Discover the unique benefits of our Insured Retirement Program designed by JBF Financial. Ensure a financially secure retirement that combines growth and protection. Don’t wait – secure your financial future now by contacting our experts in Alberta.
There are several mechanisms available for individuals to save in a tax-efficient manner for their retirement – from employer-sponsored pension plans to government plans, RRSPs (Registered Retirement Savings Plans) or TFSAs (Tax-Free Savings Accounts). But, options can be limited for those who earn a higher income and wish to contribute more to their pension savings than they can benefit from under the plans, which are subject to annual caps. The insured retirement program effectively bridges the retirement savings gap for such individuals in a cost-effective manner.
This program works with the concept of collateralization in the following way:
The individual takes out a universal life (or eligible whole life) insurance policy and subsequently makes sizable cash deposits into it. These deposits grow within the policy on a tax-sheltered basis, providing that the funds remain in the policy and are within the maximum allowable limit.
Upon the retirement of the policyowner, the funds within the policy may be used as collateral to take out a loan.
This loan can provide valuable cash for the retiree to purchase an annuity or to use as income.
When the retiree dies, the loan is repaid, and the remaining balance can be distributed among their beneficiaries.
As with all investment strategies, there are some risks. Namely, in this case, the fact that the program involves incurring a debt, borrowing funds and interest rate changes means that investors need to be comfortable with the unlikely but possible fact that the bank calls the loan or that changes in tax rules negatively impact them.
The insured retirement program can be a smart way for high earners to maximize their retirement income in a tax-effective manner.