Annuities Make Sense For Retirees

With the markets generally going higher over the last twenty years, a valuable financial planning tool that has all but been forgotten is the Life Annuity.

After the recent declines of the market, it is important that retirees maintain their cash flow without undue risk. Annuities can accomplish this as they are in simplicity a pension plan that provides a guaranteed income for life.

With life expectancy anticipated to rise over time, more and more people will begin to outlive their capital which makes this an even more valuable tool.

Annuities can be based on a single life or a joint basis where an insurance company will continue to pay an income as long as one spouse is alive. Guarantees for 5 years, 10 years, 15 years and even guarantees up to age 90 are available to protect your estate in the event that you pass on early.

A 65 year old male can expect to receive about 7.5% per year on a life annuity with a 10 year guarantee. If the funds are non-registered, very little of this income is taxable as the 7.5% rate is a blend of capital and interest.

A 70 year old male can expect payments of about 8.5% with a 10 year guarantee. It is important to consider this opportunity when RRIF payments start going up and capital begins to get depleted.

For more information or comments, please dont hesitate to reply to the blog.


Bank of Canada May Be Right in Forecast

Bank of Canada Governor, Mark Carney, projected a difficult 2009 but surprised many in the media with his forecast of 4% growth in 2010.

With the media focusing on job losses and corporate profits falling. you wouldn’t think that their is any light at the end of the tunnel. Interest rates, however, are close to zero.

The economic stimulus packages that are being put forward around the world will have some positive impact but it does take some time to work through the system.

Demand for housing in the US showed its first increase in many many months but the signs are there that all of the monetary and fiscal policies put forward will kick into gear at the same time allowing for some pretty impressive growth next year.

What are your thoughts? Do you think the Bank of Canada is off base or do they have a case for economic growth in 2010?

Corporate Bond Spreads Improving

Canadian Corporate bond rates are coming down, prices are going up which could signal better times for the stock market in weeks to come.  With yields in excess of 8% on longer term maturities of investment grade companies, investors are finding them hard to ignore. Yields on these bonds were less than 5% a little over a year ago.

Preferred shares which were yielding in the 8% – 9.25% just a month ago have gone up in price more than 25% bringing yields into the low 7% range.

Another sign of improvement is the lower rates on long-term mortgages as can be seen by clicking the link to the following article indicating that mortgage refinances in the US are going through the roof which will free up some cash for the currently strapped consumer.

What are your thoughts on this? Will these lower rates bring investors back into the stock market or do we have a long wait ahead of us?

BioMS Gaining Traction

BioMS, an Edmonton, Alberta based biotech company working on a treatment for Multiple Sclerosis has seen its stock double from its lows of October 30th when the stock traded at $1.95. 

BioMS (T-MS), is nearing completion of phase 3 trials that it has been conducting in North America and Europe. The company was a spin off out of the University of Alberta’s Research department many years ago.

We have been following this story for the greater part of 5 years and the author does own a position in the company. 

The stock really started to move as Bloomberg published an article on the company last week. I have attached a link below to the article.

While I am optimistic on the longer term prospects of the company, it is important to note that there has been downward pressure on the stock each time it trades close to $4.00. The company has raised money several times in the past and each time has issued warrants exercisable at $4.00.

Once the overhang on the $4.00 price has been traded out, the stock could see higher pricing in the future.  If you are looking for a Canadian biotech stock to own and there arent many, this is one you may want to consider.