Retirement Income Strategy |
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When you start to use your assets to fund your retirement income, use the funds from your least tax efficient investments first. As we saw from the example a non registered investment can only provide income about half as long as an RRSP and an RRSP less than a third as long as an Insurance . Therefore, it is prudent to use funds from your non-registered (non-sheltered) investments first, then your RRSP assets and give you the best bang-for-your-buck while you're alive. And after you die, all the value left in your Insurance will be paid out TAX-FREE directly to your named beneficiaries, avoiding your estate and probate tax.
I recommend these plans to a wide age range of people. From young people in their early 20's, starting their first investment plan; to seniors in their late 60's, looking for ways to shelter money in retirement. It's hard to find situations where these tax-sheltered insurance accounts aren't superior to other types of comparable investments.
Not all. products offered by insurance companies are the same, and you should make sure the financial planner who you're dealing with works with sound institutions. However, assuming that is the case, you will be amazed at how extra money you could end up with, down the road, and by not paying taxes as you go! Life Insurance tax-sheltered investments have very unique positions in the tax laws, and should be investigated at every opportunity.
Lets review the features and benefits of owning an Insurance. |
| Deposit Flexibility - You can charge both the frequency and amount of your deposits. |
| TAX-FREE build up of earnings within the plan. |
| TAX-FREE income through an innovative loan program when required. |
| TAX-FREE money to heirs upon death. |
| Creditor Proof - money in the plan can never be seized by creditors. |
| Complete choice of investments with no restriction on foreign content. |
| Assets in the plan can be used as collateral. |
| no mandatory or minimum income payments in retirement - if you don't need the income you can continue sheltering the growth within the plan. |
| Since income from the plan is not included in taxable income, the plan could prevent clawbacks on an Old Age Security payments or other benefits. |
| An Insurance is truly a WIN-WIN-WIN plan. Your investment stays TAX-DEFERRED while it is building up the plan. You will earn TAX-DEFERRED income from the plan in retirement. And when you're gone, the rest of the money goes to you heirs TAX-FREE! CRA never sees one red cent in this strategy. In my books that's WINNING!
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