Kathleen van den Berg, MBA, CFP kvandenberg@equitable · 2018. 7. 9. · • Kathleen van den Berg, MBA, CFP • 416.579.9319 • [email protected] • For assistance with

Payout AnnuitiesThe Foundation of

a Good Retirement Strategy

Kathleen van den Berg, MBA, CFP

[email protected]

Regional Investment Sales Manager

Fall, 2012

Would you like to be able to

• Give your clients a higher income in retirement?

• Have them pay less tax on that higher income?

• Give them a greater amount of guarantees?

… then let’s get started.… then let’s get started.

• Q: What is one of the biggest fears your clients face when it comes to their retirement savings?

• A: Outliving their money —

Retirement FactsRetirement Facts

• A: Outliving their money —Longevity Risk!

At age 65, the average Canadian is expected to live to age:• 87, female

Clients are concerned more than ever about how to financially manage their retirement…


Today, more couples are living to age 90!

• 87, female• 84, male

“The question isn’t at what age I want to retire, it’s at what income”

- George Foreman

Retirement Income Needs


- George Foreman

� 70% of pre-retirement income is needed to maintain your standard of living

� OAS and CPP pays a maximum (total) of $17,976 per year *

* Based on 2011 government rates

InvestmentsHome and Rental Properties

Other Savings

Sources of Retirement Income


Pension, RRSPs, & TFSAs

Government ProgramsOAS and CPP

Target Profile for an Annuity

� Females and males over the age of 60

� Already in retirement

� Looking for the stability of a guaranteed income

� Don’t want to be affected by stock market fluctuations

� Want or need portfolio diversification � Want or need portfolio diversification

� Need retirement income solutions for their savings and/or RRSPs

� Currently have income products but need guaranteed income

Annuity Options

• Equitable Life offers a number of payout annuity options that can be set up to meet your specific needs, including:

• Life Annuity

• Annuity Certain: 16-86 (non-reg)

• Annuity Certain to 90: 65-86• Annuity Certain to 90: 65-86

• Joint and Survivor Annuity: 50-86

• A payout annuity can be purchased with either registered or non-registered funds

Life Annuity

• Provides a guaranteed income benefit for the life of the annuitant

• Guaranteed periods range 0 to 20 years

• Only life insurance companies can offer life annuities

• Feature: You don’t have to worry about outliving your income

Annuity Certain

• Provides guaranteed income payments for a specific period of time

• An Annuity Certain to Age 90 pays a guaranteed income benefit until the annuitant reaches age 90

• Terms can be 5 to 20 years depending on your age at the time of application

• Feature: If annuitant dies before the end of the term chosen, payments can continue to the named beneficiary or paid as a lump sum

Joint and Survivor Annuity

• Provides guaranteed income payments for as long as you or your spouse/partner is living

• Income payments can continue in full or can be reduced by a specified percentage on the death of the first annuitant

• Feature: Provides security for spouse and relieves worry of providing for a spouse after death

Annuities are the opposite of Life Insurance

• There are many factors that will affect the amount of income received from your payout annuity:

• Sex

• Age

• Health status

Amount of deposit • Amount of deposit

• Prevailing interest rates

• Guarantee period

• Indexing

Annuity Options

• Equitable Life® payout annuities are available with many flexible features, including:

• Guarantee Periods

• Indexed Payments

• Reduced Survivor Payments

Impaired Annuity*• Impaired Annuity*

• Payment Frequency

* Underwriting review

The Payout Annuity Advantage

• An annuity is the only vehicle which can secure a guaranteed income for life

• Are you looking at GMWB when you should be looking at a traditional annuity?

• No other product can give you more income during your lifetime that a traditional payout annuity

• Only an annuity can offer clients the mortality credit income advantage

Four Golfers

�Friendly wager

�$100 each

Four Golfers – Next Year

�$400 in the pot

�$400 / 3

�= $133 each

�33% return on �33% return on money

�This is a mortality credit

Payout Annuities Vs. GMWB

Male - $100,000

GMWB 7 Guarantee

Annuity

20 yr Guarantee

Annuity

60 $4,500 $5,675 $5,257

65 $5,000 $6,404 $5,617

70 $5,250 $7,335 $5,848

Equitable Annuity Rates as of Sept 10th, 2012


Female - $100,000

GMWB 7 Guarantee

Annuity

20 yr Guarantee

Annuity

60 $4,500 $5,203 $4,984

65 $5,000 $5,836 $5,400

70 $5,250 $6,664 $5,770



Joint Survivor Annuities - $100,000Couple Both Aged 65

GMWB 7 Guarantee

Annuity

20 yr Guarantee

Annuity

60 $3,000 $4,713 $4,679

65 $3,500 $5,186 $5,083

70 $3,750 $5,763 $5,442


Taxation: Registered Annuities

• While saving for retirement, registered investments have enjoyed the benefits of tax-sheltered growth

• As a result, any income payments from a registered annuity are fully taxable in the year they are received

Taxation: Non-Registered Annuities

• A non-registered payout annuity is purchased with after-tax dollars

• Therefore, the income payments consist of three components:

1. Tax-free return of capital

2. Interest component - which you pay tax on

3. Mortality Credit – a return of capital from those that leave the pool

Taxation: Non-Registered Annuities

• Payout annuities purchased with non-registered funds can be set up as either prescribed or non-prescribed

Non-Prescribed – F65

Prescribed- F65

Taxation Recap

1.Registered

2.Non-registeredA.Prescribed

B.Non-prescribed

Case StudySolid Retirement Strategy


[email protected]


It’s simple …

• What does your money need to do for you in retirement?

