Q – I am a 60 year old man, and I need income. I am not getting what I require to live off of from my investments, and even more frustrating, I am depleting all my assets at a rapid rate. I need a steady stream of income and want to leave something behind for my children. Do you have any suggestions? – Daryl T., Simcoe, Ontario
A – One idea is to look an insured annuity strategy. These days, with so many income options available, the simple annuity often gets second billing. That could be a mistake, because the strategy can offer a good fix for the problem of creating a reliable income stream during retirement, while providing a legacy for your beneficiaries.
This particular strategy involves insurance-based products. Here’s how it works: You purchase a prescribed life annuity and a term-life insurance policy together. The annuity will provide guaranteed regular income, and a term-to-100 life insurance policy will provide a cash payout to your children when you die.
There are many advantages to an insured annuity, including income security through a regular income stream, tax-deferred growth, and preservation of capital.
Essentially, in the insured annuity strategy, you purchase an annuity with your non-registered assets and use a portion of the annuity payments to purchase the level-premium term-to-100 insurance policy that is equal to the value of the life annuity. The death benefit of the life insurance policy is paid directly to your named beneficiary tax-free when you die. The catch here is that you will need to be in good health, because that affects your insurability.
Keep in mind that annuities and insurance products in general can be complicated. Annuities are contracts, and once you sign on the dotted line, it’s very difficult to “unsign.” They are definitely not a “do-it-yourself” product, so while an annuity strategy might be the solution to your income-stream problem, be sure to get advice on all the options available to you. – R.T.