Michael, 60, owns a successful consulting business in Victoria, BC, and wants to retire at 65. He wants to ensure a guaranteed income stream for life starting at retirement to cover his essential expenses of $60,000 per year, over and above his CPP and OAS benefits which are projected to be $20,000 combined. He anticipates withdrawing from his substantial non-registered investment portfolio and RRSP/RRIF. What strategy would a financial advisor likely emphasize first to secure his essential income needs given his desire for certainty?

Question: Michael, 60, owns a successful consulting business in Victoria, BC, and wants to retire at 65. He wants to ensure a guaranteed income stream for life starting at retirement to cover his essential expenses of $60,000 per year, over and above his CPP and OAS benefits which are projected to be $20,000 combined. He anticipates withdrawing from his substantial non-registered investment portfolio and RRSP/RRIF. What strategy would a financial advisor likely emphasize first to secure his essential income needs given his desire for certainty?

Answer options:

• Structuring his non-registered portfolio for systematic withdrawals. ✅ Purchasing a life annuity to cover the $40,000 annual income gap.
• Aggressively investing his RRSP to maximize growth before retirement.
• Delaying his CPP benefits until age 70 to receive higher payments.

Correct answer: Purchasing a life annuity to cover the $40,000 annual income gap.

Explanation: Given Michael's desire for a guaranteed income stream for essential expenses, purchasing a life annuity (immediate or deferred) is the most direct way to secure a predictable, lifelong income to cover the $40,000 gap ($60,000 essential needs - $20,000 CPP/OAS), providing insulation from market risk and longevity risk. Other options either involve investment risk or delay income.