How the Insured Retirement Program Works

Your situation

Even though you have maximized contributions to your RRSP and pension plan, you are concerned that they will not
provide you with the retirement income you need. In addition, you need permanent life insurance protection. You are
looking for a financial planning strategy that will address your dual need for insurance and a retirement income
supplement.

An option to consider – the Insured Retirement Program

With this financial planning strategy you deposit funds into a permanent life insurance policy in excess of what is required to cover the insurance and other
policy costs. In the future, you assign the policy to Manulife Bank as collateral for a loan, which is structured as a line of credit. By using your life insurance policy in this manner, you satisfy your need for both permanent life insurance protection and a retirement income supplement.

How does the Insured Retirement Program work?

You purchase a life insurance policy on your own life. You deposit amounts into the policy, creating significant cash values. At a point in the future, you assign the policy to Manulife Bank as collateral for a loan. You receive the borrowed funds tax-free and use them to supplement your income during
retirement. If you use the borrowed funds for investment purposes, the interest may be deductible against your taxable income.

When you die, the insurance proceeds are used to pay off the outstanding loan balance and the excess proceeds are paid to your beneficiary tax free.

Insured Retirement Program… A Client Profile

Who is it for?
• individual, Canadian-resident taxpayers
• ages 30 to 55 and in good health
• need permanent life insurance protection
• have funds available to invest
• want to supplement retirement income
• have maximized RRSP/pension plan contributions
• have minimized non-deductible debt
• receptive to long-term planning strategies
• not averse to debt

Why does it work?
• provides client with needed life insurance protection
• provides an opportunity to create cash value that
grows on a tax-deferred basis
• provides security for a loan
• borrowed funds are tax-free
• insurance proceeds provide a means of repaying
the loan at death

An example

Your client is a 40-year-old male non-smoker. He currently needs $1,000,000 of life insurance. He plans to deposit $25,000 into the life insurance policy for the next 15 years. He plans to retire at age 65 and estimates that during retirement, he needs an after-tax income from non-registered sources of approximately $40,000. With the Insured Retirement Program, he can receive tax free loans from age 65 to age 84 in the amount of $46,766 each year. Here’s a comparison…