Guaranteed Income Solutions that Contribute to a Secure Retirement

In the realm of financial planning, the fear of running out of money in retirement is a pervasive worry that can cast a shadow on your dreams. In this article, we will introduce various types of guaranteed income products. These financial tools provide a defence against financial uncertainty and offer predictability, helping you secure your retirement with peace of mind. If you're the type of person who values financial security and tranquility, these are investment products that could work as building blocks in producing retirement income that won’t run out during your lifetime.

The Fear of Running Out

Retirement brings the promise of relaxation and fulfillment, but it can also bring new worries, particularly the fear of running out of money. When you retire, you no longer have a regular paycheque to provide income. Uncertainty about the future, rising costs, and unpredictable investment returns can all bring into question the ability of your savings to produce income over your lifetime. At Quiet Wealth, we are able to use both guaranteed income products and smart withdrawal strategies to put your mind at ease and allow you to enjoy your retirement on your own terms. Let’s look closer at the guaranteed income products that you can use to support your retirement income.

Government Benefits

Most Canadians are eligible to receive retirement income from the government. These benefits can provide a base of guaranteed income for those who qualify.

1. Old Age Security (OAS) is available to every citizen who has lived in Canada at least 10 years (more details).
2. Canada Pension Plan (CPP) is available to citizens who have contributed (more details).
3. Guaranteed Income Supplement (GIS) is for low-income retirees (more details).

Upon sitting down with you, our team will determine the amounts and benefits that you qualify for, and how that supports you retirement plan. Most people will receive a little over $1000 per month (adjusted for inflation) from these programs, which is a good start but likely not sufficient for the lifestyle you want in retirement.

Pension

You may have a pension or group savings plan with your employer. Some employers still offer these programs and it’s important to know which one you participate in. A defined benefit (DB) pension plan provides guaranteed income in retirement, where the income is guaranteed to last your lifetime and possibly for your spouse as well. A defined contribution (DC) pension plan or a group RRSP holds investment funds that you need to manage yourself, including deciding how much sustainable income you can withdraw. If you have questions about your employer’s benefits, you can either ask your HR representative, or arrange to show us a copy of your benefits and we’ll be happy to provide some personalized advice.

Guranteed Investment Certificates (GICs)

GICs typically provide a set amount of interest over a set period of time, without uncertainty. Now that interest rates are higher than a couple of years ago, you could put your money in a GIC that pays interest yearly or monthly and you could spend the interest. Or you could ladder the GICs by buying a 1-year, 2-year, 3-year, 4-year and 5-year GIC. However, there are two factors to consider: first, the income is all taxable, so it works best in a registered plan (RRSP or TFSA); second, interest rates are likely to change over the next five years, so this strategy may be less attractive in future.

Lifetime Annuity

An annuity is very similar to a pension that you can set up with an insurance company. You tell them how much you want to deposit, and they tell you how much income you will receive for the rest of your life, based on your age and current interest rates. There are no investment decisions and once you buy it, neither you nor the issuer can make changes. This can work for either registered or non-registered money (e.g. an inheritance or selling a home), and it can include continued payments for a spouse, if you choose. If you don’t have a pension from your employer, this may be a good way to cover your monthly needs with guaranteed income.

Guaranteed Minimum Withdrawal Benefit (GMWB)

Some insurance companies also offer a product called a GMWB which could be described as a cross between an annuity and an investment fund. When you start withdrawing, the company sets a guaranteed level of income. If you never exceed it, you will receive income as long as you live even if investment markets turn down. At the same time, you can choose the investments and benefit from potential market growth. And, if need be, you can dip into it or withdraw it, however you would forfeit the guarantees. The GMWB provides certainty while maintaining flexibility.

These products can be used individually or together to ensure that you never have to worry about running out of money. When we develop a strategy to create lifelong income from your investments, we discuss all the tools in the toolbox so that your plan will be suitable to your individual situation. We are happy to provide more information or personalized quotes for any of these products. Considering guaranteed income products to complement your withdrawal strategy will reduce financial uncertainty and offer greater peace of mind and financial security while you enjoy your retirement.

On our website, you can find more articles about investment solutions and other financial topics. If you have questions about this article or would like a conversation about how these ideas apply to your unique situation, call us at 403-290-0940.