt your retirement planning” by Moshe A. Milevsky & Alexandra Macqueen

This is another comprehensible article for all retirees to consider.

Now we are faced with the fact that we could live longer for varied reasons and the question is, how do we cope with that?

It might seem a simplistic answer but this is the reason life annuities were designed.They take out that risk of outliving your money and put the risk on the shoulders of the insurance company. As you don’t intend to shovel snow when you are older but rely on someone else, so you hire the insurance company to send you monthly cheques.

The talk of mortality tables and longevity risk means little to each person who is concerned with their own situation. And all these theoretical discussions never mention the physical and/or mental health of health of the annuitants. All the planning goes out the window when somebody becomes ill.

Posted in retirement | Tagged , , , , , , , , | Leave a comment

Should your life expectancy be part of your financial planning?

My comments on  “Should your life expectancy be part of your financial planning?” by Garry Marr of the Financial Post.

Rick and Carol got it right!

It is all about your health, not your money. Rick saved for umpteen years and now he can’t spend it.And Carol is facing that question but from the still-healthy side.

Carol should buy the largest income she can get in an annuity and start the income now;otherwise she can end up like Rick.

Clients continually tell me that ” annuity rates will go up ” as they wait to act. Actually they’ve been telling me that for more than 10 years as the rates slowly drop and their lives ebb away.

If you get sick or lose your partner,it is all for naught. There are only 2 considerations in retirement planning; action and guarantees.

Posted in retirement | Tagged , , , , | Leave a comment

Your Savings Annuity Can Outlive You

Did you know your savings annuity can last beyond your lifetime?
savings annuity can outlive youI speak to annuity clients or those engaging in buying one everyday. And the one thing they know is that annuity guarantees do not extend beyond age 90. And you can use the age of the younger to get the longest guarantee period.
And they are correct. For registered annuities, the government does not permit life guarantees beyond the age of 90. The couple where the youngest age is 68, can get a 22 year guarantee! Similarly a couple where the youngest age is 82, can get a guarantee for 8 years.
But that all changes with non registered annuities. Here the companies have more flexibility and some will issue policies beyond age 100.
Again we shop the market to get you the longest guarantee if that is what you want. Or the highest income; you just need to tell me what you are trying to achieve.
Posted in retirement | Tagged , , , | Leave a comment