Annuities

Annuities are a form of insurance contract that puts aside money for your retirement. The concept of an annuity, is that you give the insurance company a lump sum payment or even pay monthly payments until you build up a lump sum, in which the insurance company then uses in order to pay you an annuity payment. The frequency of these payments can be monthly, quarterly, semi-annual or yearly. There are several different kinds of annuity products depending on the insurance company you choose to invest with. However, the two most common and well known form of annuities are Term Certain Annuity, otherwise known as annuity certain, and the second most common product is a Life Annuity.

Annuity Certain

This form of annuity is set for a certain amount of years. You get to set up this criteria at the beginning of the policy. This is also based on the type of investment you use for your annuity, for example, if you fund an annuity with RRSP’s, then your annuity payments will carry on until you reach the age of 90. If you pass away before your annuity payments have been paid up, then your beneficiary or your estate (if no beneficiary is selected or alive) will receive the remainder of your annuity in the form of a lump sum.

The same thing is said for an annuity funded by a RRIF, payments will also carry on until you reach the age of 90. If there are any outstanding payments at the time of your passing, a lump sum shall be deposited into your estate, or given to your beneficiary if one has been chosen.

Other forms of acceptable investments:

You can also fund your annuity with non-registered funds as well as a deferred profit sharing plan (DPSP)

Minimum age to purchase annuities:

If you choose to invest using non-registered funds, policies can be setup for a new born. This provides flexibility as a policy can be issued for anyone between the age of 0 to 100 (restrictions may apply depending on the insurance company)

If you choose to invest using registered funds, than the minimum age for a policy holder would be 18 years of age.

Life Annuity

This form of annuity guarantees that you get set payments for life. It doesn’t matter how your money gets invested, your annuity payments will be guaranteed for life. Payments can also be made on a monthly, quarterly, semi-monthly and annual basis.

It is possible to fund your life annuity with through the following types of investments:

• Non-registered funds
• Registered retirement savings plan (RRSP)
• Locked-in retirement account (LIRA)
• Registered retirement income fund (RRIF)
• Deferred profit sharing plan (DPSP)
• Life income fund (LIF)

An annuity is a great way to make sure that you have enough funds for retirement. There are several benefits to purchasing annuities, a Team Levine specialist will be happy to help you explore these benefits. Give us a call today, and we’ll help you decide if this is the right product for you!