Insured Retirement Planning Guide In Canada

It cannot go down regardless of what's going on in the stock market, real.

Estate, the economy, the next election, regardless of which country. It is politics that can play havoc, wreak havoc with financial markets. It does every four years. It happens no matter what.

We work with folks who prefer that certainty.

Let's talk a little bit about the Insured Retirement Guide, but let's support that with a couple of quick examples. So when you think about insured retirement, what comes up for you?

I would think that it's something that means that I'm going to have stable and consistent retirement and that I can be assured and insured that there's going to be income coming in on a regular basis. And so that's what comes up for me. Now granted, I have some inside knowledge there, but I think if anyone was just looking at the terminology of an insured retirement planning guide, they would allude to something like that. Wow. Okay. So it's for retirement. It's something that's going to help me plan for that, meaning probably income, because we're talking about retirement income and if we're using insurance or if it's insured, that should mean that it's going to be stable and consistent. So to me, those kind of things dovetail together. So I think the example we're going to talk about today on this video, Jay, is going to be really, really helpful for people who are interested in learning about what is an insured retirement and the different terminology that people use around that and how could it work for someone? How could a Canadian participate in something like that?

When the process begins for somebody, when they think about retirement planning in general, what comes to mind for folks that we interact with is the process of accumulation. So how do I go about setting aside money so that eventually, at some point down the road, I'm going to be utilizing it as retirement income or a supplement to other sources of retirement income. A common method that, that we see is registered retirement savings plans or even non registered accounts that people are investing in, things like mutual funds, equities, the stock market, et cetera. So we're going to look at the insured Retirement planning guide and we're going to examine an actual case study and talk about it. And I think we'll be able to hit all of the different phases, you know, as we go through that. So we're going to talk about Nasia. Now, Nasia is 45 years young husband, two young children, and Nasia's objective was to have 39,000 in net annual retirement income from age 65 to age 90. Now this is to supplement the total household retirement income. And NASIA decided that rather than put money into instruments like registered retirement savings plan stocks or mutual funds, Nasia decided to insure her retirement solution by depositing what she could have otherwise put in to an rrsp. She decided to put that money into a participating dividend paying whole life insurance policy.

Just to recap that, Jay, what you're saying is she was going to be putting money into something anyway. She was saving already and had developed the habit of saving. She knew she needed to be contributing about $30,000 a year, which was already in her plan, to other things. It was going to other mechanisms to invest for her retirement future. She's just taking those dollars and redirecting them now. And instead of it going to this thing over here, it's now going into this properly structured, well structured dividend paying participating policy.

That's exactly correct. And if I may just expand on what you just shared. So the insurance company itself refers to it as a preferred retirement solution or an insured retirement plan. And so if that resonates where a person says, okay, I know that I can engineer an outcome in terms of what I need and the timeframe that I need it for. So if we go back to nausea for a moment, she put that capital into that policy for a period of 10 years. So $300,000 went in in the form of premium. That's the amount that went into the contract. Now, this contract comes along with contractual guarantees, one of which is that cash value, which is real value, begins accumulating inside of this policy on day one and continues accumulating every single day thereafter until NASIA either A reaches age 100 or B passes away. And so from age 65 to age 90, NASIA is able to access $39,827 every year from age 65 to age 90, tax free. So not only has she insured her retirement plan, but she's also ensured that she's going to have access to money on a tax free basis.

This is really important. I'm glad that you said that, Jay, because you're watching this right now. You need to really be aware most other incomes that you're going to generate in a retirement phase of life are going to have income to it. You have your, if you have Canada pension plan, okay, great, you got to pay tax on that income. You have older age security, there's going to be some tax on that you may have. If you're drawing down from registered accounts, you've been waiting to pay tax on those things. CRA is going to get their pound of flesh, right? There's all these other mechanisms out there and if you can now supplement those other sources, whatever those are the sources, maybe you have rental, real estate, etc. That's going to be income generated, it's going to be taxable. All these other sources. Now if you can access tax free income, you know there's other one of those sources you might be anticipating might be the old age security plan. Well, when you get up to a certain level of income, taxable income, they start to claw back that amount that you would receive. So this allows for very strategic planning because it can offset those other things, which means you can maximize some of the benefits that you would normally be receiving and you can kind of play the game a little bit more because you can allow for this tax free potential using the right structuring and coaching that are available to understand how this plan works.

