According to the study, when someone reaches 60 years old they can expect to live another 27.3 years if they are male and 29.4 years if they are female. Compared to the previous study, that’s an extra 2.9 years for men and 2.7 years for women, making today’s life expectancy 87.3 and 89.4 respectively for men and women.
That means mortality tables (statistics used by actuaries to measure pension plan and annuity liabilities) will probably change. It also means that seniors have to make their money last longer.
One way to do that is through gift annuities. A gift annuity is a type of investment that allows someone to make a significant contribution to a charity and then receive tax benefits and a guaranteed annual payment at a level that typically exceeds the rate of return on a GIC. It is suited for someone who wishes to donate a large sum to charity but also needs to maintain ongoing cash flow from their investments. When the donor dies, whatever funds are left in the annuity go to the charity.
Annuity rates are calculated based on long-term interest rates and on the life expectancy of the contributor at the time the annuity is issued. No medical is required when applying for an annuity.
The older you are when you establish a gift annuity, the higher the payments. For example, using current annuity rates and based on a $10,000 gift by a male, a 70- year-old investing with Catholic Missions In Canada would receive an annual payment of $513 tax free (a return rate of 5.3 per cent) while an 80-year-old would receive $675 tax free (6.75 per cent) and a 90- year-old $991 (9.91 per cent), also tax free.
In these examples, participants receive a one-time charitable donation receipt for approximately 29 to 36 per cent of their investment, which helps reduce current income taxes.
The annual return for females making a $10,000 gift would be slightly lower than for males because females are expected to live longer. Their annual return would be $478 for a 70-year-old with 98 per cent tax free; $623 for an 80-year-old tax free; and $944 for a 90-year-old tax free. In these examples, female participants will receive a one-time charitable donation receipt for approximately 28 to 31 per cent of their investment.
Joint-life annuities are also available and are paid out without interruption until both parties have died. At Catholic Missions In Canada, the minimum age for an annuitant is 60 years.
Canada Revenue Agency does not allow the tax-free roll-over of registered funds such as RRSPs or RRIFs into gift annuities.
For more information about gift annuities from Catholic Missions In Canada, phone (416) 934-3424, toll-free 1 (866) 937-2642, or e-mail winnie@ cmic.info. The minimum amount for a gift annuity with Catholic Missions In Canada is $10,000. There is no maximum.
(Quinn is manager of gift planning at Catholic Missions In Canada.)