Sleeping beauty lay resting 100 years, and this has been the fate of Life Annuities since the 1990s. Most advisors aren’t legally licensed to discuss or offer Life Annuities. Most people are unaware how annuities can guard us from ever running out of money. As I said to a client one time, “we’ve made it legally impossible for you to ever run out of money!” So if you’re looking for the perfect “fairy tale future” you might discover that including Life Annuities alongside other investments offers a “just-right” Goldilocks portfolio ..or a famed Cinderella future. Fairy-tales aside, here are a few things you or someone dear to you, may want to know about Life Annuities.
Guaranteed for Life … Longevity
Life Annuities provide for Longevity. Living long is popular these days. You or your parents, and someday your children too, are destined to live to 85, 95, perhaps even 125. Do you have a fixed-pension for life? If not, (or if it’s grossly underfunded by your employer) then Life Annuities offer the true guarantee of Money-for-Life. This income is insured and guaranteed to pay as long as you live ….or even longer!
Far more than Interest Rates
Life Annuities aren’t just built on prevailing interest rates. People assume – wrongly – that annuity income would be like guaranteed cash deposits (GICs / CDs) but that’s not true at all. Cash deposits these days pay less than 2%. 30-year bonds are paying near 3%. Yet at 60 you can find a Life Annuity paying 6%. In our 70s they’re paying 8% to 12%. That’s because Life Annuities combine interest-rates along with “mortality-credits” to pay a competitive and secure income for the rest of your life. Would a guarantee at 6%, 8%, 12%, help you worry less about money? Would such guarantees protect your adult children …eg. from jeopardizing their retirement while supporting you in your 80s and 90s?
Flexible and Strategic Income
Life Annuities combine well with other investments to assure a flexible income for life. Life Annuities alone lack flexibility, even if indexed for rising costs of living. If you review “Life Income Mandates” (see here) we can combine five or more distinct strategies to assure flexible and lasting income for life’s changing needs. If we put Life Annuities as 10% to 40% of an overall portfolio, you can optimize flexibility and adapt to changing living expenses through dividend- and other income strategies.
Tax-savings
Where I live and work, Life Annuities can be an especially effective tax-strategy for non-pension (non-registered) money. Some of my clients in their 70s and 80s originally complained they were paying far too much tax. I replied we might be paying them too much income. Laughter aside, we find Life Annuities have given these clients a powerful and lasting smile. The accountant for such a client reports to me that instead of paying 46% tax our client is now paying nearer 3% total tax on the life annuity income. Furthermore this annuity income here allows an added tax-exemption when shared with spouse. We’re happier than a fairy-tale! But there’s more….
Pays even after Death
The same client whose tax-rate (in life annuity income) fell from 46% to 3% also appreciates that the unique advantages of life annuity income and tax-benefits continue even beyond death (to age 90). Our client felt this guarantee was highly valuable. No one wants to think that their money would stop paying if they died too soon! So check on the guarantees available to you. Learn your options so a Life Annuity can keep paying your family (even charity) if you were to pass away prematurely.
From sale/succession of Business
A major worry for business owners – and this can slow or prevent Sale or Succession of a business – is the question: “How do I perpetuate an Income after I sell my Business?” They’ve always known how to get income out of their business. What they need to know now is how to sell or transition their business and get a life-income from that!
Life Annuities offer the confidence to move ahead with sale / succession of business. In my book (A Lifetime of Wealth) and in the learning modules of this website, I share a story of Linda who sold her business at age 60 yet never felt comfortable with usual investment strategies. In another story I introduce you to Tom, age 73, who was turning away good offers for his business because he worried that today’s low interest rates would run him out of money and destroy his family’s estate. For such people as Linda or Tom, Life Annuities, or laddering these annuities, combine with the other income mandates to help perpetuate life-income and guard estate you wish to leave your loved ones.
Pension Pay-outs …Inheritance …other Windfalls
Which of these is touching you or your family right now? What is the risk if you don’t know or if you cannot share the insights to protect these valuable financial assets?
Ready-made resources are freely available on this website and also in my book, A Lifetime of Wealth – And How Not To Lose It. You may have personal stories that focus your attention on protecting against severe losses. Check further in our website here. Reach me directly for a copy of the book or other resources we’ve built to help guide your way safely forward. Life Annuities aren’t for everyone, but knowing how to use them (now or in future) can be a powerful advantage for you and your family’s financial, tax, and estate planning.
Cinderella Never Sleeps
You know the stories. We never hear of Cinderella sleeping. Life Annuities also never sleep but keeping working, paying, providing for the longest possible horizon. Perhaps this is why people with annuity income tend to be happier and live longer than those who don’t own life annuities. Repeated studies keep suggesting this is true!
Life Annuities pay as long as you live, or as long as you’ve set for them. We could say they’re a lifetime bond …except bonds are paying far less, and differ in other ways too. Have a look if you combine Life Annuity income alongside dividends, real estate income, infrastructure income (see here), and other mandates: here we build a comprehensive plan to sustain Life Income for Life …and beyond.
Speak with a qualified, licensed advisor (even reach me directly) and learn how life annuities can fit with your personal planning. As years pass, the steps and decisions you make today can ensure Income for Life and a continuing value and comfort to those you love.
Freely share this letter whenever it can help a neighbour or friend, and ease the concerns of someone you know. Introduce us — we love to help.
Yours in Financial Security for LIFE!
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Brian@SovereignWealth.ca
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.