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A Lifetime Annuity is a good option for retirees who wish to increase their guaranteed income.
Income from an Annuity (specifically those purchased with non-registered funds) is taxed substantially less than regular investment income (GICs, mutual funds, segregated funds, etc). This makes a non-registered Annuity a valuable tax-reduction strategy in retirement. Annuity income (after age 65) also qualifies for the pension credit, which again reduces tax.
Key Reasons to Buy an Annuity
- To ensure you don’t outlive your savings
- To give peace of mind in volatile fund markets
- To lower your taxes without lowering your income
- To preserve government benefits (reduce OAS clawbacks)
- Provide lifetime income for a spouse (with a Joint Life Annuity)
- To fund insurance premiums for Legacy Protection
- To make a charitable gift
Annuity payout values vary from company to company, and from day to day. It is important to work with a broker who will compare policies for you and get you the best return for your investment.
At Ottawa Asset Management, we review your goals and needs and help you to decide how to structure your income to provide peace of mind and lifetime income.
We work with all the major Canadian providers of Life Annuities to find you the best rates for your policy.
Call us today, or book an appointment online, for a free quote or consultation.
What is a Life Annuity?
A Life Annuity is a pension plan that you create for yourself, that guarantees regular payments for as long as you live. It is an insurance product, so is only available through insurance companies.
You purchase an annuity with a portion of your investment savings. Then, based on interest rates, and mortality credits, you receive a series of regular payments. Selecting a guaranteed period (eg, 10 or 15 years) ensures that if you die before the end of the guarantee period, your beneficiary or estate will receive the remaining payments until the guarantee period is over. You can also select a Joint and Last Survivor Annuity. This guarantees payments for as long as either you or your spouse is alive.
If you buy an annuity with registered funds such as RRSPs, the payments are fully taxable because your contributions to your RRSP were tax deductible. If you buy an annuity with non-registered funds, only the interest portion of your income payments is taxable (because you already paid tax on the principal when you earned the income). In this case, the tax is spread evenly over the lifetime of the annuity and significantly reduces the amount of taxable income that you declare.