Buy Now or Buy Later?

Good afternoon everyone,

We are often asked about the best age to buy an annuity and today we are going to give you some information which should help you to decide.

People want to receive the highest income and to meet that request we give you quotes from all the companies, along with various guarantee periods.

But timing is also important; do we buy now or later? If we buy now, our monthly income will be less but will waiting improve our position? This is answered by comparing a “DO-IT-NOW” quote with a “DO-IT-LATER” quote. If it takes too many years to make up the forsaken income, you have your answer.


Well consider this. If interest rates across the yield curve increased (say by 2%) the impact on annuity incomes would be more significant for younger ages than for older ages. Considering the time value of money, a company will have the ability to earn higher yields for the younger clients for longer periods of time. For older clients the amount of time is shorter to take advantage of the higher yields.

If a company sells an annuity to a 80 year old, on average it doesn’t expect to pay income for that long a period. There is less time to take advantage of a possible increase in interest rates, especially when you consider most of the client’s deposit is being paid back faster than to a younger person.

For these older clients, mortality credits play a big role in the value they receive from an annuity, For younger clients it is more a combination of interest rates and mortality credits that provide the annuity value.


Here is a link to the Financial Post with information from Statistics Canada on that exact question

Our position remains the same. Only the RRSP holder and spouse can take advantage of the continuing income tax protection. When the RRSP holder or spouse passes away, there is no more tax protection.

And in most cases these days, a non registered annuity, is a replacement for a defined benefit pension.

But a DO-IT-NOW and a DO-IT-LATER quote will answer that question for you. In this context; Waiting is hoping!



My comments on “Buying a prescribed annuity?” by Rob Carrick of the Globe and Mail

Rob Carrick has written another helpful article on prescribed annuities, this time specifically on non-registered annuities.

Yes, it’s come time to make up your mind on whether you want your retirement savings to be both guaranteed and remunerative, while paying less taxes.

A non-registered annuity increases your monthly income and reduces your income tax on that capital. If you are concerned about market volatility and low interest rates which could guarantee losing not only capital but income,then this is the way to go. Rob introduces several examples but as usual, you need to get your own figures to see if this product is for you and your family.



Should you consider an annuity?

My comments to “Should you consider an annuity?” by Kevin Press at

Mr Press has emphasized perhaps the most important element in the purchase of annuities today.

As the largest seller of life annuities in Canada, in which we specialize at, we find that that most people seem to believe that it is 1-5 year GIC rates which set the scenario for the payouts which is not true at all.

And even if long term bond rates do rise,there is still no guarantee that annuity rates will go up. And of course you are getting older and losing time to enjoy the income.You might want to read ” Retirement Income; income that lasts a lifetime ” which you can find here. Hopefully it will give you some ideas.


10 Easy Steps On How To Buy An Annuity?

1. Ask an annuity broker
Ask an annuity broker to find the best deal for you by shopping around to compare annuity rates from all the insurance companies that sell annuities in Canada.

2. Decide on the type of annuity that fits your needs.
a. Single life annuity
b. Joint life annuity
c. Term certain annuity

3. Fund type
a. Are the funds from a non-registered account (savings, chequing, TFSA or GIC)
b. Are the funds from a registered account (RRSP, RRIF or RPP)

4. Premium amount
The amount of funds you are willing to invest in the annuity.

5. Payment frequency
When would you like to receive the payments (monthly, quarterly, semi-annual, annually)

6. Decide on the extra options you want
a. Guarantee period (none, 5yr, 10yr, 15yr, 20yr or maximum available) Provides you with income for life, plus guarantees X years of payments to your beneficiary in case you die within the first X years of your contract.

b. Indexing option
Payments increase with inflation to maintain your buying power

7. Purchase date
The date when you would like to buy the annuity

8. Start date
The date when you want the annuity payments to start. The norm is usually month after the purchase.

9. Signed Application, Copy of ID, Void cheque, Cheque  (for non-registered funds) or Transfer form (for registered funds)
The following documents are then sent to the insurance company by the agent or broker for the annuity contract to be issued.

10. Annuity Contract
The contract is then sent to the annuitant and the income payments are deposited into your account.


Buy BMO Annuity Products

BMO Insurance

About BMO Insurance Company of Canada

Effective April 2009, AIG Life Insurance Company of Canada was acquired by BMO Financial Group and changed its name to BMO Life Assurance Company. It is no longer affiliated with American International Group, Inc.

BMO Financial Group is a highly diversified North American financial services organization that provides a broad range of retail banking, wealth management, and investment banking products and solutions to more than seven million clients and customers across Canada. BMO offers a range of innovative and easy-to-understand insurance solutions that includes: life and disability insurance on mortgages, loans and lines of credit; MasterCard Outstanding Balance insurance; DirectTerm life insurance; Personal Accident Protection, critical illness, and travel insurance. BMO Nesbitt Burns and its predecessor companies have been helping investors meet their financial goals since 1912. Read more about BMO Insurance.

Product name: single premium immediate annuities

Issue ages: Life and term certain non-registered funds  18 – 80

Types of annuities: single life annuity, joint life annuity, term certain annuity

Rate guarantee: non-registered 7 days, registered 45  days

Guarantee period: up to 25 years maximum

Premium: minimum $10,000 , maximum $2,000,000

BMO Quote: BMO Insurance Annuity Quote

BMO Calculator: BMO Annuity Calculator


Why you should think about buying an annuity at age 75

“What’s the benefit of waiting until 75 and how much of a penalty in returns is there with an annuity?”

Below are my comments to The Globe and Mail Video: Why you should think about buying an annuity at age 75

Well, here we go again with someone who does not deal with the man on the street and does not understand the questions involved.

Most clients are not fancy pants people with large corporate pensions and multiple sources of income.but working men and women with jobs and small businesses.

Your interviewee proposes that waiting to 75, which is beyond life expectancy, to take an annuity is a good idea! Why not wait longer?

Very few people who are not active in financial firms have any good knowledge of markets,probabilities and financial products in general.They want a guaranteed income,without the fluctuations of the stock market or interest rates.

And my clients will be interested to hear that people were not buying annuities 15 years ago;this is just nonsense.Interest rates were higher but that is not why they were buying.They were buying guaranteed income,the same as today.

There are more important factors than interest rates,when deciding if and when to buy.Increasing longevity,your health,financial need and your own ages are just some of them.

Buying an annuity is personal, not a one-size-fits-all, product.