How annuities work in Canada + MORE Apr 18th
How financial advisors can help at different life stages + MORE Mar 23rd
How much money do you need to retire in Canada? Is it really $1.7 million? + MORE Mar 1st
Corporate investments for retirees + MORE Feb 15th
When are tax-deferred and tax-free accounts actually taxable? + MORE Feb 9th
Choosing priorities in retirement planning
– moneysense.ca
Q: We are in our sixties and still have a $310,000 mortgage. We are paying about $600 per month for life and disability insurance. Can this insurance be cancelled? We’d like to use these funds to help pay down our mortgage sooner.
— Retiring in debt, Vancouver
Ayana Forward is a certified financial planner in Ottawa:
You can cancel life insurance in writing at anytime, but I wouldn’t recommend that course of action unless you have or can obtain sufficient coverage elsewhere at a lower rate. Without knowing what other assets and coverages you currently have in place it would be difficult to advise you on your particular situation. Your current health status would also be a consideration when advising you on the best next steps. You can always shop around for a term policy that covers a period of time that matches the remaining amortization of your mortgage, which may end up being cheaper than what you are currently paying. I would also double check the conditions around the disability portion of your policy as most don’t payout past age 65, so you might be paying a high premium for something that could have little or no benefit to you…
How to win using annuities in retirement
– moneysense.ca
The good news is most of us can expect to live longer. The bad news is that the decline of defined-benefit pensions, along with chronically low interest rates, makes it harder for us to avoid outliving our money.
For those without workplace defined-benefit pensions, annuities can offset that risk by acting as a form of longevity insurance. You hand over capital to an insurance company today in exchange for a guaranteed flow of income for as long as you live. In a real sense a DB pension, with its guaranteed payouts, is annuity-like. As are programs like the Canada Pension Plan (CPP) or Old Age Security (OAS).
Despite similar terminology, defined-contribution pensions, RRSPs, TFSAs, and non-registered savings are not real pensions, cautions Schulich School of Business finance professor Moshe Milevsky. While those vehicles will help out in retirement, the only way you can create a real guaranteed income for life is to annuitize, he explains in the second edition of Pensionize Your Nest Egg…
