In this very recent issue of Forbes magazine there was an enlightening article on life annuities, “Use Annuities To Protect Yourself From Yourself.”
Annuities can protect your future self from bad financial decisions http://t.co/gFjJx2mDXy
— Jeff Brown (@Brown_Jeffrey_R) May 22, 2014
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?