Income optimization strategies – Case Studies
managed by CI Investments Inc.
issued by Sun Life Assurance Company of Canada
SunWise Essential Series
income optimization strategies
2
SunWise Essential Series income optimization
strategies provide investors the flexibility to optimize
their financial benefits by holding multiple classes of
units under one contract. This means contracts can
be individually tailored to client needs. And, if their
plans change, they are able to move from one class to
another all within the same contract.
Income optimization allows SunWise Essential
Series to provide liquidity, income, growth and
protection all within the same contract. Rather than
waiting until age 65 to receive income from SunWise
Essential Series, selected funds can be used to satisfy
immediate income needs while others can be left to
grow to fund retirement income. For example, by
investing in both SunWise Essential Series Income
Class and SunWise Essential Series Investment
Class and/or Estate Class investors can continue to
grow their Guaranteed Lifetime Withdrawal Benefit
through the 5% guaranteed income bonuses and
GLWB Resets and still receive income from either
Investment Class and/or Estate Class prior to age 65.
Income optimization strategy
SunWise Essential Series Investment Class
and/or Estate Class portion
SunWise Essential Series
Income Class portion
To satisfy income requirements
until age 65
For predictable, sustainable, guaranteed
income for life at age 65
Here are two case studies that present income optimization strategies that meet the needs of different investors.
Kevin – Early
retirement and the
need for income
before age 65
Ann and Trevor –
Two-Life Income
Stream option with
a younger spouse
These case studies require a basic knowledge of SunWise Essential Series.
We encourage you to read the SunWise Essential Series Advisor Guide and watch the videos
at www.sunwiseessentialseries.com, or talk to your CI Sales Representative for details.
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Case study #1
Early retirement and the need for income before age 65
Kevin: The situation
Kevin is 60 years old. He has worked for 36 years and has a company pension. Originally, he
planned to retire at age 65; however, a recent accident has caused him to rethink his plans
and retire earlier. He is concerned about taking his Canada Pension Plan payments at age
60 because his benefits will be reduced for each month before he turns age 65. In addition,
this reduced income would be the amount he would receive from CPP for life. He is also
concerned that using his retirement funds too early in life will erode his assets and reduce his
future income.
The challenge
To find an income solution that will help Kevin bridge
the gap until he turns age 65 and becomes eligible for
Old Age Security benefits. Fortunately, Kevin has saved
$225,000 to satisfy his retirement income needs. While
taking a reduced CPP at age 60 provides him with
some income, simply withdrawing his savings could
mean lower future cash flow during his retirement.
Kevin’s advisor had estimated that he would need
$4,311 in monthly income if he retired at age 65. Due
to his unexpected retirement at age 60, he needs to take
a reduced CPP benefit, but he still qualifies for his full
company pension. Since he must wait until age 65 to
receive OAS, this leaves him with a significant shortfall.
Kevin needs an income solution that can:
y g enerate immediate cash flow to meet
his income needs until age 65
y still allow most of his retirement assets to grow
y ensure that he has sufficient capital to meet
his income requirements in the future, and
y provide a guaranteed, predictable income
for life at age 65.
Income Gap
$1,286
Total Required
Monthly Income
$4,311
Reduced CPP $525
Company Pension
$2,500
*All amounts have been rounded. Canadian Pension Plan is
based on the average benefit and reduced by 30% which is an
estimated amount of $6,300 a year, or approximately $525
per month.
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The solution
Kevin can satisfy his current and future income
requirements with the SunWise Essential Series
income optimization. He invests $77,160 in the
Investment Class units of SunWise Essential CI
Signature Canadian Bond Fund, to meet his current
monthly income needs of $1,286. If markets perform
well over the five years and his investment surpasses
his income requirements, any residual balance can
be withdrawn or switched into SunWise Essential
Series Income Class to increase his guaranteed
income for life.
Kevin places the remaining, $147,840, in the Income
Class Units of SunWise Essential CI Signature
Select Canadian Segregated Bundle, to provide an
income for life starting at age 65. This allows him to
continue to build his guaranteed retirement income
over the next five years since he will receive an
annual guaranteed income bonus of 5% each year he
does not make withdrawals from SunWise Essential
Series Income Class. As a result, by the time Kevin
is 65, his guaranteed income for life will have grown
to a minimum of $9,240 a year. If markets perform
well, he may receive a Guaranteed Lifetime
Withdrawal Benefit Reset that will increase his
monthly income, provided he has not taken any
withdrawals, his guaranteed income will not be less
than $9,240 a year.
Income Optimization Strategy
SunWise Essential Series Investment Class
Monthly income
Months
X
requirements $1,286
required 60
=
SunWise Essential Series Income Class
Assets to
invest $77,160
Remaining assets
$147,840
As Investment Class is depleted, Income Class continues to grow
Investment Class
Income Class
$77,160
$184,800 $184,800
$170,016 $177,408
$155,232 $162,624
$61,728
$46,296
$30,864
$15,432
60
61
62
63
Estimated Market Value
Values are as of calendar year end.
64
65
60
61
Initial Investment
62
63
64
LWA Base
65
5% Bonus
Lifetime Withdrawal Amount (LWA) $9,240
Values are as of calendar year end.
At age 65, Kevin begins to receive his OAS. This, along with his guaranteed income for life, provides him with his
required monthly income for life.
Kevin’s monthly income at age 65
Company pension $2,500
CPP benefit $525
OAS benefit $527
Lifetime SunWise Essential Series income $770
Total $4,322
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Case study #2
Two-Life Income Stream option with a younger spouse
Ann and Trevor: The situation
Ann and Trevor are preparing to retire next month. Trevor is 65 and Ann is 63. Ann is a member
of a pension plan sponsored by her employer. Her pension includes a survivor benefit which
ensures that Trevor will continue to receive her pension if she passes away before him.
