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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.


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