Peter Boys, Boys Financial Services

Retirement Strategies for Seniors

retirement strategies

As we approach the end of 2017 it seems timely to review some insurance, investment and income options for seniors, their children and their grandchildren.  There are a number of different retirement strategies to implement depending on your individual needs.

For people approaching or in retirement and concerned about income, an often overlooked asset is their home which may represent 50% or more of their total net worth. Let’s look at an example of how to use your home equity to end up with $5,000 of income a month.

You might be able to mix $1,500 from a pension, $2,000 from a RRIF, $500 from a TFSA and $1,000 using leverage from your home. This is done by leveraging 50% of your home’s equity value to provide a monthly income stream. A home worth $300,000 would allow you access of up to $150,000 for additional income.

Many seniors already have an account such as this in place but are using it for a different purpose. Unlike most chequing accounts, they are earning some decent interest when there’s a positive balance, they have easy access to their cash, plus have access to 50% of their home’s equity for emergencies. An additional bonus is, it can also provide an affordable level of mortgage fraud protection. This leverage program is not to be confused with reverse mortgages you see advertised on TV.

For those of you with significant funds sitting in fixed income options or equities, why not consider an annuity for your fixed income portion. For couples, a joint with a survivor option, reducing 25% on the first death with a 10 year guarantee can be a good fit. Consider that at current rates, a mid 70s couple investing $300,000 could receive payments of $1,850 a month and only $253 of that is taxable.

For those of you who have grandchildren, there are innovative life insurance strategies that can transfer your wealth to your children and grandchildren. This involves taking out an insurance policy on children who themselves have children. You as grandparents own the policy until you pass on. Your child is set up as the successor owner and your grandchildren are the beneficiaries. Using a type of policy that builds cash value, the successor owner can access the cash if needed, with the grandchildren eventually receiving the policy’s face value tax-free. These types of policies need careful set up and implementation, but can be an effective way to pass on wealth tax-free to the next generations.

For those of you looking to transfer unregistered funds to your children, you can name them as successor annuitants using investment contracts called segregated funds. These are pools of financial assets managed by investment professionals the same as mutual funds but are only available from life insurance companies. But segregated funds contracts can be transferred to your children tax-free on your death. They can then choose to keep the contract or cash it in and pay any tax owing on the embedded gain.

To learn more about these and other strategies, seek out a trusted professional to review your options, especially in light of all the proposed tax changes.

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