A Case Study For Insured Annuities

Joan Smith, a retired 72 year-old widow found herself in a situation that many older Canadians face. Joan lived in a large four-bedroom home that she found very hard to maintain. Her three grown, financially independent children, along with her five grandchildren did not live near her.

Investment Assumptions
Capital	$500,000
GIC Interest Rate	4.35%
Marginal Tax Rate	46.40%
Annual Guaranteed Annuity Income	$48,641.73
Annual Taxable Portion	$13,704.37
Annual Insurance Premium	$18,385.00

Comparison
	GIC	Insured Annuity*
Annual Income	$21,750	$48,641
Income Tax Payable	(10,092)	(6,358)
Annual Insurance Premium	NIL	(18,385)
Net Income	$11,658	$23,897

Analysis
	GIC	Insured Annuity
Difference in Investment Income		$12,240
Effective Return After-Tax	2.33%	4.78%**
Effective Return Pre-Tax	4.35%	6.05%***

Joan sold her home for a value of $500,000 and moved into a retirement community.

Joan's tolerance for risk was low and therefore, she was looking for a strategy that would provide her with the highest amount of income with the least amount of risk.

An insured annuity was suggested to Joan. This concept combines a prescribed life annuity and a life insurance policy that will guarantee an income and an after tax income of $23,897 per year. Joan's original investment will be fully restored upon her death and can be bequeathed to her heirs.

Here's how an insured annuity compares to the same investment made in a GIC.

An insured annuity should be considered as an important component of a larger diversified plan. It is important to discuss the suitability of this strategy with your CIBC Wood Gundy Investment Advisor and one of our Estate Planning Specialists**** who can help you determine your retirement and estate planning needs.

To learn more about insured annuities and how they could fit into your investment plans, the following articles are available:

Use our Find An Advisor tool to locate a CIBC Wood Gundy Investment Advisor near you and take the first step to achieving the financial future you want.

*Example is based on a Manulife T-100 Policy combined with a Standard Life Annuity and A CIBC 5 Year GIC.

** Net rate of return based on income received versus capital invested.

*** Gross rate you would have to earn in an interest-paying vehicle in order to receive the same net income as the Insured Annuity Concept based on your current marginal tax bracket.

**** Financial Security Advisor in Quebec.

The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.

Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.