Canadian Annuities: Retirement Income Guide
A comprehensive breakdown of annuities, RRIFs, and GICs for Canadian retirees
What Is an Annuity?
An annuity is a financial product sold by insurance companies that provides guaranteed regular income, typically during retirement. When you purchase an annuity, you make a lump-sum payment to an insurance provider in exchange for regular payments that start immediately or at a future date.
Guaranteed Income
Annuities provide a predictable income stream that you cannot outlive, offering financial security throughout retirement regardless of market conditions.
Tax Advantages
In Canada, annuity income is taxed as regular income, but only the interest portion is taxed each year, potentially resulting in lower taxes.
Risk Management
By transferring longevity risk to the insurance company, annuities protect against the possibility of outliving your savings.
Types of Annuities
Different annuity products are designed to meet various retirement needs and financial situations. Choose the one that best fits your retirement strategy.
| Type | Description | Pros & Cons |
|---|---|---|
| Life Annuity | Pays income for life, no matter how long you live | Guaranteed lifetime income No death benefit |
| Term-Certain Annuity | Pays income for a fixed period (5-40 years) | Beneficiaries receive remaining payments Payments stop after term ends |
| Variable Annuity | Combines fixed and market-based income | Potential for higher returns Less predictable income |
| Indexed Annuity | Payments rise with inflation | Protects purchasing power Lower initial payments |
| Impaired Life Annuity | Higher payouts for shorter life expectancy | Maximized income for health issues Not suitable for healthy individuals |
Estimate Your Annuity Income
Use our calculator to estimate your potential retirement income from different investment options based on your personal financial situation.
Your Estimated Retirement Income
Based on your inputs, here's an estimate of your potential monthly retirement income:
Life Annuity
GIC
RRIF
Selected Annuity
Annuity vs Other Retirement Options
Understanding how annuities compare to other retirement income sources can help you make informed decisions about your financial future.
RRIFs
A Registered Retirement Income Fund (RRIF) provides regular payments from your retirement savings. Minimum withdrawals are required annually, but you can withdraw more if needed.
GICs
Guaranteed Investment Certificates (GICs) offer fixed returns for a set period. They provide security but no longevity protection and lower potential returns.
CPP & OAS
Government benefits form the foundation of retirement income but are rarely sufficient on their own. Annuities can supplement these benefits.
Annuity FAQs
Get answers to the most common questions about annuities and retirement income planning.
The optimal time to purchase an annuity depends on interest rates and your financial situation. Generally, annuities become more attractive as you get older (70+) and when interest rates are higher. Many Canadians purchase annuities between ages 65-75.
Yes, annuity payments are guaranteed by the insurance company. In Canada, Assuris protects annuity holders if an insurance company fails, guaranteeing up to $2,000 per month or 85% of the promised monthly payment, whichever is higher.
Annuity payments are treated as income and taxed at your marginal tax rate. However, only the interest portion of the payment is taxable - the return of your principal is tax-free. Your provider will issue a T4A slip showing the taxable portion.
Yes, joint life annuities provide income for as long as either spouse lives. This option typically results in lower initial payments than a single-life annuity but provides important protection for couples.
