After we blogged on deferred annuities or, as now popularly called, longevity insurance, we started getting emails about the wisdom of such a product given the low interest rates, high taxes, volatile stock market and the state of the world’s political situation.
Well we think we have a better idea, a solution we found for a client with a specific income problem.
Instead of falling income, increase it! You’re possibly familiar with group pensions , where the income can be dropped by 60% at the first death. Up to now this often was not available for non registered or RRSP funds. And it is still not generally available and certainly not from all the companies. In fact I am told that it will not be offered due to the lack of demand. But it will still may be what you need.
If you increase the payments now, say for a specific period, you can use the time and income to establish yourself as you commence your retirement. Then, when possibly a government or company pension kicks in, the decreased income from your life annuity will not have a profound effect, if at all, on your standard of living.
There are many ways to cut this cake and you need to keep your mind open as to what type of life annuity you should buy.