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Term vs. Permanent Life Insurance: What You Need to Know

Both types of insurance can protect your loved ones and their futures, but not all life insurance policies are the same. Different products have features that can help you meet your personal needs and goals, whether you’re growing your family, getting ready for retirement, or just planning ahead.

Key takeaways

  • Life insurance helps protect your loved ones from unexpected costs when you pass away.
  • There are two main types of life insurance: term and permanent life insurance.
  • Term life insurance provides coverage over a fixed amount of time with often affordable monthly or yearly payments. However, your beneficiaries won’t receive a payout if you live beyond your policy’s term.
  • Permanent life insurance costs more upfront but covers you for life, even if there are changes in your health.
  • Some permanent life insurance policies also work like investments. If you cancel early, you can receive the policy’s cash value.

Life Insurance Basics

Life insurance is a great way to help your loved ones meet financial goals or commitments, after you pass away. It’s also a way to ensure they’re able to:

  • Pay for final expenses, such as funeral costs
  • Pay off a mortgage or other debt
  • Cover the costs of raising children
  • Put aside funds for retirement

There are two basic types of life insurance: term and permanent. The cost of your life insurance policy depends on your personal situation, factoring in things like your age, gender, health status, habits (like smoking and drinking), and any activities that may be considered risky (like motorcycling). However, in general, term policies are more affordable than permanent ones.

It’s important to note that not everybody is insurable. There are instances where something like a pre-existing health condition may affect eligibility to buy life insurance. However, there could still be options, like guaranteed life insurance policies that offer a lower death benefit (the amount paid out by the life insurance company) at a higher premium.

What is term life insurance?

Term life insurance is often the most straightforward and affordable way to get coverage. You pay an affordable premium (a regular monthly or yearly fee), and in return, receive life insurance coverage for a defined amount of time (called a term), such as 20 years. When your term ends, your insurance fees also end, and your loved ones are no longer eligible to receive a death benefit when you pass away.

Term life premiums

With term life insurance, you choose how long you’d like to pay premiums for, such as 10, 20, 30 or 40 years. The length of your term and the amount of coverage you choose affects the price you’ll pay each month, which could be as low as $13 a month[1] (paying for policies yearly is also an option). While coverage is temporary, you may have options to convert to long-term coverage later if needed.

Benefits of term life insurance

There are many benefits to term life insurance, including:

  • Flexible terms: Flexible policy terms commonly range from 10-40 years.
  • Affordable rates: Monthly or annual fees are guaranteed to stay the same for your entire term.
  • Accessible policies: Medical exams may not be required depending on your policy and terms.
  • Customizable add-ons: Policies can be adapted to meet changing needs over time or include coverage for children (such as a children’s term rider, which provides life insurance for children as well).
  • Tax-free death benefit: Your beneficiaries will receive a lump sum, tax-free benefit if you pass away, offering extra stability at a critical time.
  • Convertible options: Some policies have the ability to convert to a permanent or universal life insurance policy before the age of 71, with no health or medical exams needed.

Drawbacks of term life insurance

Terms can run out: Living beyond your term means your policy ends without your beneficiaries getting a benefit payout. However, there may be options to continue or renew your policy or convert it into a permanent policy.

Eligibility can change: As we age, our health circumstances also change. Buying life insurance when you’re younger can make policies more affordable. For example, term insurance is usually easier to qualify for when you’re younger and may be more challenging to qualify for when you’re older, or become more expensive to buy.

What is permanent life insurance?

Permanent life insurance covers your entire life, regardless of your age, how long you live, and your health status. Depending on the policy it can also help with estate planning needs, like costs associated with transferring assets to your partner or kids. Permanent life insurance premiums can be paid monthly or yearly, just like term insurance, but coverage remains in place when your payments end. Like term insurance, buying life insurance when you’re younger and healthier can make policies more affordable. If you cancel a permanent life policy before your death, you’ll receive the cash value of your policy (minus any fees from managing the plan associated with the policy).

Some permanent policies also allow parents or grandparents to transfer a life insurance policy to a child. That way, they have life insurance coverage as they grow up, and if the child develops an illness or health condition that would make them uninsurable.

Common types of permanent life insurance are:

Participating Whole Life Insurance: These policy premiums and benefits don’t change over time. Because you’re paying into the policy it can be structured so that it’s paid up (reaches full value and monthly payments end) after a certain period of time, like 10 or 20 years, or once you reach 100 years old. Once a policy is paid up, coverage still remains in place. With participating whole life insurance the policy’s invested assets are professionally managed by the insurance company, not the policy holder.

Universal Life Insurance: These flexible policies allow you to update policy premiums and benefits over the years. They can be structured so that you overfund your policy (pay more than the minimum monthly fees required) earlier in life to raise the cash value up front, and offset the cost of premiums later. This can be really helpful for people anticipating retirement or another fixed-income situation down the road. With universal life insurance the policy holder is involved with managing the assets in the policy.

T100 permanent life insurance: This type of permanent life insurance policy covers you for life but without the investment and cash-value benefits of other permanent policies. Like term policies, you pay your monthly or annual contribution fees and are covered.

Benefits of permanent life insurance

Permanent policies have a range of benefits, on top of paying out a benefit when you pass away. Additional benefits include:

  • Dividend reinvestment: The dividends you earn in the policy can be reinvested, increasing the value of the policy’s death benefit over time. As the value of your death benefit grows, so does the cash value of your policy.
  • Tax-deferred growth: Your policy’s annual cash value can grow without incurring annual taxes, but it is subject to limits set by the Income Tax Act.
  • Options to use your cash value: You may request to use your policy as collateral for a loan from a financial institution, subject to the lender’s requirements. You can also access the funds in your policy to supplement retirement income or if you have an illness.

