ALDA – A NEW Tax Deferral To Age 85 Annuity

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ALDA is the acronym for the Canadian Advanced Life Deferred Annuity. Now you are able to use this annuity to defer registered taxable income to your age 85.

ALDA was touted by the government in 2019 as the biggest change in Canadian retirement planning in quite some time. An ALDA, specifically designed for registered funds was projected to be available starting in 2020. The reality is, Canadian insurance companies did not rush to embrace ALDAs, and it wasn’t until December 2023 that the first ALDA became available.

ALDA is a Canadian Government approved life pay annuity that allows individuals to defer part of unlocked registered funds such as registered retirement savings plans [RRSP], registered retirement income plans [RRIF] and deferred profit-sharing plans [DPSP] up to the age of 85.

ALDA permits an individual to defer up to 25 per cent to a maximum of $170,000 [2024] of an individual’s aggregate registered investment accounts to be used to purchase an annuity that begins payments at the very latest by the end of the year in which they turn 85. Going forward, ALDA limits are indexed to inflation. ALDA purchases are rounded to the nearest $10,000.

ALDA withdrawals are fully taxable, and upon death any remaining funds in such an account would become fully taxable to the owner’s estate. Alternate beneficiaries could trigger a qualified transfer of registered funds if made to surviving spouse, common law spouse or financially dependent child or grandchild. Any subsequent withdrawals in their hands are fully taxable.

Traditionally, owners of RRSPs must elect before the end of December of their 71st year of age and choose which investment vehicle they intend to use to begin periodic withdrawals from their registered investments. The choices are to simply de-register their plan and pay tax on the lump sum received, a registered retirement income plan or a registered annuity.

An ALDA could be an important option for the right retiree. For those retirees with significant registered savings, being able to defer up to 25 per cent of those savings up to age 85 would reduce minimum required RRIF withdrawals during one’s 70s up until age 85 when the ALDA would start. After this deferral period, annuity payments are guaranteed payable for life.

There are no fees for an ALDA. Full purchase price is returned if death takes place before the first payment. After first payment, death triggers a return of the difference between purchase price and payments received.
Obtain a free ALDA quote by reaching out to annuity broker, John Beaton at john@annuitybrokers.ca.


How much does a $100,000 annuity pay?

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Our accumulated data for the year 2023 to date from annuity market surveys reveals that $100,000 non-registered Canadian funds used by a male age 65 to purchase a single life pay annuity with a 10 year guarantee period would receive between $527 and $578 monthly for the rest of his life. If that same male was 75 years of age at time of purchase, he would receive between $646 and $728 per month for the rest of his life. Payments commence in one month from purchase date. Payments must be paid to the annuitant during the guarantee period whether or not the purchaser is alive or dead. If you would like to know how much an annuity would pay to you go to Get a free Quote right now.


How annuities can be used to deter unexpected retirement hardships

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In today’s world, you will inevitably encounter swindlers and scammers who will test you and determine quicky whether or not they can exploit you financially. If it’s determined that you are an elderly person, these trickers assume that you likely have sufficient savings that they can steal, and they will think endlessly of ways to get their hands on it. You may already know someone who has fallen victim to scam phone calls or “get rich quick” schemes.

Scammers and swindlers are not the only robbers that elderly folk face when it comes to their finances. You must be aware that, presumably, there are two other bandits hiding in your future and they are preparing to slip undetected into your life and remain undetected until they steal your independence and ability to maintain financial security. These bandits are dementia and Alzheimer’s disease. Statistics indicate that nearly a quarter of North Americans over the age of 65 experience some form of diminished mental capacity, putting them at risk for poor financial decision-making and exploitation.

Additionally, you could encounter pressure from your adult children or grandchildren to help solve their financial needs. Ever been asked to co-sign a loan? It is difficult to say no to your own, but you must consider the impact it could have on your own future needs. Putting the needs of your children ahead of your own while you are entering – or are already in your retirement stage of life may cause you to run out of the money needed to support yourself.

Lastly, other family members or well-meaning friends may urge you to devote your money to a hot, “can’t lose” investment, helping you to augment your retirement income.

Any of these issues can derail your retirement income. When you provide some of your retirement funds to others as a loan or gift, you need to make sure you can afford to use those funds for that purpose.

Insulate yourself against all the above by turning some of your retirement savings into an annuity sufficient to provide level and stable long-term guaranteed income to cover your basic needs for the future. Then, if you want to help your children or allot part of your income into that hot investment, you can do so without worrying about your own financial well-being. As you know, lifelong annuities pay for your lifetime and cannot be cashed out. In any event, get expert advice before transferring funds out of your control.


How does a Guarantee Period Impact an annuity?

Term Certain Annuities pay for a specific period of time. Life Annuities pay for a lifetime. So the annuity guarantee period varies.

