Page 21 - April 2024 News On 7

ARE ANNUITIES A WISE INVESTMENT CHOICE FOR RETIREMENT?

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Submitted by Scott Foster, Financial Advisor, Edward Jones
317 DECLAIR ROAD, MADOC, ON K0K 2K0

When it comes to financial planning and securing a stable retirement, annuities are often overlooked or misunderstood.
Annuities can provide a guaranteed income for life, making them an attractive option to create a stable retirement income
and enhance your long-term financial security.
What are annuities?
Annuities work on a simple premise: you make a lump sum payment in return for a guaranteed, predictable, ongoing
stream of payments. In this sense, annuities create a pension-like income that can be particularly attractive to retirees
who need to convert a portion of their savings into a retirement income stream. The amount and duration of payments
can vary as annuities can be structured to provide income for a specific period of time or for life.

Retirement risks and realities
Retirees are facing two significant new realities. First, we are living longer than ever before. Indeed, life expectancy in
Canada has increased by more than 20 years during the last century. That's very good news, but the flip side of that coin is
we now face a much greater risk of outliving our savings – this is known as longevity risk.
Second, only about 1 in 3 Canadians has an employer pension. We can no longer rely on employer pensions to provide for
us when our working days are done. After saving and investing throughout our working years, we are the ones responsible
for turning that pool of savings into a lifestyle-sustaining retirement income stream. Yet, market volatility and
unpredictable investment returns can threaten an otherwise healthy retirement income. What can you do?
Top 3 benefits of annuities
Annuities offer a unique set of benefits to retirees, including:
1. Lifetime income: Annuities can provide a steady stream of income for life, eliminating the risk of outliving your savings
and recreating some of the comfort that many people have with receiving guaranteed income. In this sense, purchasing an
annuity can be thought of as buying yourself a guaranteed pension-like income. Indeed, with a life annuity, you can be sure
to receive an income for the rest of your life.
2. Tax advantages: Certain types of annuities offer additional tax benefits and a tax-efficient source of retirement income.
A special type of annuity known as a prescribed annuity can ensure that the taxable portion of your annuity payments is
stable and predictable, so you won't be caught off guard with any unexpected tax consequences.
3. Protection against market volatility: Annuities shield you from market fluctuations, providing financial stability during
your retirement years. A key risk when drawing an income from your retirement savings is suffering poor market returns
especially in the early years of retirement. Annuities can help shield you from this risk and potentially protect your
retirement income against market volatility.

Bottom line
Annuities are valuable tools that can provide
financial security and peace of mind in
retirement. Remember, it doesn't have to be
an 'all or nothing' decision – you can use a
portion of your savings to purchase an
annuity while leaving a portion of your
retirement assets invested elsewhere in
financial markets. To find out more, speak
with our Edward Jones advisor today.