In the previous chart, we found that 70-year-old men could generate more income by buying a life annuity than by managing their own account balances in retirement through a “DIY approach.”
When we apply the same analysis for women, we arrive at pretty much the same conclusion – but with one major caveat.
Consider a 70-year-old woman with $100,000 in her RRSP. She could buy a life annuity with payments guaranteed for 10 years, even if she dies earlier.
Or she could follow a DIY approach in which she invests the $100,000 in a long-term bond portfolio and draws out a certain fixed amount each year until age 92, by which point her account would be depleted.
(In the chart for men, we assumed retirement funds would have to last only until 90 instead of 92, because women tend to live longer.)
To make the comparison a fair one, we assume that female retirees would invest in a long-term bond fund if they follow the DIY approach. As the chart shows, the amount payable varies by starting year since bond yields change continuously. Even without any investments in stocks, this bond portfolio would still be a little riskier than an annuity.
As in the case of male annuitants, the life annuity always provides more income than the DIY approach, but in recent years that difference has become razor-thin.
In the case of an annuity bought in November of 2025, it provides only $95 a year more income than the DIY approach and even that tiny excess could disappear if we tweaked the bond yields slightly – say by using higher-yielding provincial bonds rather than Government of Canada bonds.
What’s changed? Well, it seems Canadian life insurance companies are not pricing annuities as attractively as they were back in 2023 when the excess income from annuitizing was a whopping $809 a year.
I have to conclude that this is not a great time for either Canadian men or women to buy an annuity, but I expect the situation will change at some point since insurance companies periodically sharpen their pencils to attract annuity premiums. I will try to alert readers if and when that happens next.
Again, I want to thank annuity broker Rino Racanelli for providing the historic annuity quotes.
Frederick Vettese is former chief actuary at Morneau Shepell. This new YouTube video outlines his recommended retirement income strategy.