Term Certain Annuity Guarantee Period

For a term certain annuity the guarantee period is the length of time that payments are made. For example, a term certain annuity for 10 years has a guarantee period of 10 years. It means that this term certain annuity pays for a term of 10 years. After ten years the annuity expires with no further benefit.

The same rules apply for any length of term of payment, whether the guarantee period is 5 years or 7 years or 20 years, etc. A term certain annuity has no mortality calculations, nor is consideration given to a person’s age or gender. A term certain annuity simply pays for a stipulated period of time and it is finished. If you die before all payments have been made, then the remaining payments can be paid to a named beneficiary.

annuity guarantee periodSo, a guarantee period as it applies to all annuities is a set period of time during which the insurance company issuing the annuity must make payments to the person[s] receiving payments, whether or not that person[s] is alive or dead. What if the person[s] receiving the payments dies before the guarantee period is completed? In that case the remaining payments can be directed to a named beneficiary.

Life Pay Annuity Guarantee Period

Life pay annuities on the other hand, pay for as long as a person lives. When a guarantee period of more than 0 years is applied to any life pay annuity there is a change in the lifetime payment amount. These include a single life annuity, a joint life annuity, an indexed life annuity, a registered annuity, a non-registered annuity, a prescribed annuity, or a non-prescribed annuity. For non-registered life annuities there is also a change in taxable portion of income. All payments made within the guarantee period must be paid whether the person receiving payments is alive or dead.

The Best Payout Rates

In its simplest form a life pay annuity would have a 0 year guarantee period in order to take advantage of a person’s age, gender, mortality calculation and any possible mortality credits. When we are searching the Canadian annuity market for the best payout rates, there is a reason for us to do at least one of our searches with a 7 year guarantee period for a non-registered life annuity and a 5 year guarantee period for a registered life annuity because sometimes the best payout rates are posted by insurance companies that have these aforementioned minimum requirements for length of guarantee periods.

An annuity with 0 years guarantee period completes after first payment, upon your death. In the case of a joint life annuity, the joint annuity completes upon the final death of the joint annuitant.


Can an Annuity Protect The Longevity of Your Assets?

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Strange question to ask? Modern medicine and good eating habits have helped increase the average Canadian’s lifetime. Along with living longer comes the need to have sufficient savings to last for your longer lifetime. It has been my observation that older people begin a process of consolidating their assets by getting rid of things that they no longer need by either selling or simply giving them away and sometimes selling their large home in preparation to downsize to a smaller living space. In or near major Canadian cities, selling a home sometimes results in what looks like a financial windfall. If this happens to you, it likely will be hard to believe that so much money could now be sitting fallow in your bank account. It won’t be long before your bank sales representative calls you to suggest ways to invest this money because, for aggressive bank employees, it’s just too good a sales opportunity to miss. In addition to pressure from your bank to invest, it’s common for close relatives to offer to help you decide what to do with all this money. The odd relative may even suggest that a loan to them or even an outright gift would be timely. Elder financial abuse abounds across this country and even though we are concerned about it, there are still no firm guidelines to protect older Canadians.

So, what puts you in the cross hairs of the opportunist with get richer quick ideas who might want to share in part of the excess funds you have come upon?

You might have:

[a] Sold a valuable home or property in preparation to downsize for retirement.

[b] Won a lottery.

[c] Come into an inheritance.

[d] Sold your thriving business.

[e] The Stock Market has been good to you.

[f] You profited from early involvement in BitCoin.

Maybe it’s time to consider setting aside part of your new found wealth to purchase a guaranteed life pay annuity. Calculate how much locked-in regular income would cover basic needs, such as food, entertainment, maybe even rent and possibly travel. Doing this would remove the temptation for anyone, friends or relatives to take a run at your assets. Now, with your essential needs covered for the rest of your life, you can more comfortably deal with the capital that you have left. Now you might feel inclined to grant occasional gifts or loans to relatives, charitable organizations or friends. Give a telephone call to John Beaton, senior annuity specialist at 1-800-667-8818. He will be happy to hear your story and maybe give you some positive feedback.


Advanced Life Deferred Annuity

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The 2019 Federal budget introduced the concept of the Advanced Life Deferred Annuity [ALDA]. This product is the biggest change in the Canadian retirement planning landscape in quite some time. Starting in 2020, an Advanced Life Deferred Annuity could be an investment option available to anyone with a Registered Retirement Savings Plan [RRSP], Registered Retirement Income Fund [RRIF], or similar registered plans such as a Defined Contribution pension plan.

