Case Study | Income Later

Carol, age 50, is 15 years away from retirement and has $200,000 to invest. Carol is concerned with experiencing poor market returns as she approaches retirement. Carol invests $200,000 in IncomePlus and waits to take income.

In this example, Carol’s initial deposit establishes a Guaranteed Withdrawal Balance (GWB) of $200,000. For every year that she does not take a withdrawal, she will benefit from a five per cent income bonus. That means even in a down market, her GWB will grow to $350,000 through annual income bonuses of $10,000 accumulated over the 20 year period. The guaranteed annual income available to Carol when she retires at age 70 will be $17,500 (five per cent of $350,000). This amount will be available for the rest of her life.

Look how Carol benefits when she invests $200,000 and the markets perform well.

In this example when markets perform well, Carol will benefit from automatic resets of her Guaranteed Withdrawal Balance every three years. Resets can also increase bonuses for future years. Even though markets have declined in year 12, Carol’s yearly five per cent bonus continues at the year nine amount. The bonus is available for each of the first 15 years that Carol does not take any withdrawals. By the end of year 15 when Carol is ready to retire, her Guaranteed Withdrawal Balance has grown to $798,680 and the annual amount available to her starting in year 16 for lifetime retirement income is $39,934.

For illustration purposes only. Portfolio consists of 80% TSX/S&P Index and 20% ScotiaMcLeod Universe Bond Index from Dec. 1991 to Dec. 2006. Returns have been reduced for 0.75% annual IncomePlus Fee.