PERSONAL INSURED ANNUITY
Second only to health concerns, the greatest fear among today’s retirees is outlasting their assets during retirement.
And with interest rates being at or near all time lows, a retiree can no longer rely on deriving an acceptable retirement cash flow from just the interest income on invested capital. It is inevitable that the classic Guaranteed Investment Certificate (GIC) strategy will at some point require a retiree to erode their capital in favour of supplementing their income. Actually, only using a GIC strategy may put the retiree at risk of outliving their capital or deteriorating the very estate they had hoped to leave to loved ones and/or charitable organizations.
This is the familiar process:
1) Use Cash to purchase GICs that provide a rate of
return for a set period of time.
2) Take monthly interest payments received from
GICs as income.
3) Pay tax on the total annual interest income derived
from the GIC investment.
The GIC Results (a cash flow example):
GIC Rate 4.00 % > Monthly Cash Flow $333
Tax Rate 53.53 % > Tax Payable $178
> Net Monthly Cash Flow $155
> Net After Tax Yield 1.86%
The Insured Annuity Strategy
The use of an Insured Annuity Strategy will provide a superior result to that of the GIC income strategy.
1) Use Cash to purchase a Prescribed Life
Annuity on the client's life.
2) Pay tax on the annual taxable amount
of annuity income.
3) Pay a monthly premium for a life insurance
policy using a portion of after tax annuity
4) At death, the clients beneficiary will receive
the life insurance face amount tax free.
Using the same $100,000 Principal, and GIC rate,
the insurance portion will be fulfilled using BMO's Permanent Life Dimension Universal Life coverage.
To further emphasize key benefits:
The Insured Annuity Strategy ...
- allows for guaranteed cash flow for life
- is very tax efficient monthly cash flow
- reduces the chance of reduction in
Government Programs (OAS, GIS)
- has creditor protection
- includes an efficient, predetermined transfer of assets to heirs
- and, the estate transfer is free of Probate Tax.
Detailed insurance illustrations, annuity projections, and policy contracts need to be confirmed on a case by case basis.
This is a conservative investment strategy requiring little to no management.
We look forward to discussing this stress free, yet highly efficient investment strategy with you.