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Financial Planning
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Financial planning makes a meaningful difference: FPSC
The Personal Retirement Account
Building Wealth with Permanent Life Insurance
Insured Annuity Strategy
Individual Investment Shelter Strategy
Financial Planning Pyramid
Planned Giving Using Life Insurance
Integrating Retirement and Estate Planning

Jake Jun Qiao, Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), Member of Million Dollar Round Table (MDRT). Please contact me for any financial planning inquires.


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The Personal Retirement Account

A retirement savings strategy using tax-exempt life insurance

If you have a higher-than-average income, you’ve probably discovered that earning more before retirement doesn't guarantee you'll have the income you want during retirement. Taxes, whether earned on investments during your working years or incurred when funds are withdrawn during retirement, can reduce your after-tax income and deplete the amount available for your beneficiaries. 

Allan works in the oil and gas industry as a financial analyst and is in the top marginal tax bracket. His home is paid for, he faithfully maximizes his RRSP and TFSA contributions, and he has worked hard to build a tax-efficient investment portfolio. While Allan is on track to retire at age 65. he estimates that even with his RRSP, pension and non-registered savings, he'll need an additional $30,000 each year in after-tax income to achieve the lifestyle he desires during retirement.

The challenge

Allan will need an additional $30,000 per year in after-tax income during retirement. 

- Accessing $30,000 per year from his non-registered investment portfolio through withdrawals mean incurring significant capital gains tax, further eroding the value of his assets.

- Tax efficiency is important to Allan. He wants to minimize the taxes he p^s each year on his investment income. Managing an equity portfolio may involve rebalancing, forcing deferred capital gains to be realized and creating additional income.

- He realizes his estate will have considerable expenses, including income and capital gains tax and estate administration fees. Allan wants to ensure the value of his estate is protected for his beneficiaries. 

The solution 

Let participating whole life insurance help maximize retirement income and minimize estate tax.
The Personal Retirement Account (PRA) strategy provides Allan with the opportunity to maximize his retirement income, while protecting his estate in a tax-efficient manner. This strategy uses the tax-preferred environment of a participating whole life insurance policy.
Allan makes payments of S23.150 for 20 years to a $500,000 par policy with the 20-pay guaranteed premium payment option. He has chosen the paid-up additional insurance dividend option.
Funds, including dividends credited to the policy, accumulate on a tax-preferred basis.
When Allan retires, he can collaterally assign the policy to a lending institution for a series of annual loans. These loan advances are potentially tax free and can be used to supplement his retirement income.

The result

As collateral for a bank loan, the Personal Retirement Account can provide Allan with the additional $30,000 per year in after-tax retirement income he will need.
Allan is able to reduce his annual investment income and create a significantly larger estate than he would have by investing his premiums of $23,150 in a balanced investment portfolio earning 6 per cent. The net estate benefit represents the amount available for distribution to Allan's beneficiaries after outstanding bank loans and accumulated interest has been repaid.
Premium payments made to the par policy provide Allan with exposure to the Participating Account through the crediting of policyholder dividends. The Par Account is managed with a long-term perspective. The combination of the long-term investment strategy, a large well-established par account and careful management contribute to strong, stable returns for par policyholders.
Simply dial 416-835-8805 for details.


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