An Annuity for Retirement

All at Once or Bit by Bit?

Retirees Jill and Dave

Jill, 65, and Dave, 67, are both active retirees. They’re also good friends, meeting regularly at their Montreal bridge club or just for coffee in town. While there’s no shortage of things to talk about, every once in a while the conversation turns to the financial aspects of retirement planning. Not that either Jill or Dave has much to worry about. Both of them opted to buy life annuities and benefit from the life-long income that the annuities generate for them. They each did it their own way however, which leads to some friendly discussion and a bit of harmless ribbing along the way.

Planning for Future Expenses

Dave bought his annuity a few years back. “I wanted to make sure that on top of my pension I’d have the income to give me a reasonable retirement. I wasn’t planning on giving up my vacations or other leisure activities, and even if I’d paid off my house a while back, I knew I was going to have certain lifestyle outgoings for some time to come. My retirement income had to cover that without being stretched.”

Getting Set Up for Life

Dave’s decision was to use a lump sum he got when he stopped working to buy a life annuity, which guarantees him regular income for the rest of his days. “I looked at other options, like the term certain annuity, but I feel in such good health that I think I’ll last till I’m 100!” Indeed, the term certain annuity would have provided bigger regular income payments, but only for a fixed period. Dave’s decision to buy the life annuity was determined by his wish to make sure he wouldn’t outlive his financial resources.

Dave’s point of view about annuities is basically:

A life annuity guarantees him regular income until he dies

He doesn’t have to worry about making investments that may or may not work out financially

He’s unlikely to have any further major capital outlays, so he can afford to buy a bigger life annuity and receive more monthly income.

Flexibility and Family

Jill on the other hand took a different approach in her purchase of a life annuity – or rather, her life annuities, because she bought one after her husband died, and then another one about five years afterwards. She has also children who are now grown-up with children of their own. “My family has always been the most important thing in my life. While I know I need to make sure that I’ll have enough to live on, I also want to be able to contribute financially when those special occasions come along, like my daughter and her husband buying a house, or the birth of a new grandchild.”

Getting the Right Retirement Mix

With this in mind, Jill has kept some of her funds in low risk investments like government bonds that she can cash in if she needs to. “I like annuities; so I’ve used some of my funds to make sure I have regular income, with the two life annuities I’ve bought, while keeping other funds available to pass on to my children.”

Jill’s thinking about annuities is:

She can build up regular income by buying life annuities at intervals, leaving her flexibility in how she uses her capital

She can make the most of favorable interest rates by timing each new increment in regular retirement income accordingly

If she decides to buy another life annuity, she will get a proportionately bigger regular income than the one before, because she’s now older and her life expectancy has changed.

Dave laughs. “Jill, buy your other annuity now and get set up for life, like me! You’re not really going to spend the rest of your life poring over interest rates, are you?” Jill smiles good-naturedly. “Dave, if it takes me a little extra effort to optimize my income and still have something I can leave to my children and my grandchildren, then I’m happy to do the work!”

If either Dave’s or Jill’s situation sounds familiar and you’d like to know more about your own retirement options with an annuity, then call us today at 877-842-3863 for a friendly, open discussion free of charge.