Turn your savings into guaranteed income for life
Canadians are living longer than ever before1. That's good news. But if you're thinking about retirement you have to ask yourself:
- Will I have enough savings to last throughout retirement?
- Will I always be able to cover my basic living expenses?
Fortunately, a payout annuity can help to answer those concerns by converting some of your savings into a guaranteed lifetime income stream. And if you're saving on your own, payout annuities are one of the best ways to get that guarantee.
How annuities work
An annuity is like a reverse life insurance policy that insures you against outliving your money. In exchange for a lump-sum premium, an insurance company - like Sun Life Assurance Company of Canada - guarantees to pay you an income for life or as long as the annuity contract specifies.
Eliminate the risk - and the worry
Once you've purchased an annuity, you never have to worry about how that money is invested or how long it will last. Payout annuity benefits include:
Receive a guaranteed income for life or for a specific period of time.
Your income will be secure from both financial market and interest rate risk.
Higher rate of income
You can receive a guaranteed rate of income that is higher than many other income generating investments.
If you use non-registered savings to buy your annuity, you could also benefit from preferential tax treatment.
Protect the basics
Government benefits are great, but when you look carefully at your retirement budget, you may be surprised at how much more income you'll need just to cover the basics - groceries, housing costs, maintenance, transportation, utilities, etc.
A strategy that's often recommended as part of our Money for Life approach is to create a solid income base to cover your basic living expenses. You can do this by putting as little as 25% of your retirement savings into a life annuity to supplement your guaranteed income from the government. With the basics covered, you'll have peace of mind to better enjoy the retirement you've earned.
See how a life annuity can help protect your lifestyle throughout retirement
Types of payout annuities
- Life annuity - provides income payments for as long as you live.
You also have the option to choose a guaranteed period. If you die before the end of that period, your beneficiary will receive a death benefit.
- Joint life annuity – provides income payments for as long as either you or your spouse/partner (or another person of your choice) is alive.
After the death of one of you, payments continue for the life of the other person.
A joint life annuity also offers a guaranteed period. If both annuitants die before the end of that period, your beneficiary will receive a death benefit.
If you are using registered pension or locked-in RRSP funds and you have a spouse, you must purchase a joint life annuity. In some cases, your spouse may waive this requirement by a signed consent.
- Term certain annuity – provides income payments for a specified period of time.
If you die before the end of the specified period of time, your beneficiary will receive a death benefit.
Now's the time for professional help
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An advisor understands how payout annuities work and can help you choose the best option for your personal circumstances.