Anytime we talk about annuities with retirees we hear the same response over 80% of the time. "Why haven't I heard more about annuities before?"
Through some research and over 25 years in the financial services industry, we’ve broken it down to 7 possibilities:
Ask yourself this question:
"Have I been receiving the kind of service I deserve from my bank and my investment advisor?"
If you answered yes-that’s great, it should be that way. If you answered no, then try this little experiment. Try pulling your money out of these places and watch how quickly they contact you and finally start paying attention to you. I personally know many retirees or soon to be retirees who have never received a call form their bank for several years to advise them of market conditions that could affect their investment and retirement portfolios. Only until their bank receives a transfer form by a competitor to transfer their funds out to another financial institution, will they contact you. It’s an easy experiment send them a transfer form and they will call you. Then they’ll tell you to hang in there and wait for you funds to go back up. Or they’ll tell you to transfer your money into one of their "new funds" that should quickly get you the money back that you lost with them. They offer no other solution. What else can they say, when the goal is simply to have a lot of money in their accounts to keep up the hefty commission cheques.
Other’s would have you buy risky stocks to make a buy and sell commission every time you make a transaction. How many phone calls have you received lately from your stock broker telling you about a new stock with loads of potential? Only to find out later that your stock tanked. Your stock broker still makes his commission regardless.
The bottom line is if your investment advisor or banker cannot offer you insurance products to protect your investments and make a commission on them, then you won’t have an annuity as an option to supplement your guaranteed pension income.
They’ll give you all sorts of reasons why annuities are a lousy investment, yet annuities have a long successful history dating back to Roman Times (the word annuity comes from the the Latin word anum- meaning year or annual)
Annuities have been around so long because they work!
Simply put, an annuity is a guaranteed and steady stream of income payments you receive in exchange for a lump sum of cash. Most annuities are purchased by retirees or soon to be retirees. They have a distinct tax advantage if purchased with non-registered money.
Annuities are a simple, guaranteed investment that has withstood the test of time. Today, annuities are increasing in popularity simply because they are very beneficial for investors, especially seniors, who need a guaranteed income they can never out-live!
Annuities are also among the safest investments around because they are financially backed by Canada’s insurance companies, which in turn are backed by an organization called Assuris (www.assuris.ca). Assuris is the not for profit organization that protects Canadian policyholders in the event that their member life insurance company should fail.
Assuris' has a monthly income protection for annuities. If your life insurance company fails, your payout annuity policy will be transferred to a solvent company. On transfer, Assuris guarantees that you will retain up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher. Assuris is funded by the life insurance industry and endorsed by the Canadian government.
It’s hard to imagine what drawbacks there would be for anyone who is retiring, who would not like to have guaranteed income for the rest of their life? A plan that will allow them to retire regardless of market conditions.
Are there any disadvantages to an annuity?
Sure, you are entering into a contract that is non-cancellable. You are basically giving up your capital for a guaranteed income stream. There is a possibility you end up choosing the wrong type of annuity with the wrong guarantees. An experienced and savvy annuity agent can help you here.
Should you put all your money in an annuity?
Of course not! But they are an excellent insurance vehicle useful in any retirement plan. They can help prevent depletion of your capital through sale of other assets.
Annuities should be a part of your overall investment strategy,
an excellent way to diversify your guaranteed income portfolio.
Don’t put all your "eggs" in the GIC and Bond basket!
Ask yourself why you have not investigated annuity accounts before. Was it because of what you know, or think you know? If you’re unsure then it may be worth learning more about annuities. The banking and investment industry may be getting more media exposure but annuity owners in the last ten years have won the battle of asset preservation. They have protected their principal and have received above average returns with zero risk.
In your working years you try to maximize your income. When you finally retire you want to preserve your savings and try to make it last the rest of your life. An annuity converts your retirement savings to a pension. Then it becomes easier for retirees to adjust to retirement since they know that their annuity income will cover their expenses. Take a good look at your personal situation and try to answer these questions.
Q. What are my living expenses during retirement?
You want to cover all your living expenses with a guaranteed income you cannot outlive. Identify all your sources of income including your Old Age Security (OAS) and Canada Pension Plans (CPP). Jot down all your expenses and see how much you need to spend. Then just top up your guaranteed income with guaranteed annuity.
Q. I don’t have a retirement pension from work. Should I use an annuity to build my own pension plan?
There are many retirees out there that do not have the benefit of a company pension plan. Take a look at your assets be it capital or liquid and determine if these assets can be converted into a monthly pension plan using a life annuity. If you are concerned about not being able to pass on your asset to your loved ones if you liquidate for the annuity, not a problem, buy a life insurance policy (if you qualify) to replace that asset. Build your pension plan with your savings.
Q. How much risk am I willing to take to receive a higher pension amount?
Know your "risk tolerance". If the stock market takes another crash, are you willing to wait for a correction? More importantly, can you wait for a correction to re-coup your lost principal? Retirees have less time to get back what they lost compared to a younger investor. If you find yourself loosing sleep and worrying about market conditions then consider an annuity because it is an insured investment that can protect you from some of the risks of investing in stocks and mutual funds. Don’t forget more safety could mean smaller gains. Some risk may be worth taking to diversify your portfolio.
Q. How long will I live?
If we had the answer to this question then investing and planning for your future would be easy. Unfortunately, we do not know the answer, but we should count on living longer instead of assuming we will die younger. Annuities can help to extend retirement funding. If you are married or with a female partner understand that on average women live longer than men, the risk for women to outlive their money is higher. That's why many couples consider joint and last survivor life annuities.
Q. Will inflation be a problem I the future?
The rising cost of living is always a concern. Look for an annuity with an inflation indexed rider attached to it. If you choose the inflation rider, your initial payout will be less than an annuity with no inflation rider.
Q. What if I am presently in poor health?
Poor health could mean you qualify for an impaired annuity. Impaired annuities have a higher payout because your life expectancy is lower.
When it comes to buying an annuity not all companies are created equally. Each insurer calculates their own annuity rates using the following criteria:
Some companies will offer better rates in certain age and gender classes. Other companies will offer better joint-life, single life, and/or term certain rates. That’s why when you purchase an annuity it is vital to shop the market. You want to get the best return for your dollar.
Once you purchase an annuity there is no turning back. It's important for you shop the market and see which companies are offering the highest income for your individual needs. That's what we do!
To receive your free personalized annuity income comparison, simply fill out the form.
Once we receive this information we shop the market for the best annuity rates from highly rated Canadian Insurance companies backed by the Assuris guarantee. Once that is done we will give you the results.
For immediate help call us at 416-880-8552 with your questions or concerns.
You will be able to see for yourself the best rates of highly rated Canadian annuity providers.
It costs you NOTHING for this service. What have you got to loose?
We will shop the market for the best rates out there, and give you the results. Get Quote NOW and find out why so many retirees have stopped looking in the financial section of the newspaper to see how their retirement plan is doing?