The Ever Changing World Of Investments
Since the guaranteed lifetime withdrawal benefit products (GLWB) first made its debut, investors have been gravitating towards this "Guaranteed Income for Life" product as an alternative solution for their retirement plans; especially in these troubling economic times, However, as the adage goes, "all good things must come to an end", and we are now starting to see life insurance companies, modify, recede, and now even exit this investment product.
Market conditions over the past four years have left everyone worrying and scratching their heads as to where to put their retirement savings. Even Bonds and GICs, the once stronghold of the fixed income market for the ultra conservative investors, can no longer provide the same level of income with the low interest environment. There is no wonder as to why we are seeing an increasingly amount of GLWB sales in 2012.
However, financial markets have not been as responsive to the recovering global economy as analysts had hoped for, and as a result of this, life insurance companies have now started to modify, recede, and even exit from this investment product.
The main reasoning comes from a continuing low interest rate environment, market volatility and slow recovery. Sustainability and capital reserves requirements set out by FSCO (or as Insurance companies like to call "RISK") cannot be met. I am convinced that there will be other closures in the near future.
If you are a Conservative Investor or a Risk Adverse Investor now is the time to investigate this product group. Where else can you get guarantees that your principle is protected and that you cannot outlive your money? This product is ideal for people who do not have a pension plan from work. Check it out before the guarantees are gone.
Give me a call or send me an email and I can discuss your specific situation with you.
Showing posts with label GMWB. Show all posts
Showing posts with label GMWB. Show all posts
Monday, April 30, 2012
Tuesday, October 6, 2009
Retirement planning with Guaranteed Minimum Withdrawal Benefit products
Guaranteed Minimum Withdrawal Benefit (GMWB) products have become hugely popular with clients. This popularity is most likely attributable to the growing awareness that individuals will increasingly have to be responsible for looking after their own retirement needs. Companies and perhaps Governments too, face significant challenges in providing retirement income to their retirees and citizens.
Canadian’s are aging and within the next 5 to 10 years there will be the largest number of people at retirement age our country has ever had in its history.
This group of Canadians aged 65 and older will control the majority of investible assets for many years to come. In 2008 they controlled $1.93 trillion and are forecasted to control $4.75 trillion in 2018. They are and will increasingly demand products that will help them fund their retirement years.
On the face of it, segregated funds with the GMWB don’t guarantee anything more than the equivalent of principal return, but these features allow the client to enjoy some upside without risking capital — a guarantee that appeals to aging Canadians.
The principal features of GMWB products address the three key risks facing pre-retirees and retirees, outliving one’s money, poor market returns and inflation. These three risks are addressed by guaranteeing income for life or a fixed period of time. Clients participate in the stock markets with limited downside risk and the potential to lock-in market gains. As well, a notional bonus adds 5% a year to the deposited capital for every year that the client does not take his or her first withdrawal.
The income period can vary, as well. Starting in the year in which the client retires — as early as age 50 and as late as age 70 — the plans offer 4%-7% of the deposit back in annual income, with most plans continuing until the client dies. And let’s not overlook the basic features of segregated funds, guarantees at maturity and death, probate avoidance and creditor protection.
If you do not have a company Defined Benefit Plan or pension – give me a call and we can see how this product class fits into your financial plan.
Canadian’s are aging and within the next 5 to 10 years there will be the largest number of people at retirement age our country has ever had in its history.
This group of Canadians aged 65 and older will control the majority of investible assets for many years to come. In 2008 they controlled $1.93 trillion and are forecasted to control $4.75 trillion in 2018. They are and will increasingly demand products that will help them fund their retirement years.
On the face of it, segregated funds with the GMWB don’t guarantee anything more than the equivalent of principal return, but these features allow the client to enjoy some upside without risking capital — a guarantee that appeals to aging Canadians.
The principal features of GMWB products address the three key risks facing pre-retirees and retirees, outliving one’s money, poor market returns and inflation. These three risks are addressed by guaranteeing income for life or a fixed period of time. Clients participate in the stock markets with limited downside risk and the potential to lock-in market gains. As well, a notional bonus adds 5% a year to the deposited capital for every year that the client does not take his or her first withdrawal.
The income period can vary, as well. Starting in the year in which the client retires — as early as age 50 and as late as age 70 — the plans offer 4%-7% of the deposit back in annual income, with most plans continuing until the client dies. And let’s not overlook the basic features of segregated funds, guarantees at maturity and death, probate avoidance and creditor protection.
If you do not have a company Defined Benefit Plan or pension – give me a call and we can see how this product class fits into your financial plan.
Subscribe to:
Posts (Atom)
Posts
