In our practice we speak with many Canadians who have saved and/or are saving for retirement who have the common desire to have a rock solid core retirement income that's guaranteed to keep them in the lifestyle they prefer for life. Defined Benefit Plans once provided that guaranteed income but not many of us have those kinds of plans anymore. Today we need solid lasting guaranteed investments that will provide for our own retirement income. Guaranteed income for life plans offered through insurance companies just might be that perfect fit!
A few of the key features of personal guaranteed income plans such as variable annuity plans (also known as GMWB's) are:
a) investors always have access to their savings in case they need their money.
b) plans are portable when people change jobs or can be changed to something else if better options become available sometime in the future.
c) some guaranteed income plans offer an additional 5% annual income bonus during savings years. - eg. RRSP contributions (and RRSP/RRIF switches) into guaranteed income plans that are made before the end of any year would receive the entire 5% annual income bonus.
d) lifetime retirement income might not be indexed to inflation.
e) investment choices fit the risk profile of many types of investors, but not everyone.
Who are guaranteed income plans intended for?
We find that clients who integrate guaranteed for life income solutions into their financial plans tend to do so for a few of common reasons. These often include such things as:
a) peace of mind that comes from having a lifetime core of guaranteed retirement income that will enhance CPP and Old Age Security (OAS) payments.
b) to enhance existing Defined Benefit plans in order to improve guaranteed anticipated lifetime income needs.
c) avoid outliving investment income. Usually this is done by converting personal RRSP's, RRIF's and Defined Contribution plans to guaranteed income plans but it is also done through non registered savings.
d) reducing or eliminating market risk in savings years leading up to and during retirement. These are known as the retirement risk zone years when savings that will be needed for retirement income should be fully protected.
e) annual RRIF income can drop like a stone whenever there are down markets but guaranteed income plans eliminate that risk by providing a nice smooth retirement income stream.
Please contact me anytime if you have any questions. Maybe your RRSP contributions should be made before the end of the year?
Jack Bergmans
jack@bequestinsurance.ca
416.356.4511
