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AnnuitiesAnnuities are sold by life insurance companies. They are insured by Assuris up to certain limits. Traditional life annuities provide a guaranteed benefit of periodic annuity payments in return for a lump sum premium to the insurance company. With traditional life annuities your income is guaranteed for life.

Studies done on people who buy life annuities have shown they live longer. A life annuity takes the stress out of outliving your money or losing your money with investments. People who buy life annuities can spend their time enjoying their retirement without having to manage their investments.    

Term certain or fixed term annuities pay a periodic income for a specific pre-determined length of time or number of payments. Once this period is over the annuity income payments cease and the annuity contract ends. A person would purchase this type of annuity if a guaranteed income stream was needed for a specific period of time. When purchased with non-registered funds the interest portion of the monthly annuity payment stream is spread out evenly over the term of the annuity. By spreading out the annuity payment stream and only being taxed on the interest portion the annuitant is able to minimize taxes. If the annuitant dies before receiving all their guaranteed annuity payments the remaining payments will be paid to the beneficiary.

Annuity Payment are determined by the following:

  1. Your age (and in certain cases, your spouse's age), for life annuities.

  2. Current interest rates.

  3. The length of time the payments are guaranteed.

  4. The amount of money used to purchase the annuity.

  5. The payment stream paid by the annuity.

  6. Your health (those with health issues may qualify to receive higher monthly annuity payments), with impaired annuities.

Benefits of Annuities:

Annuities pay higher interest rates than banks. When you buy a life annuity you give the insurance company a lump sum deposit in exchange for lifetime income.

Annuities have traditionally been used as a means of providing a lifetime pension. Annuities are one of the few investments available that provide benefits comparable to a traditional company pension plan. People save during their working years and purchased an annuity to provide income when they retire.

In exchange for a single lump sum deposit, the insurer makes guaranteed income payments to the annuitant. Each guaranteed income payments is made up of a portion interest and principal. Annuity payments can be tailor made to your needs, they can continue for the lifetime(s) of one or two people or for a specified period of time.

Annuities are suitable for those who:

  • Want the highest guaranteed income amount possible from their investment;

  • Wish to help cover essential expenses at retirement;

  • Are concerned about outliving their savings;

  • Wish to minimize tax on their investment income;

  • Value security and peace of mind while reducing the need for ongoing investment decisions;

  • Want to subsidize early retirement income;

  • Need income until they are eligible to receive their pension and government benefits;

  • Wish to fund a child's ongoing educational costs.

Types of Annuities:

  1. Life Annuities - will provide you with a guaranteed, regular income for life. Life annuities can be purchased as a single life, based on one person’s life, or as a joint and survivor, based on the lives of two people.

  2. Joint life and Last Survivor Annuities - provide income payments as long as either you or your spouse is living.

  3. Term Certain Annuities - provide guaranteed, regular income for a specified period of time. Once this period is over, income payments cease and the annuity contract ends.

  4. Prescribed Annuities - offer preferential tax treatment when purchased with non-registered funds. Each annuity payment includes a combination of both interest and principal. This evens out the amount of tax payable on the annuity payment income stream and provides a tax deferral benefit.

In order to make an informed decision you will have to consider the following:

How Long Would You Like The Income To Last?

You can choose whether the annuity income stream ends after a chosen number of years or at the end of your lifetime. The longer the annuity has to pay an income for, the lower the annuity payments you will receive. The older you are, the shorter your life expectancy, the higher the annuity payments you will receive.

Will your spouse require income after you are deceased?

Consider a joint life survivor annuity that will continue payments to your spouse.

Will you be in a high tax bracket after you retire?

Consider a prescribed annuity with non-registered money, it provides addition tax benefits for those in high marginal tax rates during retirement. This is accomplished by having each annuity payment comprise of a combination of interest and principal, only the interest portion is taxed.

Do you want to leave an estate to your children or spouse?

Consider a back to back annuity also called an insured annuity that will allow you to do both. This is a combination of life insurance and an annuity. The annuity provides the monthly annuity payment income stream and the life insurance policy provides a tax free lump sum benefit to the estate. When you name your children or spouse as beneficiary on the life insurance policy, the death benefit will be paid to them in a lump sum tax free amount. You can name any beneficiary or a combination of beneficiaries on the life insurance policy. Beneficiaries can include but not limited to your spouse, children, grandchildren, relative, best friend, church, synagogue, mosque and charity.


Annuities Are Complex Products That Require Professional Guidance

When deciding which type of annuity is best suited for you Stone-Hedge Financial Group Inc. will guide you through this process.

Stone-Hedge Financial Group Inc. will provide quotes from some of Canada’s most competitive insurance companies.


The information provided on this web site is intended for general information only. It should not be construed as legal, accounting, tax or specific insurance and investment advice. Clients should consult a professional advisor concerning their situations and any specific insurance and investment matters. While reasonable steps have been taken to ensure that this information was accurate as of the date hereof, Stone-Hedge Financial Group Inc. and its affiliates make no representation or warranty as to the accuracy of this information and assume no responsibility for reliance upon it.

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