With the increase in life expectancy, investors are worried about outliving their retirement assets. One of the ways to reduce the anxiety is to invest in insured annuities. It is a combination of life annuity contract and life insurance policy, purchased at the same time. The cash flow for the insurance premium and taxes are generated by the annuity.
How will annuity help during retirement?
When an insured annuity is purchased with the retirement fund, the portfolio gets a stable income flow with tax benefits. As the annuitant gets older, the payment gets larger. It also preserves capital and provides tax less transfers, to the beneficiaries. You can witness significant preferential tax treatment when non registered funds are used. The income gained is taxable and there is elimination or lowering of Old Age Security clawbacks.
There are many factors which determine the interest rate including the amount to be kept liquid, insurer’s quality, investor’s age and desires.
Wise strategy for retirement
Insured annuity is a unique product that provides both lifetime income and return of capital to the heirs. There are many variations in the rates and rules. Investors should seek help of a specialist, to understand and choose the product that suits their needs.
Date: 07 November 2013
Source: http://business.financialpost.com/2013/11/07/preserving-income-through-insured-annuities/