An annuity is an investment that pays a guaranteed income for a specified period of time (i.e. 5 years, 10 years or life). The amount of the payment is usually based on the investors' age, sex and current interest rate environment. Annuity income can also be increased if the investor has serious health concerns.

Many investors look at an annuity like a personal pension plan. They invest a lump sum with the promise of a guaranteed income no matter how long they live.

For many individuals, annuities can form part of an effective financial plan because:

• they can provide a guaranteed income for life
• enhance an investor’s income for a specific period of time
• provide peace of mind knowing that income payments will not be affected by swings in the market

Types of Annuities

There are two main types of annuities: Life and Term Certain.

A Life Annuity gives you a set annual, semi-annual or monthly income for life (no matter how long you live). There are additional options that can be added to life annuities. For example, you can choose a life annuity that increases income payments to keep up with inflation. In addition, you can also choose a life annuity with a minimum payment period, thus ensuring that if you pass away early your beneficiaries will still receive income payments. Although each option does have its benefits, they do have a cost as well.

Term Certain Annuities provide income payments for a specific period of time (i.e. 5 or 10 years). This type of annuity is chosen many times by individuals who will have higher expenses for a specific time period (i.e. while a child is attending university). If the investor passes away prior to the end of the term, the payments will continue to the investors' beneficiaries or estate.

Variable Annuities…A New and popular investment option

Since 2006, a new and increasingly popular investment vehicle has begun to take the Canadian market by storm. Variable annuities are investments that provide guaranteed growth in future income during the accumulation phase and guaranteed income for life in the income phase. This type of investment has become very popular among investors 10 – 15 years away from retirement and those who have recently entered retirement. Variable annuities differ from traditional annuities in that they offer the investor the option to participate in the investment marketplace. In addition, variable annuities have a death benefit associated with them. Thus, if the investor were to pass away, the market value of the investment would be passed onto his/her beneficiaries.

If you think an annuity would enhance your overall investment plan, please contact us to learn more.