Q: I had a representative from Sun Life approach me with the option of rolling my LIRA/RRIF money into an annuity, providing guaranteed, stable income for life. Would you suggest taking a portion of RRIF funds and putting it into an annuity, or instead relying on a combination of ETFs that provide dividend income and capital appreciation?
5i Research Answer:
The answer really involves a lot more than a simple opinion on annuities, and needs to reflect one's personal goals, tax rates, estate needs and risk profile, amongst other factors. Annuities often get a bad rap, but they can be useful in certain instances. But with rates low, payments are now low. For example monthly payments for $100,000 for a 70-year old are in the $625 range. 7% guaranteed sounds good, but a basic dividend fund such as XEI has returned an average of 18% over five years. Timeframe becomes important in this decision. For us, we would be more inclined not to buy an annuity, but we cannot really answer this question on an individual level for someone else.