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Your Retirement Income Blueprint: A Six-Step Plan to Design and Build a Secure Retirement by Daryl Diamond

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Insured Annuities

There are times where the objectives of guaranteed sustainable income and preserving capital for the survivor or the estate have an equal priority. There is a strategy involving non-registered capital that allows you to address both of these objectives in a very efficient way. Once again, it involves combining two financial tools to best obtain the desired outcome. This is also known as a “back-to-back annuity.”
Let’s examine this using the example of a couple, Desmond (age 65) and Molly (age 62). Both are retired and in the 31 per cent marginal tax bracket. They jointly own $200,000 in a non-registered account. They are disgruntled with the current low yield on this money and further annoyed by the fact that they are taxed on the paltry amount of interest it earns. One option they have is to take these savings and place them in a five-year GIC that will pay them 3.5 per cent. They are not concerned with committing the capital for a period of time, as they have built up some other non-registered savings plus they have each contributed the maximum to their respective TFSA accounts. But they are wondering if there are any alternatives to help them do what they wish to do with this money.
They wish to safely invest this money, preserve the capital and receive a better income in a more tax-efficient way. The following is one strategy involving two financial tools that will help them to meet their objectives. Both are non-smokers and in reasonably good health. ...

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