IRP the fastest growing alternative to the RRSP

BY: ANDREW STEWART 

You may have just started saving for your retirement or maybe you’re close to approaching retirement. We all need to develop an income strategy that provides us with a dependable income, for those years that we envision taking a step back from the daily grind and to do the things we enjoy the most. Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) are arguably the most popular way to save for retirement. But they are not the only way. To enhance your retirement strategy, consider the Insured Retirement Plan (IRP) or Corporate IRP.

The IRP is a financial planning strategy that uses a Participating Whole Life Insurance Plan to build your wealth and provide the following:

• A solution to current and future insurance needs
• An opportunity to take advantage of tax-deferred growth
• An innovative way to supplement your financial needs in retirement

A Corporate IRP is a “Participating” Whole Life insurance plan and the only plan business owners and professionals can fund with capital from their holdings, professional or operating company completely tax-free. This will provide them:

• A tax-free annual dividend for life
• The cash value will grow tax-free throughout your life
• Includes permanent whole life insurance growing tax-free for life
• You can transfer funds from your holding, professional or operating company tax-free to your plan
• You can access the cash value tax-free as a retirement income source

The IRP has three primary components; Life Insurance, Accumulation, Income. Life insurance offers you the protection you need and the peace of mind that comes with knowing loved ones or business interests will be looked after once you pass on. The accumulated value in your participating whole life insurance policy grows on a tax-deferred basis. Combined with the insurance benefit, the overall value of the policy can surpass what would otherwise be earned in taxable investments. Income; once the policy has accumulated a considerable cash value, you or your company can use those assets to obtain a loan from a financial institution. 

The cash value can be accessed at any time in five different ways:

• You can withdraw an amount annually or a lump sum
• You can request the annual dividend be paid in cash
• You can borrow from your cash value account
• Using the cash value as collateral up to 90% of the total cash value in your plan, without personal security or income requirements
• You can cancel the plan and withdraw the entire cash value

Let’s quickly review if you have retirement savings within an RRSP, or locked-in money that came from a workplace savings plan, you would have to consider these possible retirement income solutions.

Option #1 transferring your RRSP to an RRIF/LIF, this option provides you with a certain level of flexibility. You can decide the amount you want to withdraw each year based on your income needs which will be subject to the minimum and maximum payment amounts.

Option #2 transferring your RRSP to Payout Annuity, this option provides you with a guaranteed lifetime income. You receive guaranteed lifetime income and will never need to worry about outliving your savings. You can protect a portion of your principal investment by choosing a guarantee period between 5–30 years. If you die before the end of the guarantee period, your income payments will continue to your beneficiary if it’s your spouse all other beneficiaries would receive a lump sum payment for the remainder of the guarantee period.

Option #3 a combination of both, this provides the best of both worlds…flexibility and guaranteed lifetime income.

Once you have mapped out your needs and confirmed that an IRP will enhance your financial strategy, remember that you are applying for an insurance policy, so you must be insurable in order to take advantage of this strategy. With guidance, you can select the plan that best meets your needs and the payment schedule that reflects your personal circumstances and preferences.