What is Annuity?

An annuity is a financial product that provides a steady stream of income, typically during retirement. You invest a lump sum (or make payments over time), and in return, you receive regular payouts—either for a set period or for life.

Types of Annuities:

Fixed Annuities – Guaranteed income with a set interest rate. (Think of it as a pension you buy for yourself.)
Variable Annuities – Payments fluctuate based on investment performance. (More risk, but potential for higher returns.)
Indexed Annuities – Returns are linked to a stock market index, offering some growth potential with downside protection.

Why Consider One?

✅ Guaranteed Income – Removes the fear of outliving your money.
✅ Tax-Deferred Growth – You don’t pay taxes on earnings until you withdraw.
✅ Customization – Choose between lifetime payments or a set term.

But Watch Out For...

🚧 High Fees – Some annuities have complex fee structures.
🚧 Limited Liquidity – Your money may be locked in for years.
🚧 Not Always the Best Fit – If you need flexibility, there might be better options.

Annuities Might Be Right For You If:

1️⃣ You’re Worried About Outliving Your Money – If you want a steady, predictable income stream in retirement, an annuity can provide that.

2️⃣ You Prefer Stability Over Market Volatility – If stock market ups and downs stress you out, a fixed or indexed annuity can offer peace of mind.

3️⃣ You’ve Maxed Out Other Retirement Accounts – If your RRSP, TFSA, or pension contributions are maxed out and you still have extra savings, an annuity can help you convert cash into guaranteed income.

4️⃣ You Want to Defer Taxes – Annuities grow tax-deferred, meaning you won’t pay taxes on gains until you start withdrawing. This can be useful for high earners who expect to be in a lower tax bracket later.

5️⃣ You Don’t Have a Pension – If you don’t have a workplace pension, an annuity can act as a private pension, ensuring you get regular payments in retirement.

6️⃣ You Want to Simplify Finances in Retirement – An annuity can provide automatic, hassle-free income, so you don’t have to worry about managing investments.

Annuities Might NOT Be the Best Fit If:

❌ You need easy access to your money (Annuities can have surrender charges and limited liquidity).
❌ You prefer investing for higher returns (Annuities offer security but may not keep up with inflation as well as a well-balanced portfolio).
❌ You already have a strong income stream from pensions, rental properties, or dividends.