Using life insurance can be a tax-effective way to save for retirement – and receive tax-free income in retirement. Here’s how it works:
- You make a series of deposits into a universal life insurance policy, allocating the minimum required amount of your deposit to the insurance premiums and the rest to your investments.
- Earnings from your investments grow tax free, just like they do in an RRSP.
- At retirement, you borrow against the policy’s cash value, receiving tax-free payments to supplement your retirement income.
- Upon your death, the life insurance proceeds are used to repay any outstanding loans. Any remaining value goes to your named beneficiaries.
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