When we are able to live longer, and all in good health, we ironically run the risk of outliving our savings, and when we run out of savings, we risk losing the capability to support our retirement, that can in turn, put our wellbeing, security and protection at risk. However, with payout annuities, you can gain financial security and stability when you retire and gain guaranteed income for as long as you wish. With the appropriate annuity plan, you can maximize your retirement funds, as well as protect your lifestyle, at any age.
Annuity
Annuities are offered with the following benefits:
- You have the choice of term annuities or life annuities, so you can spread out your savings as to how you need it.
- You have the choice of single or joint annuities, for wither just you, or you and a spouse
- Guarantee periods are provided, so that if you were to pass away, your monthly benefit would go to your family.
- You can supplement your annuity with registered RRSP funds or non-registered savings.
Segregated Fund
Being similar to mutual funds, the thing that sets segregated funds apart is the guarantee offer of investment protection against possible market downturns. Segregated funds are distributed exclusively by insurance companies, and are comprised of stocks, bonds or market securities, all managed by experts.
Benefits of segregated funds include:
- Guarantee at Maturity:
- Money that is invested in a segregated fund has a 75% guaranteed payout upon maturity.
- Guarantee Upon Death:
- Upon your death, any amounts invested in your segregated fund contract are guaranteed.
- Potentially Creditor Protected:
- Your funds are protected from seizure by creditors if one or more beneficiaries within the class of beneficiaries are designated (by applicable insurance legislation).
- Potential Buyer:
- Business owners/professionals who want to have a guaranteed contribution and protect their beneficiaries from seizure by creditors, lawsuit and bankruptcy after their death can specifically benefit from segregated funds.
Registered Retirement Income Fund (RRIF)
A registered retirement income fund (RRIF) basically adds on as an extension to a registered retirement savings plan (RRSP). The RRIF lets you utilize the savings you have gathered during you work life. When you turn 71 years old, you have until the end of that year to convert any amounts invested in your RRSP into RRIF. Over the course of your retirement, your RRSP will convert into an RRIF. With RRIF, you are provided with flexibility and ease.
Advantages of an RRIF:
- You won’t be taxed on your investment income. However, you any withdrawal amounts will be taxed.
- You have freedom as to how much you would like to withdraw, above the annual minimum prescribed by law on January 1st of each year.
Life Income Funds (LIF)
Let’s say your savings have been placed in a locked-in retirement account (LIRA). Well, with a life income fund (LIF), you can periodically withdraw the funds you require to live comfortably. The LIF is nearly identical to a registered retirement income fund (RRIF), but the source of funds as well as the payment of a maximum annual income are different.
Advantages of an LIF
- You won’t be taxed on any of investment income, however, you will be taxed on any withdrawal amounts.
- You can periodically withdraw any funds you need within the fixed minimum and maximum annual amount limits set.
- You will receive an income for as long as you live.
Registered Education Savings Plan (RESP)
What is a Registered Education Savings Plan (RESP)?
A registered education savings plan, also known as an RESP, is an investment option that allows Canadian families to save for their children’s post-secondary education with ease and convenience.
The most significant benefit of a RESP is that the savings plan can aid in earning government grants like the Canada Education Savings Grant (CESG). It can also bring you to be eligible for any additional provincial government grants, that could in turn could add thousands of dollars additionally to your plan.
Another advantage of a RESP is that it can make quite a unique form of investment, as any growth income that is earned on investment contributions stays tax-free up until your child enters a post-secondary program, and money is withdrawn form your RESP.
Basic Canada Education Savings Grant
The basic Canada education savings grant can give you approximately 20% on every dollar, for the first $2,500 you save in your child’s RESP every year.
Canada Learning Bond (CLB)
If your child is born on or after January 1, 2004, they are eligible for the Canada learning bond, also known as a CLB. The CLB comprises of a $500 lump sum, as well as an additional amount of $100 per year until the child turns 15 years of age.
Additional Canada Education Savings Grant (A-CESG)
Depending on the net income of your family, you could be eligible to receive an extra 10% to 20% on every dollar of the first $500 you save in your child’s RESP every year.
The maximum you can receive per child is:
CESG – $7,200 + CLB – $2,000 = Total $9200
Registered Retirement Savings Plan (RRSP)
When you want to save money for your retirement, RRSP is the plan for you. With RRSP, you can invest money tax-free, as well as deduct all contributions from your taxable income to become eligible for a tax-refund. Anyone under the age of 71 with an employment income is eligible.
Advantages of an RRSP
With RRSP, maximum contribution limits can reach up to 18% of all income earned the previous tax year or a fixed maximum amount if your income is high.
Advantage of RRSP include:
- Any contributions that go unused can be carried forward, year after year.
- Because any contributions made are deducted from your taxable income, the amount of tax you pay decreases and can make you eligible for a refund.
- All income earned in your RRSP will only be taxed if it is withdrawn.
- With RRSP, you can buy or build your first home (Home Buyer’s Plan) or even go back to school (Lifelong Learning Plan)
Locked-In Retirement Account (LIRA)
If you have switched to a different employer and want to transfer any funds from your group pension plan to an individual plan to have more control over your investments, then this plan is the on for you. If you decide to leave or you lose your job, then LIRA allows you to move your funds accumulated under a retirement savings plan or even your previous employer’s pension plan to your own individual plan.
Advantages of a LIRA
The advantages of the LIRA plan include:
- All your savings can thrive and grow, tax-free.
- You may not contribute nor withdraw any money invested in a LIRA, except under certain conditions.
Tax-Free Savings Account (TFSA)
The tax-free savings account, also known as the TFSA, is a unique savings account available to anyone 18 years or older. The TFSA allows you to grow your savings, tax-free, for a personal project. The TFSA is an extremely flexible savings plan, so, you may withdraw funds whenever you need, without any tax penalty.
Advantages of a TFSA
Advantages of the TFSA include:
- You have the ability to contribute up to the annual limit, no matter what your income is. Furthermore, you may carry forward any unused contribution, year after year.
- Your savings can accumulate tax-free.
- You can put funds such as inheritance, donations, or investment incomes aside.
- You are able to withdraw any amount of money, at any time, without any tax penalty.
- Even if you’ve reached your maximum contribution limit for your RRSP, you can continue to save for your retirement.
Non-Registered Savings Plan
Similar to a personal savings account, the non-registered savings plan allows you to save money, whether that be for a project or to grow your retirement income if you’ve reached your maximum RRSP and TFSA contribution limits. However, with this plan, you get a higher return rate than your bank account, as well as have access to different investment funds.
Advantages of a Non-Registered Savings Plan:
Advantages of a non-registered savings plan include:
- You have the ability to freely grow your investments to fund your projects.
- You can contribute to the plan through pre-authorized payments.
- You can withdraw funds whenever you want.
For more information on investments and investment plans, contact us and we’d love to help you here at Xeed!