Drawbacks of permanent life insurance

As these policies last your lifetime, they tend to cost more than term life insurance, making them less affordable in the near term.

What are the differences between term insurance vs. permanent life insurance?

Below is an overview of the differences between RBC Insurance term and permanent life insurance policies and some answers to common questions.

 

 

Term Life

Permanent Life

Coverage Timeframe

Usually varies: 10 to 40 years, with the option to renew for another term

 

For life

Coverage amounts

$50,000 – $25,000,000

Amounts depend on type of product and age of the insured.

 

$25,000 to $25,000,000

 

Medical Exam

May, or may not, required depending on the term product

Typically required

Tax-free death benefit

Yes*

Yes*

*Note that probate fees are applicable if you have not designated a beneficiary and the proceeds of your policy become part of your estate.

How Do I Know Which Policy Is Right For Me?

While both permanent and term life insurance provide a payout when you pass away, permanent life insurance offers additional benefits that may be worth the additional cost to you.

Here are some questions to consider when choosing a life insurance policy:

  • Do you want the guarantee of life insurance coverage in place for as long as you live?
  • Are you concerned that you may become uninsurable over time?
  • Are you seeking an additional tax-deferred growth opportunity to build up savings beyond your Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP)?
  • Are you more interested in ensuring affordable life insurance coverage now, versus a product that combines insurance and investing?
  • Will you only require life insurance coverage for a defined period? For example, you might want to ensure you have funds available to pay the costs of your child or children’s post-secondary education or to cover your remaining mortgage balance.

Term Life Insurance

Permanent Life Insurance

Universal Life Insurance

 

Participating Whole Life Insurance

An option for shorter-term needs if:

●      Others depend on your income

●      You have debts that need to be paid off in the event of your death

●      You are in need of a cost-efficient solution

 

An option if in addition to lifetime insurance coverage:

●      You’re looking for a tax-deferred growth opportunity

●      You want to take a hands-on approach to managing the investment risk of your life insurance policy

 

An option if in addition to lifetime insurance coverage:

●      You’re looking for a tax-deferred growth opportunity combined with the comfort of guarantees

●      You want to take a hands-off approach to your life insurance policy by benefiting from the investment expert

 

Common Questions:

How long does a life insurance policy last? Permanent life insurance provides coverage for as long as you’re alive, regardless of age or health status. Term life insurance covers you only for a specific period, known as a term, such as 10, 20 or 30 years. As you age, term insurance may be more challenging to qualify for and more expensive to buy.

What do life insurance premiums pay? With both types of policies, you’re entering into a contract with an insurance company to pay the death benefit you’ve agreed on if you die while the insurance coverage is in force. This death benefit can range from $25,000 to $25 million, depending on your selected coverage level.

Is my life insurance policy considered an investment? In addition to the guaranteed death benefit, some permanent insurance policies, such as Universal Life and Whole Life, include an investment component. This component, called the embedded cash value, grows without being taxed yearly. You can use the cash value as an emergency fund by withdrawing or borrowing against it before the person insured under the policy passes away. If you withdraw or borrow from the policy, some income tax might be payable.

Will my beneficiaries need to pay taxes? When the person insured under the policy passes away, the beneficiary will receive a lump sum death benefit that isn’t taxable.

Will I need to manage my life insurance policy? Different options are available, depending on how hands-on you want. Some permanent life insurance policies that include investment options, such as RBC Growth Insurance® are managed by RBC Insurance, so you can be hands-off and let the company manage ongoing changes.

  1. Rate based on a $100,000, Term 10 policy for a male, age 37, non-smoker.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Just like unexpected bills can throw plans off track, it’s hard to imagine what could happen if you or your partner were suddenly left to cover all of those costs alone. Life insurance can cost as little as $13 a month* but create a safety net for your children as they grow.

Life insurance is an important part of a larger discussion around family finances and ways to protect your family’s financial wellness and overall well-being. To buy life insurance, parents pay a monthly or annual cost (called a “premium”) for a set number of years (called a “term”), so loved ones can receive a lump sum of money when you pass away. How much money they receive depends on the plan you purchase — it could be anywhere from $25,000 to $25 million — but it can be enough to help your family bounce back, cover funeral costs, stay in their home, or go to university one day.

Understanding how life insurance impacts your family’s finances is the first step to putting them on the path to a more secure and stable financial future.

Why is life insurance important for parents?

Protecting your family’s future

You’d do anything to protect your family right now. What about when you’re not here? Life insurance can help you leave money for your partner and children, safeguard your family’s financial future, and try to ease any future burden on them — which can help ease your mind now. Signing up for a plan now means that you’re covered right now, and not relying on savings to build up over the long term.

The financial impact on a family if a parent passes away

Losing a parent early or unexpectedly can have a devastating impact on families. Without life insurance coverage or savings, your surviving partner and kids may find themselves unable to cover their costs at all. Some common challenges include:

  • Inability to make mortgage payments and having to move out of the family home.
  • Scrambling to cover unexpected bills, like final expenses including funeral expenses.
  • Inability to meet daily expenses, like monthly bills and car payments.
  • Unable to save for children’s education in the future, or having to cash out education funds to pay for other bills now.

Aside from covering costs, life insurance benefits can help give your family members a much-needed boost and help them achieve their dreams, like having enough money to attend the school of their choice, the funds to start their own business, have their dream wedding, or even travel.

How much life insurance do parents need?

There’s no magic number when it comes to how much life insurance coverage you need for your family. It may depend on your age, the ages of your kids, your phase of life, your family’s size, and your ongoing financial needs. When determining the amount of life insurance coverage you want for your family, it’s important to consider factors like:

  • How many dependents you have
  • If you’re the sole income or main provider
  • What your family’s debt load is
  • If your house has been paid off
  • Whether you have other investments that can cover costs for your family, such as a Registered Retirement Savings Plan (RRSP)
  • Personal goals like wanting to pay for your children’s educations or weddings in the future

As well, the more coverage you have, the higher the monthly premium payment is likely to be. If money is already tight, you may choose a coverage amount that has a lower monthly fee and meets your short-term needs.

