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Insured Retirement Plan (IRP)

Insured Retirement Plan (IRP)

Old Jun 11th 2020, 12:24 am
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Question Insured Retirement Plan (IRP)

Hi folks

I have been looking to buy life insurance for a while and the above type of scheme caught my eye as not only it provides life insurance but the premiums are invested in the stock market and grow tax free. I haven't settled on any particular provider yet as that's still work in progress but I would like to seek some advice from the financial savvy members of this forum and see how popular this product is amongst people who are retired or close to retirement, as aside from the life insurance part the income benefits from investment do not start until the old age.

I am a long way away from retirement but the aside from UK Class 2 NI (which I hope will continue) I do not have much in the way of retirement income that I can expect to receive (my CPP contributions have not been so great since I have moved to Canada). I do have some trivial savings in TFSA and RRSP but I do not contribute into those pots on regular basis.

The internet is full of conflicting reviews on IRPs but if anyone could guide me in the right direction about their pros and cons that would be highly appreciated.

Thanks everyone for their time and advice!
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Old Jun 11th 2020, 12:19 pm
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Default Re: Insured Retirement Plan (IRP)

An IRP is a universal life type product. Not keen on these as a retirement vehicle - neithert 'fish nor fowl'. If you really need life insurance (ie you have dependants etc) suggest simple and cheap term insurance for the period until your dependants have flown the nest. For retirement funding, either max out your annual TFSA, and / or make regular monthly investments in a decent RRSP. Choose probably a stock market tracker fund if you have 10 years or more to retirement and in your last 5 years, progressively switch into safer and more stable funds.
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Old Jun 12th 2020, 5:21 pm
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Default Re: Insured Retirement Plan (IRP)

Originally Posted by Hurlabrick View Post
An IRP is a universal life type product. Not keen on these as a retirement vehicle - neithert 'fish nor fowl'. If you really need life insurance (ie you have dependants etc) suggest simple and cheap term insurance for the period until your dependants have flown the nest. For retirement funding, either max out your annual TFSA, and / or make regular monthly investments in a decent RRSP. Choose probably a stock market tracker fund if you have 10 years or more to retirement and in your last 5 years, progressively switch into safer and more stable funds.
Thanks for your reply Hurlabrick. Can I ask why you don't support IRP as a retirement funding vehicle. For comparison's sake would funds invested in TFSA bring different returns than IRP assuming both are made in similar stocks?

I do understand that the MERs tends to be higher on IRP but on the up side the funds could be withdrawn tax free at retirement (as well as passed on tax free to dependents after death).

Secondly, with respect to RRSP I follow some money savvy retirees on social media who's RRSPs performed really well over the years but now when they withdraw funds they are subject to much higher taxes than what they paid in their working lives. Some of them advise younger folks to stay away from RRSPs which I know is a personal opinion but do you have any thoughts on this?
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Old Jun 12th 2020, 5:42 pm
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Default Re: Insured Retirement Plan (IRP)

Originally Posted by Edo View Post
Thanks for your reply Hurlabrick. Can I ask why you don't support IRP as a retirement funding vehicle. For comparison's sake would funds invested in TFSA bring different returns than IRP assuming both are made in similar stocks?

I do understand that the MERs tends to be higher on IRP but on the up side the funds could be withdrawn tax free at retirement (as well as passed on tax free to dependents after death).

Secondly, with respect to RRSP I follow some money savvy retirees on social media who's RRSPs performed really well over the years but now when they withdraw funds they are subject to much higher taxes than what they paid in their working lives. Some of them advise younger folks to stay away from RRSPs which I know is a personal opinion but do you have any thoughts on this?
You CAN use any form of savings in retirement of course, I would personally always go for products specifically designed for retirement income and not 'bit of both' type products as this seems to me.

I am not a financial adviser (I used to work in UK Life and Pensions back offices in a variety of roles, including product specification).

I would suggest speaking to a proper Canadian financial adviser on this.
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Old Jun 14th 2020, 11:24 pm
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Default Re: Insured Retirement Plan (IRP)

Originally Posted by Hurlabrick View Post
You CAN use any form of savings in retirement of course, I would personally always go for products specifically designed for retirement income and not 'bit of both' type products as this seems to me.

I am not a financial adviser (I used to work in UK Life and Pensions back offices in a variety of roles, including product specification).

I would suggest speaking to a proper Canadian financial adviser on this.
Thank you for your time and advice
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Old Jun 15th 2020, 2:59 am
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Default Re: Insured Retirement Plan (IRP)

I hadn't heard of this product before but from some research, it is mentioned multiple times that an IRP shouldn't be used as your primary source for income retirement, that should always be your RRSP or TFSA.

In any case, important to note you don't withdraw the funds directly at retirement. You use the funds as collateral to take out a loan (with interest). Then at death the idea is that the policy will pay off the loan + interest and the excess is paid to the estate. There is a risk that there won't be an excess and your estate will have to make up the difference or that the bank won't lend more than 50% of the value or interest rates will be high or lots of other variables (moreso than RRSP/TFSA).

In any case, definitely get independent financial advice. (Though I wouldn't trust one who advises you to take this when you haven't maxed out RRSP/TFSA).
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Old Jun 18th 2020, 5:24 pm
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Default Re: Insured Retirement Plan (IRP)

Originally Posted by bc2015 View Post
I hadn't heard of this product before but from some research, it is mentioned multiple times that an IRP shouldn't be used as your primary source for income retirement, that should always be your RRSP or TFSA.

In any case, important to note you don't withdraw the funds directly at retirement. You use the funds as collateral to take out a loan (with interest). Then at death the idea is that the policy will pay off the loan + interest and the excess is paid to the estate. There is a risk that there won't be an excess and your estate will have to make up the difference or that the bank won't lend more than 50% of the value or interest rates will be high or lots of other variables (moreso than RRSP/TFSA).

In any case, definitely get independent financial advice. (Though I wouldn't trust one who advises you to take this when you haven't maxed out RRSP/TFSA).
Thanks for all the good points. What you said is completely in line with what I have been told or found through research.
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