Jayson Lowe explains how Canadian doctors use dividend-paying whole life insurance to build tax-advantaged retirement savings inside their corporations. The policies offer guaranteed cash value, avoid passive income tax rules, and let physicians control their money privately without the usual extraction penalties on corporate income.
Discussing a case scenario where doctors are leveraging the process of becoming your own banker, the infinite banking concept, to create a preferred retirement solution, you know, for themselves. Gosh, there's so many, so many cases to share there. But most commonly when we're dealing with a physician, they're structured in a way where they have a professional services corporation, so they have the money that they're earning flowing into a company. And then that money has to come out, and it has to come out in a way that is either T4 income from the business or they're taking the money out in the form of dividends, or it's a combination of both. Now, doctors, more than anybody, understand longevity risk. People are living much longer than they've ever lived before. One of the fastest growing segments of our population are centurions. And so when, when I talk about this process with people and we say, listen, you know, when you have a policy or a system of policies, the daily accumulating cash value is contractually guaranteed to match the total death benefit of the policy by age 100. Now, most often not with doctors, but with the general public, they say, well, gosh, I don't think I'm going to live to age 100. And the question that I'm asking, including physicians, is, what if you do? You're going to need the use of money for that entire period of time. And so we go through a very fun thought experiment. And doctors love to do this. Doctors are inherent at troubleshooting. They're inherent at being problem solvers. And so I say, look, if you can create the perfect investment from scratch, it has no drawbacks whatsoever. Because everyone talks to doctors about investing their money. There are financial entertainers coast to coast who are banging down the doors of doctors saying, hey, listen, that wheelbarrow full of money that you have in an empty patient room, let me put that to work for you in something. And you know, we're going to subject it to the risk of loss and, but you're going to be great and well taken care of. Well, doctors want certainty. And so when we go through this fun thought experiment, the most common attributes, because they say, look, what attributes would this perfect investment have? Remember, there can be no drawbacks. Well, we want it to be conservative and safe and guaranteed and high rate of return and accessible liquid. I want to be in control. I want it to be private. I don't like everybody knowing what my financial affairs are, et cetera, et cetera. Well, what they're doing is they're best describing the characteristics of dividend paying, participating whole life insurance contracts. And when they see the power of these contracts, they also understand that someday death will come. There's 100% probability that it's going to happen to them too. They just don't know when it's going to occur. And so in Canada, we have what are called the passive investment income rules, which essentially means more tax. And doctors who are accustomed to taking surplus money in their business and investing it to multiply it, they spontaneously burst into flames when they see the tax bill. And these policies are exempt from those passive investment income rules. Now, for most people, it's a moot point because of the amount. But I haven't met a doctor yet who says, yeah, I prefer to have more exposure to tax versus less exposure to tax. This is all about common sense. If you recognize that you're going to live longer and that you need to use some money for a longer period of time, and that you can build a warehouse of wealth inside of an instrument that attracts no tax, you can get a guaranteed retirement paycheck without having to take on the risk of investing in a temperamental stock market, or dealing with government intervention, or dealing with all these things that can erode your wealth.
What better place to than here to have your money reside? And so when we go through that, we map out very specifically, how much income are you going to need? Let's engineer this warehouse to be able to deliver that to you. And once doctors see the power of it, they embrace it. They absolutely love it. And so if you're a physician and you're watching this, I would wholeheartedly, wholeheartedly suggest to you that you examine this process and give it the same level of close examination as you would a patient. And I promise you that the prognosis will be, this is something you need to do.
Now, I can diagnose that, but the prognosis will be very clear.
