Should you take your pension as a lump sum?

Cashing in a pension or putting it into any investment that is NOT GUARANTEED is foolish in the extreme. Witness the advice from Nathan Parkhouse who is concerned about lower interest rates. He is concentrating on the hole, not the doughnut.
The stock market does not give guaranteed returns. Only an annuity will guarantee a cheque until the day you die.

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Single or Joint Annuity? Which is best?

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Nortel Pension Calculator

UPDATE: Nortel Negotiated Pension Plan Windup

In one of the last updates, FSCO approved the final windup plan for the union (negotiated) Pension Plan #0587766. Morneau Shepell will commence mailing letters around November 16, 2015 apparently which will explain the status of the member.

Nortel Pension Plan Calculator

Nortel employees can now instantly calculate their approximate annuity income online. To find out approximately how much Guaranteed Income For Life you could receive, simply use this easy Nortel Pension Calculator. A precise quote from all the companies will be provided before you make a decision.

Start your calculation here > Nortel Pension Calculator


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Online Annuity Calculator

How Much Guaranteed Income Will I Receive?

To find out approximately how much guaranteed income you can expect to receive when you own a life annuity, simply use this easy online annuity calculator.

Annuity CalculatorThe great thing about life annuities here in Canada is that the income you will receive is guaranteed. For life. Depending on your individual circumstances, you can also choose to guarantee the income for the joint lifetimes of yourself and your spouse or other family member, or for a specific number of years. Once you own a Life Annuity, you will receive a guaranteed income that will never decrease – no matter what happens to interest rates, and no matter what happens to the stock market. You have no risk, the insurance company takes on all the market and interest rate risk.

No other financial product on the market can make these guarantees and provide them in writing. Not mutual funds, not stocks, not bonds, not municipal funds, not bank GICs. All of them are subject to interest rate or market risk, or they could be reduced to zero if you live too long. Only life annuities can specify and promise a guaranteed income – for life.

Try our online annuity calculator

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Term Life Insurance – The Affordable Solution

For the young family, accumulating debt seems to be as normal as having children. It makes very good sense that as the family grows, so does the debt. Very few 25 to 35-year-olds are concerned about the amount of debt they carry until the time comes when they cannot possibly pay it. Usually, this happens when a family breadwinner becomes disabled or dies unexpectedly.

term-life-insurance-the-affordable-solutionThe spouses are typically concerned enough to insure their home against damage or destruction, and, of course, the family autos must be protected, but in most cases, there’s no choice in the matter since the home and vehicles are collateralized. Lenders certainly don’t care who you buy your insurance from, as long as you buy it to protect the collateralized property. The bottom line is quite simple; you have debt and a lot of it. What are your survivors going to do if you’re no longer in the picture?

How much insurance is enough?

This is that the $64,000 question that many consumers fail to get answered before making an insurance purchase. Yes, having insurance is important and yes, you need to make sure that your loved ones are not saddled with your debt when you’re gone. But buying insurance that “sounds about right” could easily leave your surviving loved ones wondering how the heck the family is going to stay in the house, pay the bills, go to college, and even pay for your funeral.

Life Insurance Needs Analysis

The most appropriate way to determine how much life insurance you need to protect your surviving loved ones is to conduct a needs analysis. You can do this on your own by using an online program that many of the insurers, such as Canada Life or Sun Life Financial offer on their websites. This needs analysis will take into consideration all of your financial data and establish the amount of insurance that would offer the best protection for you at that time in your life:

* Your savings and other assets

* Business assets

* Mortgage balance, vehicle loans, and personal loans

* Monthly living expenses (over a selected time period)

* Funds needed for education expenses

* Credit card debt

* Final expenses

* Financial gifts to your survivors

* Current Income

* Current insurance in force

After this data is entered into the program, the total amount of life insurance needed will be calculated and therefore used as a goal for protection. You will then know how much insurance you need to purchase at that time in your life.

Although your needs analysis can be determined on your own, it makes better sense to rely on the advice of an experienced and reputable agent or broker to work with you. Since the analysis is for the current position you and your family are in, it makes even more sense to rely on an insurance professional so that the two of you can revisit your needs analysis each year or so going forward. You need to accommodate for life change events and your agent will keep you on track.

