GIF Leverage Concepts RRSP vs Leverage Manulife Guaranteed

GIF Leverage Concepts RRSP vs Leverage Manulife Guaranteed Investment

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? Manulife Guaranteed Investment

RRSP • • • Contribution Deductible Tax Deferred Investment Income Rollover to Spouse at Death Income Splitting BUT, Retirement Income taxed at MTR 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 3

RRSP vs Leverage Contribution Deductible Tax Deferred Income Rollover to Spouse Interest Deductible • Inv. Income @ preferred rates Rollover to Spouse • Income Splitting Less Income Reported • Retirement Income @ MTR Less Taxable Income and @ preferred rates 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 4

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% 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 5

RRSP vs Leverage RRSP Leverage Contribution $205, 310 Invest Tax Refund $ 83, 688 Total $288, 997 Non registered $204, 627 Invest Tax Savings $ 63, 372 Total $267, 999 After tax $ 192, 423 $230, 190 The Leverage Advantage after 10 years $37, 767 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 6

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 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 7

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 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 8

RRSP vs Leverage AFTER TAX INCOME Income Taxable portion After Tax Income RRIF Non-Registered $ 17, 500 $ 9, 625 $ 17, 500 $ 3, 380 $ 15, 980 The Leverage Advantage $6, 355 more income, 80. 7% less tax, less impact on income tested tax credits and social benefits 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 9

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 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 10

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 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 11

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) 9/12/2021 Manulife Guaranteed Investment Funds Leverage Concept 12