The annuity video below, the point of which seems to escape a lot of retirees who are setting up a retirement plan.
If you intend to use annuities in your retirement plan, you need to consider various factors.
Firstly RRSP money, whether turned into a RRIF or annuity is for the enjoyment of the participants alone. The balance of any RRIF or annuity payments is taxed as a lump sum at the death of the last annuitant,so any benefit for heirs is questionable.
Age is the bigger factor, more than the long term interest rate of approx 4% mentioned, for those at a later retirement age. If you are waiting for the returns to increase,you might be waiting for a long time.The US is holding rates low and the world seems to be slowing down.
But you are aging and you need to calculate that cost of waiting as you have to make up for lost income and lost enjoyment of the funds you have saved.At some point,and this is the tricky part,you have to pull the trigger. Don’t be the person who buys a stock, watches it going down but every day resolves to sell until the stock disappears entirely.
Using annuities in your retirement plan is just smart. The annuity payments are guaranteed forever;you get a higher return;you don’t have to worry about the stock market etc, etc.
And if you don’t buy the annuity, where are you going to invest the capital that will give you at least the same return and income guarantees for your retirement plan?