Here’s the problem …
Most people think of permanent life insurance as money paid when someone dies. They know it’s a great solution for paying a tax liability at death, providing an estate for loved ones or leaving a gift to a charity. But what about planning for retirement? Without careful planning, you may not have enough savings when you retire to maintain the standard of living that you’re enjoying now.
What are your options?
People typically think of RRSPs and other registered plans when they think of retirement. Many rely on these registered plans as their main source of retirement income. The problem is that the amount you can contribute to these plans is limited. This means the base amount might not be large enough to provide the retirement income you desire. One solution is an insured retirement strategy. It uses a permanent life insurance policy to provide you with the insurance protection you need and access to tax-free cash during your retirement years.
How does it work?
Under current tax law, the cash value in a life insurance policy accumulates tax-free, up to certain limits. The insured retirement strategy lets you use that cash value at a point in the future. Whether you want to supplement retirement income, purchase a vacation property or go on a trip, the insured retirement strategy lets you use your policy’s cash value as collateral for a bank loan. This bank loan provides the cash you desire … and you receive it tax-free. The loan doesn’t have to be repaid until the life insured dies. When the insured dies, the tax-free death benefit is used to repay the loan. Once the loan is repaid, any remaining death benefit is then paid to the policy’s beneficiary.
Are you a candidate?
Estate and retirement planning is critical to your financial health and it requires your careful consideration.
The insured retirement strategy generally is designed for those who:
• Need permanent life insurance protection
• are between the ages of 30 and 55
• are in a high marginal tax bracket
• have maximized RRSP/pension plan contributions
• want to supplement retirement income with tax-free dollars
• want to reduce the amount of tax they’re currently paying on investments
• have minimized non-deductible debt.
Remember to always consult your advisor before taking any action.
Written by Stuart Kirk, CIM
Stuart Kirk is an Investment Funds Advisor with Manulife Securities Investment Services Inc and a Retirement Planning Specialist with Precision Wealth Management Inc. The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc or Precision Wealth Management Inc. For comments or questions Stuart can be reached at stuart@precisionwealth.ca or 250-954-0247.
