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GIF Leverage Concepts

GIF Leverage Concepts. RRSP vs Leverage. RRSP vs Leverage. What would you say if I told you I can offer an investment with the advantages of an RRSP and then some?. RRSP. Contribution Deductible Tax Deferred Investment Income Rollover to Spouse at Death Income Splitting

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GIF Leverage Concepts

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  1. GIF LeverageConcepts RRSP vs Leverage

  2. RRSP vs Leverage What would you say if I told you I can offer an investment with the advantages of an RRSP and then some?

  3. RRSP • Contribution Deductible • Tax Deferred Investment Income • Rollover to Spouse at Death • Income Splitting • BUT, Retirement Income taxed at MTR Manulife Guaranteed Investment Funds Leverage Concept

  4. Contribution Deductible Tax Deferred Income Rollover to Spouse Income Splitting Retirement Income @ MTR Interest Deductible Inv. Income @ preferred rates Rollover to Spouse Less Income Reported Less Taxable Income and @ preferred rates RRSP vs Leverage Manulife Guaranteed Investment Funds Leverage Concept

  5. RRSP vs Leverage Compare $13,500 RRSP to $13,500 Interest Assumptions • Loan $192,857 (interest payment = $13,500) • Rate of return = 7.5% • Interest Rate = 7% • MTR = 45% • Tax on Earnings = 30% • Taxable portion of Fund Return = 25% Manulife Guaranteed Investment Funds Leverage Concept

  6. RRSP Contribution $205,310 Invest Tax Refund $ 83,688 Total $288,997 After tax $ 192,423 Leverage Non registered $204,627 Invest Tax Savings $ 63,372 Total $267,999 After tax $230,190 RRSP vs Leverage The Leverage Advantage after 10 years $37,767 Manulife Guaranteed Investment Funds Leverage Concept

  7. Retirement Income GENERAL STATEMENT ON RETIREMENT INCOME NEEDS: You need 60-70% of your pre-retirement income to live comfortably in retirement REALITY: You need flexibility so you have access to additional dollars for changing needs or emergency funds Manulife Guaranteed Investment Funds Leverage Concept

  8. Retirement Income AGE 55 - 64: Leave workforce during highest earning period, fewer years to save, in good health, pent up desire for leisure activities: will use more of personal savings AGE 65 - 79: OAS/CPP kicks in, more tax credits available - most likely to fit the general statement: will use less personal savings AGE 80 and beyond: Poor health, long term care expenses, inflation has taken its toll: high income need, many will consider annuity Manulife Guaranteed Investment Funds Leverage Concept

  9. RRIF Income $ 17,500 Taxable portion $ 17,500 After Tax Income $ 9,625 Non-Registered $ 17,500 $ 3,380 $ 15,980 RRSP vs Leverage AFTER TAX INCOME The Leverage Advantage $6,355 more income, 80.7% less tax, less impact on income tested tax credits and social benefits Manulife Guaranteed Investment Funds Leverage Concept

  10. RRSP vs Leverage Other non-registered advantages • No Foreign Content Limits • No requirement to take income • use as much or as little as you need • Remove less to receive same after tax income (keep more assets working for you) • example - need $20,000 emergency funds • withdrawal from RRIF @ 45% MTR = $36,360 • withdrawal from non-registered @ 38.6% gain = $21,900 • withdraw $14,460 less to get $20,000 in hand Manulife Guaranteed Investment Funds Leverage Concept

  11. RRSP vs Leverage Client Profile • High Income or professionals who normally maximize their RRSP • now do both, double your deduction, or • leverage now, accumulate $135,000 unused RRSP room to be paid in a lump sum with some of the leverage proceeds, then deduct $13,500 over 10 years to further reduce taxable retirement income Manulife Guaranteed Investment Funds Leverage Concept

  12. RRSP vs Leverage Client Profile (cont’d) • Executives or business owners in a pension plan, not able to make large RRSP contributions • many in this group will have an IPP • Needs equity of $64,000 (3:1 Loan) Manulife Guaranteed Investment Funds Leverage Concept

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