Here’s a breakdown of how these two options fit in the decumulation toolkit
While guaranteed minimum withdrawal benefits have mostly fallen out of favour, advisors should know how they work. More recently, a new twist on the old-fashioned annuities known as advanced life deferred annuities has hit the market.This is the second in a four-part series examining the decumulation product landscape in Canada and how advisors can explain the options to clients.
The timing couldn’t have been better as panic about the market crash in 2008-09 increased consumer demand for guarantees. GMWBs were the hottest-selling innovation for several years until their guarantees proved too rich for the insurers. Then, in light of new regulatory reserve requirements, guarantees were first reduced on newer versions of GMWB contracts before they eventually disappeared from the market.
Given these products provide guarantees at levels no longer available, a move away from them requires careful consideration. Too often, these products are dismissed solely based on cost. Advisors must consider the client’s age, health, life expectancy, assets and need for guaranteed income. Advisors should also assess the client’s situation in a financial plan. Unfortunately, financial planning software doesn’t support GMWBs and is incapable of modelling the impact of volatility on the market value or guaranteed income from the seg fund.
It focuses on tail risk. Those who live the longest benefit most, but these are the same people most at risk of running out of money.Let’s take the example of a 65-year-old couple retiring today with full CPP and OAS benefits, combined RRSP assets totalling $1.36-million and earning 5.22 per cent annually, who spend $100,000 a year adjusted for inflation. They would bounce their last cheque in the year they turn 95.
Globe Advisor Appwebview Cent Age Income Alda Debt Market Gmwb Client CPP Monte Carlo OAS
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Police launch tip line for missing manIt's been 67 days since his family has last heard from Richard Graham.
Read more »
No flu or COVID-19 vaccines for medical clinics as Alberta's fall immunization launch nearsConcept fight against virus covid-19 corona virus, doctor or scientist in laboratory holding a syringe with liquid vaccines for children or older adults,Concept:diseases,medical care,science. Stock Photo ID: 1690179541
Read more »
Apple will reportedly launch AI software on Oct. 28: BloombergApple (AAPL) announced it will launch its AI program — dubbed 'Apple Intelligence' — via a software update for the new line of iPhone 16s on Monday, October ...
Read more »
Hundreds of residents launch court challenge of Calgary rezoning bylawA file photo showing an aerial view of Calgary suburban housing.
Read more »
Uber to launch AI assistant powered by OpenAI's GPT-4o to help drivers go electricThe ride-hailing company has advocated a shift to EVs for several years and has pledged $800 million to support its driver partners' switching entirely to...
Read more »
Writ drops: Provincial election begins as Sask. Party, NDP launch official campaignsPremier Scott Moe, left, and Opposition NDP Leader Carla Beck, right, were busy this week making appearances and announcements as an election call looms.
Read more »