GIF Leverage Concepts RRSP vs Leverage

Manulife Guaranteed Investment Funds Leverage Concept 12/2/2018 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 Financial & Manulife Bank of Canada

Manulife Guaranteed Investment Funds Leverage Concept RRSP Contribution Deductible Tax Deferred Investment Income Rollover to Spouse at Death Income Splitting BUT, Retirement Income taxed at MTR 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept RRSP vs Leverage 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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% 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept RRSP vs Leverage 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 The Leverage Advantage after 10 years $37,767 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept RRSP vs Leverage AFTER TAX INCOME RRIF Income $ 17,500 Taxable portion $ 17,500 After Tax Income $ 9,625 Non-Registered $ 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept

Manulife Guaranteed Investment Funds Leverage Concept 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) 12/2/2018 Manulife Guaranteed Investment Funds Leverage Concept