I would like to make an exception to the article on life annuities by Jonathan Chevreau which appeared on Tuesday June 8th, 2010 “Doing The Math on Annuities“.
He says at one point, that you are “forfeiting the capital” but the facts disagree with that. Whether it is RRSP money or just savings you are using to buy the life annuity, it is your money, you saved it and you’re entitled to use it. You trade the capital to give yourself income which you enjoy.
Otherwise, why bother saving? You could leave it in the bank and just spend it gradually, but the life annuity gives a greater income which is guaranteed for your lifetime.