“Some things are certain in life… shouldn’t your retirement income be the same?”™ Equitable Life.
What is a Prescribed Annuity?
A Prescribed Life Annuity is a tax-efficient way for you to receive income for life in retirement, and has the added benefit of the taxable income being spread out evenly over the future life of the owner. This makes it an effective way for you to get more after-tax income from your non-registered savings.
In financial planning an important rule is how much money you keep in the end. Currently, Prescribed Annuities have a significant impact on the owner’s after-tax income. If you have been considering getting a Prescribed Annuity, there are some major tax advantages in doing so prior to January 1st, 2017.
Who is Eligible for a Prescribed Annuity?
• The source of the funds is non-registered*
• Both owner and the annuitant are the same person.
• Payments are not deferred beyond the end of the following calendar year.
• The guarantee period does not extend beyond the age of 90.
• Income payments are not indexed.
Annuity payments are based on life expectancy, and the life expectancy rates for non-registered Prescribed Annuities, and for many years, have been based on the 1971 Individual Annuity Mortality Tables (IAM). Due to changes to the Income Tax Act, as of January 1st, 2017, the Annuity 2000 Basic Mortality Tables will now be used.
Why the Change? Simply put, we are living longer, and these new tables reflect longer life expectancy.
Since Annuities are a combination of both principal and interest, the principal portion of the payment will be spread over a greater number of years. Although the annual income payment amount will be the same, a greater portion of the payment will be interest, and thus subject to taxation.
You owe it to yourself to minimize your tax burden!
NOW is the time to invest in a Prescribed Life Annuity BEFORE the new tax rules come into effect on January 1st, 2017.
Margaret Janecki, EPC,
Your Financial Doctor,
* For Registered Plans, Payout Annuities are available. Call today for more details.
Source: Equitable Life