Why do I need an annuity?
After years of hard work, you deserve a rewarding retirement. But it takes planning to reach that goal and traditional sources of retirement income are decreasing. In the past, Canadians could count on three sources of retirement income – company pension plans, personal savings and government pension plans1. But today, only 38% of paid workers have a company-sponsored pension plan1 and 50 per cent of Canadians are concerned they will not have enough funds to live comfortably during retirement.2
To safeguard against the risk of outliving your assets, you may want to consider an annuity.
What is an annuity?
An annuity is a contract issued by a life insurance provider that guarantees a steady stream of payments at some point in the future. Annuities have two phases:
- The accumulation phase, during which you contribute to your annuity and your investment grows as interest is credited.
- The payout phase, when the investment you have accumulated is paid out to you.
The size of the payments you receive from your annuity will depend on the size of your investment and the length of time that investment is held. Annuities can be registered as part of your Registered Retirement Savings Plan (RRSP) so that contributions are tax-deductible and your funds grow tax-deferred.3 You can also hold an annuity in a Tax-Free Savings Account (TFSA) where your investment earnings will accumulate tax free.
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