Income Generation

• Disability Income
• Insured Annuity
• Insured Retirement
• Long Term Care

Estate & Insurance Services

Insured Retirement
The Insured Retirement Strategy may be an ideal solution for people who have maximized their RRSP and/or RPP contributions, and are looking for other tax-efficient strategies to save for retirement. This strategy is commonly called Leveraging.

Leveraging is a financial strategy which uses a life insurance policy to provide for:

• tax-deferred accumulation of funds today;
• possible tax-free access to those funds in the future (at retirement), and
• tax-free proceeds for your estate at death.

How does Leveraging Work?
Leveraging involves borrowing (from a lending institution) by using the accumulated value of a life insurance policy as collateral for a loan. The accumulation period must be at least 15 years (of premium payments.

At retirement, when an income stream from the life insurance policy is required, you could arrange to take a loan from a lending institution. Interest on the loan may be capitalized or paid at your discretion. If it is capitalized, the accumulated loan balance will not be allowed to exceed the loan-to-cash value threshold of the policy that has been assigned as collateral.

Upon the death of the life insured, part of the insurance death benefit is used to repay the loan and any remainder is paid tax-free to the beneficiary or estate.

Issues to Consider
Leveraging isn't for everyone. It's important to have a long enough time horizon to accumulate enough cash surrender value in the life insurance policy in order to generate the income you require. Also, loan rates, cash surrender values, future changes to the income tax act are just a few of the items which could impact the suitability of the insured retirement strategy for you.

For more information, contact an Investment Advisor at a BMO Nesbitt Burns branch near you who will be pleased to introduce you to an Estate and Insurance Advisor.

If you would like a BMO Nesbitt Burns Investment Advisor to contact you, simply complete this brief contact form.

Note: All insurance products are offered through BMO Nesbitt Burns Financial Services Inc. by licensed life insurance agents, and, in Quebec, by financial security advisors.

Using borrowed money to finance the purchase of a life insurance product involves greater risk than a purchase using cash resources only. If you borrow money to purchase a life insurance product, your responsibility to repay the loan and pay interest as required by the terms of the loan remains the same even if the value of the life insurance policy purchased declines.