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How does a payout annuity work?
Key advantages and who they're suited for?
By Ivon T Hughes
Who's most suited for payout annuities?
People nearing retirement
Early retirees who want more income until OAS begins
Clients who must convert RRSP funds to an income stream
Retirees with limited financial management experience
People desiring an income stream to cover specific fixed expenses
Anyone advising/managing finances for elderly parents
Anyone concerned about outliving their retirement savings
Key advantages of payout annuities
Provide a regular income stream for retirement or fund a major expense (e.g. mortgage, ongoing healthcare, vacation, etc.)
Payments will continue, unchanged, for life or the designated term regardless of interest rate fluctuations
As part of a diversified retirement income plan, annuities reduce risk, add stability
Ideal to top-up retirement income
Annuities can create personal pension plans for those without pension plans
Annuities can be integral to estate planning (i.e. death benefit guarantees, appointment of beneficiary to avoid probate, if any and create potential creditor protection1, etc.)
Suitable for investors who can’t or don’t want to actively manage part of or all of their capital
No one knows how long they will live, and with a life annuity, your clients can never outlive their money. Joint life annuities can also protect their spouse’s income
Cashable feature with non-registered accrual annuities allows clients access to cash
About the Author
Ivon T. Hughes
Ivon T Hughes is a leading expert in life annuities in Canada. His website LifeAnnuities.com is a recognized authority on annuities. He's also an established insurance and investment broker, through The Hughes Trustco Group since 1972. Recently, he's been redefining how annuities are sold in Canada.