Buying an Annuity

[Pavel]

I was fllipping through the AM channels the other day and I heard a financial advisor briefly mention that it's a good (and safe) method of getting a high yield on your investment if you buy an annuity and then buy insurance on the annuity.

I have heard of an annuity but I know very little about it. Just wondering if anyone knows the particulars.

[ZxExN]

This is only for old people. If you had a say 300k of retirement money, instead of using it to buy GICs which are 100% taxable, you buy an annuity with that money. The annuity pays you a sum of money but it is taxed more preferentially. Now in order to get back that 300k, you buy an insurance policy. (The annuity payments can fund this insurance policy) So when you die, you get 300k back tax free. In the end, it works out better for you that way than if you just simply put the 300k in the bank and collected interest.

[John_In_Vancouver]

This is called an insured annuity.

This has to be the right plan in the right circumstances and not for everyone.