The Affordable Solution

At this point, you probably already imagine that the final number delivered by your needs analysis is going to be quite large, and you may not be able to afford the insurance premium. The good news is that Term Life is more affordable today than ever before. Even if you cannot take care of the entire amount of insurance you need now, you can probably handle most of it and then add later as your financial position improves. Using a 10 or 20 year term policy makes a lot of sense because it is very affordable and in most cases, the company has a conversion privilege available so that you can convert some or all of the death benefit to a permanent policy before the 20 year period is concluded. Or you can decide to renew the term. This privilege is especially important because after 20 years or so you will have most likely reduced your debt and gotten the kids into college and may not need near as much life insurance as you did when you started. You can convert the temporary insurance to permanent insurance for a lower face amount and not have to prove you are healthy!

Available Options

The newer term products have even more great options that you want to consider:

Additional Insured rider – this allows you to add an additional insured to your policy (like your spouse) for the same or lower death benefit.

Child Term Rider – allow you to purchase a block of insurance (usually $5,000 to $25,000) to cover all of your children you have now or will have in the future.

Waiver of Premium – this is a very good option that allows the insurance company to pay your periodic premium if you become disabled and cannot work.

Accidental Death Benefit – this is a very inexpensive way to increase your death benefit if you die as a result of an accident. Typically the insurance company will double your death benefit for a very reasonable additional premium.

It’s important that everyone, whether single or in a family, purchase enough life insurance so that they do not pass along debt to their surviving loved ones. Someone has to pay for your funeral and other final expenses and that someone should be you. Term insurance is the most affordable way to accomplish this and there’s no time like the present to get started.

And a Bonus!

Due to the high costs of houses and general living expenses, people are buying large amounts of term life insurance as a pension loan! The idea is that if one spouse dies, the survivor will have the proceeds of a joint life policy to buy a life annuity or make a safe investment. Thus, until the 1st death occurs, they can spend their savings as they know the survivor will be financially secure.

Term Life Insurance – The Affordable Solution

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Retirement Planning and Deferred-Income Annuities

Most people today envision a comfortable style of living once they have retired. But the generation of workers that built solid pension plans to fund this anticipated comfortable lifestyle have mostly passed on and the generations that are replacing them are not able to depend on the same type of pension largely due to higher costs.

retirement-planning-deferred-income-annuitiesCompanies are now pitching highly regulated products known as deferred-income annuities, which will allow the individual earner to create their own sense of well-being when they have decided they no longer wish to participate in the worker’s race to the top. Typically, the consumer will pay a lump sum of money to an insurance company or pay into the plan over time, in exchange for a paycheque for the rest of their life.

You have no way of knowing for sure if this annuity purchase is a perfect way of accumulating retirement funds because you cannot possibly predict how long you will live after the distribution begins. Even with taking this unpredictability into consideration, the annuity could be the best answer to providing some form of certainty during the retirement years as it can be guaranteed for life.

For the conservative investor wondering what they will do for a financially secure retirement, bonds will not deliver the returns they need, and equities are too risky for their liking. So then, the annuity fits right in the middle and brings peace of mind since the risk is non existent. Yes, you will need to invest a large amount to generate the income you’re striving for, but the return will be higher the longer you wait to access the funds.

Deferred Annuity Example

Take, for example, a male who purchases an annuity at age 68 and promptly begins to collect a lifetime income of $12,000 a year or $1,000 a month. That is going to set him back about $167,100. View annuity illustration.

Purchasing the same annuity ten years earlier and then waiting until age 68 to make the same $12,000 annual withdrawal would reduce the investment required to $129,139 or $37,961 less. View annuity illustration.

The popularity of annuities means that all the insurance companies issue them.

It’s interesting to note that deferred-income annuities have been around for quite awhile. Historically, they were marketed as a type of longevity insurance to insure against outliving a retirement plan. They were purchased at or near the age of retirement, but withdrawals were postponed until later. The insurance companies are very much in favour of this approach since it gives them capital to work with.

Retirement Income

Purchasing retirement income when retirement is clearly on the horizon requires less guessing. For example, some people will choose to purchase an annuity to fund their basic living expenses, such as housing and food, because they have a good idea of what their income sources might be and then potentially close any remaining gaps with income insurance through an annuity.

Deferred annuities are still considered to be a great deal because they know they will have guaranteed income.

“No matter how good a cook or an engineer you may be, you can’t bake this in your own kitchen,” said Moshe A. Milevsky, a finance professor at the Schulich School of Business at York University in Toronto, who said he would wait to begin collecting until 70, or even later.

