Three Big Mistakes: #3 Insurance
Daren Givoque, CDFA, Financial Advisor
O’Farrell Wealth & Estate Planning | Assante Capital Management Ltd.
In the first two articles in this series I talked about the first two mistakes I see when planning for retirement. The first one talked about how delaying liquidating your RRSPs could cost you money in the long run. The second was about using your TFSA effectively to save for retirement.
So, what happens if you are doing everything right? You melt down your RRSPs, are using the TFSA effectively, own your home which is not taxable. Is there anywhere else to shelter money for retirement?
Many people don’t realize it, but certain types of insurance can act as an investment to save for the future. Whole Life insurance offered by companies like The Great-West Life Assurance Company, London Life and Canada Life have an investment portion that remains tax-free as it is sheltered in a life insurance policy. In simple terms you have the ability to overpay the premiums and have that money invested by the insurance company and allow it to grow in a tax-sheltered environment. Many of the large insurance company’s whole life dividend scales on their participating accounts have actually beat the stock market over the *past 20 years with next to no volatility.
You can also pass the policy on to future generations which makes it a great way to pass money on to your children or grandchildren. Unlike Term Life insurance, whole life insurance guarantees you a payout not matter when you die.
Whole life insurance is not for everyone as the premiums can be expensive depending on the size of the benefit. However, it is a great option for people who find they have maxed out all other tax-free savings options. People who really understand insurance know how effective it can be as an avenue for savings.
As I have mentioned before there is no cookie-cutter approach to saving for the future.
*Great West Life Financial Facts 2018
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