A Canadian retiree’s most significant decision with this Sun Life product is the age at which the cash will last (the maturity age). You can choose from 85, 90, 95 or 100 (or select some with an age combination); However, you may also start claiming it as early because the age of fifty. Sun Life recalculates customers’ payments annually initially of annually based on account balances. The company considers the entire amount invested, the payment frequency, the variety of years remaining until the chosen maturity age, the estimated annual return (the expected return is 5.5%, but a conservative rate of 4.5%) is utilized in the calculations) and all applicable statutory minimum and maximum annual returns.
According to Birenbaum, MyRetirementIncome owners can initiate transfers to their bank accounts from bi-weekly to annually. While the payment amount is not guaranteed, they’ll expect what Sun Life calls a “stable income” until maturity, so the payment is not expected to vary much from 12 months to 12 months. If the client’s circumstances change, they could change the due date or payment frequency at any time. While most other account types aren’t available in Registered Retirement Savings Plans (RRSPs), Registered Retirement Savings Funds (RRIFs), Life Income Funds (LIFs), Tax-Free Savings Accounts (TFSAs), and Open (Taxable) Accounts are also available.
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The focus is on simplicity and adaptability
In a telephone interview, Eric Monteiro, senior vp of group retirement services at Sun Life, said that when MyRetirementIncome is first implemented, most investments might be in RRIFs. He expects many will use it as a part of their retirement portfolio, although some may use it 100%. Initial feedback from Canadian advisors, advisors and plan sponsors has been positive, he says, particularly regarding its flexibility and consistency.
As noted above, unlike annuities, the return just isn’t guaranteed, but Monteiro says, “That’s the only question mark.” Sun Life checked out the competitive landscape and decided to deal with simplicity and adaptability, “precisely because these others don’t were successful as expected.” The total fee management expense ratio (MER) is 2.09% for assets as much as $300,000, but drops to 1.58% thereafter. Monteiro says the fee is “in line with other actively managed products.”
Birenbaum cites simplicity and accessibility as benefits, with only limited input required from customers who “simply decide up to what age” the cash ought to be valid. The remaining balance just isn’t lost upon death but passes to a named beneficiary or estate. The goal payout amount is calculated annually based on current market value and life expectancy, so payouts will be as sustainable as possible. This is useful if the investor is not any longer in a position to manage investments competently in old age and doesn’t have a trustworthy power of attorney available.
As for the downsides, Birenbaum says it’s currently only available to existing members of the Sun Life Group Retirement Plan. “A single fund may not be optimal for such a wide range of client needs, risk tolerances and time horizons.” In her experience, “clients tend to underestimate life expectancy,” which puts them at longevity risk. To her, Sun Life’s approach seems too easy: “This product cannot replace a comprehensive financial plan with a view to estimating the sustainable level of annual payouts.”
In short: “There is a high cost for Sun Life to do a bit of math on behalf of customers…This is a way for Sun Life to maintain the group’s RRSP savings as its customers retire…to create small accounts in the.” to change to automatic pilot mode supported by a call center and ultimately a chatbot. For a retiree who has no other investments, it’s a straightforward approach to generate retirement income.”
However, “Anyone who has a great financial advisor who offers both planning and investment management can do better with this product,” says Birenbaum. “For those without an advisor, a simple, low-cost balanced fund or ETF with a discount brokerage can save the client more than 1% annually in fees in return for doing a little annual math.”
