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How annuities work in Canada
– moneysense.ca
Annuities are life insurance products that pay a regular income to a purchaser. When you buy an annuity, it’s like buying a pension plan with a lump sum premium paid from your savings. The payments you receive include a return of your original capital and interest income on that capital. It may also include the remaining capital of others who purchased an annuity who died before their life expectancy.
Annuity payments can be paid to you monthly, like with a pension. They can also be paid quarterly, semi-annually or annually.
When payments begin right away, you have what’s called an immediate annuity. Payments can also be deferred and begin in the future. This type of annuity is called a deferred annuity.
How are annuity payments determined?
Annuity payments depend on a variety of factors, including:
Your sex: Women are statistically more likely to live longer than men, so they receive lower payments.
Your age: The later your annuity payments begin, the higher the payments since less payments are likely to be made between the starting age and your life expectancy…
Before the tax filing deadline rolls around on April 30, 2024, you can avoid missing out on any tax-reducing opportunities—plus, look for any deductions, rebates or tax credits that will help you put some money back in your pocket. Use our income tax guide to help yourself prepare for filing your taxes for last year.
1. Get your T4, T4A and T4E forms together
As part of your tax filing prep, you’ll need to get your T4, T4A and/or T4E forms in order. These government documents will help to determine your income. On your T4A, you can also see how much you’ve saved for retirement throughout the year via your registered retirement savings plan (RRSP), if you contributed.
“The T4, or Statement of Remuneration Paid, is a tax slip that employers issue to employees after each calendar year. It includes your earnings, deductions and tax paid so far. The T4A is another tax slip, issued by payers of other amounts related to employment (pension payments, annuities, self-employed commissions, retiring allowances, scholarships, bursaries, research grants, etc…
