What is a Life Annuity?
A life-contingent annuity provides an individual with guaranteed income payments for his or her life or, in some cases, for his or her life and that of another person such as a spouse. This means that no matter how long an individual lives, annuity payments will continue to be paid. Life annuities are typically purchased with a “guarantee period” of some duration, such as 10 years. This assures that payments will continue for the longer of the individual’s life or the guarantee period.
A life annuity provides you with a series of payments in return for a lump sum paid up front. A lump sum of money is transferred directly from your pension plan, LIRA or RRIF to a life insurance company to purchase an annuity. In return, the issuer pays you an annuity on a regular basis (monthly, quarterly, semi-annually, or annually) for the remainder of your life. Where can I purchase a life annuity? The life annuity may be purchased from a life insurance company licensed in any jurisdiction in Canada to carry on life insurance business. How much will I receive? The amount of your payment is based on the amount of the lump sum, your age (and that of your spouse if applicable), the survivor benefits you choose and the annuity rate in effect at the time of transfer. The annuity rate reflects the insurance company’s expectations of the rate of return on its assets. The amount will vary by insurance company. It pays to ask for a quotation from several insurance companies. Will an insuran
In this day and age, it’s full-time work that makes the world go around. It’s next to impossible to survive – and succeed – without having a full-time job. So how do you plan for your retirement years, when you can no longer, or no longer want to, work a full-time job? One answer is to invest in a life annuity. A life annuity is a fund that you contribute to during your working years, while you have a steady and reliable income. The advantage to investing in a life annuity, instead of just saving the money yourself, is two-fold: your investment grows according to the interest rates the life annuity offers, and the money is tax-free until it is withdrawn from the life annuity. The funds in a life annuity will not be taxed until you retire and start getting payouts, at which time it is considered income and is taxed as such. A life annuity enables people to plan their retirement. Once you retire and start getting payouts from your life annuity, you’ll get monthly checks for the same amou
