Annuities are financial products designed to provide a regular income stream during retirement or a specified period. They are typically offered by insurance companies. Annuities offer individuals the opportunity to accumulate funds and then receive payments either immediately or at a later date. Individual makes either a lump sum payment or a series of contributions over time, known as premiums, to the insurance company. In return, the insurance company guarantees regular payments of interest and principal either for a fixed period or for their lifetime.
Annuities provide a reliable and guaranteed income stream. Once purchased, they offer a predictable payment schedule, which can help ensure a stable financial future, especially during retirement.
Contributions made to annuities in Canada grow on a tax-deferred basis. This means that investment earnings within the annuity are not subject to immediate taxation, allowing the funds to potentially grow more quickly.
Annuities can provide income for life, eliminating the worry of outliving your savings. This feature is particularly valuable for retirees seeking to cover their living expenses throughout their lifetime.
Certain types of annuities, such as fixed annuities, shield the annuitant from market volatility. The insurance company assumes the investment risk, providing stability and peace of mind, especially during turbulent market conditions.
Annuities can be structured to include death benefit options, allowing the annuitant to leave a legacy for their beneficiaries. This can be particularly advantageous for individuals looking to transfer wealth to their loved ones in a tax-efficient manner.
Annuities may offer some degree of creditor protection, which means that in certain situations, the funds within the annuity may be shielded from creditors.
Annuities in Canada typically offer various payout options. Annuity holders can choose between receiving fixed payments for a specified period or opting for a lifetime income stream. The flexibility in payout options allows individuals to tailor their annuity to their specific financial needs and goals.