Some other ways life insurance can help parents prepare for the unexpected include:

Paying off debts and final expenses

Many people don’t realize that some debts and loans, such as private student loans, aren’t forgiven when you pass away. Life insurance can help you cover those debts and protect your loved ones from taking on those costs after you’re gone. Not having to pay down loans and being able to pay out mortgages could lighten the load of their daily living expenses.

Covering funeral expenses and other end-of-life costs

Funerals and end-of-life expenses, such as legal fees and taxes, can cost thousands and can catch families by surprise. Life insurance can help cover these costs and help pay for the funeral you want.

Providing for your children’s education

School is expensive. It can cost many thousands to put kids — or multiple kids — through college and university. Life insurance can help ensure your family doesn’t have to make tough choices down the road. Both term life insurance and permanent life insurance death benefits can be used to cover education costs if you pass away. As well, some permanent life insurance plans have the option to cash out the money you’ve invested so far while you’re alive and help your kids out along the way.

Estate Planning

Life insurance can help reduce or even eliminate the government tax paid on your assets when they get transferred to your family, to ensure a smoother transition. Some permanent life insurance plans are tax-sheltered investment opportunities, which means you can add money and grow your investments along the way, knowing your family won’t have to pay taxes for receiving it.

Supporting a spouse or surviving partner

When a spouse or partner passes away, the surviving partner is suddenly responsible for all of the bills — the mortgage, the groceries, daycare and other bills can pile up quickly. Life insurance is one way to help keep taking care of your partner long-term, so they can keep living the lifestyle they’re used to. As well, some life insurance plans offer joint coverage options or options for insuring all family members.

Life insurance as a long-term investment

Life insurance can act as an investment vehicle. Depending on the specific plan, permanent life insurance may be a way to invest and grow your wealth while protecting your family’s financial future. Some choose it for its flexibility over other investment plans, like Registered Retirement Savings Plans (RRSPs) and Registered Education Savings Plans (RESPs) which have defined purposes (paying for retirement and education costs). You and your loved ones can use the money for whatever you want. It could also help your family with daily living expenses, purchasing a car, paying off debts, putting a down payment on a home, or taking the dream trip you always talked about — anything they choose.

Choosing the right life insurance policy for your family

The different types of life insurance policies available

Term life insurance: Term life insurance plans are an option for young families who prioritize affordability and short-term protection or are prioritizing paying off debts and paying into other plans, like an RESP. Term plans are more affordable than permanent plans in the short term and fees stay the same throughout, so you can predict your expenses. You pay a small amount over a set period of time (called a term), usually between 10 and 40 years, and are covered as long as you’re making those payments within that term. Coverage expires when your term runs out or you stop paying (however, there may be options to convert it to a permanent plan down the road).

Permanent life insurance: Permanent coverage is more expensive than term coverage upfront but it covers you for life, even when you’ve finished your payment term. There are several types of permanent life insurance plans, like Whole life insurance, Universal life insurance, and T100 life insurance.

Whole life insurance fees won’t change over time. You will still be insured for life, even when your payments end. Some people who like to take a “set it and forget it” approach to their finances and investments may choose this hands-off option.

Universal life insurance plans are more flexible types of permanent plans, allowing you to update your policy premiums and benefits in the future, so you can adapt to your changing life. Some people may choose this option because they love being hands-on with investments and enjoy managing investment risks for the possibility of more growth.

T100 life insurance, also known as Term 100 life insurance, is a simpler permanent plan. It offers lifetime coverage like other plans but without investment perks. You pay a set fee each month or year for the rest of your lifetime, or until you reach age 100.

How to choose a policy that meets your family’s needs

Choosing a life insurance plan now can help you set your family up for success later and protect your family’s financial future.

How much life insurance coverage does my family need?

There are many different factors that determine how much coverage you may need. Consider things like your annual salary, how long you want to cover your family, how many children or dependents you have, and how much debt you carry, like your mortgage balance.

Can I add beneficiaries later, like if I have more children?

Of course! You can change and add beneficiaries at any time, including dependents like children, grandchildren, parents, or partners over the years.

What is the best age for parents to buy life insurance?

There is no ideal age to buy life insurance. Parents may choose to buy plans before they have kids or wait until later in life. However, because older people tend to have more health issues, signing up for life insurance at a younger age can make it easier to qualify and help you if health issues arise in the future.

Can I insure individual members of my family?

Depending on your life insurance plan, you can insure yourself, sign up for joint coverage for you and your spouse, get coverage for future spouses, and even insure your children.

Are death benefits taxed?

A death benefit is the lump sum of money paid out to your loved ones or beneficiaries when you die. It’s tax-free, so your family can avoid being caught off guard by unexpected fees or deductions.

Can I receive money for a critical illness?

Death benefits are only paid out when you pass away, but some permanent life insurance plans have options to cash out the value you’ve paid into the plan while you’re still alive. This can be a way to help cover expenses of an unexpected critical illness, or another unexpected major cost.

Parents have different reasons for wanting life insurance at different life stages. A licensed insurance advisor can help you ask the right questions and develop a personalized plan that will ensure you make the right choice for you and your family.

*Rate based on a $100,000, Term 10 policy for a male, age 37, non-smoker.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Surprisingly, there’s an option that you may not have heard about: segregated funds. Discover the differences between segregated funds and mutual funds and why the former might make a great addition to your investment portfolio.

