Life Annuities Blog

What is an annuity guarantee period?

Posted by: Ivon T. Hughes — Thu, 03 May 2012 17:54:23 +0000

Annuity Guarantee Period – Life annuities are guaranteed for the life of the annuitant or co annuitant; you cannot outlive the annuity payments. And the extra feature of a guarantee period means that you can ensure that someone gets a benefit if you die early.

For non-registered funds: a named beneficiary has the choice of continuing the guaranteed payments or receiving a lump sum payment. An estate can only receive the present value of the remaining guaranteed annuity payments.

For registered funds: A spouse can receive the balance of the guarantee payments or receive the present value of the remaining guarantee payments as a lump sum. Otherwise a beneficiary receives the commuted value.

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.

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Annuity Due 2012 | Tables, Rates and Calculators

Posted by: Ivon T. Hughes — Tue, 01 May 2012 18:31:58 +0000

What is an Annuity Due?

An annuity due is almost identical to a regular annuity. When you buy an annuity due contract, you make a deposit with an annuity company. In exchange for your investment, the annuity company agrees to give you monthly payments in the future. The main feature of an annuity due is the timing of its payments. A regular annuity makes its payments at the end of a period. If you have a regular, monthly annuity, you get your payment at the end of the month. An annuity due makes its payments at the beginning of the period. As a result, you receive your payment on the first day of each month.

Annuity Due Tables

The tables below show a premium amount of $100,000 registered funds with a purchase date June 1, 2012 & Start date June 1, 2012. Monthly income are listed below by age group.

Annuity Due | Single Male Table

Annuity Due | Single Female Table

Annuity Due | Joint Male Table

Annuity Due Calculator

Immediate Annuity Calculator
Lump Sum to Invest:
Life Expectancy (in yrs):
Annual Rate of Return (%):
Payment Frequency :

Your annuity payment will be

Annuity Due Quote Example

This is an example of an annuity due quote from a list of Canadian insurance companies.

Annuity Due Quote

Start here and get annuity quotes from all the annuity companies.

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Income from an Annuity

Posted by: Ivon T. Hughes — Mon, 30 Apr 2012 18:05:27 +0000

What happens when you wait to receive income from an annuity?

If you are waiting because you believe you will get more money each month, well, that might be true; your monthly payments might be greater.

But how much greater? Let’s say instead of taking a $1000 monthly annuity income today, you wait 6 months and receive $50 more annuity income or $1050. You have missed out on $1000 x 6 months which you are now making up at the rate of $50 a month. That means that you must live at least 10 years to make up this difference.

But this ignores the fact, that for annuity rates to increase by 5% in 6 months, requires a lot higher bond interest rates and very strong business activity.

This is not what is happening today. Interest rates have been at an all-time low for a long time and it may well be 2014 until interest rates increase. If your investment is not making a solid return, you need to take advantage of coupling your age with the capital to get yourself a good, guaranteed annuity income.

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Waiting For Your Annuity?

Posted by: Ivon T. Hughes — Fri, 27 Apr 2012 17:11:22 +0000

Are you waiting for interest rates to go up before you take your annuity?

Even our government have realized that waiting may not be the thing to do as it pays a reduced pension at 60 and a full pension at 65. The person who waits till 65 must live till 73 or 74 to receive the same amount of money.

Do you have a guarantee that you will that long and, hopefully in good health?

So if you are waiting, how much does your payment have to increase before you will act? Will $20 or $25 increase be sufficient? Let’s say it’s $25 a month and you wait 6 months for that increase. If the original amount has been increased from $500 to $525, or 5% more, are you better off?

Simple arithmetic tells you that have missed 6 payments of $500 or $3000. So to make up that $3000 at $25 a month will take you 12 years. Is that a good deal?

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Inheritance Annuity Payments for a Beneficiary

Posted by: Ivon T. Hughes — Thu, 26 Apr 2012 14:21:03 +0000

If you have a parent or older relative for whom you are financially responsible in one way or another, here is a suggestion.

Let’s say your relative is 80 years old with $100,000 to invest. GICs pay nothing, the stock market is too volatile and what you need is the best fixed income.

The parent or relative buys a life annuity guaranteed for 35 years which pays about $400 per month. But in the event of death, sometime before age 115, the beneficiary will inherit the payments. And as these payments were based on the age of an 80 year old, the younger beneficiary will benefit accordingly.

The non-registered income will be taxed on an accrual basis and therefore interest will be reported each year as it is earned.

The only part of the income payments to be taxed is the amount paid in excess of the capital repayments. A tax schedule is supplied with each policy.

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Annuity Tax Schedule

Posted by: Ivon T. Hughes — Wed, 25 Apr 2012 15:51:35 +0000

From time to time, we are asked to explain how annuity taxation works and, in particular, how annuity taxation works for registered annuities.

