Only one in three Canadians have defined benefit pensions (retirement money that only ends when you die), and there are a ton of pluses to having a defined benefit pension. The biggest benefit is not running out of money and being forced to eat cat food when you retire. It is also known that people with a set pension have a deeper sense of peace or satisfaction knowing that money will come in from a source until they die.
Millennials have learned not to trust banks and financial advisers after the great recession. They were young when the financial crisis happened and they saw the pain and uncertainty that the bankers and stock market created for their families. If it happened once, it could happen again, and putting all of their retirement eggs in one basket is frowned upon. Many retirees were about to retire when their savings collapsed, and then not willing to lose it all pulled their savings out at the worst time. Retirement dreams were crushed, and millennials watched it happen.
The other variable to retirement is that government pensions will be almost dry after the Boomers go through the system. Will there be any money left for millennial retirement plans? Most experts suggest that the pensions will be dry before millennials line up to get their first cheques.
Instead of putting our faith in the government to shore up our retirement, or the volatile stock market to provide the growth and security for something as important as retirement, there has to be another solution. Annuities just might be that solution for these five reasons.
1. Annuities are managed by life insurance companies and sold as insurance licensed products. They are the reverse of a life insurance policy in the way that you give them a lump of sum when you are about to retire and it will pay you a set sum for the rest of your life.
2. There is peace of mind and satisfaction from knowing that you'll receive money for the rest of your life vs. having to depend on your life ending before your money does. Who knows how long the millennial generation will live, and the longer you live the better a deal an annuity is for you.
3. You don't have to pay a financial adviser or mutual fund manager with annuities. The evil banks are out of the picture. You set the annuity and leave it alone, if you don't trust advisers or mutual fund managers to not blow up your retirement funds.
4. Once the annuity is in place you can't raid the funds for random whims or through emotional manipulation from your kids. Once it is set you forget it and accept those payments monthly.
5. You don't have a say in how it is managed. If you are freaking out about the stock market, you don't have the option to sell out or move to a less risky manager. The insurance company manages it like it would its insurance policy funds. Over the long run this conservative method has been proven fruitful in all markets.
Based on annuity calculators found online, a $1,000,000 investment at age 65 will provide around $4,500 a month for the rest of your life. Now that is a retirement income everyone can count on.
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