Chiropractic + Naturopathic Doctor

Financial Adjustments

By Paul Philip   

Features Business Finance

When it comes to retirement planning, one of the biggest questions most
of us face is, “Will I have enough money and will it last?”

When it comes to retirement planning, one of the biggest questions most of us face is, “Will I have enough money and will it last?” Traditional investment vehicles such as bonds, T-bills, and GICs are often popular choices to achieve the goals of income generation, safety and preservation of capital in retirement. However, the after-tax rate of return of these options may not provide enough income to meet your needs. Let us share a creative strategy that can result in more income for you in retirement, on a guaranteed basis.


The Insured Annuity strategy provides income that is guaranteed for life, and upon death pays a benefit to your loved ones directly. This strategy can preserve the value of your estate, minimize taxes, and most importantly, guarantee an income stream for the rest of your life, with equivalent returns often much higher than other fixed-income options.



The Insured Annuity strategy involves the purchase of two types of insurance contracts. With the first contract, you purchase a Life Annuity, investing your capital with the insurance company, and in exchange the insurance company pays you a series of regular, tax-efficient, guaranteed payments  for the rest of your life – if you are married, potentially, your spouse’s as well.

The second contract you purchase is a life insurance policy. A feature of this strategy is that the premiums for the life insurance are paid by a portion of the income generated for the annuity, with no additional costs to you. At death, the annuity income ceases and the life insurance death benefit is paid to your beneficiaries directly (replacing to the estate the value of the capital originally invested in the Life Annuity), without the usual estate-related hassle or costs.

The benefits of the Insured Annuity strategy are

  • It provides guaranteed income for you for the rest of your life (or for you and your spouse’s life) – no matter how long you live;
  • It significantly enhances the value of your estate and preserves your capital – your beneficiaries receive the insurance proceeds without going through probate;
  • It protects you against fluctuations in the market – you’ll always know what your income will be no matter how the markets perform;
  • It is tax efficient – it enhances both your base level of income during retirement (only a portion of each annuity payment is taxable, as the remainder is a return of your original investment) and the amount your beneficiaries ultimately receive;
  • For clients over 65, the interest portion of the annuity income will generally qualify for the Pension Income Amount Tax Credit;
  • It can help reduce clawbacks of Old Age Security benefits.


To illustrate how the Insured Annuity strategy works, let’s take a look at a 65-year-old couple, who are looking to maximize their income now that they are retired. They want higher returns but don’t want the market risk associated with those returns and are comfortable with bonds and GICs. By employing the Insured Annuity strategy they are able to increase their monthly cash flow and maximize the size of their estate.

As illustrated, the couple would apply for a $500,000 permanent life insurance policy and once the insurance is in place, they would buy a $500,000 Life Annuity to generate income. They would then receive the difference between the monthly
income from the annuity payment (composed of return of capital and interest earned) and the monthly premiums being withdrawn for the insurance, while still maintaining the full value of their estate. Upon the death of the last surviving spouse, the annuity income ceases and the life insurance proceeds are paid out to the couple’s beneficiaries without passing
through probate.



This strategy might be the ideal solution for you if you are between the ages of 60 and 85, risk-averse, dissatisfied with low interest rates on fixed-income investment alternatives and in good health (to qualify for life insurance). If you are younger than this and have parents with non-registered assets, consider passing this article on to them. It can significantly increase their retirement income and provide excellent estate benefits for their heirs (you and your family). A win-win proposition for all.

Once a life annuity is purchased you cannot cancel the contract – it is locked in for life. This may represent a significant commitment, depending on your age. To ensure your retirement portfolio is balanced and reflective of your risk tolerance, you should consider allocating only a portion of your assets that would normally be invested in traditional fixed-income vehicles. As well, annuity income is fixed, so although interest rate levels may go up, the annuity income remains the same. However, the accumulated cash flow over the lifetime of the annuity may be more than that of a GIC, even with increasing interest rates.


With the Insured Annuity strategy you can enjoy returns that are typically much higher than what you can achieve with other fixed-income vehicles. Plus, you’ll preserve your capital, payable directly upon death to your heirs, avoiding unnecessary estate costs and delays – all with favourable tax treatment.

In the context of a holistic financial plan, this strategy can be an excellent component. Speak with an experienced financial advisor for more information.

Paul Philip, CFP, CLU, and Nancy Philip, CFP, CLU,  are a dynamic sibling team who have been advising hundreds of chiropractors across Canada since 1992.  Their firm, Financial Wealth Builders, is located in Toronto, Ontario.  To learn more about building your wealth, visit their website at or contact Paul or Nancy at 416-497-0008.

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