An annuity is like a mortgage but in reverse.  You make a one-time lump sum deposit with a financial institution and they then invest the funds for you and return to you a regular stream of income consisting of both interest and return of principle components.

Often times the income stream from an annuity can be more tax favorable than the income stream resulting from interest payments on a fixed income investment.  There are a variety of different types of annuities designed to meet varying needs such as: life annuities, term certain annuities, impaired annuities, accrued rate annuities, prescribed rate annuities etc.

People who would typically invest in annuities are those who:

  • Require a guaranteed stream of income for life
  • Require a guaranteed stream of income for a specific time period
  • Want to invest in a vehicle that’s simple and does not require a lot of time and effort to manage
  • Are concerned about outliving their retirement savings
  • Are considering diversifying their portfolio to an investment vehicle that is more conservative   and possibly more tax efficient
  • Are looking to convert their registered retirement accounts i.e. RRSP, Spousal RRSP, LIRA etc. into a conservative registered retirement income vehicle before the end of the year in which they turn 69

At the time of purchase, the amount of income generated from an annuity is based upon the following factors:

  • Age and sex of the purchaser
  • Current interest rate environment
  • The number of years you want the financial institution to guarantee the income payments
  • The amount of money deposited
  • Whether or not you want your payment amounts indexed

If you are interested in exploring any of the annuity options mentioned here please contact us at 3i Financial Group and one of our Advisors will be more than happy to sit down with you to go through the best options available.