Using A Life Annuity For Peace Of Mind In Retirement

Using A Life Annuity For Peace Of Mind In Retirement

You want to make your retirement as good as it can possibly be, relaxing in your favorite spots and no longer having to worry about going to work. But sitting back and doing nothing isn’t the way to go. The sooner you take some action and get preparing for retirement the better. Even if the action you take is to simply learn a bit more about how to prepare for retirement.

In this article, we’re going to talk about how you can prepare for retirement financially. (We’re not going to tell you how you should spend your time or suggest places to holiday when you find yourself with tonnes of free time.)

There actually happens to be a lot of things you can do to start preparing for your retirement - and you don’t have to wait until you’re nearly there to make a start.

There are 3 main ways to go, and they are:

• Pay off debt and build your savings
• Build up your pension plan
• Buy an annuity

This article is going to concentrate on these 3 particular methods, but we will concentrate more on annuities because we think that buying a life annuity is the method that not only brings the most benefit, but also brings the most peace of mind.

Looking after your money before you retire

When it comes to looking after your money, many people take the view “Well you can’t take it with you”. However, if you are in good physical health, there’s no reason to assume that you cannot live a good long life, AND have a good, long retirement.

The more money you have to retire with, the better. If you have a pension plan set up, then the maximum amount of regular income you will receive from it won’t be any more than the salary you make just before you hit retirement.

And if you’re thinking “Well that doesn’t sound so bad”, remember, the cost of living in Canada will only increase as the prices on your purchases increase.

Preparing well for retirement starts with getting yourself financially healthy before you retire. And of course, you probably don’t need us to tell you that you should (a) pay off your debts as best you can, even if it means taking out another loan to consolidate your debts, and (b) save as much money as you can, for example by making sure your monthly bills are as low as they can be.

When we speak about paying off your debts before you retire, this includes your most expensive purchases. For example if you’re paying a mortgage, you should really aim to have it paid off in full before you retire. Your mortgage is your most costly bill, and once that money is freed up, you’ll have a lot more disposable income to play around with. The same goes for any vehicles you might have, although you may still want to renew your vehicle a number of times during your retirement.

Pension Plans

The next element of financial planning for retirement is to have a good pension plan, whether public or private.

Basically, Canada has three main types of pension plans to choose from, a Defined Benefit Pension Plan, a Defined Contribution Pension Plan, and a Group Registered Retirement Savings Plan. All of these plans come with advantages and disadvantages, and it is up to you to do your homework, and ascertain which of these three options best suits your needs and your financial goals.

Annuities

One of the most popular ways to financially prepare for your retirement in Canada is to buy a life annuity. And it’s popular for a very good reason.

Just as there are different types of pension plan to consider, there are also different types of annuities. These include life annuities, joint life annuities, fixed term annuities, variable annuities and term certain annuities.

An annuity is a financial product that you buy from an insurance company to give you a guaranteed stable and regular income during your retirement and until your death.

You buy an annuity in one lump sum and we’re going to concentrate on fixed term annuities, variable annuities, and life annuities.

The way that an annuity works is that, the money you have paid into the annuity is carefully invested and it is from this investment and growth, that the insurance company pays this money back to you.

If you would like to learn a little more about how an annuity actually works, then you can check out our article entitled How Does An Annuity Work.

• Click Here To Find Out How Much An Annuity Will Cost

Types of Annuities

With a fixed term annuity, as the name suggests, you will receive a guaranteed regular over a set period of time. And your beneficiaries will inherit any remaining guaranteed payments if you die.

A variable annuity is different. With a variable annuity, you have greater freedom to choose exactly how your annuity payment is invested. In this set up the amount of money that you earn from your investments is going to depend on how well they perform.

Variable annuities come with a greater element of risk. On the one hand your investments could do well and you will see some considerable growth from your investments, or the investments might not do as well.

Variable annuities will sound good to some. But many people who want to financially prepare for retirement tend to be looking for peace of mind rather than an investment, and that’s where life annuities come in to save the day.

A life annuity is one whereby you have a guaranteed lifetime regular income throughout your entire retirement, right up until the day you pass away.

We think life annuities are a great idea, and one that will give you the most peace of mind for your retirement. Life annuities are a great way to supplement your income during your retirement, particularly if you haven’t got yourself a particularly good pension plan.

If you’re in good health, there’s no reason why you won’t live a long life. You don’t want to outlive your money, and you need the reassurance that you can live as comfortably as possible right throughout your retirement years. And can you really put a price on such financial security? We don’t think so.

And a life annuity isn’t just about you. If there’s guaranteed income left at the time of your passing, then you can arrange for this money to be paid to a specified beneficiary.

For more information on life annuities, please see our other article entitled What Is A Life Annuity.

• Click Here To Find Out How Much An Annuity Will Cost