Corporate Insured Retirement Program
There are a number of 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 plan) or TFSAs (tax free savings account).
For business owners, retirement benefits can be tied into their business. The corporate insured retirement program can be an effective strategy for business owners/shareholders to receive retirement benefits through their corporately owned permanent life insurance policy.
Who is the Corporate Insured Retirement Program Best Suited To?
- Shareholders that have corporate funds to invest
- Shareholders at least fifteen years away from retirement. This can allow enough funds to accumulate inside their life insurance policy for collateralization
- Shareholders with a need for permanent life insurance protection
- Shareholders who want to supplement retirement income
- Shareholders that are comfortable with the concept of borrowing
How Does the Corporate Insured Retirement Program Work?
- The corporation 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 shareholder, the funds within the policy may be used as collateral in order to take out a loan
- This loan can provide valuable cash for the shareholder. It can be used to purchase an annuity or it can be used as income, via a series of short loans
- When the shareholder dies, the insurance proceeds generate a credit to the corporation’s Capital Dividend Account, the loan is repaid, and the remaining balance can be distributed among their beneficiaries
Are There Any Pitfalls Associated With the Program?
As with all investment strategies, there are some risks. Namely, the program involves leverage. Investors must be comfortable with the amount of debt that they may incur. Interest rate changes, investment performance and changes in tax rules may also negatively impact the investor.
The corporate insured retirement program is a smart way for business owners to maximize their retirement income in a tax effective manner.
Contact us today to learn more about this opportunity and allow us to work in partnership with you to understand your unique needs and requirements. We will create a retirement strategy that works for you.
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Our team in Nanaimo has acquired decades of experience specializing in providing quality financial advice in areas of financial planning, investments and insurance. Book a meeting with us to learn how we can help you with your finances.