Jayson Lowe shows how participating whole life insurance can fund retirement through tax-free loans. Myra deposits $500,000 over 10 years and withdraws roughly $45,000 annually tax-free from 65 to 90. A business owner can use a corporate policy the same way, generating about $41,000 yearly in tax-free income.
Questions this video answers
Age 50; target $45,000 net annual retirement income from age 65 to 90.
$50,000 per year for 10 years (total $500,000).
Approximately $45,008.17 per year from age 65 to age 90 (total spent ≈ $1.19M).
Approximately $1,000,000 paid tax-free to beneficiaries at death (age 91 in example).
Age 45; target ~$41,000 net annual retirement income from age 65 to 90.
Chapters
Ask yourself what is easier? Is it easier to save $500,000 in a policy or to accumulate $1.1 million inside of a mutual fund in a RRSP?
Now let's dive into a passive income example. I'm going to talk about tax free passive income. How is that for a change? Passive income, but tax free. Now Myra, so when she met with us, she was age 50, so it was 50 years young. And her goal was simple, you know, she just wanted to maximize how much she can passive income. So objective was to have $45,000 in spending money at retirement time from age 65 to age 90. That's why we spend so much time in a meeting so that we can narrow down on very specific goals. Because the policy is going to be designed and steered towards achieving those goals. Once the policy set, we cannot change it. That's why it's such an important thing for us to spend the time initially and do the things right from get go. So her goal was to have $45,000 in net annual retirement income from age 65 to age 90. She's age 50. She discovered the process of becoming a banker. Now she deposits $50,000 per year into a participating dividend paying whole life policy for 10 years. She was already setting aside that money to put into some other investments for the purpose of retirement. She didn't change her cash flow, she just changed where the money's going to be sitting. And all the attributes of the policy kicked in. Daily cash value growth. She got dividends, she had death benefit. So she put in $50,000 for the next 10 years. The total money that she put into the policy is $500,000. Now from age 65 till age 90, she's able to access as loans 45,008, 17 per year, no tax on it. It's tax free because she's accessing loans and she's not repaying any loans from age 65 to age 90 because remember she controls a transaction. The loans are going to be repaid, anything that's outstanding, principal and interest. At debt, because that's a beauty about it. The lien for the loan is on the death benefit. And death benefit, the way we design policies, increases. So at debt, any loans outstanding will be deducted. So she was able to meet her objective of having access to 45,000 every year as income. And this is tax free because these are loans. So if she has other sources of income at that time, cpp, oas, rental income, dividend income on stock, whatever, she had this money that she's Able to access against the policy as a loan will not change her tax bracket because it is tax free. It's a loan, it's not an income. So she puts in $500,000 as premium 50k every year for 10 years and she's able to spend 1.19 million at retirement, which is 45,008, 17 per year from age 65 to age 90, she puts in 500. She spends, let's just say a lot more than what she put into the policy. And when she passes away at age 91, she also will leave behind additional tax free benefit called the death benefit to the next generation of $1 million. She puts in 500,000, spends way more money while she's alive for the purpose of meeting her goal while she's alive, which is retirement income tax free. And she also leaves behind more money for the family more than what she put into the policy when she started. So if you live a long life, you're fine and God forbid you become an angel, the family is still fine because of the extra death benefit that's going to come walking in when your family needs the money the most. So ask yourself, this is a very important question. Ask yourself what is easier? Is it easier to save $500,000 in the policy and enjoy all the attributes and benefit and contrast guarantees in the policy without having to worry out what's going to happen in stock market, what's going to happen in crypto world? So that easier to save $500,000 in a policy or to accumulate $1.1 million inside of a mutual fund in a RRSP and that $1.1 million to match with the policy, that has to be after taxes. So just think about that. Now the other passive income example is going to be for business owners. So business owners, you know, they always retain money in their business because they want to take advantage of small business tax deduction because businesses, you know up to certain income is only taxed at about 10%. So next example in passive income is, is on Dylan. Dylan is age 45, he's a successful business owner and Billen's objective is to get $41,000 in net annual retirement income from age 65 till age 90. We always solve beyond projected mentality for male, non smoker is about 85 and for about female is about 88. So we always want to solve beyond projected mortality. Now here's the most interesting thing. It's the business that owns the policy on Dylan because business has a beneficial interest in Dylan. So business is putting the premium On Dylan's life, it's not Dylan paying the premium after personal tax dollars is the business after business tax dollars. That money is going into policy as premium. So $50,000 goes into a corporate owned policy for 10 years. He has the option to put money beyond 10 years and showed it Myra. We're just showing you a definitive timeline of putting money in because that was what's required to achieve their goals. So total in just like Myra was $500,000 for Dylan, but it was the corporation paying the money, not Dylan. Now the corporate tax on daily cash value growth is $0. So corporation doesn't pay any tax on the daily cash value growth of the policy. The policy is not part of the passive investment income tax rule. So there's zero passive income taxes in the policy. But if you have business retained earning, you invest money into anything other than the business to produce a passive income. That passive income tax is very, very significant on the policy. There's no tax at all. From age 65 till age 90 Dylan is able to access personally and this is where the difference is. The corporation is paying the premium, but Dylan is spending the money personally for personal lifestyle. Isn't this awesome? So Dylan is able to spend 41,000 per year from age 65 till age 90 after tax money in hand for him to use total out for Dylan is 1 66. So again the corporation paid the premium about $500,000. 50k every year for 10 years is 500k. But he was able to spend a million dollars personally fund his retirement at that time. Now if Dylan passes away at age 91, since it's a corporate owned asset, the Death benefit is $806,000 which is net after loans and interest outstanding since it's a corporate owned asset villains that will give rise to a capital dividend account CD account. So if you're a business owner, do definitely schedule that call with the right advisor on the team. You would have already received the link and have an expanded discussion on the capital dividend account and all the advantages of getting the money through that account tax free to your family or to your state. So all that 8006000 doll out of the capital dividend account from his corporation tax free. So corporation paid the money premiums. Dylan spent the money while he was alive personally and then Dylan's estate and Dylan's family received $806,000 tax free when he was gone. So this is a great strategy from tax planning estate planning, not just for the purpose of meeting your goals for passive income and financing like how I talked about car financing but also for the purpose of leaving more behind tax free whether it's corporately whether it's personally now CDA credit so although $806,000 is what was net tax benefit and that is what showed up in the capital dividend account as physical dollars but the credit received to the CDA which is the capital dividend account is 3.5 million because credit is equal to total death benefit. But only 8006000 came out because the rest of the money was paid to cover the principal and interest on policy loan. So what does that mean for billings? Business is the credit is 3.5 million but only 806,000 actually came up. There's additional room in the CDA to pass out more money from the business as tax free to the next generation. So again an amazing tool for tax planning. So definitely business owners as you schedule the call have a discussion with an authorized infinite banking practitioner with a team on the capital dividend account. The capital dividend accounts monies from that are paid tax free because it's capital dividend not taxable dividend.
