RBC Payout Annuities: Stability, Tax and Estate Planning

The prospect of retirement can be a source of concern for many Canadians. In these uncertain times, individuals seek financial solutions that can offer stability and a guaranteed income stream throughout their post-career years. RBC payout annuities emerge as a beacon of financial security, not only assuring a steady income but also presenting advantageous tax and estate planning benefits.

Payout annuities prove to be an ideal choice for those who harbor apprehensions about market volatility. Unlike investments tied to market performance, the income derived from a payout annuity remains steadfastly guaranteed for the entirety of the contract’s duration, impervious to the ebb and flow of market conditions or interest rate fluctuations. By converting a lump sum of capital into an annuity, Canadians can unlock the potential for receiving consistent, periodic income payments throughout their retirement years.

Furthermore, payout annuities address the legitimate concern of outliving one’s financial resources. Both single life and joint life payout annuities offer the assurance of lifelong payments, providing invaluable peace of mind to retirees. Additionally, a payout annuity serves as an ideal mechanism to bridge the financial gap between the cessation of active employment and the commencement of full monthly pension disbursements.

For those with a keen eye on tax efficiency, RBC® Payout Annuities present a strategic advantage. In the realm of non-registered contracts, the taxation of all RBC® Payout Annuities follows a prescribed basis. This astute approach results in a balanced distribution of tax liability, evenly spread over the duration of the contract. What’s more, income derived from payout annuities qualifies as eligible pension income for the coveted $2,000 pension income tax credit, thereby potentially reducing federal tax obligations. Moreover, the income from payout annuities is eligible for pension income splitting. This empowering provision allows a higher-earning spouse to transfer up to 50% of taxable pension income to a lower-income spouse, effectively offsetting the household tax burden.

Beyond personal financial security, RBC payout annuities also extend their benefits to estate planning. Opting for a minimum guarantee period ensures that income payments persist for a surviving spouse holding a joint life annuity. In addition, provisions exist for payments to continue for a named beneficiary or to be received as a lump sum commuted value, providing valuable flexibility in planning for the financial security of loved ones.

Alarming statistics reveal that nearly 60% of Canadians lack the safeguard of a workplace pension plan. In light of this, an RBC Payout Annuity emerges as a compelling solution, offering a comprehensive package of stability, tax advantages, and estate planning opportunities, all crucial elements for a secure and worry-free retirement. Embracing the security of an RBC Payout Annuity can transform apprehensions about retirement into a confident stride towards financial well-being.

Contact us today to learn more.