Key takeaways

  • Segregated funds and mutual funds both involve pooling investments with other investors to create more options and reduce risk, but they also have some key differences.
  • Segregated funds are an insurance product with unique benefits, such as guarantees on your original investment, estate-planning perks, and potential protection against creditors.
  • Before choosing your investment route, speak with a certified professional about considerations that include your retirement timeline, tax planning, and risk tolerance.

What are segregated funds?

Segregated funds, also known as guaranteed investment funds (GIFs), are similar to mutual funds in that they involve the pooling of money by multiple investors. In both cases, a professional fund manager will take that pooled money and invest it in various stocks, bonds, and/or other securities (known as a “portfolio”), based on the fund’s investment mandate. This strategy allows investors to put their eggs in a variety of different baskets, which may limit the risk of market fluctuations.

The major way that segregated funds are unique is that they include insurance guarantees, which means you may be able to protect part or all of the money you originally invested. At their most basic, segregated funds are mutual funds combined with an insurance policy.

How do segregated funds and mutual funds differ?

Mutual funds and segregated funds are similar in many ways: they have professional portfolio managers, they allow you to diversify risk, and they offer potential creditor protection on registered accounts.

But, there are some unique benefits of segregated funds.

Principal protection

When investing in mutual funds, there’s always the risk that the market could be experiencing a downturn when you’re hoping to access your savings for retirement. With segregated funds, the amount you invest (known as your “principal”) is protected by two guarantees.

  • Maturity guarantee: At the maturity date (the date the term is up for your investment—typically, 10 years or longer), you’re guaranteed to receive either the current market value of your investment or a minimum guaranteed amount, whichever is greater (the difference paid is often called a “top up”). The minimum guaranteed amount is typically 75 to 100 per cent of your principal, minus management fees and other costs.
  • Death benefit guarantee: Should you pass away, the person or people you name as your beneficiary or beneficiaries will receive either the current market value or a minimum guaranteed amount (75 to 100 per cent), whichever is greater.

Estate-planning benefits

Normally, the settlement of an estate takes time and involves a public probate process (where the courts formally recognize and review an individual’s will) with fees and taxes. With a segregated fund, the death benefit may be paid out faster to your named beneficiary or beneficiaries, bypassing a lengthy, public, and expensive estate settlement and probate.

If you have a blended family, a segregated fund may reduce potential conflict by allowing you to set aside assets from your overall estate to go directly, and privately, to a specific beneficiary.

The quicker process with the segregated fund could also help your beneficiary or beneficiaries when its proceeds are intended to provide ongoing financial support.

Resets

With segregated funds, you may be able to “reset” the guaranteed amount of your principal investment. Say you invested $10,000 in a segregated fund, and the market rises over the next year, so your investment is now worth $11,000. With a reset, you can lock in your principal guarantee at $11,000 to protect your gains. Just note that your maturity date will likely reset as well.

Potential creditor protection

Segregated funds are an insurance product. That means, unlike mutual funds, segregated funds can potentially protect both registered and non-registered assets from creditors. If you’re a business owner or are self-employed, this perk might be particularly attractive.

Liquidity

Both segregated funds and mutual funds can be cashed in at any time at their current market value. However, you’d need to hold the segregated funds until their maturity date in order to access the maturity guarantee amount.

Fees

Sometimes, the fees for segregated funds may be higher than for mutual funds, due to their additional benefits.

Factors to consider when choosing between segregated funds and mutual funds

When deciding between various mutual fund and segregated fund portfolios (or choosing a mix), you’ll want to consider several factors.

  • Investment goals and timelines: Segregated funds are a long-term investment and will match best with your long-term goals, such as planning for retirement or planning a financial legacy for your family.
  • Risk tolerance: Mutual funds and segregated funds have investment options for all risk tolerances, but segregated funds are generally considered safer, because of the principal guarantees.
  • Liquidity needs: Do you need to be able to liquidate your assets at a moment’s notice? Both segregated funds and mutual funds allow you to access your invested capital at any time; although, cashing in early means you lose your guarantee.
  • Estate-planning considerations: Segregated funds can be a smart idea if you’re planning a financial legacy for your beneficiary or beneficiaries or you want privacy for your estate plans.

RBC Retirement Investment Solutions

Whether you’re building up your nest egg or ready to turn your hard-earned savings into retirement income, our solutions can help you make the most of your money. Have an RBC Insurance Advisor call you to learn more.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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TORONTO, Oct. 12, 2023 – As Canadians continue to feel the pressure of rising inflation rates on nearly every aspect of their lives, a new study from RBC Insurance finds that employer-provided benefits play an increasingly important role in maintaining a sense of overall well-being. Two-thirds of working Canadians (66 per cent) that have access to employer-provided benefits rate their overall wellbeing as good or excellent compared to under half (49 per cent) of those without these benefits.

Those with employer-provided benefits experience higher overall mental health (65 per cent, up 5 per cent from 2022) than those without benefits (51 per cent, down 2 per cent from 2022), revealing inverse trends and a widening gap between the two groups. To note, the majority of Canadians with employer-provided benefits also felt their employer enables them to have work/life balance (81 per cent).

In addition, there is a growing disparity among Canadians based on their access to employer-provided benefits, particularly when it comes to financial health. More than half (54 per cent) of workers with employer-provided benefits reported their overall financial health as being good or excellent, compared to only a third (33 per cent) of workers who did not have any employer-provided benefits. Low-income households (less than $40K) are also significantly less likely to have employer-provided benefits (44 per cent) than higher income households earning $60K-$100K (83 per cent).

Older millennials (aged 35 to 44) reported the weakest financial health of all Canadians, with only 44 per cent feeling positive about their current situation. This comes at a time when millennials are facing high household debt. According to RBC Economics, these Canadians had a total debt-to-disposable income ratio of 250 per cent in 2019 – compared to roughly 150 per cent with the same cohort in 1999. This debt is set to grow in next few years as Canadians who need to renew their mortgage could face a 25% increase in monthly payments.

