Retirement income you can count on
 Every
retirement plan should have some security, some income that
can be relied on every month. That’s what an annuity
can provide.
An annuity is a financial contract between you and an insurance
company. You give them an amount of money in one lump sum
and they agree to give it back to you in set small amounts
over a planned length of time.
The attractiveness of annuities depends largely on interest
rates. The higher the rates, the more an annuity offers. Someone
who had purchased an annuity years ago when rates were 12%
would be looking at today’s low rates with great satisfaction.
An annuity is perfect for you if you want to receive a reliable
income from your assets but you don’t want to be involved
in managing them. You’d rather rely on the expertise
of the insurance company.
The insurance company invests your money into the types of
assets that you select. And like a RIF, the money is able
to grow tax-free. And like a RIF, you pay tax only on the
payments you receive.
Annuities offer three main benefits – security, convenience
and tax-deferred growth. Plus they may help avoid probate.
There are many types of annuities
One thing to keep in mind is that once you purchase an annuity,
generally, its terms can never be changed. So be sure to give
careful thought to the type you choose and the options it
offers.
Annuities can vary by their duration
-
Defined term - Such as 5, 10, or 20 years. At the end
of the term, the annuity is depleted and payments end.
-
Life annuity – An annuity can last for life, making
guaranteed payments to you for the rest of your life.
-
Joint-life annuity – Or they can continue payments
as long as you or your spouse is still alive
And they can vary by their risk and reward
-
Fixed–rate annuities guarantee a stream of payments.
-
Variable annuities offer flexibility with stock, bond,
and other investment portfolios. You can choose based
on your long–term goals, risk tolerance, and your
unique situation.
-
Indexed annuities guarantee a stream of payments that
is indexed for inflation
Three factors determine the size of payments you’ll
receive
Regardless of the type of annuity, payments will be based
on three key criteria:
- the amount of capital used to purchase
the annuity
- interest rates at the time of purchase
- your life expectancy (and your spouse's
if using a joint-life annuity) at the time of purchase
You can receive payments monthly, quarterly, annually or
any other interval agreed upon at the time of purchase.
If you’d like the peace-of-mind of knowing exactly
how much income you’re going to receive without the
responsibility for investing your money, an annuity might
be right for you. If you’d like to know more, click
here to find the RBC financial planning professional closest
to you.
Important information about our financial planning services can be found at the bottom of our
homepage.
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