So What’s an Annuity, Anyway?
An annuity is a unique way for you to invest your money a little differently than you would at a bank. At Serenia Life, we offer two very different annuity products for two very different financial goals: (1) Guaranteed Interest Annuity (GIA), and (2) Single Premium Annuity (SPA).
While a GIA gives you the opportunity to accumulate money for a goal – like post-secondary education, a down payment for a house, a dream vacation, or retirement – an SPA can turn a lump sum of money into a guaranteed stream of income, typically used when you are no longer working. We’ve broken each down based on how they can help you achieve your financial goals.
How annuities create financial certainty at any age
People who value financial certainty have always appreciated annuities, and use them in a variety of ways to achieve any number of goals.
Personal Financial Goals
| Saving for a short-term goal (e.g., a down payment or a family vacation) | Guaranteed income for a set number of years… or for life | |
|---|---|---|
| Which type of annuity is best? | A Guaranteed Investment Annuity (GIA) | A Single Premium Annuity (SPA) |
| Who's it for? | Savers who want to achieve a specific goal with zero investment risk. | Individuals, typically retirees and those about to retire, who want a steady income and have an amount of money to invest. |
| How it works | You park a sum of money in your GIA for a set period of time (the term). At the end of the term, you get all of your money back, plus guaranteed interest. There are no up-front fees. Ideally, you shouldn't touch your money until the term is up, but in the event you really need the extra funds, you can always access your savings early (charges may apply). | You buy an SPA using a lump sum of money (minimum: $10,000) and an insurance company agrees to pay you a guaranteed annual amount for 5, 10, 15, 20 years… or for life. You can use money from such sources as an inheritance or insurance proceeds, the sale of your home or business, or the money inside your registered retirement savings plan (RRSP). You can choose to receive payments immediately, or within 10 months of making the investment. |
| Major advantages | Risk-free growth – never worry about losing money Guaranteed returns – avoid the ups and downs of the market | Guaranteed steady income Income payments for life or for a set period of time – your choice Never outlive your money if you choose the lifetime option |
| Options | GIAs are a great option when saving for a specific goal with little to no risk to your initial investment regardless of market performance. With a GIA, you can lock in your rate for a specific amount of time – just be aware that interest rates vary based on the term you select. When it comes to choosing a term, typically a shorter term is preferable for a specific, time-sensitive goal while a longer option is the way to go if you're looking to ”park” some extra funds and earn more interest. | SPAs offer a known, guaranteed regular payout for the duration of the term you choose. With SPAs, you can choose income for life or purchase a term certain annuity with an expiry date. The life option means never having to worry that you'll outlive your income, while opting for term certain gives you the opportunity to decide how many years you'd like to receive your guaranteed income stream – whether you need supplemental income while your child finishes their post-secondary education, or you know you only need an extra boost as you first settle into retirement. |
| Minimum initial investment | $50 | $10,000 |
| Registered or not? | RRSP-eligible. We can help you weigh the tax advantages of registering your savings. | RRSP-eligible. We can help you weigh the tax advantages of registering your savings. |
Still can’t decide? Book a FREE Needs Analysis with a Serenia Life advisor to determine which type of annuity is right for you. Get started.
Including others
In addition to security and certainty, annuities offer unique forms of protection that make them an ideal addition to your financial and estate plans. Whether you want to protect your spouse or give money to a beneficiary, annuities make it easier to care for loved ones.
[table “7” not found /]Getting started
Whether you’re saving for a specific goal or plan to turn a part of your nest egg into retirement income, an annuity offers the highest level of protection and certainty. If you are looking to understand more about annuities, reach out to a Serenia Life advisor who can help you assess if an annuity is the right type of investment for you.
