RRSP & Living Benefit Insurance Coverage
At first glance, you may not see a relationship between a RRSP and any living benefit product, but there is a very real connection.
RRSPs are one of the more important elements of retirement planning and in order for your retirement plan to work; you will need to make consistent ongoing deposits, have a positive return on your investment and then allow time to do the rest.
But what happens if you suffer a disability, now you can no longer work nor can you make those ongoing retirement savings’ contributions?
Consider this:
What does your retirement savings look like if you miss 2, 5, 10 or more years of contributions? Not a pretty picture.
How is your CPP calculated? It is a combination of your contributions from earned income combined with the total number of years you made contributions!
There is a way to protect your retirement savings’ contributions from being totally disabled. It is through RBC’s Retirement Protector! Surprisingly, this product has been around for a very long time. Retirement Protector is a stand-alone, non-cancelable disability product that provides a monthly benefit paid into a trust should you become totally disabled during your working career. Other suppliers have similar coverage, but many are only available as a rider added to a base income replacement plan. What if you don’t have a base plan for income protection?
When we speak with a prospect or client about disability, many of us quickly withdraw from the discussion once we hear the response: “Oh, I have LTD at work”.
Next time, try some further engagement:
- How long have you been with your current employer?
- Do you expect to work there forever?
- How many employers have you had so far in your working career?
- Did each one of your previous employers offer exactly the same benefits plan?
- Do you think that someday you might – work for yourself?
- What happens to your retirement savings’ contributions, when you become disabled?
This may open some doors and minds to a further discussion!
Meet Marko!
Marko is a self-employed certified electrician, making decent income, in his mid-30s and doing the middle class juggle. Paying down his modest mortgage, keeping his family in the style to which they have become accustomed, trying to save for the kids’ education and someday hoping to put some retirement savings together for himself and his lovely bride.
He already has some term life insurance, a modest paycheck protection plan, some health insurance, all of which protects his family and him today. This is very important.
But did you know – a $1,000 per month Retirement Protector – 90 day wait – benefit period to age 65 – would cost him $34.04, monthly. About the cost of a take-out pizza & some pop for the family.
If he became totally disabled today, the potential benefit from his Retirement Protector policy by age 65, – $630,000. (Assuming a 3.5% net return on investment)
Looking after tomorrow, today.