A life annuity pays an income for life. This solves the risk of living to a very old age and running out of money. There are several types of annuities:
Single life pure annuity:
Income stops when you die, even if you die in six months.
Single life with a minimum guaranteed period of time:
Such as life guaranteed 5 years, 10 years or 15 years, etc.
Pays an income as long as one spouse is alive. Again - there can be guaranteed periods.
Pays for a fixed period of time. This is not based on your life expectancy.
An annuity personally owned and purchased with non-registered money is called a prescribed annuity. The taxable interest portion of the annuity income is level for life, and can provide an improved after-tax income and can be purchased with guaranteed periods. Registered funds from an RRSP, RPP, locked-in RRSP or DPSP may be used to purchase annuities.
Prescribed annuity example:
A male, age 75 years uses $100,000 of non-registered money and purchases a prescribed annuity, guaranteed for life and five years in any event. Quotations vary daily with changing interest rates. This quote was dated April 9th, 2010, when interest rates were historically very low.
Monthly income for life generated 5 years = $840
Taxable portion = $97
At age 75 years, you may consider using a portion of your non-registered funds in GIC's and purchase a life annuity to increase your after-tax income.
TEN STAR is a Managing General Life Insurance Agency (MGA) with independent life insurance agents across Canada. TEN STAR subscribes to Cannex software, and as such, can shop the market for annuities.
- Low cost competitive term life insurance protects your family before you have accumulated an estate.
- Low cost term-to-100 life insurance preserves your estate.
- You work hard to build your estate - why give it to the TAXMAN?
Pick up the phone today and call 1-877-TEN-STAR to get started!