“There is a sense of stability that comes with knowing that your needs and the needs of your family will be taken care of in case of the unexpected, and that definitely contributes to feelings of overall well-being,” says Andrejka Massicotte, head of Group Benefits, RBC Insurance. “Considering all of the possible situations that can happen in life, having comfort that you will be able to focus on recovery rather than the cost of care if you get sick, or that you will be able to access mental health supports and services and well-being programs if you need them, can have a very positive impact on your financial and mental health. Group benefits offer a peace of mind that allows you to focus on the important things in your life.”

Online services key for benefits offerings

When it comes to accessing their benefits, Canadians’ preferences continue to shift towards the convenience of online services, which have become more broadly available in recent years. Among the features they desire most from an employer-provided benefits plan are:

  • access to doctors and specialists (73 per cent)
  • online pharmacies (72 per cent)
  • online prescription glasses (65 per cent)
  • online mental health and wellness programs (61 per cent)
  • services for wellness and management of chronic diseases (57 per cent)

Tailored benefits are increasingly important to Canadians

Tailored employee benefits are also increasingly important to the vast majority of Canadians (89 per cent) who have access to them. Overall, satisfaction with their plans is high, with 83 per cent of Canadians who say they are happy with their current benefits, and 87 per cent who feel they have a good understanding of what is offered to them.

At RBC Insurance, our tailored solutions are designed for the evolving world of work. Our plans offer a range of solutions, including convenient access to online services for managing mental and financial health and well-being. As people’s needs continue to evolve over time, we are committed to providing best-in-class advice and service, flexible plans and specialized solutions that get the support you need, when you need it.

About the RBC Insurance Study

These are some of the findings of an Ipsos poll conducted on behalf of RBC Insurance between July 6 and July 10, 2023. For this survey, a sample of 1,000 working Canadians was surveyed online. Weighting was employed to balance demographics to ensure that the composition of the sample reflects the population according to Census data and to provide results intended to approximate the sample universe. The results are considered accurate to within ±3.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian working adults been surveyed.

About RBC Insurance

RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth, group benefits, annuities and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, Canada’s biggest bank and one of the largest in the world, based on market capitalization. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with 2,600 employees who serve 4.8 million clients globally.

Media contact

Cody Medwechuk, RBC Insurance Corporate Communications

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Both options offer a way for retirees to create an income stream from their RRSPs to help meet their financial needs, but they differ in the way they operate and the financial situations they best suit.

When planning for your retirement, you’ll want to understand the differences between the two options to determine which one might be the right fit for you. You may even consider a combination of both products.

Once you have a better understanding of the options available to you, you’ll be able to make an informed choice that allows you to enjoy your retirement years to the fullest.

Key takeaways

  • There are important differences between payout annuities and RRIFs, and each one has its own set of potential pros and cons.

  • Payout annuities provide guaranteed stable income payments for a fixed term or for life.

  • RRIFs offer flexibility in terms of when and how much you withdraw (subject to annual minimum withdrawal requirements), as well as control over your investment, but they come with greater risk due to market fluctuations.

  • Your personal circumstances and financial goals in retirement are two key factors to consider before you invest in a specific product.

How do payout annuities work in retirement?

A payout annuity is an insurance product that provides guaranteed income for a set term or for life—it’s up to you to decide. When considering options for your RRSP, payout annuities may be a good choice for people who are:

  • Risk-averse when it comes to market fluctuations

  • Looking for a guaranteed stream of income for life or for a set period of time

  • Looking for fixed and regular payouts

  • Concerned about outliving their retirement savings

  • Lacking the time and skills to manage their own investments (or simply don’t want to).

There are several factors to consider when you’re selecting your payout annuity:

  • How often you’d like to receive payouts. Typical payout schedules are monthly, quarterly, semi-annually, or annually.

  • Do you want to guarantee income for yourself and your spouse/common-law partner, or just yourself?

  • Do you want added protection with a guaranteed period?

Those who choose to invest a portion of their retirement savings into a payout annuity could benefit from a guaranteed income stream with regular payments and a sense of security in knowing how long their income stream will last, whether that’s for a fixed term or for life.

What are some of the different types of payout annuities?

The type of payout annuity you choose will depend on your financial goals and your family’s needs. There are many options available, and each one deserves careful consideration. Here are three common types of payout annuities.

Single Life Annuity

This type of payout annuity provides a series of guaranteed income payments for the life of one person (known as the “annuitant”). When the annuitant dies, the payments stop.

Joint Life Annuity

A joint life payout annuity provides a series of guaranteed income payments for the lives of two annuitants (usually the individual and their spouse or common-law partner, though sometimes also a financially dependent child) during a joint lifetime. When one of the annuitants dies, the payments will continue to be made to the surviving annuitant until the end of their life. This is also sometimes called a “survivor annuity.”

Term-certain Annuity

The key difference in this type of payout annuity is right there in the name—instead of providing payments for life, a term-certain annuity ends on a specific date (at the end of the term that was agreed upon when the annuity was initially set up), or until the individual reaches a certain age.

The benefits of payout annuities

A payout annuity is an effective, easy-to-manage solution that provides you—or you and your spouse/common-law partner, if you choose—with a guaranteed level of income for the rest of your life or for a specified number of years. It can help cover your fixed expenses during your retirement years. That’s why it’s considered a foundational product for a well-balanced retirement portfolio, as it’s reliable and offers a level of predictability and stability once you retire.

Other benefits include:

  • Income security: Regular guaranteed payments are unaffected by changes in interest rates or the stock market.

  • Tax benefits: The amount directly transferred from an RRSP to buy an annuity is not considered a taxable income. Only the payouts from the annuity are considered taxable income and, as a result, they provide some degree of continued tax deferral.

