By Rick C. Singh
Are financial headlines keeping you awake at Night?
The recent volatility in financial markets and the sudden decline in 2008/09 have caused a lot of investors to stay awake at night because their investments are down significantly from their previous highs. It is also one of the first times in history that Canadian markets have had a negative return over a ten year period. Retirees and those planning for retirement are re evaluating what they invested in previously, and are looking for safety and security.
Most of the clients that I deal with are boomers and retirees and over the years they have instilled in me that what’s important to them is not the returns they get on their investments, but it is the return of their investments. They want assurances that their investments will be safe in the future so they can plan their retirement. They want investments that give them the opportunity to participate in the upside of the markets, but protect the deposit value if the markets should go down. They want to know that their income is guaranteed, and has the potential to increase, rather than go downwards when the markets decline. They especially want to be able to pass on a guaranteed value from their investments to their spouse, children or grandchildren in case of death, and not just the market value at death.
Recent surveys show that investors are looking for alternatives and advice in this time of uncertainty. It is for this reason I am reminded to write about the benefits of Guaranteed Investment funds (GIF) for investors looking for safety, security and the opportunity to participate in the upside of the markets, and to be able to sleep at nights.
Give your investments the guarantee it deserves: for Estate planning and Income for Life:
GIF for Estate Planning:
Investments from insurance companies are called Guaranteed Investment funds (GIF). GIF offer solutions that allow you to invest in mutual funds and guarantee that at least either 75% or 100% of your principal is protected over a specified period of time. They have a Death Benefit feature that guarantees at least 100% of your original deposit minus any withdrawals, on death. Some have a death benefit guarantee that will annually reset and lock in the market value if it is higher than the deposit value; an important feature for estate planning. They also offer the ability to name one or more beneficiaries. This allows you to direct the value of those investments, at the time of your death to individual(s) you have designated within your contract in a manner that is private, outside of your estate, while bypassing the expense and inconvenience of probate. The settlement and transfer of these proceeds to your beneficiaries is quick and seamless.
GIF for Guaranteed Income for Life
Guaranteed investment funds have also evolved to guarantee you an income for life, and the income will never decrease due to declines in the markets, as is the case with mutual funds and stock portfolios. You essentially create your own Defined Benefit Pension plan, with your personal investments providing guaranteed income for life, 5% at age 65 or 6% at age 75.
With GIF Income for Life investments, in years that you do not take any income, regardless of what the markets are doing these income solutions add a minimum of a 5% bonus annually to your original deposit plus any subsequent deposits, creating an income pool. Every three years if the market value is greater than the income pool they will lock in the greater of value and calculate the 5% bonus from the higher market value, so that the bonus paid will be 5% of a higher value going forward. Think of this as inflation indexing. When you start taking income at age 65 they guarantee a minimum 5% payout from your guaranteed income pool. If you wait to take your income at a later age such as age 75 the guaranteed payout will increase to 6% of your income pool. The lifetime income guarantee and the 5% bonus during the accumulation stage make a GIF a great income solution especially for RSPs and RRIFs and GIC investors who want guaranteed income for life.
If more Canadians knew about these investment solutions they would sleep better at night. They would have peace of mind knowing that they do not have to worry about what the markets are doing. They have guarantees that will protect what they have worked hard to accumulate and not have to worry about losing it, or living on lower income.
To find out more about GIF investment solutions for Estate planning and Income guarantee, contact your financial advisor or Rick Singh at 604-535-3367 or
email: rick@crsfinancial.ca