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Are you interested in guaranteed lifetime income? Maybe it’s time to consider:
The Insured Annuity Strategy
Perhaps the biggest retirement question we face is, "Will I have enough?" Most of us want to know that we'll have a steady base level of retirement income that won't run out too soon. Traditional investment vehicles such as bonds, T-bills, and term deposits are often popular choices to achieve the retirement goals of income generation, safety and preservation of capital. However, the after-tax rate of return of these options may not be enough income to meet your needs.
There is an alternative strategy that provides income that is guaranteed for life and upon death, pays your originally invested capital to your beneficiaries directly, without the usual estate-related hassles and costs. The Insured Annuity strategy can preserve the value of your estate, minimize income taxes and most importantly, guarantee an income stream for the rest of your life.
| Age/Sex | Male | Female | Joint |
| 60 | 7.59% | 7.30% | 7.53% |
| 65 | 7.47% | 7.21% | 7.69% |
| 70 | 7.54% | 7.20% | 8.28% |
| 75 | 7.49% | 7.35% | 8.83% |
| 80 | 4.63% | 6.87% | 9.99% |
| 85 | 2.90% | 6.68% | 13.07% |
Sample Approximate Insured Annuity Rates
(as of February 2010)
- Rates are equivalent pre-tax yields based on a $250,000 investment, 40% taxbracket, and non-smoking.
- Returns will vary based on age, sex, smoker status, investment amount, tax bracket, insurability, and interest rates.
Enhance Your Retirement Income
The Insured Annuity strategy involves the purchase of two contracts: a permanent life insurance policy and a prescribed Life Annuity. You designate a portion of your non-registered capital to be used to generate a guaranteed income with which you purchase a Life annuity. This usually produces a higher income than typical fixed income investments and ensures a guaranteed income that you and/or your spouse cannot outlive. With a Life Annuity, each payment is actually a blend of interest and your original capital, where only the interest portion is taxable. As a result, there is no residual value for your estate when you die.
Leave a Legacy
To ensure a value for your estate, part of the annuity payment is used to pay the life insurance premium. At death, the annuity income ceases and the life insurance death benefit is paid to your beneficiaries to replace the capital originally invested in the annuity. Because of the special tax treatment afforded by the annuity and the life insurance policy, the after-tax return on the Insured Annuity concept may be significantly greater than can be found on conventional interest-bearing investments.
Summary
The Insured Annuity strategy can generate a guaranteed, lifetime net income that is typically much higher than what you can achieve with other fixed income vehicles. As well, by directing the capital to named beneficiaries, you can avoid unnecessary estate costs and delays.
Contact The Mailey Rogers Group for a personalized example of how this might benefit you.
This article is for information purposes only. All performance data represents past performance and is not indicative of future performance. It is recommended that individuals consult with their Wealth Advisor before acting on any information contained in this article. ScotiaMcLeod does not offer tax advice, but working with our team of experts we are able to provide a suite of financial services for clients. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF. |
