Would you like a higher lifetime income to enjoy retirement even more?
At one time, you could count on fixed-income investments for solid retirement income. But with today’s low interest rates, it’s a different story. The traditional instruments may not give you the income you would like.
Fortunately, there’s a way to maximize your income in a low interest rate environment if you fit this profile:
- You are at least 60 years of age, retired, and in a medium or high tax bracket.
- You depend on income from non-registered investments to supplement your retirement income.
- You would take comfort in knowing that part of your portfolio provides a guaranteed fixed income, avoiding investment volatility and risk.
- You don’t want to encroach on your capital, and especially don’t want to outlive your savings.
- You’re of average health for your age and qualify for life insurance.
- You are able to lock in a sizeable lump sum for life.
Your solution? An insured annuity.
An insured annuity sounds complicated, but it’s really quite simple. It’s a solution that uses two easy-to understand products – a life annuity and life insurance. A life annuity is a product you purchase with a lump sum of non-registered funds, in return for a guaranteed lifelong stream of equal payments. The payments are part interest, part return of capital—and that has a significant tax advantage. Tax is only payable on the interest portion, whereas interest income from traditional non-registered investments is fully taxable. That’s the annuity half. But if that’s all you did, you would leave no funds for your heirs.
Which brings us to the insurance half.
The tax savings you receive from the annuity are applied to insurance premiums on a life insurance policy. You purchase a policy that has the same value as your annuity. Buying a $250,000 life annuity? Then get a $250,000 life insurance policy. That amount is paid upon death to your beneficiary, tax-free. In other words, the capital originally invested in the annuity is recovered. So you receive greater payments throughout retirement than you would receive from fixed-income investments. Your loved ones receive a significant lump sum, tax-free.
Consider the many benefits of an insured annuity.
- In addition to increasing your income and protecting your capital, insured annuities also provide the following benefits:
- Your income is fully guaranteed for life.
- You diversify your retirement portfolio with a risk-free investment that’s not dependent on stock or bond market performance, or even on interest rate movement.
- When you direct the tax-free life insurance proceeds to your beneficiaries instead of your estate, you avoid probate fees and other costs and delays.
- A single insured annuity can be established for both you and your spouse.
- The annuity income qualifies for the pension income tax credit, which is granted on the first $1,000 of eligible pension income when you’re 65 and over.
- An insured annuity can minimize the clawback of Old Age Security benefits, because it reduces taxable income.
- You can donate all or part of the tax-free proceeds to a charity, either choosing charitable donation receipts that reduce your tax annually, or by having the donation provide tax relief to your estate.
Oct 13, 2019 16:50 EST - Stock Prices delayed by 20 minutes Source: ci.com