Ron s. gilbert

Lifecycle Financial Strategies

Annuity

An annuity is the very simplest income option for retirement. An insurance company provides you with a worry free stream of payments in exchange for an initial lump sum payment. The payments are made up of interest and principal and are determined based on:

  • Your Age (and your spouse’s age) 
  • Current Interest Rates  
  • The number of guaranteed payments  

The amount of money used to buy the annuity Selecting a life income option guarantees you a steady retirement income from your pension funds, as well as, the security that you will not outlive your money. And since the insurance company takes on the management of your money, you don’t have to worry about market fluctuations or investment management decisions. You can relax and enjoy your retirement. Income payments are guaranteed for life regardless of ongoing economic conditions. Tax Treatment… For Registered Funds – Your annuity payments are taxed as income in the year they are received. For Non-Registered Funds – Only a portion of each payment is taxed each year as part of the payment is considered a return of equity. Types of Annuities:  

  • A life annuity – provides you with income payments for as long as you live.  
  • A joint life and last survivor annuity provides income payments as long as either you or your spouse is living.  
  • An annuity certain provides you with a pre-determined number of income payments.