According to a recent RBC Insurance survey, 94% of Canadians aged 55 to 75 agree that they would like to have guaranteed income for life when they retire, but 61% say that they don't understand what an annuity is and how it might help – which means advisors need to educate their clients on the product.
“Outliving retirement savings and having enough income in retirement are real concerns as Canadian retirees are living longer and are more active in their retirement years,” says Parul Vora, head of wealth products, RBC Insurance. “Annuities are an ideal solution to help alleviate some of that financial uncertainty and provide peace of mind and financial stability.”
Annuities can form an important component of a retirement plan because they provide guaranteed income for life that is protected from stock market volatility, says Vora. Although the majority (58%) of respondents indicated that they are worried about outliving their retirement savings, only 35% are exploring or considering annuities as part of their retirement plans.
Canadians have many investment avenues to consider as they plan for retirement including personal savings, company pension plans and Canada's public pension plans (CPP/QPP/OAS), but just 22% of those surveyed “agree” that Canadian pension plans will provide enough retirement income.
Vora points out that annuities can provide payment guarantee options to the client’s beneficiary – an important point to make when discussing the value of annuities.
“With guaranteed income for life, potential tax benefits and the ability to protect beneficiaries,” says Vora, “Canadians need to familiarize themselves with annuities and take a close look at how annuities can help them in retirement.”