• Income

• Lump Sum Access• Lump Sum Access

• Inheritance

A Retirement Strategy

• Consider the following combination investment solution:

Payout Annuity+

Segregated

Guaranteed Income+

Investment fund »Segregated Fund

Investment fund growth with estate planning features

»


• Currently, Joe’s pre-retirement portfolio is

• Equities

• Fixed Income

• Cash & Equivalents

Equities (39%)Equities (39%)Cash & equivalents (3%)Cash & equivalents (3%)

Seg

reg

ate

d F

un

ds

Fixed income (58%)Fixed income (58%)Seg

reg

ate

d F

un

ds


• EXAMPLE: Joe’s retirement portfolio*

• Shifting to a Life Annuity

• Joe’s retirement portfolio would appear as such:

• Life annuity Equities (39%) Equities (39%) Life annuity (41%)Life annuity (41%)

Seg

reg

ate

d F

un

ds

• Life annuity

• Equities

• Fixed Income

• Cash & equivalents

Equities (39%) Equities (39%) Life annuity (41%)Life annuity (41%)

Fixed income (17%)Fixed income (17%)Cash & equivalents (3%)Cash & equivalents (3%)Seg

reg

ate

d F

un

ds

*For illustration purposes only.


• Applying the concept

• Equitable Life’s Investor Profile

• Map the results of the Investor Profile Questionnaire to the Investment Options

• Based on your client’s investment profile category • Based on your client’s investment profile category and the recommended allocation to Guaranteed investments, determine the proper allocation to the Life Annuity

• Based on monthly or annual income needs during retirement

Case StudyBuy Cash, Invest the Difference


[email protected]


Non-Registered Retirement Portfolio Strategy

• $200,000 invested in GIC’s earning 3% interest

Amount Invested In GIC $200,000

GIC Interest 3%

Annual Pre-Tax Income $6,000

• Generating $4,200 in after-tax income

Tax Payable (30% MTR) $1,800

After Tax Annual Income $4,200

Current Non-Registered Strategy

Results:

� Guaranteed Income

� Principal Protection

$4,200 Income

An Alternative Investment Portfolio

• $63,000 into a Life Annuity

• Provides after-tax income of $4,220 per year

• $137,000 into a Pivotal Solutions Segregated Fund

• 100% death benefit protection

Equity exposure• Equity exposure

Providing Equal Income:

Life Annuity

Amount Invested In Annuity $63,000

Annual Pre-Tax Income $4,383

Taxable Portion $542Taxable Portion $542

Tax Payable $163

After-Tax Annual Income $4,220

• As of July 9, 2012. Based upon a $63,000 single premium non-registered annuity with monthly payments beginning in one month and a 10 year payment guarantee.

Comparison of the Strategies

Purchase GIC At 3%

Purchase 10 Year Prescribed Life

Annuity

$200,000 Amount Invested $63,000

$6,000 Annual Pre-Tax Income $4,383

$6,000 Taxable Amount $542

$1,800 Tax Payable $163

$4,200 After-Tax Annual Income $4,220$4,200 After-Tax Annual Income $4,220

GIC Total Capital Seg Fund

$200,000 Initial Investment $137,000

$200,000 Age 80Segregated

Funds with 4% after-tax return

$219,341

$200,000 Age 85 $266,862

$200,000 Age 90 $324,679

Alternative Non-Registered Strategy

� Guaranteed income for life

� Efficient taxation

� Efficient income generation$4,220

Income

� Improved flexibility

� Growth potential

� Segregated Fund principal protection

Income

What Return is Needed to Match GIC

• What return is required to restore Russell’s initial $137K segregated fund investment to match the $200K GIC?