  • Estate planning: A spouse/common-law partner or beneficiary can be added to receive the remaining payments should the annuitant die before the end of the guarantee period. The amount goes directly to the spouse or beneficiary and does not have to go through probate.

  • Easy management: Once you purchase your fixed payout annuity, you’re set. There are no ongoing investment decisions to make.

Considerations and potential drawbacks of annuities

A payout annuity is a product designed for those who prefer predictability and security over liquidity and market risks. Most annuities cannot be surrendered or altered after you start taking income. Why? You’re exchanging control for the assurance of guaranteed income payments for life or for a set term. 

People who think they can get a better rate of return over time than the insurance company provides and wish to continue managing their investments might find other options that better suit their needs. Also, while a payout annuity provides stable payments and security, inflation can eat away at the purchasing power of the annuity payouts.

When considering any payout annuity, make sure to consult with a licensed insurance advisor. Ask lots of questions and invest plenty of time in going over the terms and conditions of the payout annuity you choose, so you fully understand it.

How do RRIFs work in retirement?

If flexibility is a priority for your retirement years, then a RRIF may be an option to consider when your RRSP matures. They’re a popular choice when converting RRSPs into a retirement income plan, as they offer flexibility and allow you to continue to make and manage all your investment decisions.

You’ll need to convert your RRSP to a RRIF by the end of the year you turn 71 (or sooner, if you need income). Your investments transfer directly and don’t have to be liquidated. And similar to an RRSP, the growth earned in a RRIF is not subject to annual taxation. Only the amounts withdrawn are subject to taxation.

The benefits of RRIFs

If you’re looking for greater financial choice in your retirement years, RRIFs might be able to offer you that. In addition to flexibility, they can also provide more control if you wish to make specific choices about where and how to invest your savings. Those decisions might result in growth and a higher income within a RRIF. Smart investments within a RRIF can also lead to a greater potential to leave behind a legacy for your family and beneficiaries.

Instead of fixed and regular payments, if you invest in a RRIF, you can withdraw variable amounts from your plan (subject to minimum annual withdrawal rules) as your financial needs change.

There are many variables to consider when withdrawing money from your RRIF, so speak to your financial advisor to understand the benefits and risks.

Considerations and potential drawbacks of RRIFs

As anyone who’s ever invested money knows, greater flexibility and potential for growth typically come with greater financial risk. Market volatility can affect or cause irreversible damage to your RRIF investments. It may not be a wise strategy to opt for high-risk investing in your retirement years. Careful attention needs to be paid to your investment strategies within your RRIF.

Consider consulting an investment professional for monitoring and advice on where to invest your RRIF funds. Depending on market activity, adjustments should be made to your RRIF portfolio, so your retirement savings remain as secure as possible and your financial needs can be met as they change over time.

Another potential drawback is that your RRIF might not provide a guaranteed income for life. There’s a chance you’ll outlive the savings in your RRIF.

Choosing between payout annuities and RRIFs—factors to consider

Personal circumstances and financial goals

Here are some things to consider when choosing an income stream strategy for your retirement years:

  • Your (and, if applicable, your spouse or partner’s) age and health, expected longevity, and possibility of surviving beyond that age.

  • Your retirement goals, including your desired lifestyle, expenses, and what you hope to leave behind for your family and beneficiaries.

  • Your own abilities for monitoring your investments and making investment decisions on a regular basis as you age. Assess these honestly.

  • Your tolerance for risk in terms of market fluctuations. Would the negative impact of a market downturn on your investments be financially devastating?

Risk and return analysis

Finding a balance between risk and return that suits both your personal preferences and your financial position is important. Of course, higher-risk investing might be enticing with the possibility of higher potential returns. Good decisions and the right market can offer growth within your RRIF, but how much risk are you willing to tolerate?

With a payout annuity, the market can’t affect the retirement income. But you’re giving up growth potential and control over your money in exchange for stability.

Tax considerations

Withdrawals from RRIFs and payouts from registered payout annuities are considered fully taxable income for the year in which they take place.

When a RRIF annuitant passes away, the fair market value of the RRIF investments will be included as income in the final tax return of the deceased annuitant, unless it can be rolled over to the surviving spouse or common-law partner, child, or even a grandchild.

If the annuity does not have a guarantee period, or the guarantee period has ended, the payout ends when the annuitant (or the surviving annuitant, in the case of joint life annuity) dies. As a result, there’s no additional income reporting.

If the guarantee period hasn’t ended when the annuitant dies, and the surviving spouse or partner is the beneficiary, the payouts made for the remainder of the guarantee period will be taxable income to the receiving spouse.

However, when a lump sum payment of a commuted value (the present value of the future payouts for the remainder of the guaranteed period) is made to the beneficiary, it’s considered taxable income to the deceased annuitant.

The tax considerations discussed here are general in nature. It’s important to seek professional independent tax and legal advice before taking any action.

If you’re planning your estate and have a RRIF and/or a payout annuity, make sure your financial advisor knows your wishes and that you understand the tax implications of the various options available for you and your beneficiaries.

RBC Retirement Investment Solutions

Whether you’re building up your nest egg or ready to turn your hard-earned savings into retirement income, our solutions can help you make the most of your money. Have an RBC Insurance Advisor call you to learn more.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Both options offer a way for retirees to create an income stream from their RRSPs to help meet their financial needs, but they differ in the way they operate and the financial situations they best suit.

When planning for your retirement, you’ll want to understand the differences between the two options to determine which one might be the right fit for you. You may even consider a combination of both products.

Once you have a better understanding of the options available to you, you’ll be able to make an informed choice that allows you to enjoy your retirement years to the fullest.

