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Three common annuity options Add to ...

When you buy an annuity, you can choose to add a number of options. The more options you add, the higher the costs of your annuity and the lower the payments you receive. Here are 3 of the most common options.

1. Joint-and-last-survivor

If you're married or have a common-law partner, this option guarantees that the payments from the annuity will continue for as long as either you or your spouse or partner lives. But adding this option may reduce your payments by up to 25%.

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2. Guaranteed benefit

If you're buying a life annuity, this option guarantees you a certain number of payments over a certain period of time, usually 5, 10 or 15 years. That means if you die before the end of the period, your beneficiaries or your estate will continue to receive your payments until the period ends.

3. Indexing

This option automatically increases your annuity payments to keep up with inflation. As prices rise, your monthly income will buy less in the future than it does today. This option can lower your initial annuity payments by as much as 30% to 45%.

Example – Let's say your annuity pays you $1,000 a month. Assume that over the next 20 years, inflation rises by 2% every year. In 10 years, your $1000 monthly payments will buy what $820 buys today. And in 20 years, it will buy $673.

How adding options can affect your annuity payments

This chart is based on a hypothetical deposit of $100,000 in a life annuity, made at age 65. It shows how your income may drop as you add options.

​Annuity optionWhat it’s designed to doSample monthly annuity payment*
​Straight life (no options)
​Provides you with income for life
Life plus 5-year guarantee​




​Provides you with income for life

Guarantees 60 payments to your estate if you die within the first 5 years of your contract
​Life plus 10-year guarantee



​Provides you with income for life

Guarantees 120 payments to your estate if you die within the first 10 years of your contract
​Life plus joint-and-last-survivor



​Provides income for life for you and your spouse

Payments stop after both of you die

*These calculations assume an investment of $100,000 in non-registered funds, made by a male aged 65.​

Choose only the options you need: For example, if you have life insurance or other savings, you and your spouse may not need a joint-and-last-survivor annuity. You may be better off taking a higher income from a single annuity during your lifetime.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

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