Choosing an Advanced Life Deferred Annuity would permit up to 25 per cent of an individual’s registered investment accounts to be used to purchase an annuity that begins payments at the very latest by the end of the year in which they turn 85. There would be a lifetime maximum investment into such a plan of $150,000 that would be indexed to inflation and rounded to the nearest $10,000. Withdrawals from an ALDA would be fully taxable, and upon death any remaining funds in such an account would become fully taxable to the owner unless left to a surviving spouse, common law partner, or financially dependent child or grandchild.

While not necessarily for everyone, an Advanced Life Deferred Annuity could be an important option for the right retiree. For those retirees with significant registered savings, being able to defer up to 25 per cent of those savings to age 85 would reduce minimum required RRIF withdrawals during one’s 70s up until age 85 when the Advanced Life Deferred Annuity payments start. If high registered retirement income has the adverse consequence of Old Age Security clawback, then the Advanced Life Deferred Annuity might solve the problem for you. Look for further announcements about this new retirement annuity proposal.


What To Expect from Beaton Annuity Services

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Most of my permanent annuity clients originate from the internet, although some do call me. Initially these clients are curious about current annuity market conditions. My response is to provide a free annuity market survey comparing current payout rates for the type of annuity that has been requested. After providing this information and further questions are asked by the inquiring person, my main agenda is always making sure the client gets what he or she wants. I’m focused on discovering what the client needs and providing services that meet those needs. If the client decides to go ahead with the purchase of an annuity that suits his or her need, I follow through the process to make certain that everything runs smoothly and that I’ve given best advice to maximize annuity payouts. After the sale, I’m available for follow up service.


The Shrinking Annuity Market

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It’s concerning that the giant life insurance company, Manulife, withdrew from the Canadian annuity market on June 29, 2018. Prior to this, in the last few years Manulife had absorbed other major players in the Canadian annuity market such as Maritime Life in 2004 and Standard Life Assurance Co. of Canada in 2015. The pool of life insurance companies that offer annuities continues to shrink leaving fewer choices for those who recognize the importance of the guaranteed lifetime income that annuities provide.

In addition to getting out of the annuity market, Manulife is currently, in the fall of 2018 approaching specific existing variable annuity clients and offering them a cash incentive to give up their variable annuity contracts to replace them with their regular segregated funds with guarantees of 75% of their holdings upon death and maturity. Clients must decide if they will take the incentive money before December 14, 2018.

If you are contemplating purchasing an annuity for your retirement years, maybe you shouldn’t wait.


Can an Annuity Protect The Longevity of Your Assets?

Strange question to ask? Modern medicine and good eating habits have helped increase the average Canadian’s lifetime. Along with living longer comes the need to have sufficient savings to last for your longer lifetime. It has been my observation that older people begin a process of consolidating their assets by getting rid of things that they no longer need by either selling or simply giving them away and sometimes selling their large home in preparation to downsize to a smaller living space. In or near major Canadian cities, selling a home sometimes results in what looks like a financial windfall. If this happens to you, it likely will be hard to believe that so much money could now be sitting fallow in your bank account. It won’t be long before your bank sales representative calls you to suggest ways to invest this money because, for aggressive bank employees, it’s just too good a sales opportunity to miss. In addition to pressure from your bank to invest, it’s common for close relatives to offer to help you decide what to do with all this money. The odd relative may even suggest that a loan to them or even an outright gift would be timely. Elder financial abuse abounds across this country and even though we are concerned about it, there are still no firm guidelines to protect older Canadians.

So, what puts you in the cross hairs of the opportunist with get richer quick ideas who might want to share in part of the excess funds you have come upon?

You might have:

[a] Sold a valuable home or property in preparation to downsize for retirement.

[b] Won a lottery.

[c] Come into an inheritance.

[d] Sold your thriving business.

[e] The Stock Market has been good to you.

[f] You profited from early involvement in BitCoin.

Maybe it’s time to consider setting aside part of your new found wealth to purchase a guaranteed life pay annuity. Calculate how much locked-in regular income would cover basic needs, such as food, entertainment, maybe even rent and possibly travel. Doing this would remove the temptation for anyone, friends or relatives to take a run at your assets. Now, with your essential needs covered for the rest of your life, you can more comfortably deal with the capital that you have left. Now you might feel inclined to grant occasional gifts or loans to relatives, charitable organizations or friends. Give a telephone call to John Beaton, senior annuity specialist at 1-800-667-8818. He will be happy to hear your story and maybe give you some positive feedback.


The Value of an Annuity Broker

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Why do so many Canadians seniors rely on an annuity broker like John Beaton? They have learned that there is no cost for the services of an annuity broker and the added value of unbiased information received is priceless. While the concept of an annuity is simple, there are many options not normally well known that can increase the value of one’s annuity purchase. Some tweaking of your purchase might increase your lifetime income. And don’t you agree, more income is good. For specific questions, call me at 604-535-2404 or toll free within Canada at 1-800-667-8818.