Questions and Answers on Annuities
Are you concerned about running out of money?
If your investments are not giving you a good return or you're eating up your RRIF funds, you won't have the capital to guarantee that you'll always have a cheque coming in on the 1st of the month. A life annuity guarantees you income for life. When you are older, it's too late to start saving.
How much money should you put in a life annuity?
Enough to guarantee the income you want or whatever amount with which you are comfortable.
Are you worried about leaving something to your heirs?
Leaving your heirs income from a registered life annuity is a very iffy approach to leaving something of value. At the death of the first or second annuitant any remaining payments under a guarantee are assessed at a present day value, taxed and then distributed. As we don't know when death is coming this is speculative approach at best..Using a non registered life annuity is better where your heirs can be named as beneficiaries in the policy and payments can continue for the guarantee period. But again it is not ideal. The best and cheapest way to leave money is through life insurance.
When is the best time to buy a life annuity?
Ladder your purchases by buying pieces at a time.
How are life annuities sold?
Life annuities are sold by insurance agents or brokers. Life annuities are generally available only from life insurance companies. Some banks and trust companies will tell you they sell registered annuities but usually they only have term certain annuities payable to age 90.
What if my insurance company goes bankrupt?
If your life insurance company fails, your Payout Annuity policy will be transferred to a solvent company. On transfer, Assuris guarantees that you will retain up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher. Go to www.assuris.ca to find information on insolvency.
What are the coverage limits in case the insurance company faulters?
Up to $2,000 per month or 85% of the promised Monthly Income benefit, whichever is higher. Go to www.assuris.ca to find information on insolvency.
What should I do if my annuity income is over $2000 a month?
Divide your purchase among highly rated carriers.
How can I compare quotes from all the insurance companies in Canada?
LifeAnnuities.com can help you compare and achieve the best return for your money. They compare all the companies in Canada and email you the results within 24 hours.
What is the maximum age to convert my RRSP?
What do I do with my RRSP when I turn 71?
You can convert your RRSP into a life annuity or a RRIF.
Are you concerned about outliving your money?
If you want guaranteed lifetime income consider purchasing a life annuity.
What is the simplest definition of a single immediate life annuity?
A life annuity is a swap, you provide a lump sum to an insurer, in exchange, they give you a steady stream of income for life.
How can I be protected from losing or robbed of all my life savings?
A life annuity prevents you from being stripped of all your life savings.
Why do people buy life annuities?
Concern of outliving their wealth. Life annuities provide lifetime income.
What are the disadvantages of life annuities?
The loss of investment value due to early death. The income amount is fixed. Purchasing power reduces with inflation - if an indexed annuity is not selected. Your ability to draw lump sums from your fund is gone.
Why do people transfer their RRSPs to RRIFs?
To maintain investment control of investments. At death, all remaining funds transfer to beneficiaries. People often want the freedom to spend in their early years, while they are more active.
What are the disadvantages of RRIFs?
Taking much more than the RRIF minimums may lead to running out of funds. RRIF minimum payments will, over time, lead to reduced payments. There may be a time when purchasing lifetime guaranteed income (life annuity) is the preferred choice.