An advanced life deferred annuity may be well-suited to more conservative clients seeking guaranteed income later in life, do-it-yourself investors and people who don’t have defined-benefit pension income.Financial professionals have another retirement planning tool at their disposal with the advanced life deferred annuity , which was introduced in this year’s federal budget.
Mr. Heath says an ALDA may be well-suited to more conservative clients seeking guaranteed income later in life as well as do-it-yourself investors who may wish to be less actively involved with their portfolios as they get older. The vehicle may also help people who don’t already have defined-benefit pension income.
Although the ALDA isn’t likely suited for the high-net-worth investors or those with a healthy DB pension plan, “for the average person, where there is a possibility they could run out of money in retirement … this is what you’d recommend," Mr. MacKenzie says. Financial advisors need to be careful in using an ALDA simply as a tool to minimize taxes in the near term, says Mr. Heath, as it could lead to higher taxes in the longer term. For instance, he says investors who defer too much income from their RRIFs to an ALDA may be in lower tax brackets in their 70s but in much higher tax brackets in their 80s than they would be if they hadn’t purchased an ALDA. “They may pay more lifetime taxes as a result,” he says.
Having a set income stream might also protect seniors susceptible to financial abuse because they won’t have the larger pot of money to hand over to fraudsters. “The money can’t be tampered with,” she says.