Trevor has saved $500,000, which represents his only source of retirement income. He needs his
savings to create an income for life for both himself and Ann. He will begin drawing an income
next month.
The challenge:
Trevor needs his RSP to provide him with a monthly
income of $1,665 during retirement. With SunWise
Essential Series Two-Life Income Stream option,
Trevor’s Lifetime Withdrawal Amount will become
available in the year Ann turns 65.
Trevor needs a solution that:
y p
rovides him with income until Ann turns 65
y ensures that Ann will continue to receive the same
level of income for life if he passes away before her,
and
y provides a predictable, sustainable, guaranteed
income for life for both of them.
Trevor’s advisor estimates that he will need $3,011 in
monthly income when he retires at age 65. SunWise
Essential Series Income Class can provide him with an
income for life, but not until Ann turns 65 in two years if
he selects the Two-Life Income Stream option. Before
then, Trevor is eligible to receive CPP and OAS, which
will provide him with a monthly income of $1,346
– but that leaves a monthly shortfall of $1,665.
Total Required
Monthly Income
$3,011
Income Gap
$1,665
OAS $537
CPP
$809
*All amounts have been rounded. Canadian Pension Plan is
an estimated amount of $9,828 a year which is approximately
85% of the 2011 maximum benefit. Old Age Security is
$6,455.64 a year or $537.97 per month.
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The solution
Trevor converts his RSP into a RIF and invests in
SunWise Essential Series. He selects the Two-Life
Income Stream option, which ensures that an income
for life continues at the same amount if he passes away
before Ann. Using the income optimization strategy,
Trevor invests $40,000 in the Investment Class Units
of SunWise Essential CI Signature Canadian Bond
Fund, to meet his immediate need for income and
the remaining $460,000 in the Income Class Units
of SunWise Essential Series, CI Harbour Segregated
Bundle, to guarantee him an income for life.
The $40,000 invested in Investment Class units
provides him with a monthly income of $1,665 for
two years until Ann turns 65. If markets perform well
over the two years and his investment surpasses his
income requirements, any residual balance can be
withdrawn or switched into the SunWise Essential
Series Income Class to increase his income for life.
At the same time, by using the income optimization
strategy, Trevor is able to receive the 5% annual
guaranteed income bonus for two years on his
$460,000. As a result, by the time Ann turns 65, they
will have a minimum guaranteed income for life of
4.5% of his LWA or $1,896 monthly. If markets
perform well, he may receive a GLWB reset that will
increase his monthly income, but provided he has
not taken any withdrawals, his guaranteed income
will not be less than $1,896 a month.
Income Optimization Strategy
SunWise Essential Series Investment Class
Monthly income
Months
X required 24
requirements $1,665
=
SunWise Essential Series Income Class
Assets to
invest $40,000
Remaining assets
$460,000
As Investment Class is depleted, Income Class continues to grow
Investment Class
Income Class
$40,000
$483,000
$506,000
$506,000
$506,000
63
64
65
66
$20,020
63
64
Estimated Market Value
65
66
Initial Investment
LWA Base
Lifetime Withdrawal Amount (LWA)
5% Bonus
Values are as of calendar year end.
Values are as of calendar year end.
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For more information about the innovative features
and benefits of SunWise Essential Series,
please visit www.sunwiseessentialseries.com.
All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
To the extent of any inconsistencies between this guide and the January 2012 SunWise Essential Series Information Folder and Individual
Variable Annuity Contract, the terms of the Information Folder and Contract prevail. For full product details and disclosure, refer to the
Information Folder and Contract.
The figures shown in the charts and illustrations are not guaranteed. They are based on assumptions that are certain to change and are
neither an estimate nor a guarantee of future performance. They should be treated as hypothetical only. Actual results will differ upward or
downward from those shown depending on future performance.
Illustration assumes a 70% equity/30% fixed-income asset mix (Equity is one-third each S&P/TSX Composite Index, S&P 500 Index, and
MSCI World Index; income is DEX Universe Bond Total Return) and a bear market declining on average 2% per year. Annual withdrawals
are assumed to be 5% of the LWA Base.
Subject to legislated minimums and maximums and certain conditions. Exceeding the LWA withdrawal rate will have a negative impact
on future payments. For One-Life Income Stream, a guaranteed income for life or Guaranteed Life Withdrawal Benefit (GLWB) of 5.0%
(LWA Rate) is available at January 1 of the year the Annuitant turns 65. For Two-Life Income Stream, a GLWB of 4.5% (LWA Rate) is
available at January 1 of the year the younger spouse turns 65. Payments can continue until the death of the Annuitant (or the Annuitant
and Second Life for Two-Life Income Stream) or termination of the contract.
Sun Life Assurance Company of Canada, a member of the Sun Life Financial group of companies, is the sole issuer of the individual
variable annuity contract ­providing for investment in SunWise Essential Series segregated funds. A description of the key features of the
applicable individual variable annuity contract is contained in the Information Folder. Any amount that is allocated to a segregated fund
is invested at the risk of the contract holder and may increase or decrease in value. ®CI Investments, the CI Investments design,
Synergy Mutual Funds, Harbour Advisors, Harbour Funds, Cambridge Advisors and Signature Global Advisors are registered trademarks of
CI Investments Inc. ™Portfolio Series and Signature Funds are trademarks of CI Investments Inc. ®SunWise is a registered trademark of Sun
Life Assurance Company of Canada.
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