If you are like me – 55 and over – wouldn’t you agree everyone needs a reliable and strong income for life? And to reduce tax? So let me share a story with you…
Don and I were enjoying a toast to his 77th birthday. He’s very passionate about his travels, and his summers here at home. “The one thing which really bothers me,” he said, “is how the government pays me OAS and then claws it back again!”
I replied with concern and a smile, “Well Don, we must be making you too much money!” He chuckled in reply, to which I added the suggestion to meet upon his next travel’s return, and look at this more carefully, as there are ways to cut taxes and avoid some of that clawback.
Here are some of the options I suggested to Don, which would work well for anyone who wants to discuss with their own advisor:
Don already believed in the value of owning Dividend and Income funds. These were paying Don a high monthly income. The bond portion was fully taxed. Dividends were giving him a tax credit. Despite the strong results we could still do more for income guarantees and lower taxes.
We looked at the guarantees in a Lifetime Income Benefit. Don can enjoy guaranteed income of at least 5% for life. Taxes are reasonable too. This could perhaps double the net income people are earning today. If “safety” is important to you, wouldn’t you want to look at these guarantees and tax advantages?
What Don really liked was hearing about Life Pay-out Annuities. This offers him what may be the strongest income of all – even ranging 9% or more! There are no market gains or losses because the contract is guaranteed. Taxes would be especially low because he receives most of this income tax-free! (And it reduces OAS clawback too).
If our greatest financial risk is outliving our money, Life Pay-out Annuities eliminate that risk with a contract that keeps paying even if we live to 150! And listen to this: If one dies too soon, your family, friend or charity can continue to receive what would be owing to you to age 90. (Ask about the age 90 guarantee.)
Since we cannot print vast tables of data here, there’s an easier way: First consider what you want your money to do for you, what income do you need today, and for the rest of your life. How important is it to reduce taxes and clawbacks? Then it’s easier to discuss the best approach.
Most people have never seen a financial plan outlining what would be your income for the next 20 or 30 years. Ask your planner for this directly if they offer it. Consider there is a way to protect your income and reduce taxes for life.
- - - -
Brian Weatherdon, BA, MA, CFP, CLU, CPCA, MDRT is a Certified Financial Planner at Sovereign Wealth Management in Burlington, and may be reached for comment or assistance by calling (905) 637-3500 x 223.
The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The views expressed are those of the author and not necessarily those of the issuer of any financial products for which the author may act as a distributor.