A Solution to Enhance Your Retirement Income Insurance Concepts

Enhance your Retirement income using Universal Life………. Retirement – your reward for years of hard work and smart planning

You’re working hard to achieve your retirement goals. You’re maximizing your Registered Retirement Savings Plan (RRSP) contributions and making some wise investments. You’ve accumulated assets that enrich your life and the lives of your loved ones.

But will you have enough retirement income to fulfill your retirement dreams? Today, many of us are living longer and retiring earlier, so it’s important to know that there will be an adequate and constant income flow when we retire. Financial experts agree that you will need roughly 70% of the average of your last five years of your income on an annual basis to retire comfortably.

So, if your average pre-retirement annual income is $100,000, you may need a retirement income of at least $70,000 a year to maintain your pre-retirement lifestyle. However, the current law limits annual RRSP contributions, and these limitations can result in significant shortfalls in the retirement income.

Fortunately, there is a way you can use universal life insurance policy to supplement your retirement income and pay NO taxes on the supplementary earnings. Universal life insurance provides a cost effective solution to enhance your retirement income..

A tax-exempt* universal life policy can provide you with an opportunity to accumulate funds without being taxed on the earnings. Plus, universal life insurance plans can be used to access retirement income without incurring income tax. *Current income tax laws limit the maximum amount of funds that can be invested in a tax-sheltered insurance policy.

Here’s how it works Accumulate funds without being taxed on earnings You purchase a universal life insurance plan and invest as much as you can in the Cash Value portion of the policy. By investing the maximum allowable, you are able to take full advantage of the tax-free accumulation of earnings that universal life insurance plans offer.

Access retirement income, tax-free The universal life insurance plan increases in value over time, and like many other assets, it may be used as collateral for a loan from a third party financial institution –a bank, a credit union, or a trust company. According to the current tax laws, borrowed money is tax-exempt.

When you retire, you can apply for a series of tax-free loans, using your policy as a collateral. You can borrow a loan amount that, together with accumulated interest, equals as much as 90% of the Cash Value of your policy. You pay no income tax on this borrowed money. The policy Cash Value remains untouched and continues to grow.

At the time of your death, the loan amount and accumulated interest can be repaid to the third party financial institution through the tax-free death benefit of the insurance policy. The balance of the death benefit goes to your beneficiaries.

Three valuable advantages of using your universal life plan as a collateral for a loan: You pay no interest or income tax on the loan, Your Cash Value remains intact and continues to earn interest on a tax-deferred basis, Your beneficiary can use the policy’s remaining death benefit to preserve your estate, or meet any other financial needs.

Excerpt from: Coopers & Lybrand, Tax Planning Checklist, “Those looking for tax shelters or deferral mechanisms may wish to explore the significant benefits that may be derived from an ‘exempt’ life insurance policy… it is to be noted that a substantial portion of the income from such investment accumulates free of tax, that such income can be utilized before death, and that the proceeds are not subject to tax on death … such policies may be a powerful tool in the tax planning arsenal.”

Key Advantages of an Individual Investment Shelter Strategy over Alternative Investment Direct withdrawals from an alternative investment incur immediate taxation, based on your marginal tax rate. Any withdrawals from an alternative investment will negatively impact the fund’s growth. In contrast, when you use universal life as collateral for a loan, you enjoy tax-free income while the policy Cash Value continues to grow on a tax deferred basis. Plus, universal life can provide a tax-free death benefit to your beneficiaries after the loan has been repaid. No other investment can offer these important tax advantages.

A Solution to Enhance Your Retirement Income Would you like a quote to see how how this strategy may work for you? For questions and comments, please contact us at Thank You