Important to mention that in Nausea's case, when NAsia accessed the $39,827 per year, the money that she was receiving was not income. And so that speaks to exactly what you were describing where you're not subjecting these other retirement income sources to the potential for clawback. So the total money out. So let's go back to what was put in. 300,000 went in over a 10 year window and then from age 65 to age 91,035,502 came out. That's far more than what went in. And if between day one and age 90 tax rates increased, so if there was the potential for and the eventual tax hike that was on the horizon, well, tax free money becomes instantly more valuable. So in Nasia's case, she did very well, passed away at age 91 and left $586,682 to her beneficiaries income tax free.

So ask yourself this question, Rich. Is it easier for nasia to save 300,000 inside of a policy or is it easier for nausea to accumulate 1,035,502 inside of a mutual fund or an RSP?

Well, I think the answer is pretty clear. But here's the thing. The question we need to actually elevate that question because the million dollars in the RRSP is the accumulation, but that's not the net amount received, Right? So in order to actually get the net equivalent of that million, she probably actually needed to have like 1.5 in that RSP, withdraw it and then pay the tax in Order to end up netting the equivalent value over that time horizon. There's also the component of market risk, which the volatility there that could have been up and down and that sort of thing. But we also have to now factor in that extra 500,000, almost $600,000 of tax free windfall that showed up to bless her family or a cause that nausea cares about, in this case her family specifically. And that solves an awful lot of problems the day that we walk off planet Earth. So really, to be equivalent, we need to add that factor in there as well. And because it's tax free, well, that means if it was all in a registered account, in order to net that almost $600,000, how much money would actually have to be still in the registered account to create a net value like that available to the beneficiaries? We would need about another million dollars around age 91 to be able to accomplish that objective. So the comparison and the question really isn't fair because there's actually a lot more additional capital value and necessary to create the same net objective.

Well, there's two other very important things that I'd like to say that complement what you just described. So the first would be, think about it from this vantage point. Would nausea have rather had an engineered outcome that mitigates tax risk, mitigates market risk with certainty, or to hope for that outcome and have to recognize and assume volatility and not mitigate tax risk or market risk? Well, I think the answer is obvious in that the insured retirement planning enables an engineered outcome. And if you know with absolute certainty what your account value is on any given day, and you know that that account value cannot go backward, it cannot go down, regardless of what's going on in the stock market, real estate, the.

Economy, the next election, regardless of which country, it is politics that can play havoc, wreak havoc with financial markets, it does every four years. It happens no matter what.

We work with folks who prefer that certainty and who know and recognize that when you have a tool and it's the best tool to get the job done.

That if you put that tool in the hands of someone who's competent, who knows how to use it, not only are they going to turn out great work with the tool, but they're likely not going to break the tool. And so when we talk about an insured retirement planning guide, that guide is not only what's listed underneath this video in how we articulate what that means, but a guide also means a coach having someone who can lead you through, make sure that you're mentored and that you're on track to achieve that engineered outcome. And so when you're considering the fact that at some point you may be planning to retire, whatever that looks like for you in your life, that you can either a engineer an outcome with certainty, mitigating tax risk and market risk, or you can hope and pray for an outcome and ride that roller coaster of volatility. It's an either or.

And there's one really important thing I want to make sure that we identify. Jay in the example that we use with nausea. She really only put capital in for 10 years. That only took her to 55. What happened? Did she just fall off planet Earth and did income stop coming in? Did her husband stop working? Did they stop working as a family? Did they try to retire early? She didn't start drawing the income till 65. What was she doing for the next 10 years? Now, if Nadia had just continued to make deposits into that machine, she could have amplified all that income and all those benefits. So the important point is here, recognize that time is one of the most important factors that is working to your advantage and your disadvantage. It's to your advantage if you're putting capital away. If you're making deposits and you're doing it for over a long period of time, you're doing consistently. If you've been waiting to start putting money away for retirement, when's the best time to plant a tree? 20 years ago? The next best time is today. So you have to get started. Nothing happens until you get started.

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