Four Ways to Preserve Wealth Using Life Insurance

Pay the Tax Man

Taxes are usually owed upon death for assets such as a family cottage or non-registered investments as they are ‘deemed sold’ when the owner dies and capital gains are realized.  The tax liability might occur when the asset owner dies, or when the spouse dies.  Since life insurance proceeds are also paid on death, they provide cash to pay the taxes.  That way, your beneficiaries won’t have to sell the asset to pay the tax man.

Fund a Charitable Gift and Trigger a Tax Receipt

Life insurance can fund a charitable donation and trigger a large tax receipt when you pass away.  You can name the charity of choice as your beneficiary, so the insurance proceeds will be paid to the charity directly, instead of into your estate.  You will receive a large tax receipt to off-set taxes owing on your final tax return.

Ensure Your Children to Ensure Wealth Transfer to Your Grandchildren

Afraid the kids are going to spend all the money and leave nothing for your grandchildren?  Take out a life insurance policy on your children with your grandchildren as the beneficiaries.  This is a common way to transfer wealth efficiently and effectively through the generations.  You can set up the premiums to be paid up by the time you pass; this way your grandchildren aren’t stuck paying the premiums after you’re gone.

Use Life Insurance for Retirement Planning

The tax-exempt accumulation of cash in a Universal Life Insurance policy can function like an RRSP on steroids.  When you retire, you can access the funds through a collateral assignment of the policy to a lending institution (put the bank as the beneficiary) in exchange for a tax free loan to supplement retirement needs.

To learn more ways to use Life Insurance to create and/or your preserve wealth give me a call.

Have a great weekend,

Tracey

Please note: Insurance is not a business of Security Financial Services but is placed through an AGA, Capital Insurance Services via Hub Financial.

5 Golden Rules of Retirement Planning

The most common question I get as a Financial Planner is “How much can I afford to live on or take out of my investments every year during retirement?”  Naturally, this question has many assumptions and everyone is different, but here are five golden rules when it comes to retirement planning;

1.       Don’t expect to reduce your spending in the first few years of retirement, this is the time when you are healthy and finally able to do the things you have always dreamed of, such as travelling and golfing – so plan for it.

2.       Plan for increased longevity.  The average person will retire today at 61 years of age and live almost three decades in retirement.  In fact, it is likely that if a couple retires at age 62, one of them will still be living at age 92.

3.       Keep your withdrawal rate as low as possible for as long as possible, despite the increasing desire to spend in your early retirement years.  If possible, keep your withdrawal rate under 5% and increase if needed as you age.  Keep in mind this is the withdrawal rate from your investment portfolio, which does not include your pension, OAS or CCP.

4.       Plan for discretionary health care expenses.  This could be in the form or retirement housing, cross-border health care or even potential amendments to the Canadian system.

5.       Don’t go too conservative too quickly, thus “going broke safely”.  Capital protection is important and while the return and safety of bonds can be attractive; it is important the average person still has some equities well into their retirement.  This will be even more necessary if we experience a continued rising interest rate environment (causing bond values to drop).

The golden years are meant to be just that – not a time to cut back on your lifestyle.  Unfortunately, outliving money will be a more likely scenario for many Canadians who have not properly prepared. 

Like never before, aging Canadians need strong leadership and financial advice, don’t wind up somewhere unexpected; for a review of your plan give me a call.

Have a great weekend,

Tracey

Happy Thanksgiving!

Happy Thanksgiving!

I’d like to leave you with some good news before a Thanksgiving long weekend.  After a troubling third quarter with difficulties in Europe filling the headlines of the business section, reports from Canada and the Unites States have shown positive news today with increases in jobs.

From the Globe & Mail:

The Canadian economy churned out 60,900 jobs last month, quadruple expectations, all in full-time positions.

The country's jobless rate fell two notches to 7.1 per cent – its lowest level since December, 2008, Statistics Canada said Friday.

The report comes after two months of little job growth and is a stark contrast to labour market woes in other countries, particularly the United States. Canada has created 294,000 positions so far this year, mostly in Ontario and Alberta. Full-time employment growth has swelled by 344,000, outweighing a decline in part-time positions.

Similarly, the US saw positive job growth (from the Financial Post):

WASHINGTON — U.S. job creation accelerated more than expected in September, easing the risk of a new recession, although the economy still created too few positions to heal the labour market much.

The U.S. economy generated 103,000 new jobs last month, beating Wall Street’s low expectations for 60,000 jobs.

The pace of hiring improved substantially from August, when the spending battle in Congress nearly left the government unable to pay its bills, damaging consumer and business sentiment. The stronger-than-expected reading for September suggests the political fight may have only temporarily damaged hiring.

Optimism needs to be tempered slightly as some of the jobs created are from normal increases in hiring in the fall.  However, analysts and economists projections, both in the US and Canada were largely surpassed which is always good news.

Please have a great weekend and a happy Thanksgiving.

Tracey