When you retire, will you have a steady source of income for the rest of your life? If you can’t answer yes to that question, you should consider annuities.

Annuities are a very popular and excellent choice for guaranteeing retirement income. An annuity is a series of guaranteed regular, periodic income payments. It provides a steady income stream while allowing its owner to defer taxes on his/her registered plan assets.

There are two types of annuities, registered and non-registered. A registered annuity is a result of having transferred the maturing assets from a registered retirement savings plan (RRSP), a locked-in retirement account (LIRA), a registered pension plan (RPP), a deferred profit-sharing plan (DPSP) or a locked-in retirement income fund (L-RIF). A non-registered annuity is one which is purchased with non-registered funds. Life annuities provide protection for the risk of living too long. This is the opposite of typical life insurance. Therefore, the older one is, when the life income starts, the larger the annuity income based on returning one’s capital plus interest during the shortened life expectancy.

A life annuity may have a minimum guaranteed period. To have a guarantee is like paying for insurance paid up front from the initial capital. So the longer the guarantee period, the lower the annuity income. If death occurs after the guaranteed period, the insurance company pays nothing more.

Annuitants living beyond the average life expectancy receive more than those who do not. Those with life-threatening health problems, significantly shortening life expectancy, may be eligible for impaired annuities with more favorable payments.

The life annuity income provided by a single premium life annuity varies with the age of the annuitant, and type of life annuity. A life annuity may be a joint and last survivor annuity, applicable on two lives, where the income goes to one annuitant until death and then continues to the survivor until their death. Since two people combined have longer life expectancy than one, the amount of annual annuity income is lower.