Key takeaways

  • There are important differences between payout annuities and RRIFs, and each one has its own set of potential pros and cons.
  • Payout annuities provide guaranteed stable income payments for a fixed term or for life.
  • RRIFs offer flexibility in terms of when and how much you withdraw (subject to annual minimum withdrawal requirements), as well as control over your investment, but they come with greater risk due to market fluctuations.
  • Your personal circumstances and financial goals in retirement are two key factors to consider before you invest in a specific product.

How do payout annuities work in retirement?

A payout annuity is an insurance product that provides guaranteed income for a set term or for life—it’s up to you to decide. When considering options for your RRSP, payout annuities may be a good choice for people who are:

  • Risk-averse when it comes to market fluctuations
  • Looking for a guaranteed stream of income for life or for a set period of time
  • Looking for fixed and regular payouts
  • Concerned about outliving their retirement savings
  • Lacking the time and skills to manage their own investments (or simply don’t want to).

There are several factors to consider when you’re selecting your payout annuity:

  • How often you’d like to receive payouts. Typical payout schedules are monthly, quarterly, semi-annually, or annually.
  • Do you want to guarantee income for yourself and your spouse/common-law partner, or just yourself?
  • Do you want added protection with a guaranteed period?

Those who choose to invest a portion of their retirement savings into a payout annuity could benefit from a guaranteed income stream with regular payments and a sense of security in knowing how long their income stream will last, whether that’s for a fixed term or for life.

What are some of the different types of payout annuities?

The type of payout annuity you choose will depend on your financial goals and your family’s needs. There are many options available, and each one deserves careful consideration. Here are three common types of payout annuities.

Single Life Annuity

This type of payout annuity provides a series of guaranteed income payments for the life of one person (known as the “annuitant”). When the annuitant dies, the payments stop.

Joint Life Annuity

A joint life payout annuity provides a series of guaranteed income payments for the lives of two annuitants (usually the individual and their spouse or common-law partner, though sometimes also a financially dependent child) during a joint lifetime. When one of the annuitants dies, the payments will continue to be made to the surviving annuitant until the end of their life. This is also sometimes called a “survivor annuity.”

Term-certain Annuity

The key difference in this type of payout annuity is right there in the name—instead of providing payments for life, a term-certain annuity ends on a specific date (at the end of the term that was agreed upon when the annuity was initially set up), or until the individual reaches a certain age.

The benefits of payout annuities

A payout annuity is an effective, easy-to-manage solution that provides you—or you and your spouse/common-law partner, if you choose—with a guaranteed level of income for the rest of your life or for a specified number of years. It can help cover your fixed expenses during your retirement years. That’s why it’s considered a foundational product for a well-balanced retirement portfolio, as it’s reliable and offers a level of predictability and stability once you retire.

Other benefits include:

  • Income security: Regular guaranteed payments are unaffected by changes in interest rates or the stock market.
  • Tax benefits: The amount directly transferred from an RRSP to buy an annuity is not considered a taxable income. Only the payouts from the annuity are considered taxable income and, as a result, they provide some degree of continued tax deferral.
  • Estate planning: A spouse/common-law partner or beneficiary can be added to receive the remaining payments should the annuitant die before the end of the guarantee period. The amount goes directly to the spouse or beneficiary and does not have to go through probate.
  • Easy management: Once you purchase your fixed payout annuity, you’re set. There are no ongoing investment decisions to make.

Considerations and potential drawbacks of annuities

As anyone who’s ever invested money knows, greater flexibility and potential for growth typically come with greater financial risk. Market volatility can affect or cause irreversible damage to your RRIF investments. It may not be a wise strategy to opt for high-risk investing in your retirement years. Careful attention needs to be paid to your investment strategies within your RRIF.

Consider consulting an investment professional for monitoring and advice on where to invest your RRIF funds. Depending on market activity, adjustments should be made to your RRIF portfolio, so your retirement savings remain as secure as possible and your financial needs can be met as they change over time.

Another potential drawback is that your RRIF might not provide a guaranteed income for life. There’s a chance you’ll outlive the savings in your RRIF.

How do RRIFs work in retirement?

If flexibility is a priority for your retirement years, then a RRIF may be an option to consider when your RRSP matures. They’re a popular choice when converting RRSPs into a retirement income plan, as they offer flexibility and allow you to continue to make and manage all your investment decisions.

You’ll need to convert your RRSP to a RRIF by the end of the year you turn 71 (or sooner, if you need income). Your investments transfer directly and don’t have to be liquidated. And similar to an RRSP, the growth earned in a RRIF is not subject to annual taxation. Only the amounts withdrawn are subject to taxation.

The benefits of RRIFs

If you’re looking for greater financial choice in your retirement years, RRIFs might be able to offer you that. In addition to flexibility, they can also provide more control if you wish to make specific choices about where and how to invest your savings. Those decisions might result in growth and a higher income within a RRIF. Smart investments within a RRIF can also lead to a greater potential to leave behind a legacy for your family and beneficiaries.

Instead of fixed and regular payments, if you invest in a RRIF, you can withdraw variable amounts from your plan (subject to minimum annual withdrawal rules) as your financial needs change.

There are many variables to consider when withdrawing money from your RRIF, so speak to your financial advisor to understand the benefits and risks.

Considerations and potential drawbacks of RRIFs

As anyone who’s ever invested money knows, greater flexibility and potential for growth typically come with greater financial risk. Market volatility can affect or cause irreversible damage to your RRIF investments. It may not be a wise strategy to opt for high-risk investing in your retirement years. Careful attention needs to be paid to your investment strategies within your RRIF.

Consider consulting an investment professional for monitoring and advice on where to invest your RRIF funds. Depending on market activity, adjustments should be made to your RRIF portfolio, so your retirement savings remain as secure as possible and your financial needs can be met as they change over time.

Another potential drawback is that your RRIF might not provide a guaranteed income for life. There’s a chance you’ll outlive the savings in your RRIF.

