You are more experienced now, your bank account is larger, and it is easier to think further ahead.
Roger and Linda are approaching their retirement. With continuing volatility in the markets, they are concerned about what effect a market downturn in the few years leading up to or just after retirement would have on their income. They also think that GIC investments would not protect their retirement income very well from inflation.
Like more and more Canadians today, neither Roger or Linda are part of a pension plan. Becausethey will be fully responsible for their retirement income stream, it's very important to them to have a plan that can potentially replicate a pension.
A new segregated fund product, that features a Guaranteed Minimum Withdrawal Benefit (GMWB), was introduced in Canada in late 2006. These plans are a long-term investment that provide a guaranteed income, either now or in the future, regardless of market performance. This type of plan may be ideal for Roger and Linda as they seek a predictable, sustainable and possibly increasing income that may last for life.
Roger and Linda are about fifteen years from their target retirement date. By depositing to a GMWB plan now, they like that they can earn a 5% income bonus for each year they don't make withdrawals. These are not a cash bonus, but add to the amount their income will be based on in case market returns are poor. For example, if they deposit $100,000 to the GMWB plan, they know that in fifteen years their income will be based on no less than $175,000. This means an assured income for them if markets fail to perform.
On the other hand, if markets do well, Roger and Linda like that their gains can be automatically 're-set' at certain intervals. These plans also have a death benefit guarantee that can increase with these market value re-sets. For example, if their $100,000 initial deposit grows to $125,000 after three years and re-sets, future income bonuses will be based on the new amount. If the investment performs poorly after a gain has been re-set, the death benefit and income guarantees will still be based on the new re-set amount.
GMWB plans also provide a guaranteed income stream that has the potential of increasing if the investments perform well. If, however, they perform poorly, the income stream will not decrease as long as only the guaranteed minimum withdrawal is made each year.
For informational purposes only and not intended as a specific product offering. See the Information Folder and Contract for a complete summary of plan guarantees and features.
Copyright © 2008 Life Letter. All rights reserved. For informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice.. Readers are advised to seek professional advice before making any financial decision based on any of the ideas presented in this article. This copyright information presented online is not to be copied, or clipped or republished for any reason. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or omission, or any financial decision.
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B. &C. W.
It has truly been a pleasure working with you; sincerely, thank you for everything. Coming into this experience, I knew we had things to improve and work on to get in better financial shape, but getting started seemed like a daunting task and quite frankly, it overwhelmed us. You really took the time to understand our financial picture and helped make sense of our 'chaos' and provided a clear path forward. Not only that, you were also kind enough to share some useful tips and tricks that we will put into practice and be 10X better for it, down the road as we work toward our financial goals. I cannot thank you enough for your efforts!
Alliston, ON
M.O.
We are approaching our retirement and I had been feeling for some time we needed to simplify our complicated financial picture. I also wanted to get a clear handle on whether we would be able to fund our retirement goals and still provide a legacy for our children.
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We did a thorough search of advice-only financial planners and interviewed several before choosing to partner with Jacquie. She had come highly recommended.
Jacquie has been a godsend. She did a deep dive into our financial position and created an initial bespoke plan to help clarify our financial position. She then helped facilitate conversations with us as we made some tough decisions. As we shifted our assumptions about what we wanted and expected for the decades to come, Jacquie ran several fresh scenarios for us.
In the end, we felt comfortable with the final version of our plan and understood the guidelines we need to be aware of to stay on track. Jacquie then introduced us to some very smart, experienced professionals in the investment industry who we are considering partnering with to manage our portfolios.
It’s a relief to have completed this process. I sleep much better at night, literally. It is also reassuring to know Jacquie is a call away to help us think through any changes to our financial picture in the years ahead. M.O., Toronto, ON
Toronto, ON
