Leveraged Deferred Compensation Program

• You accumulate funds on a tax deferred basis

• What you don’t spend goes to your family tax-free

• What you do spend goes to you tax-free

- Saving for retirement
- The Great Retirement Myth!
- A best case scenario
- Tax deferral is the key
- How do you keep Revenue Canada out of your assets?
- What you don't spend goes to your family tax free!
- A comparison

In saving for retirement, most of us use RRSPs and/or a Pension Plan to build our retirement nest egg.

Well over $10 billion dollars was contributed to RRSPs in 1997 by over 5 million Canadians.

This is not surprising since virtually all accounting firms and financial planners recommend placing as much money as possible into these plans.

The financial objective in doing so is to be able to retire on about 70% of your final year’s income.

For example, if you are planning on retiring at age 65 and you are earning $100,000 in your final year, you will want to have an annual income at age 65 of $70,000.

The current registered retirement system is designed to provide up to $60,000 of income at retirement.

Therefore, if you are earning more than $86,000 at retirement, it will be virtually impossible for you to attain the 70% goal using these vehicles. (i.e. $60,000 is 70% of $86,000).

Therefore, if you are earning more than $86,000 at retirement, it will be virtually impossible for you to attain the 70% goal using these vehicles. (i.e. $60,000 is 70% of $86,000).

• Your Income keeps pace with inflation.
  
• RRSP limits are not reduced further.
  
• You work at least 35 years.
  
• Max RRSP for 35 years.
  
• CPP & OAS still available.
  

Since Registered Plans will not be enough to reach your retirement goal, where do you turn?

The key is to find a vehicle that offers both a tax deduction and a tax deferral; then, find one that offers just tax deferral.

The tax deferral helps build significant cash values using the magic of compound interest.

For instance, if you, at age 24 put $35,000 for 10 years into a vehicle that earns 7.5% and is taxed at 50%, you will accumulate $899,891 by age 49.

If you can find a vehicle that offers tax deferral with tax payable at the end of the growth phase you will have $1,305,531.

Finally, if you could find a vehicle that pays no tax you will accumulate $2,261,063.

Very few individuals want to split their assets between their family and the government. The problem is that the interest on a traditional investment vehicle, like a GIC, is taxed every year in the form of interest taxation.

And with registered vehicles, like RRSPs, any balance that is left unspent at your death will be taxed.

So it’s all a matter of time as to when the government gets THEIR piece of YOUR pie - unless we can come up with a method of passing as much as possible to your family at death AND eliminating the tax paid along the way.

1. An exempt Universal Life Insurance policy

2. A loan from a financial institution.

Universal Life insurance is purchased and deposits are made into the plan to take advantage of Section 12.2 of the Income Tax Act which provides for significant tax sheltering of funds.

At age 66 , when you are to receive an income from the LDCP, the policy is assigned to the bank and is used as collateral for a line of credit.

In fact, at this point the plan has a Cash Surrender Value of $3,613,09 which will allow you to generate a tax free income stream of $514,949 from age 66 to 75 (based on an interest rate of 10.00 and a loan rate of 9.00).

When you die, the death benefit of the plan pays off the loan including all the interest. For example, if you were to die at age 76 , the projected death benefit would be $10,953,690 of which $9,532,016 would be used to pay off the loan, and the remaining $1,421,678 would end up in your family’s hands tax-free!

What would the numbers look like if the deposits were placed into a traditional taxable investment such as GIC?

	# Years $514,949 is Provided Tax-Free	Net Estate At age 76
LDCP Strategy	10	$1,421,678
GIC Strategy	2	$0