Your retirement savings, along with your house and perhaps a company pension, are the 3 legs on which many people base their retirement income.
But increasingly there is no company pension and often there is some mortgage remaining on the house. So now your retirement savings come down to what you have been able to save in an RRSP and personal savings products such as GIC’s.
Now you are faced with the problem of providing a steady income to replace your salary to use along with your government pension. You are very concerned about using the stock market to protect your capital as as you lost capital in 2008 and just don’t trust it to preserve your capital.
Annuities May be the Answer
So you turn to the one product that the stock market and mutual fund salesmen don’t want you to buy; a life annuity. There is much misinformation about how life annuities work, so I’ll show you a simple example.
A man aged 65, with his wife aged 60 have a $100,000 in an RRSP, their retirement savings. They buy a joint life annuity whereby they guarantee, for each of them a monthly cheque until they die. It is that simple. They do not have any children or close relatives, so when the 2nd person dies, so do the payments.
If there were children to be considered a guarantee with lesser payments could be taken out until the wife turned 90. Thus if both deaths had occurred before that date, there would have been some residue from their retirement savings account.
Annuities which are based on your age, are ideal vehicles for retirement savings as they cannot be outlived.
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