Good comparison, falls in line with Wade Pfau's Safety First approach. There are quite a few studies that show statistically people with guaranteed lifetime income spend anywhere from 30-50% more than retirees drawing from their assets.
My parents put most, if not all their RRSP's (as far as I know) into annuities. This was in the late eighties and my dad worked in the insurance industry. It worked out well for them.
In the US, you can buy an FIA with an Income Rider, and the annual payout rate is 8.4%. I am 63, and I am seriously considering spending $400,000 to get $33,600 of guaranteed annual income. I will ask my CFP to provide an illustration for an inflation-adjusted annuity. The two breakeven points didn't look too bad to me. My family is long-lived, and I plan to live to be 100. Thanks for the information.
If she waited 5 years before taking income, she would get over 3k a month in lifetime income. Also she should be able to get 1800/ month if she needs income right away. I did an annuity search on a fixed index with an income rider. The break even is around 14-15 years. Not sure if it's worth it.
It's certainly not worth it in all cases. For some, the trade of a guaranteed and known cash flow is worth some of the downsizes. Great points though :)
Investing in a riff or blue chips stocks or dividend returns of 12.6% ..300k age 62 male..the monthly income in 2024 in ontario..You need a minimum of 65k now..Indexing sounds good but i could not live on $1900.00 dollars per month..Love your video
Hello Chad, Great video by the way. If you don't mind, I have simple ask / question / scenario and wonder if you can provide your thoughts on it or better yet demonstrate a feasible solution / plan. Age : 60 (not retired yet, but eligible for full cpp / oas) Cash money in hand: $1,000,000 to $1,500,000 million Canadian dollars Scenario / Challenge to provide a method / solution to: For a 60yrs old individual with above mentioned cash in hand, is there a real practical way to implement an investment solution to generate $6,000 to $10,000 cdn per month after tax passive income for a minimum of 30yrs (or in perpetuity)? If yes, please help explain and if no, then what might be possible / feasible closest to the goal. Thank you for your time in advance as i look forward to your reply.
There are good reasons that banks do not offer annuities. How can annuities make sense against long term investment in the stock market? How does the insurance companies 'keep your money' in the event of early death v. your heirs make sense? The 'cost of annuities' include the cost of the insurance company operations, insurance company profit v. .003% Vanguard? Not for me thanks. I am more afraid of annuities, than the volatility of the stock market.
Annuities make sense the same way a DB pension makes sense, everyone contributes and everyone has the security that they won't "run out of money" no matter how long they live. It's an insurance product which is why annuities are sold mainly by insurance companies. It is true that those that live the longest collect the most and those that die early get less but it's pooled risk. It's kind of like the insurance on your house that didn't burn down pays for those whose houses did burn down. Of course you could say the fire risk doesn't bother you and go without insurance, very few houses actually do burn down, but most people have house insurance anyway. After paying (wasting?) tens of thousands in insurance premiums over the years most people also aren't particularly upset that their house didn't burn down.
I think you need to update your understanding. In the event of early death, the balance of invested funds goes to the beneficiary. Second, comparing to Vanguard, Schwab etc is illogical -- they are different assets for different purposes. One guarantees income (potentially doubling during a nursing home stay), the other is designed for growth. For many retirees having BOTH is often very wise. If you retired in say 2008-09 with only market exposure you had a massive problem: the market pick- pocketed you exactly when you began drawing out money to live on. The math is terrible in this situation.
Totally a fair assessment. For me personally, with a high risk tolerance and understanding of markets, I would tend to agree with your for my personal plan. However, it's my job to adapt to the outlook of a client and what keeps them up at night. So for an investor that priorizes the safety of knowing their income over the best possible return it can be a good fit. Thanks for the comments :)
Good comparison, falls in line with Wade Pfau's Safety First approach. There are quite a few studies that show statistically people with guaranteed lifetime income spend anywhere from 30-50% more than retirees drawing from their assets.
Interesting! Thanks for your input :)
Great video Chad. Wasn’t really sure about annuities. Always love new information about retirement.