Attained AgeRequired After-Tax

Annual ReturnAnnual Return

80 3.20%

85 2.25%

90 1.73%

Case StudyHouse Rich, Cash Poor


[email protected]


Meet Jacob and Rachel

• Jacob is 65

• Rachel is 65

• Both still working

• Chemists at a pharmaceutical pharmaceutical company

• Tired

• Want to retire

Meet Jacob and Rachel

• Home is worth $400K

• Mortgage is still $100K

• Have a DC plan • Have a DC plan with the company

• 3 Children

• Youngest still at home

Solution: Tap into the equity in their home

• Home Worth $400K

• Mortgage $100K

• Equity $300K

• Room Available $220K

(400 x 80% - 100K = 220K)(400 x 80% - 100K = 220K)

Option 1: Line of Credit

• $220,000 LOC• 3.5% Variable• Annual Interest $7,700

• Joint Life Annuity $11,684• (7 Yr Guarantee)• (7 Yr Guarantee)

• Positive Cash flow of $4,684/yr

• Payout Annuity Rate is 5.3%• GMWB would be 4.5%

Option 2: CHIP Plan

• $145,000 LOC

• 4.95% Variable

• No obligation to pay

• Joint Life Annuity $7,589• Joint Life Annuity $7,589

• (7 Yr Guarantee)

• Positive Cash flow of $7,589/yr

www.chip.ca/

Taxation Benefits

• Interest may be tax deductible

• Annuity is purchased on a non-registered basis

• Prescribed basis – taxation advantages

• Mortality Credits – taxation advantages

Annuity Reverse Mortgage Combination

• Seniors

• Want to increase monthly cash flow by tapping into the value of their home

• This strategy can be done using a LOC Mortgage or CHIP Plan

Equitable Life – getting started

• Marketing support – for you and your clients

• Web support – EquiNet

• Forms

• Illustration software

• Competitive rates

• Special quote process

• Your Equitable Life contacts

Marketing support

Marketing material for advisors:

• Advisor Guides (payout annuities & segregated funds)

• Segregated fund Advisor Guide

• Payout Annuities – Helping you sell

• Products at a glance

• Various sales strategy pieces

• Loan program details• Loan program details

Marketing material for clients:

• Prospecting flyers

• Web advertisements

• Brochures (payout annuities & segregated funds)

• RRIF/LIF brochures & income strategies

• Illustration reports

• Dollar-cost averaging

Web support - EquiNetWeb support - EquiNet

Sign-in Here

• Product information

• Forms

Weekly rate surveysIllustration software

• Forms

• Marketing Material

• Rates & Performance

• Contact information

Special quotes

• Quotes up to $1M can be done by you on our Sales Illustration software

• We will quote impaired annuities

• For larger quotes, please contact your Regional Service Representative

In Summary

• Payout annuities have many key advantages

• They can give your clients more money during retirement

• Less Risk

• More guarantees

• Less tax• Less tax

• They are the foundation to any good retirement strategy

Your Equitable Life contacts

• For sales strategies, product training, client support, contact me, your Regional Investment Sales Manager:• Kathleen van den Berg, MBA, CFP• 416.579.9319• [email protected]

• For assistance with point of sale process, special quotes, • For assistance with point of sale process, special quotes, and web training, contact your Regional Service Representative:• Racquel Velante• Toll Free: 1.888.707.2110 Press 1 Ext: 2244• Email: [email protected]

Legal Notice• Any statements contained herein that are not based on historical fact are forward-looking statements. Any

forward-looking statements represent the portfolio manager’s best judgment as of the present date as to what may occur in the future. However, forward-looking statements are subject to many risks, uncertainties and assumptions, and are based on the portfolio manager’s present opinions and views. For this reason, the actual outcome of the events or results predicted may differ materially from what is expressed. Past performance does not guarantee future performance.

• Please note that both our Death Benefit Guarantee 100%, and Maturity Benefit Guarantee 75%, are reduced proportionately for all withdrawals or transfers that the client makes.

• Investors do not purchase units of the funds but, rather, an individual variable insurance contract issued by Equitable Life of Canada.

• This presentation is intended for informational purposes only and is provided with the understanding that it does not render legal, accounting or other professional advice. Equitable Life has made every effort to ensure the accuracy of this presentation, however, accuracy is not guaranteed.

• Unless otherwise indicated, ® denotes a trademark of The Equitable Life Insurance Company of Canada. • Unless otherwise indicated, ® denotes a trademark of The Equitable Life Insurance Company of Canada. Reproduction or redistribution of this presentation, in whole or in part, without permission from Equitable Life is forbidden.

• All RRSP and Investment Loans are approved and funded solely by B2B Trust, a subsidiary of the Laurentian Bank of Canada or by AGF Trust or by TD Lending Service. All loan documentation is entered into between your client and B2B Trust, AGF Trust or TD Canada Trust, as lender. The Equitable Life Insurance Company of Canada does not act as lender. Neither B2B Trust, AGF Trust nor TD Canada Trust are affiliated with Equitable Life of Canada and do not endorse or promote the investment products offered by Equitable Life of Canada. Retail investors must consult their Financial Advisor for professional advice and assistance.

• © 2011 The Equitable Life Insurance Company of Canada. All Rights Reserved.

Thank you

Documents

Kathleen van den Berg, MBA, CFP kvandenberg@equitable · 2018. 7. 9. · • Kathleen van den Berg, MBA, CFP • 416.579.9319 • [email protected] • For assistance with