Taking the Risk out of Retirement Income

Avoid risking your retirement income

By Ivon T Hughes
taking the risk out of retirement income
Figure 1. Taking the Risk out of Retirement Income

What is the one thing most seniors want to avoid?

If there is one thing that most seniors want to avoid, it’s risk to their retirement income. Even if higher risk brings higher reward, by the time people get to retirement age, most would rather have steady, reliable income that comfortably covers their expenses. They also want the assurance they won’t outlive their resources. The Canada Pension Plan (CPP) and the Old Age Security (OAS) program provide a modest base for retirement income. But what are your options if you want to receive a higher level of regular income that you can depend on, month in and month out?

The Need for a Reliable Solution

Mike has been catching up on financial events and economic trends in the newspaper and thinking about how they might affect his own retirement planning. ‘Life is a risky business, however you look at it!’ he exclaims. ‘But putting your money under the mattress and hoping you’ll have enough to last is no answer either. You have to find something else to do with your money that is at least reasonably certain – preferably something that gives you a known return that is guaranteed and secure.’

An Annuity for Guaranteed Income

Mike also thinks he has a good answer to the problem. He’s increased his monthly retirement income by buying an annuity. More precisely, he’s purchased a joint lifetime annuity that pays out fixed monthly income for him and his wife, Jan. The annuity will also continue to pay out the income if one of them dies. ‘We’re covered for the rest of our lives,’ explains Mike.

Jan adds, ‘We’ve always followed current affairs. For one thing, it’s good to know what’s going on in the country and in the world. But as we got to about the mid-career stage, it was becoming increasingly clear that we should make sure we had revenue we could depend on in retirement, and enough of it.’ She picks up the newspaper that Mike was reading and turns to the page with the financial news. ‘Every time I see news articles about the stock market going up or down, I’m glad we took the decision to buy our annuity. We don’t have to worry about investment. Everything is done by our annuity company’.

· Mike and Jan’s annuity provides them with fixed monthly payments for as long as they live

· They don’t have to worry about investment decisions – their fixed income is guaranteed

· Their annuity also means they don’t have to worry about uncertainty in the stock market

Reliability Built In

So what makes their annuity company a safe partner for their retirement income? Firstly, any company selling annuities must be registered as such with the government. Secondly, their annuity company is also a centuries-old insurance company with the experience and the resources to carry on for another few centuries as well. And thirdly, their annuity investment is also protected by a nationwide annuity insurance fund called Assuris to which all annuity companies must subscribe.

Financial Security in Retirement

That makes a lifetime annuity with its guaranteed monthly payments a pretty safe bet, as far as Mike and Jan are concerned. ‘About the only thing that directly affects your annuity is your age’, says Mike. ‘The Canadian economy like any other is influenced by things like the rate of employment, inflation and government policies. You can buy one annuity now and others later, so that they add up to the fixed monthly income you need.’

‘Want to help me with the crossword, Mike?’ asks Jan. ‘Let’s see, the clue for one across is “an investment providing reliable fixed income and peace of mind” – seven letters, starting with an A and ending with a Y. Any guesses?’

Phil Barker

About the Author

Phil Barker

Phil Barker is a leading expert on life annuities in Canada. LifeAnnuities.com has different financial products and has been a recognized authority since 1972.

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