Glad it was helpful!
My parents put most, if not all their RRSP's (as far as I know) into annuities. This was in the late eighties and my dad worked in the insurance industry. It worked out well for them.
Awesome!
Thanks for that video, Chad. Annuities can provide a reassuring comfort when markets are volatile.
Absolutely!
In the US, you can buy an FIA with an Income Rider, and the annual payout rate is 8.4%. I am 63, and I am seriously considering spending $400,000 to get $33,600 of guaranteed annual income. I will ask my CFP to provide an illustration for an inflation-adjusted annuity. The two breakeven points didn't look too bad to me. My family is long-lived, and I plan to live to be 100. Thanks for the information.
Very interesting! I love learning the differences across theefinanical industry in difference countries
How is an annuity taxed?
Good video Chadski
If she waited 5 years before taking income, she would get over 3k a month in lifetime income.
Also she should be able to get 1800/ month if she needs income right away.
I did an annuity search on a fixed index with an income rider. The break even is around 14-15 years. Not sure if it's worth it.
It's certainly not worth it in all cases. For some, the trade of a guaranteed and known cash flow is worth some of the downsizes. Great points though :)
Investing in a riff or blue chips stocks or dividend returns of 12.6% ..300k age 62 male..the monthly income in 2024 in ontario..You need a minimum of 65k now..Indexing sounds good but i could not live on $1900.00 dollars per month..Love your video
Thank you!
Excellent video Chad.
Thank you!
👍
Hello Chad,
Great video by the way.
If you don't mind, I have simple ask / question / scenario and wonder if you can provide your thoughts on it or better yet demonstrate a feasible solution / plan.
Age : 60 (not retired yet, but eligible for full cpp / oas)
Cash money in hand: $1,000,000 to $1,500,000 million Canadian dollars
Scenario / Challenge to provide a method / solution to:
For a 60yrs old individual with above mentioned cash in hand, is there a real practical way to implement an investment solution to generate $6,000 to $10,000 cdn per month after tax passive income for a minimum of 30yrs (or in perpetuity)?
If yes, please help explain and if no, then what might be possible / feasible closest to the goal.
Thank you for your time in advance as i look forward to your reply.
There are good reasons that banks do not offer annuities. How can annuities make sense against long term investment in the stock market? How does the insurance companies 'keep your money' in the event of early death v. your heirs make sense? The 'cost of annuities' include the cost of the insurance company operations, insurance company profit v. .003% Vanguard? Not for me thanks. I am more afraid of annuities, than the volatility of the stock market.
Annuities make sense the same way a DB pension makes sense, everyone contributes and everyone has the security that they won't "run out of money" no matter how long they live. It's an insurance product which is why annuities are sold mainly by insurance companies. It is true that those that live the longest collect the most and those that die early get less but it's pooled risk. It's kind of like the insurance on your house that didn't burn down pays for those whose houses did burn down. Of course you could say the fire risk doesn't bother you and go without insurance, very few houses actually do burn down, but most people have house insurance anyway. After paying (wasting?) tens of thousands in insurance premiums over the years most people also aren't particularly upset that their house didn't burn down.
I think you need to update your understanding. In the event of early death, the balance of invested funds goes to the beneficiary. Second, comparing to Vanguard, Schwab etc is illogical -- they are different assets for different purposes. One guarantees income (potentially doubling during a nursing home stay), the other is designed for growth. For many retirees having BOTH is often very wise. If you retired in say 2008-09 with only market exposure you had a massive problem: the market pick- pocketed you exactly when you began drawing out money to live on. The math is terrible in this situation.
You sounds very worked up, maybe take some deep breathing exercise. Then watch Chat’s video again.
Totally a fair assessment. For me personally, with a high risk tolerance and understanding of markets, I would tend to agree with your for my personal plan. However, it's my job to adapt to the outlook of a client and what keeps them up at night. So for an investor that priorizes the safety of knowing their income over the best possible return it can be a good fit. Thanks for the comments :)