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.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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