This is sponsored content submitted by Sun Life Financial.
Let’s be honest. There are many people who would prefer to retire sooner rather than later. But nagging uncertainties have made ‘later’ more common than with previous generations. For the first time the number of people who expect to be retired at age 66 is virtually equal to the number who expect to be working full time.1 Meeting basic living expenses is the number one reason Canadians expect to be working past the traditional retirement age.1
This is where you come in. You can offer your clients income solutions—solutions that can provide predictable retirement income, guaranteed for life—to help them cover basic costs such as food, utilities, housing and insurance premiums. Helping your clients look after their basic living needs in retirement is the foundation of Money for Life™—our approach to retirement planning. It’s the confidence builder your clients will welcome as they look ahead to how you can help them meet their other main income needs in retirement.
Similar to the accumulation phase where clients consider a multi-fund or product approach to investing to mitigate risks while maximizing return, we know one product solution will not meet every retirement need. There are a variety of products that can be structured to provide an income stream—mutual fund portfolios, income funds, SunFlex Retirement Income and life annuities can be combined to create multi-product solutions in retirement.
More and more Canadians are looking for some portion of their income stream to be guaranteed. In fact, 75% of Canadians2 aged 57 plus have expressed that they want guaranteed income in retirement. Before you discuss your clients’ basic living needs with them, review some resources that focus on payout annuities, which currently provide the highest initial level of guaranteed income in retirement. Other products provide guaranteed minimums or guarantees that increase at a fixed rate over time. You’ll discover valuable information about life annuity benefits, how to overcome objections to them and why they’re a strong foundation to most retirement plans.
When it’s time to sit down with your clients, emphasize how important it is for them to have an income floor to cover basic living expenses. This floor includes any sources of guaranteed lifetime income from Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Old Age Security (OAS) and, for those of your clients that have one, a defined benefit (DB) pension plan. The income floor also includes any other sources of guaranteed income (e.g., from a guaranteed product) that may be needed to fill a gap between government and employer sources of income and your clients’ basic living expenses.
You can use the online calculators at www.myretirementcafe.ca to help your clients calculate their preferred CPP/QPP start date, as well as basic expenses.
The difference between the guaranteed income generated from government and employer sources and basic living expenses is the basic income gap. Recognize this gap can grow as inflation erodes the purchasing power of retirement income over time, so it’s important to show your clients how inflation can affect their ability to pay for basic living expenses.
So what can you do for those of your clients whose income from guaranteed sources is less than their basic living expenses? Taking into account the impact of inflation, there are certain products your clients can purchase to increase their income floor. Many clients do well with a mix of different solutions, each with its own desirable benefits:
- Single premium life annuities currently generate the highest initial guaranteed lifetime income, delivering consistent guaranteed income year over year. The trade-off for high income is no access to capital.
- Indexed life annuities provide lifetime income that initially starts lower than a life annuity with no indexing and grows each year at a fixed rate, helping to offset inflation.
- A segregated fund contract with guaranteed lifetime withdrawal benefit (GLWB) typically provides guaranteed lifetime income with some exposure to market performance, some access to money and other features. The preferred time to buy this solution may be during the retirement risk zone—typically the five to 10 years just before and after your clients retire.
- SunFlex Retirement Income provides a level guaranteed lifetime income with the potential for bonus income.
Depending on risk tolerance and financial preferences, some of your clients may wish to forgo additional guaranteed lifetime income and fill this basic income gap with market-based products that deliver sustainable income solutions that, in combination with their guaranteed products, will meet their basic expenses.
Get your clients on track to the retirement they envision. It starts with the basics.
1Finding from the 2013 Sun Life Canadian Unretirement™ Index
2Finding from the 2012 Sun Life Canadian Unretirement™ Index
Since joining Sun Life in 2004, Rocco has held various executive leadership roles, including Vice-President Business Development, Group Benefits; Head of Individual Wealth Management; Senior-Vice-President, Client Solutions; and most recently Senior Vice-President, Distribution and Marketing, Individual Insurance and Wealth. Throughout his tenure at Sun Life, Rocco has led various business strategies centered on building, transforming, and evolving organizations and teams to drive higher levels of performance and success.
Rocco has 36 years of experience in strategic leadership in the insurance and investment industries. He has served on and is a member of a number of boards. Rocco is currently President and Chair, Sun Life Financial Distributors (Canada) Inc. and is a member of the Sun Life Financial Investment Services (Canada) Inc. board. He is a member of various industry associations, including Advocis, GAMA Canada, the Canadian Pension and Benefits Institute, and the Association of Canadian Pension Management.
Rocco holds a Bachelor of Arts in Economics from York University.