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Home Financial Health Blog Active retirement - the early years Build a rock solid pension with no stock market exposure: Start with $25,000

Build a rock solid pension with no stock market exposure: Start with $25,000

by Tim Weichel

Consider this fixed income investment that provides a guaranteed retirement income for life without having to live with the risk and volatile returns of the stock market.   

Retirement today

Most Canadians have saved some money in RRSPs and TFSAs but do not have a clear idea whether their savings are sufficient, or how much income they will need in retirement.  Nor do they know all of their options for converting their savings into a stream of income that will last for the rest of their lives.  Interest rates are at an all-time low and stock market returns are increasingly volatile and disappointing. 

We are living significantly longer than our parents generation and the majority of Canadians no longer belong to company-sponsored guaranteed pension plans, also known as Defined Benefit Pension Plans.  So most Canadians will be dependent on CPP and OAS plus good investment returns on their savings over the 30 or so years they will be retired.  The problem is that poor investment returns in the five to ten years before or after you retire can make for a significantly reduced standard of living in retirement, or worse, to your running out of money. See Video: The Retirement Risk Zone

PensionBuilder is a way to put a portion of your savings to work to create a guaranteed lifetime pension-like income, whether you are in the pre-retirement or retirement stage of your life. A complement to other retirement income sources, PensionBuilder supports retirement plans and helps ensure that you will not run out of money.

Where does PensionBuilder fit into your portfolio?

PensionBuilder Guaranteed Income Fund, established in October 2013, is a Canadian long-term fixed income fund. Its objective is to seek preservation of capital and provide sustainable income. The Fund’s investment mix has been specifically chosen in order to best match the expected income needs of investors.  In addition, it guarantees a lifetime stream of income at a growing rate the longer you wait to take income from it. 

Most people have a mix of equity and fixed income in their portfolio.  PensionBuilder can become the fixed income portion.  Here’s why:  In this low interest rate environment, fixed income may generate a yield of perhaps 1-2% going forward with no guarantees, and even the possibility of decline if interest rates rise in the future.

Here are some examples of how today’s five-year 2% GIC rate compares to Pensionbuilder’s current rates:

A male aged 65 making a $100,000 deposit today and starting to take income today would get $4,670 annually for life or 4.67%.  If he waited until age 71 to start taking income, his lifetime guaranteed annual income would be $6,300 annually, or 6.3%.

A female aged 60 making a $100,000 deposit in PensionBuilder today and starting to take income immediately would get $4,040 annually for life or 4.04%.  If she waited until age 70 to start taking income, her lifetime guaranteed annual income would be $6,310 annually, or 6.31%.

A couple aged 67 making a $100,000 deposit today and taking income at age 72 would get $5,230 or 5.23% until the last of the couple passed away. 

And in all cases, if you have an emergency need for cash, you can access the market value of your investment in Pensionbuilder. 2

You’ve worked hard throughout your life and retirement is your time to reward yourself, not to be worrying about whether the stock market is up or down today. PensionBuilder can help you spend time living your retirement, not worrying about it.

Features and Benefits

PensionBuilder is an innovative income solution designed to provide you with:
  • A secure income stream that is guaranteed for life to help form the foundation of a retirement income plan
  • A higher level of retirement income the earlier you invest and/or the later you wait to start drawing income
  • Flexibility to choose when to begin taking income, as early as age 50
  • The option of uninterrupted income for life for your surviving spouse1
  • A conservative investment in a fixed-income portfolio with full access to your market value, should the need arise2

Try the Income Calculator to help calculate what your guaranteed income from PensionBuilder will be in retirement.

Download the PensionBuilder Client Brochure.  Contact us to help make PensionBuilder part of your retirement income strategy.

1Spouse or common-law partner (as defined by the Income Tax Act (Canada))
2Fees may apply
Exceeding the withdrawal thresholds of the Manulife PensionBuilder insurance contract and/or withdrawals taken prior to the Election of the Income Benefit may have a negative impact on future income payments. Age restrictions and other conditions may apply.
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