New Retirement Investment Vehicle coming in 2020Iwona Nicastri, CFP®, Wealth Advisor
The federal budget has introduced a possible solution to help Canadians highly concerned about out-living their money. A recent CBC news article refers to a new type of retirement savings product — ALDAs, or Advanced Life Deferred Annuity, and VPLAs, or Variable Payment Life Annuities — that may be hitting the product shelves of financial institutions in 2020.
The plan will allow retirees to keep more savings tax-free until later in retirement. The rules are being amended to permit seniors to purchase an advanced life deferred annuity (ALDA) under certain registered plans—an annuity whose commencement can be deferred until age 85. An ALDA could be an investment option available to anyone with a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), or similar registered plans like a Defined Contribution (DC) pension plan. ALDAs will also have a lifetime limit of $150,000 from all qualifying plans.
What do ALDAs mean for the future?
With very little information about the details of these products, it’s difficult to say whether they will be a staple in retirees investment portfolios, or if they will be the latest and greatest product to be pulled off the shelves after a couple of years. When anything new comes to market, you can be sure that at Precision Wealth Management we will complete our due diligence to ensure these strategies are applicable to our clients.
One thing is certain, outliving retirement savings will always be a concern of retirees in Canada. To ensure your retirement income is sustainable, work with a Financial Planner to create a retirement plan that will manage your retirement income expectations and help achieve your financial goals.
Choosing investment products is secondary to your retirement plan. Once you know your sources of income, estimated taxes and required rate of return to achieve your goals, your advisor will make recommendations about the most suitable combination of investment products for you.