As we mentioned in other articles, the government only represents about 30 and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plan. Now you have reached your retirement age, there are some important investment options for your RRSP or 401k plan. In this article, we will discuss characteristics of non registered annuity.
An annuity is non-registered when it is purchased with funds from money other than registered plan. Payments made under a non-registered annuity contain your principal and earned interest. Only the interest portion is taxable each year.
1. Non-registered fixed term annuity
Annuity payments are fixed for the term of the plan and cannot be changed. The payment amount is determined by the interest rate for the term and the term chosen, if term is long than payment will be small, on other hand if the term is short than the payment will be large. Each payment includes principal and interest and only the interest portion of the payment is taxable for the year of receipt.
2. Non prescribe annuity
The taxable interest portion of a non-prescribed annuity decreases annually. Therefore taxes paid are higher during the first few years, gradually decreasing to zero over time.
3. Prescribe annuity
Payments contain capital and interest income in a ratio that can not be change over the entire duration of the contract. Under a prescribed annuity contract, the tax payable is spread out evenly over the entire duration of the contract.
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