A few notes on a recent article “Guaranteed retirement income, but at a price” by Rob Carrick
1. Long term interest rates have a relatively small impact on life annuities;age is the most important.
2. I have seen a large jump in sales,especially in non registered life annuities,since the 2008/2009 stock market crash.Clients just don’t want to know about losing more money if the market collapses again.
3. Macqueen is correct; you know you will receive the life annuity income for the rest of your life.You no longer have to worry about GIC rates or the market
4. Tward is incorrect. You can buy non registered life annuities which are cashable from 2 major companies, one being Canada Life.
5. Indexing is available from all major insurers; it has major setbacks however.
6. It is difficult to calculate a rate of return on a life annuity as you don,t know how long you will live.In this respect you can’t compare a GIC and a life annuity.
7. A female client, aged 89, purchased a term certain annuity in January this year,guaranteed for 25 years till 2036.She is receiving $860 a month on $160,000 and pays virtually no income tax. Compare that to getting 3% or $400 taxable GIC income.At death, the balance of the payments pass to her beneficiaries
8. The last comment in your table on indexed annuities perhaps should read “goes up as the years pass”