Life Annuity Options

It is no secret that there are many people that are sincerely reluctant to part with a large amount of money and, as a result, the insurers help make people a little more comfortable with their decision. A typical example would be if an annuitant dies before receiving withdrawals that the heirs would receive the funds as the annuity owner opted for the cash refund feature. This is a very popular option.

Another factor that should be considered is that the annuitant is relying on the unwavering financial stability of the insurer for many years into the future. However, the insurer is part of the guarantee association of Assuris, that would step in to make the payments.


The tax liability will depend on whether the annuity was purchased using after-tax dollars or with registered funds. By purchasing with non-registered dollars, the annuitant gets back benefits equal to the contributions paid in on a tax-free basis since those funds have already been taxed.

If the annuity is purchased with registered or before-tax dollars, then the payments withdrawn will be fully taxable.

Retirement Planning and Deferred-Income Annuities

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Do You Want a Fixed Annuity or a Life Annuity?

This is the same type of annuity in Canada, although some people feel there are differences.

In Canada a life annuity is sometimes referred to as a fixed annuity as the payment is “fixed” or “settled”. The confusion arises when you think of annuities with a yearly time element.

For instance a 10 year term annuity is a “fixed annuity” but here the phrase refers to a time element; it is payable for a certain number of years only.

So the next time someone asks you about a fixed annuity, ask him or her if they are referring to the amount of the annuity payment or the number of years in a term annuity.

And you need to be aware of variations. Most life annuities carry two guarantees

1. a lifetime payout and

2. a guaranteed payout for a number of years. So here we have a life annuity with a “fixed” or guaranteed number of payments.

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5 Annuity Examples to Help Guide You

An annuity is a guaranteed stream of payments that will provide you with a regular income for your lifetime. You, nor your spouse if included, can outlive the income.

Below are 5 annuity examples and an interpretation of the annuity illustration provided by 5 annuity companies.

1. Annuity Example of a Single Life Male 

Personal Information
The annuitant is a male aged 68 years old. He is currently retired.

Source of Funds
The annuitant lives in the province of British Columbia and has a RRSP account with TD Waterhouse. He does most of his investment transactions online. He has now transferred his stock into cash to purchase a life annuity.

 General Information about the Contract
The annuitant purchased a single life annuity with $147,000 from Industrial Alliance Insurance. The life annuity will provide a monthly income of $825.44 for his lifetime, he will never be able to outlive the income. The life annuity income will help cover his fixed costs such as food, rent, electricity in his retirement.

Annuity Illustration Example from Industrial Alliance

Company: Industrial Alliance
Type of annuity: Single Life Annuity
Guarantee Period: 5 years
Annuitant: Male, 68 years old
Jurisdiction: British Columbia
Source of funds: RRSP
Premium: $147,000
Monthly Income: $825.44
Annuity Illustration: View and print annuity quote

To view the the rest of the examples please continue reading “5 Annuity Examples to Help Guide You” on our website.

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Afraid of outliving your money? Here’s why annuities might be for you

My comments of a recent article by Craig Wong, The Associated Press “Afraid of outliving your money? Here’s why annuities might be for you

Jamie Golombek managing director for tax and estate planning at CIBC Wealth Advisory Services is correct; an annuity provides guaranteed funds, usually monthly, to meet your continuing needs after your regular pay cheque ends.

And Crystal Wong, senior regional manager at TD Wealth Financial Planning is incorrect in trying to compare annuities to “alternative investments”. There are none. You either guarantee your income with an annuity or you don’t; your choice.

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Does new RRIF legislation in the 2015 budget help you?

RRIF: Changes to the RRIF minimum withdrawal amounts are designed to let you preserve more of your retirement savings and most companies will adjust your minimum income as of January 1 2016.

2015-rrif-minimum-withdrawals-smBut if you are drawing income from a RRIF/LIF, you could benefit from reduced minimums starting now.

While a RRIF now allows you to shelter more capital it results in less income . And is that what you want? All tax sheltered income is taxable at the 2nd death of a couple, so is taking less worthwhile? You can leave tax-paid capital and goods to your beneficiaries, so it is your tax sheltered investments that you should use before you use any non-registered funds.

Click here for the Best 2015 RRIF Interest Rates

TFSA: Thanks to proposed budget changes, you can now contribute up to $10,000 annually to a TFSA (Tax-Free Savings Account). Boost your contribution to enjoy increased tax-free savings.

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