Charitable Gift Annuities

Helen and Frank Morneau Honorary Chairs of CMIC's Tastes of Heaven Gala

In our last edition of the Highlights Newsletter, Mr. Frank Morneau wrote a wonderful article about annuities with CMIC and the possible benefits. It was received so well that we thought it would be a good idea to reprint a ‘Reader’s Digest’ version in this magazine. Currently, interest rates for annuities are quite high and this created a flurry of interest and requests for quotes. We thank Frank and Helen Morneau for their thoughts. – Joe Gennaro

Helen and I elected recently to review our housing requirements, including the potential of a retirement home. As we age, we understand the importance of considering these significant decisions before our health deteriorates or one of us dies.

A major problem is space within retirement facilities. If you wait to select a retirement home at the point when you are absolutely requiring such services, you may be faced with substantial wait times. Further concerns revolve around the lack of possible admission anywhere, if in fact adverse health issues prevail.

Beyond finding the right facility, comes the consideration of funding. Having founded and operated Canada’s largest human resource and actuarial firm, I am particularly aware of the investment needed throughout one’s final years. All should approach savings, review actual, real estate and other assets with a consideration to balance; most people continue to operate from the old 60% (stocks) and 40% (bonds) rule. While this is a simple starting point, you may wish to consider the potential of a minimum guaranteed monthly income as you age.

Having sufficient assets, we began to consider our financial situation in our final years. We wished to be certain of a minimum monthly income, without the fluctuation of stock variables and real estate prices, but not by eliminating the latter. For us this meant moving to guaranteed income in the form of an annuity.

An annuity encompasses an insurance contract that is both issued and distributed by a government-approved underwriter, typically within a financial institution. The intention of an annuity is to pay out invested funds through a fixed income stream. You may invest in or purchase an annuity with either monthly premiums or lump-sum payments. Annuities, as a financial product, offer a guaranteed income stream, typically utilized for retirement purposes. They provide a solution amidst your retirement years to maintain a guaranteed income until death. This financial product is an appropriate one for investors looking for a guaranteed income as they age. It is less considerable for younger individuals or for those who may have liquidity needs. Mainly, annuities are an attractive option for those aging and entering into their retirement years.

For us, an annuity presented the option of a minimum level of guaranteed income, which will last until we do – providing an amount sufficient to cover the costs of our retirement home and allowing our other assets to remain in our estate for additional cost offset or for our family.

In looking for an annuity, we researched the common insurance markets, but found a second avenue, which also presented a charitable component – this being CMIC, which has been offering a ‘charitable gift annuity’ option for many years.

They have long provided flexible annuity programs, well-funded and with significant reserves. CMIC professionally invests with an annual actuarial evaluation to support their total offerings.

I hope you note all of this, but only reflect on it as an illustration. I encourage and insist that all should and must do their own analysis, reflective of their own financial situations and retirement considerations. A charitable gift annuity presents a potential avenue for financial security, guaranteed income and significant choice when considering retirement institutions.

Our analysis provided for a 14% larger net monthly payout than the alternate ‘commercial’ submissions. 100% of the monthly payout through the CMIC option is tax-free and includes an immediate charitable tax receipt that is provided at the outset of the contract. The latter equals 20% plus of the initial premium. We were able to utilize this receipt to assist with the capital gains tax generated by the sale of certain investments, allowing us the opportunity to move into our new home and our chosen annuity.

We were impressed with the services and professional expertise at the CIMC Office and encourage you to reach out to Joe Gennaro, who is particularly versed in these decisions and investments. CIMC’s professionals are able to present you with an illustration reflecting your given situation, if you desire to consider this option.

I must again emphasize that this article is one of personal elaboration. An annuity presented the solution to our financial considerations. While it is the right option for my family, there may be another one better suited to yours. It is wise to independently review your concerns and needs with the CIMC office. They are available to assist and answer any questions.