1. GIF Leverage Concepts
RRSP vs Leverage

2. 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

3. 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

4. Manulife Guaranteed Investment Funds Leverage Concept
RRSP vs Leverage
Contribution Deductible
Tax Deferred Income
Rollover to Spouse
Income Splitting
Retirement MTR
Interest Deductible
Inv. preferred rates
Rollover to Spouse
Less Income Reported
Less Taxable Income and
@ preferred rates
12/2/2018
Manulife Guaranteed Investment Funds Leverage Concept

5. 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

6. 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

7. 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

8. Manulife Guaranteed Investment Funds Leverage Concept
Retirement Income
AGE :
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 :
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

9. 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

10. 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 45% MTR = $36,360
withdrawal from 38.6% gain = $21,900
withdraw $14,460 less to get $20,000 in hand
12/2/2018
Manulife Guaranteed Investment Funds Leverage Concept

11. 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

12. 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