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Unlocking the Annuity Puzzle: Why Canadians avoid what seems to be the perfect retirement vehicle
– moneysense.ca
The Annuity Puzzle is about a curious phenomenon in Canada: while life annuities sold by insurance companies seem to have all sorts of compelling reasons to acquire them, more often than not, retirees shun them.
Financial planner Robb Engen recently tackled this puzzle in his Boomer & Echo blog, “Why Canadians avoid one of retirement’s most misunderstood tools.” Engen notes that experts like Finance professor Moshe Milevsky and retired actuary Fred Vettese believe “converting a portion of your savings into guaranteed lifetime income is one of the smartest and most efficient ways to reduce retirement risk.” Vettese has said the math behind an annuity is “pretty compelling,” especially for those without Defined Benefit pensions.
Milevsky and Alexandra Macqueen coined a great term applicable to annuities when they titled their book about the subject Pensionize Your Nest Egg, which I reviewed in the Financial Post in 2010 under the title ”A cure for pension envy?”
Engen observes that a life annuity is “the cleanest version of longevity insurance … You hand over a lump sum to an insurer, and they guarantee you monthly income for life…
Should I hold my house in a trust?
– moneysense.ca
I am now in the process of looking for a much smaller house, and wonder if you could give me some guidance on how to buy it under a “Trust”, and not under my own name. I would like to minimize the tax implications from the Estate in the event that something happens to me and my kids get stuck with taxes.
—Silvana
Congratulations on your home sale, Silvana. A downsize can help supplement a retiree’s savings. Your question about using a trust to buy a new home is not a simple yes or no answer.
What is a trust?
A trust is a legal arrangement where a person called the settlor transfers assets to a trustee to manage for beneficiaries, based on pre-determined rules. The assets are typically investments, real estate, or a business.
There are two main types of trusts: an “inter vivos” (living) trust, created while the settlor is alive, and a “testamentary” trust, which is written into a will, which takes effect after death…
