Edit Annuity Income

Use this page to review and edit all the information for an existing annuity income.

The fields shown depend on the annuity type and on whether the annuity has already been purchased or is planned for the future.

The income source cannot be changed because registered, prescribed and structured settlement annuities have different calculations and tax treatments. If the wrong annuity type was selected, delete the income and add the appropriate type.

Enter a name that will make the annuity easy to recognize. Each income must have a unique name.

Select the annuitant who receives the income.

A registered annuity cannot be Joint. A prescribed annuity or structured settlement annuity may be Joint when the annuity contract applies to both spouses.

The percentage of the annuity payable to a surviving spouse is entered separately below.

The additional fields shown depend on the annuity type, its start date and whether its purchase will take place in the TIME MACHINE.

For an annuity that has already been purchased, enter its original purchase cost if that field is shown.

Enter the annuity’s actual annual payment in the Amount/year field below.

For an existing prescribed annuity, also enter the portion of the annual payment that is taxable. This amount should be available from the insurer or on your tax information.

For a future registered or prescribed annuity purchase, select the account from which the purchase will be funded and the percentage of that account’s balance to be used.

The account balance available on the future purchase date will be calculated in the TIME MACHINE. The selected percentage will be withdrawn from the account and used to purchase the annuity.

The future annuity payment will then be estimated using the annuity payout rate you enter. Leave the common Amount/year fields at zero when the future payment is to be calculated from the funding account.

The annuity payout rate is the annual income paid by the annuity divided by its purchase cost, expressed as a percentage. It is not an investment rate of return.

For example, an annuity paying $500 per month for each $100,000 of purchase cost has an annual payout rate of 6%:

100 × ($500 × 12) ÷ $100,000 = 6%

Ignoring inflation and the time value of money, the approximate number of years required to receive payments equal to the original purchase cost is 100 divided by the payout rate. With a 6% payout rate, this would be approximately 16.7 years.

Actual payout rates depend on factors such as the annuitant’s age, the annuity’s features, interest rates and the insurer. For a future purchase, use a reasonable estimate and try different assumptions in the TIME MACHINE.

For an immediate future annuity, the purchase date will normally be shortly before the income begins.

If a future registered annuity will be purchased earlier and its payments will begin later, enter the planned purchase date and the expected annual growth rate between the purchase date and the income start date.

A registered annuity is purchased with funds from a registered retirement account, such as an RRSP, RRIF, DCPP, GRSP, DPSP or PRPP. The complete list of eligible accounts available to the annuitant will be shown in the funding-account menu.

Payments from a registered annuity are treated as taxable income. They may be eligible for pension income splitting with a spouse, depending on the source of the funds, the recipient’s age and whether the annuity was received following the death of a spouse.

An RRSP must mature by the end of the year in which its annuitant turns 71. Registered funds not used to purchase an annuity will be converted in the TIME MACHINE to an RRIF or LIF at the age specified for the account.

An advanced life deferred annuity allows payments from qualifying registered savings to begin as late as the end of the year in which the annuitant turns 85. Transfers are subject to both a percentage limit and an indexed lifetime dollar limit.

IMPORTANT: The MoneyReady App does not currently enforce all legal limits governing registered annuity or ALDA purchases, including limits on the amount transferred and the timing of the purchase. Confirm that a planned transaction is permitted before implementing it.

A prescribed annuity is generally purchased with non-registered funds. Funds may also be withdrawn from an account such as a TFSA and used to purchase the annuity.

Part of each prescribed-annuity payment is taxable income and the remainder is treated as a return of capital. Under prescribed taxation, the taxable portion is generally level throughout the payment period.

For an annuity that has already been purchased, enter its annual taxable amount. For a planned future prescribed annuity, the TIME MACHINE will estimate both the payment and its taxable portion.

A prescribed annuity cannot be deferred or indexed in the MoneyReady App.

This optional field is used only when estimating the taxable portion of a future prescribed life annuity.

For a Joint annuity, enter the gender of the younger spouse. If no gender is selected, the estimate will use the average of male and female life expectancies.

A structured settlement provides a stream of payments arising from the settlement of a legal claim.

The MoneyReady App treats income entered as a Structured Settlement Annuity as non-taxable. Use this income type only when that tax treatment applies to the settlement.

Enter the annuity’s guarantee period as stated in the annuity contract.

If you have a spouse, enter the percentage of the annuity payment that will continue to the surviving spouse after the annuitant’s death and beyond the guarantee period.

Enter the terms that apply to the actual or proposed annuity contract.

Enter the dates on which the annuity payments begin and end. Each can be entered as a date, an age or a LIFE EVENT. The resolved date that will be used is shown below each selection.

For an annuity that has already begun, enter its actual starting date. For a life annuity, leave the end at its default or select the appropriate death-related LIFE EVENT.

For a term-certain annuity, enter the date on which its payments end.

Select the currency in which the annuity amount is entered. The MoneyReady App will convert the income to Canadian dollars when required using its currency assumptions.

Registered and prescribed annuities are handled in Canadian dollars by the MoneyReady App. If another currency is selected for one of these annuities, it will be changed to Canadian dollars when the income is saved.

For an existing annuity, enter the gross annual payment before taxes or other deductions.

For an existing prescribed annuity, enter the complete annual payment here and enter its taxable portion separately in the annuity details above.

For a future annuity whose payment will be calculated from a selected account balance and payout rate, leave this amount at zero.

For an annuity with a known payment that begins in the future, you can enter its annual amount in today’s dollars. The MoneyReady App will increase it to the start date using the applicable inflation assumptions.

If you already know the amount that will be received at the future start date, use the OR Amount/year in FUTURE currency field instead. Use one amount field or the other, not both.

Do not enter either amount when the future annuity payment will be calculated from the funding account and annuity payout rate.

For a registered or structured settlement annuity, select Index to inflation once started only if the annuity contract provides for indexed payments.

The inflation adjustment multiplier controls how much of the inflation rate is applied:

• 1 applies the full inflation rate.
• 0.5 applies half of the inflation rate.
• 2 applies twice the inflation rate.

The additional yearly adjustment is added to the inflation-based increase. If the annuity is not indexed, this adjustment becomes its entire annual rate of change.

A prescribed annuity cannot be indexed in the MoneyReady App. Leave its indexing unchecked and its additional yearly adjustment at zero.

You can enter an optional note of up to 280 characters. The note is for your reference and does not affect the TIME MACHINE calculations.

Your changes will be validated and saved. The annuity information will be used in the TIME MACHINE to calculate its purchase, payments and tax treatment.