You are nearing or in your retirement years and want:
- Guaranteed Supplemental Retirement Income
- 100% Capital Preservation
A guaranteed income certificate (GIC) will work perfectly. The problem is that GIC revenue is interest income and is taxed at your marginal tax rate. Also, in today’s interest rate environment, you will earn approximately 4.0% before tax.
An alternative is to take your lump sum of cash used to invest in a GIC and purchase a life annuity. This pays you a regular income for the rest of your life. You then use a portion of that preferentially taxed annuity income to purchase a permanent life insurance contract. This will replace the money used to purchase the annuity when you pass away. This strategy will typically produce a pre-tax rate of return between 5%-6% and is guaranteed for life.
Benefits of the Retirement Income Enhancer
- Higher amount of net spendable income
- Income guaranteed for life
- Preferential tax treatment on the annuity income
- Capital replaced at death and paid directly to your heirs
- Beneficiaries can be changed at any time
- No probate fees on the life insurance death benefit
Example:
- Male 65 non-smoker regular health
- Non-Registered Funds
- GIC rate= 4.0%
- Marginal Tax rate= 40%
An increase of 31% or $1,882/year
Example:
- Male 70 non-smoker regular health
- Non-Registered Funds
- GIC rate= 4.0%
- Marginal Tax rate= 40%
An Increase of 34% or $2,046/year
Rates are from July 2023 and are subject to change.
If you are interested in discussing this strategy and to see if it works for you, please let me know.