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 gifts for loved ones or charities.
But what about planning for retirement? Even with careful planning, you may not have enough savings when you retire to maintain the standard of living that you're enjoying now. Implementing a financial plan can help you in charting, planning and achieving your retirement goals.
What are your options?
People typically think of Registered Retirement Savings Plans and other registered plans when they think of retirement. Many rely on these registered plans as their main source of income. The problem is that the amounts you can contribute to these plans are limited - which may leave you short of retirement income.
One solution is the Insured Retirement Plan (IRP), a financial planning strategy that uses tax-exempt life insurance to complement your retirement savings. With the IRP, the accumulated value of a tax-exempt life insurance policy can be used to provide you with future cash flow that will supplement your retirement income.
The strategy provides the potential for tax-deferred accumulation of funds in the tax-exempt life insurance policy, and tax-free access to those funds in the future as cash, policy loan or collateral loan. What's more, you are free to contribute as much as you like, based on the amount of insurance coverage purchased. (For tax-exempt status there are some limits to your contribution amounts.) Once you have left the policy to grow for a significant period of time you can access the funds for income.
Upon death, the loan is automatically repaid and the remaining tax-free death benefit is paid to your beneficiaries.
This article was supplied by Colin MacAskill CFP, CIM, a Vice-President and an Investment Advisor with RBC Dominion Securities Inc. *Member-Canadian Investor Protection Fund. Insurance products are offered through RBC Wealth Management Financial Services Inc. ("RBC WM FS"), a subsidiary of RBC Dominion Securities Inc. When providing life insurance products in all provinces except Quebec, Investment Advisors are acting as Insurance Representatives of RBC WM FS. Colin welcomes your calls on his direct line 604-257-7455.