Choosing between payout annuities and RRIFs—factors to consider

Personal circumstances and financial goals

Here are some things to consider when choosing an income stream strategy for your retirement years:

  • Your (and, if applicable, your spouse or partner’s) age and health, expected longevity, and possibility of surviving beyond that age.
  • Your retirement goals, including your desired lifestyle, expenses, and what you hope to leave behind for your family and beneficiaries.
  • Your own abilities for monitoring your investments and making investment decisions on a regular basis as you age. Assess these honestly.
  • Your tolerance for risk in terms of market fluctuations. Would the negative impact of a market downturn on your investments be financially devastating?

Risk and return analysis

Finding a balance between risk and return that suits both your personal preferences and your financial position is important. Of course, higher-risk investing might be enticing with the possibility of higher potential returns. Good decisions and the right market can offer growth within your RRIF, but how much risk are you willing to tolerate?

With a payout annuity, the market can’t affect the retirement income. But you’re giving up growth potential and control over your money in exchange for stability.

Tax considerations

Withdrawals from RRIFs and payouts from registered payout annuities are considered fully taxable income for the year in which they take place.

When a RRIF annuitant passes away, the fair market value of the RRIF investments will be included as income in the final tax return of the deceased annuitant, unless it can be rolled over to the surviving spouse or common-law partner, child, or even a grandchild.

If the annuity does not have a guarantee period, or the guarantee period has ended, the payout ends when the annuitant (or the surviving annuitant, in the case of joint life annuity) dies. As a result, there’s no additional income reporting.

If the guarantee period hasn’t ended when the annuitant dies, and the surviving spouse or partner is the beneficiary, the payouts made for the remainder of the guarantee period will be taxable income to the receiving spouse.

However, when a lump sum payment of a commuted value (the present value of the future payouts for the remainder of the guaranteed period) is made to the beneficiary, it’s considered taxable income to the deceased annuitant.

The tax considerations discussed here are general in nature. It’s important to seek professional independent tax and legal advice before taking any action.

If you’re planning your estate and have a RRIF and/or a payout annuity, make sure your financial advisor knows your wishes and that you understand the tax implications of the various options available for you and your beneficiaries.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Planning for retirement as a couple can be a balancing act as you attempt to blend individual goals and needs into a unified financial vision. It starts with a discussion of expectations — namely, what kind of lifestyle do you hope to enjoy in retirement and how much income you’ll need to attain it. For example you may want to purchase a vacation home or start a new business in retirement. A spousal RRSP can help you and your partner even out each of your retirement savings. This way, when you retire, you’ll both be able to withdraw a similar amount of money from your RRSPs based on your needs.

What is a spousal RRSP?

A spousal RRSP is an investment account for your spouse’s or common-law partner’s retirement. If you earn more annual income than your spouse, you can contribute some or all of your individual RRSP contribution into a spousal RRSP account registered under your spouse’s name.

What are the benefits of having a spousal RRSP?

A spousal RRSP allows you to:

  • Save on taxes: A spousal RRSP allows you to “split” your retirement income and find tax efficiencies as a couple if you fall under a lower tax bracket when you withdraw from the account.
  • Invest for retirement: You can contribute money each year into a spousal RRSP, tax is deferred on that money until it is withdrawn.

A spousal RRSP with a segregated fund can help you provide protection to your loved ones. You can hold segregated funds in an RRSP account to help you protect, grow and preserve your money. It can help you reach your retirement goals and guarantee that your beneficiaries receive a certain percentage of your investments when you pass away.

Split your contribution with a spousal RRSP

If you and your spouse earn different levels of income, a spousal RRSP can help you “split income” to even out your annual income tax payments and save on taxes when you eventually withdraw from the account. Take this example:

  • Deborah earns $100,000 annually, and Jack earns $50,000.
  • As spouses, Deborah and Jack are each able to contribute up to 18% (or the CRA established limit for that year) of pre-tax earnings from the previous year into their individual RRSPs.
  • This would mean Deborah can contribute $18,000, and Jack could contribute $9,000.
  • If they open a spousal RRSP where Deborah is the contributor (because she earns more) and Jack is the recipient (because he earns less), Deborah can split her $18,000 contribution and contribute $4,500 to her own RRSP and $4,500 to Jack’s spousal RRSP.
  • Jack may still contribute $9,000 to his own RRSP and they will both have $13,500.
  • Deborah will get a tax deduction for her contributions. Jack will be able to use the funds from the spousal RRSP in retirement and he will be attributed the income (for tax purposes) for withdrawals (in retirement).

A spousal RRSP allows Deborah and Jack to equalize their retirement savings between them so that they have a pool of savings and pay less in taxes upon withdrawal each year of retirement.

This “split income” strategy can help you build a nest egg that provides each of you with a source of income in retirement and a way to manage your taxes efficiently.

What happens to a spousal RRSP if we break up?

Should you and your partner end your marriage or common-law partnership, your spousal RRSPs will be treated the same as your other assets. This means that your RRSPs will be split and can be transferred tax-free.

What happens to a spousal RRSP if one partner dies?

If one RRSP contributor dies, it’s possible to roll over the RRSP tax-free to the surviving spouse or common law partner. This means that the income from the spousal RRSP is transferred to the living spouse or partner and is reported on the beneficiary’s tax return for the year. Spousal RRSPs can be a potentially useful estate-planning tool to provide a tax-free inheritance upon your death.

How do I set up a spousal RRSP?

You can set up an RRSP account with a Segregated Fund and start saving by setting up automatic contributions. Add insurance as a part of you and your spouse’s retirement planning today.

RBC Retirement Investment Solutions

Whether you’re building up your nest egg or ready to turn your hard-earned savings into retirement income, our solutions can help you make the most of your money. Have an RBC Insurance Advisor call you to learn more.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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