How does a payout annuity work?

Key advantages and who they're suited for?

By Ivon T Hughes
how does a payout annuity work?
Figure 1. Wallet

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
Ivon T Hughes

About the Author

Ivon T. Hughes

Ivon T Hughes is a leading expert on life annuities in Canada. His website LifeAnnuities.com has been a recognized authority on Canadian life annuities since 1972.

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The Hughes Trustco Group | Website: LifeAnnuities.com | Email: info@trustco.ca | Toll Free: 877-842-3863