It‘s been said that one of the best tax-savings tools is also one of least known, least understood, and most under-utilized financial instruments (yes, that’s the Annuity).

In particular, the prescribed annuity – which levels out your taxes, can significantly reduce it in the early retirement years, and therefore leaves more after-tax dollars in your pocket.  That’s because with a RRIF or an RRSP, your total withdrawal is all taxed when you take it out.

With an annuity, part of your withdrawal is taken out of your capital, so only the earnings is taxable.  So balancing your RRSPs with a non-registered annuity can leave you in a lower tax bracket than getting all your retirement income out of a pension and registered income plan.

A life annuity also has the added bonus of providing guaranteed income for life so you don’t have to worry about “out-living” your money.  When this is paired with a life insurance plan, you can “spend all your savings” and still leave a gift of inheritance for your children or grandchildren.

Here are links to a few articles that explain these advantages.

Article updated: 22Feb16