How does a payout annuity work?
Key advantages and who they're suited for?
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
