In addition to providing a guaranteed income, annuities can be used for 2 other financial planning goals:

1. To provide money for your beneficiaries or estateEstate The total sum of money and property you leave behind when you die.+ read full definition
2. To leave a gift to charity

1. Money for your estate: An insured annuity

An insured annuityAnnuity A contract usually sold by life insurance companies that guarantees an income to you or…+ read full definition is a life annuityLife annuity A life annuity gives you a guaranteed regular income for life. Payments usually stop when…+ read full definition combined with a life insurance policyInsurance policy A written contract for insurance. It describes how long you are covered, what you are…+ read full definition. You get a steady stream of income for life – and your beneficiaries receive a lump sum amount at your death.

Here is how it works:

1. Buy the annuity – You buy a prescribed life annuity with a lump sum from your non-registered money.
2. Receive taxTax A fee the government charges on income, property, and sales. The money goes to finance…+ read full definition-efficient income – Some of the annuity income is interest income, which is fully taxable. The rest is not taxable. This generates higher after-taxAfter-tax The money you have left after you pay taxes on money that you made working…+ read full definition income than investing your money in a fully taxable investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition – like a GIC.
3. Pay life insuranceLife Insurance Insurance that pays cash to your family or other beneficiary after your death. This can…+ read full definition premiums – A portion of the annuity income is used to make premium payments on a life insurance policy with a value equal to the cost of the annuity.
4. Provide cash for beneficiaries – At your death, your beneficiaries or estate receives a tax-freeTax-free Money that you do not pay tax on.+ read full definition lump-sum paymentLump-sum payment A large one-time payment of money.+ read full definition from the insurance policy.

Get advice before you buy

Consult with a financial advisor before buying an insured annuity or charitable gift annuity. These are specialized strategies and are only advantageous in certain situations.

2. Money for charity: A charitable gift annuity

A charitable annuity can be an effective way to generate retirement income and support a charitable cause.

Here’s how it works:

1. Make a lump-sum donation to a charity – The charity uses this money to buy an annuity from an insurance companyInsurance company A company that sells insurance products. Some companies sell only life insurance. Some sell only…+ read full definition on your behalf.
2. Receive a tax receipt – You get a donation receipt for the difference between the purchase price of the annuity and the total income from the annuity that you’re expected to receive.
3. Receive tax-efficient income – You receive guaranteed monthly payments, which are taxed either partially or not at all depending on your personal circumstances.

Guaranteed Minimum Withdrawal Benefit (GMWB)Guaranteed minimum withdrawal benefit (GMWB) Guaranteed minimum withdrawal benefit (GMWB) products are a combination of investments and insurance. This is…+ read full definition products

GMWB products are a type of annuity that provides guaranteed retirement income that can increase with investment gains in your portfolioPortfolio All the different investments that an individual or organization holds. May include stocks, bonds and…+ read full definition and with certain bonus features. Learn more about GMWB products.

2 key points

1. Insured annuity – lifetime income for you and a lump-sum payment to your beneficiaries at your death
2. Charitable gift annuity – retirement income for you and support a charitable cause