Case study:

Single Annuity, Male, Age 62, RRSP, $150,000, Guarantee Period of 10 years. Purchase date May 1, 2012, Start Date June 1, 2012

This man pays income tax on the complete payment he receives. Remember he has tax sheltered this money by deducting it from his taxable income . Now the government wants its income tax on that capital as well as on the interest or gain earned.

To better illustrate how this annuity taxation works, I am setting out an annuity tax schedule.

PDF Illustration: Annuity Tax Schedule for Registered Funds

You will see that the client is investing $150k in registered funds with a minimum 10 year guarantee. Then if you look at the annuity tax schedule, you will see that the monthly amount is fully taxable each year.

Annuity taxation for non registered funds shows that there is no income tax on capital invested, only on the gain.

PDF Illustration: Annuity Tax Schedule for Non-Registered Funds

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Today’s Annuity Rates as of April 24, 2012

Posted by: Ivon T. Hughes — Tue, 24 Apr 2012 15:17:13 +0000

Today’s Annuity Rates: 24-April-2012

The following annuity rates comparison tables are for registered funds, with a premium amount of $100,000 and with a “no guarantee” period.

Comparison Table: Single Male Annuity Rates

Comparison Table: Single Female Annuity Rates

Comparison Table: Joint Annuity Rates

Canadian Annuity Quotes

To obtain your own personal Canadian annuity quote please use the instant annuity calculator on our site.

Annuity Prices

We represent the following list of life insurance companies in Canada that sell life annuities. To request an annuity price choose from one of the list of companies below.

Assumption Life

BMO Life insurance

Canada Life Insurance

Empire Life Insurance

Equitable Life

Foresters (was Unity Life)

Industrial Alliance

La Capitale Insurance

Manulife Financial

Standard Life Insurance

Sun Life Financial

Transamerica Life Insurance

Wawanesa Life

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Waiting to start your life annuity payments?

Posted by: Ivon T. Hughes — Mon, 23 Apr 2012 17:17:37 +0000

If you are waiting to start your life annuity payments, it might be a good idea to decide on a fixed date to start so that you can avoid large losses.

The reason most people wait to commence life annuity payments is because they believe interest rates will increase and that rise will mean a bigger monthly income.

While in theory it might be correct, it is certainly not so in the real world. There are many factors to be considered both on the business side of an annuity and the personal side.

On the business side, there may be reduced demand for money due to business conditions and greater availability of capital for the insurance companies, leading to lesser rates.

But the greater damage in waiting for life annuity payments are on the personal side. While you are waiting, you are not taking advantage of blending your age with your capital to give yourself a far better return with a life annuity payment. And unless you are earning outstanding returns on your capital, this will cost you dearly.

And that is because everyone, agents and clients, avoid the topics of sickness and death. If you become seriously ill, you may have to give up control of your money anyway, so what was the point in waiting?

Or you may just become infirm. And as you don’t know when you’ll die, what is your plan to make up for the annuity payments you did not take? If you fail to take, for example, a annuity payments of $1000 monthly for 6 months, you must live long enough to make up that money from an increase in the payment.

But that could be a long, long time; just do the math. If you only get $50 more a month, you’ll need to live an extra 10 years.

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Will Annuity Rates Go Up In 2012?

Posted by: Ivon T. Hughes — Fri, 20 Apr 2012 14:34:50 +0000

I am asked on a daily basis whether annuity rates will go up in 2012 and the plain answer is that “I don’t know”.

But that is the wrong question. Whether annuity rates go up or down, does not answer your real question. Your real question is “Should I wait to take the annuity?”

And the answer to that is no. President Obama has said that he’ll keep rates low until the end of 2014 or 2 1/2 years away and Canada can’t disregard that.

And if annuity rates due rise, what are you going to do? How do you know that annuity rates won’t rise more. And then increase some more?

The only thing that is true is that if you will miss taking $500 a month for any period of time, you have to make the loss up in increased payments which is nearly impossible.

And what if annuity rates go down while you’re waiting?

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Regular Annuity vs Index Annuity Example

Posted by: Ivon T. Hughes — Thu, 19 Apr 2012 18:08:08 +0000

If you wait to take your annuity, it has the same result as indexing. The payment to increase 2% per year.

Compare these two tables of a Regular Annuity and an Indexed Annuity.

Example of a Regular Annuity (non-indexed)

Print: Regular-Annuity.pdf

Example of an Index Annuity

Print: Indexed-Annuity.pdf

The indexed payment is a lot less. It will take him 10 plus years to catch up with the amount paid by the regular annuity (non-indexed).

If you wait to take your annuity, you get the same poor result. The payments you don’t receive cannot be made up, even with increased payments. You saved the money to enjoy it later and now “later” has arrived. When you buy a house or a car, you look for the best deal. You should apply the same reasoning when you buy an annuity.

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