How Life Insurance Fits Into Your Retirement Plans

January 17th, 2011 | Author: Mitch Reynolds

How Life Insurance Fits Into Your Retirement Plan

A personal retirement plan can be enhanced with permanent life insurance

Life insurance and your retirement plan As people in Canada enter into the 2011 RRSP season, thoughts naturally turn to investing and saving for their retirement. If you are planning on putting some more money away into your Registered Retirement Savings Plan (RRSP) have you also considered taking a good hard look at your life insurance coverage?

Life Insurance is a corner stone of any good financial plan. It provides families and business owners with risk protection they very much need to protect the ones they love, their incomes and business interests. For many Canadian clients, life insurance is viewed as a necessary expense, and the lower they can get their premiums the better. This is sometimes a good strategy for the needs of pure risk protection but does not address the need for insurance long-term.

Why would I need life insurance when I am older and have all my debts paid off?

There are many reasons you would still need life insurance, and having a healthy retirement plan is one of them. Millions of Canadians own permanent life insurance to protect themselves from life risks today but also as a financial planning tool for the future. There is no better guaranteed investment product over the course of your life with a guaranteed rate of return built in. It is the most cost effective way of creating tax free wealth for your estate when you pass away.

What would a large amount of tax free cash be used for by your estate?

There are many options – paying off estate taxes created by unused RRSP or RRIF funds; capital gains taxes on investments like non-registered accounts and revenue properties; leaving a legacy to your children and grand-children; or supporting a charity through a final gift of insurance money.

Saving money and creating a stable retirement plan, either through your RRSPs, investments or business interests creates a long-term tax burden that will ultimately need to be dealt with. Many of these taxes are postponed until death of the owner (or last surviving spouse with regards to RRSPs and other assets that can roll over to the surviving spouse). Planning for the Canada Revenue Agency (CRA) to be a beneficiary of your estate is the LEAST efficient plan you can make. Although life insurance is not the only strategy to solving estate issues, it is usually a fundamental part of any good estate plan. Working with an accountant and estate lawyer to plan out your affairs would be a very good strategy if you have built up considerable wealth during your life.

So, in conclusion, when you make your retirement plan for adding to your RRSPs, you are planning out your wealth creation strategy. If you are good at saving and investing and have built up a large amount of assets/wealth, either personal or business investments, you have a growing estate problem, mainly in the form of taxation. If you are in good health and can purchase life insurance today, it might be the most cost effective way to create funding options for your estate or business when you pass away.

Life Guard Insurance can show you how life insurance fits into your retirement plan

At Life Guard Insurance we would be happy to help you look at your current situation and give you options to protect your estate and create excellent tax efficient strategies for your retirement plan through life insurance products. Please feel free to contact us at Life Guard Insurance for more information.

The article was written by Mitch Reynolds+. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about life insurance as part of your retirement plan would also be very much appreciated.