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How to Guarantee Your Income for Life

January 21, 2015

If you like the feeling of knowing that your money is well invested and well protected then Segregated Funds with the growth potential of a mutual fund and the security of principal guarantees may be what you need.

What is a Segregated Fund?

A segregated fund is a type of investment fund available through a life insurance company. Companies keep these funds separate (or “segregated”) from the general assets of the company so only investors in the funds have access to their value.

Why purchase a Segregated Fund?

When you invest in a segregated fund contract you combine the growth potential of investment funds with certain guarantees and benefits of a contract with a life insurance company.

Those benefits include:
Guarantees that can help protect your investments
Guaranteed death benefits
Potential creditor protection
The right to designate a beneficiary
Tax and estate planning advantages (no probate)
An option that lets you reset your guarantee

How to Obtain a Paycheque for Life
You can also guarantee your income for life with the lifetime guarantee benefit option.

Lifetime Income Benefit Option

The Lifetime Income Benefit Option helps you manage risks in retirement and protect your savings. The lifetime income benefit can help you provide predictable, guaranteed income for life, beginning as early as age 50 and the potential for increasing income.

Longevity Risk

Retirement planning considers the risk that you or your spouse might outlive your assets. The lifetime income benefit can help provide predictable, guaranteed income, no matter how long you or your spouse lives. Joint-life income can help protect couples from the risk of reduced income when a spouse dies.

Market Return Risk

As you plan for retirement you may question what happens if you experience poor market returns early in retirement. Industry experts consider the five years before and the five years after retirement an especially critical phase for your retirement savings.

This 10-year period is often referred to as the retirement risk zone, because short-term losses in the years leading up to retirement have a limited time to recover before you begin to rely on them for income. The shorter the recovery period before and after your retirement date, the greater the negative affect these losses have on your ability to sustain income for life.

The lifetime income benefit helps you get through the retirement risk zone by guaranteeing the starting value on which your lifetime income amount will be based. You can increase your income amount through bonuses earned in every year you defer making a withdrawal prior to taking an income.

Take Control of Your Income

The lifetime income benefit puts you in control of your retirement savings and income by guaranteeing your income for life. Your income won’t decrease, regardless of how the segregated funds perform, which provides you with the protection against the risks of longevity, inflation and market returns and volatility.

Is it Right for You?

The lifetime income benefit is just one component of a well-diversified retirement income portfolio. It’s most appropriate for people getting ready to retire and retirees looking for secure, predictable, guaranteed income. You and your spouse, if applicable must be age 50 and under age 91 to add the lifetime income benefit to a segregated fund policy. By selecting joint-life income, you and your spouse can receive guaranteed income for life.

Guarantee your income for life

For years your focus has been to save for retirement. Now you need innovative solutions to help you transition your hard-earned savings into income that will last your lifetime.

The lifetime income benefit option provides predictable, guaranteed income for life, starting as early as age 50, unlike other policies that don’t start distributing income until age 65. The lifetime income amount is based on your age or the age of the youngest spouse if you select joint-life income. This makes your eligible for higher income payments as you get older.

Annual Deferral Bonus

With the lifetime income benefit, you are eligible to earn a three percent deferral bonus every year until you make a withdrawal. If you don’t need to take an income right away, the deferral bonus can help you grow your lifetime income amount even when markets are down.

Deferral Bonuses Can Add Up

You can increase your income amount by bonuses earned in every year you defer making a withdrawal before you start taking an income. Bonuses increase the lifetime income withdrawal base, which helps determine the lifetime income amount available to you.

For Example
If you contribute a premium of $200,000 to your policy and defer income for 10 years, your lifetime income withdrawal base will have a minimum value of $260,000 because of deferral bonuses.

A powerful combination

By combining a segregated fund policy with the lifetime income benefit you can have an income for life as well as an investment portfolio to suit your needs.

For more information, please contact Jim Powell, Financial Security Advisor with Freedom 55 Financial, London Life and Quadrus Investment Services. Jim.powell@f55f.com

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