Episode #8: Creating a Guaranteed Retirement Income Stream

In this episode of the Retirement IQ, retirement wealth coach John Stregger walks listeners through the essentials of building a secure and reliable retirement income plan. With the number one concern for Canadians over 55 being the fear of running out of money, John focuses on how to create guaranteed lifetime income that can support you through an unknown retirement timeline.

John breaks down the five key sources of retirement income, including Old Age Security (OAS), the Canada Pension Plan (CPP), defined benefit pension plans, life annuities, and Guaranteed Investment Funds (GIFs). He explains how each works, when they make sense, and the role they can play in creating a dependable income foundation.

The episode emphasizes the importance of establishing a base level of guaranteed income to cover essential expenses, then layering additional income to support the lifestyle you want in retirement. With clear explanations and practical guidance, John shows how combining different income tools can help reduce risk, increase confidence, and bring clarity to your overall retirement income strategy.

Transcript

Retirement IQ Ep.8

John Stregger: 00:00.630 - 10:09.558

Hey everyone, before we jump into this episode, I want to let you know that we are doing our planning for next year and we are making sure that we have the capacity to take on six more families as clients for the first half of 2026. If you would like to explore the possibility of working with me, we offer a free test drive of our services. And if you want the details on what that looks like, head over to freeretirementreport.ca for details. Now, onto the show. 

Welcome to Retirement IQ, where I help you, our listener, simplify the complex world of retirement planning so that you can focus on what's really important to you, building the life that you want to have. I'm your host, John Stregger, and today I want to talk to you about ways to map out your retirement income with secure, reliable lifetime income. Now, by far the number one financial concern for people over the age of 55 is the risk of running out of money during retirement. And let's face it, it's a very real risk. In fact, if you're a 65 year old married couple, Sats Canada tells us that in their mortality tables, there's a better than 50% chance that one of you is going to live beyond age 94. Now forget all those stats for a minute. Just think about in your life. How many people you know that are living well into their 90s or even 100s? Personally, I've got aunts and uncles that have crossed the 100 year old mark. So the risk, it's very real. So how can you get to a position where you can truly make work optional in retirement? In other words, how can you get to a mindset where you have the confidence to step away from your work and the security of a paycheck knowing that you have income for the rest of your life? In an ideal retirement planning world, your employer would say to you, don't worry about coming into work ever again. We'll keep paying you and giving you raises for the rest of your life. Unfortunately, that's not what happens. And it is left on you to make that happen with whatever cash you've been able to save. In reality, you need to create a guaranteed income for an unknown period of time. That's your retirement years, which is very difficult to plan around. It's not impossible, but difficult. Today, I'm going to look at five sources of retirement income that will pay you an income for life. Now, some you can control, some you can't, but it's important to know how they all work as you build out your retirement income plan. First, let's look at old age security. Generally speaking, if you've been a resident of Canada for most of your life, you're gonna automatically receive OAS. And the starting age to receive OAS is age 65. And at the time of recording, the benefit is about $740 per month. Now, you do have some control over that amount in that you can request that OAS be deferred as late as age 70. The benefit of you deferring that payment is an increase to your monthly benefit of 36%. That would increase your monthly benefit to over $1,000 per month. Again, if you wanna learn more about OAS, tune in to our previous episode where I did a deeper dive into how to maximize OAS. The second lifetime income benefit which you might receive is Canada Pension Plan. CPP is a government-run pension plan where employees and employers contribute money over your lifetime. With CPP, you could be eligible for over $1,400 per month at age 65. Now, there are several nuances to CPP which you can take advantage of, such as flexible starting dates. You can start income as early as age 60 or as late as age 70. Keep in mind though, if you start at 60, you're gonna receive a reduced pension amount. But like OAS, if you start after 65, your benefits are gonna be enhanced. Again, we cover all of these details in our previous episodes. So I'd encourage you to go back and have a listen. Now, if you're a married couple and you combine your CPP and OAS, we find that people's base income can exceed over $4,000 per month, which is a pretty good start. So if you wanna add to that base, here are three other lifetime income sources available to you. The first one is Define Benefit Pension Plans, which is an employer-based pension plan that guarantees you a specific amount of income during your retirement. Now, because of the long-term costs involved to operate these plans, very few companies offer them anymore. Usually only large companies or government-based jobs offer them. And if you happen to be part of one, you're in the minority, but you're also probably pretty happy about it. Now, if you are lucky enough to be part of a defined plan, and you're a long-term employee, chances are that you're gonna be on track to receive around 60, maybe even 70% of your pre-retirement income through retirement, and that's really good. Now, unless you choose to work for a company with a defined benefit plan at a young age, these benefits are largely out of your control. So beyond CPP, OAS, and defined benefit pension plans, just exactly what is in your control? Now, there are two other products which you can invest in at or close to retirement, and they are designed to provide lifetime income. The first is life annuities. So what is a life annuity? Simply put, a life annuity is a contract between you and an insurance company that provides you with guaranteed income for the rest of your life. It's a lot like a personal pension plan. You give an insurance company a pile of money and in exchange, they give you income for life. It's a popular retirement tool because it protects you against outliving your savings. There is no product out there that addresses the living too long issue more directly than life annuities. However, annuities do require careful planning as they only pay you as long as you live. In other words, if income stops when you die, you're probably gonna wanna make sure that there's a plan in place to protect your spouse if they too are relying on your income. Also, annuity income is usually not adjusted for inflation. So you'll need to consider how inflation might impact your spending dollars down the road. Annuity purchases are major decisions and should be well thought out before finalizing. And while annuities are terrific products and help solve the living too long issue, in my practice, we view them as one potential product tool to help build your retirement income base. Now, the last product you can employ to create lifetime income is Guaranteed Investment Funds, also known as GIFs. GIFs are offered through life insurance companies and are very similar to mutual funds. Now, while ordinary mutual funds do not have any guarantees attached to them, gifts can offer guarantees in the form of lifetime income. As an example, and depending on the insurance company, the annual guaranteed income from your gift portfolio might be 4% of the portfolio value. So if you have $100,000 invested in a gift, the insurance company will guarantee you $4,000 of annual income for the rest of your life, regardless of the value of the portfolio. Now, the main benefit of the gift product is that it's gonna pay you income, even if the portfolio value goes to zero because of poor market returns. Now, when you do pass away and there is money left in the gift account, your beneficiaries are gonna receive the remaining portfolio value. The major downside of gifts are the fees. Because the insurance company offers these guarantees of income for the rest of your life, they need to charge additional fees to support those guarantees. Those fees can really impact the portfolio values over the long haul. The other caveat of gifts is a small print. If you do utilize these investments, make sure you understand the allowable withdrawal options. Making an unscheduled withdrawal, it can severely impact the contractual benefits going forward. Grading an income equal to 100% of what you took home before you retired. it can be really difficult. But when we work with our clients, our first goal is to create a base level of income to take care of your core needs for the rest of your life. We want to make sure that you'll always have enough money to turn on the lights and set the table. From there, it depends on you and your circumstances regarding your lifestyle needs and funding what's really important to you. There isn't one product that's going to solve all of your retirement goals, but by making use of all the tools available, we have the ability to help you build the financial confidence you want before you enter the second and hopefully happiest half of your life. That wraps up another episode of Retirement IQ. I'm John Stregger. Thank you for listening. Have a great day.

Female Narrator: 10:20.810 - 10:37.829

The information provided in this podcast is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax, or other professional advisors.