Frequently Asked Questions

What are the drawbacks of a guaranteed income?

Guaranteed income, while offering a sense of financial security, does come with certain drawbacks. One of the main disadvantages is that an individual is locked into a low rate of return. This means that if the same individual were to invest in a bond or a diversified stock portfolio instead of an annuity, the potential for growth over time would likely yield a higher income level. Another drawback is that opting for guaranteed income often means trading the peace of mind of having a steady income for the possibility of earning higher returns. This is because guaranteed income products often come with high hidden costs that are not immediately apparent. Once an individual has decided to invest in a Guaranteed Investment Contract (GIC), it may not be possible to reverse the decision. This lack of flexibility can be a significant disadvantage for some investors. Furthermore, GICs may not be able to keep pace with the rate of inflation, which could erode the real value of the guaranteed income over time.