Protect Your RRSP with Critical Illness Insurance

You’ve got a plan

You’re well on your way to meeting your retirement goals. You’ve taken the steps needed to build a retirement plan, including setting up a registered retirement savings plan (RRSP). By contributing on a regular basis, you’re helping to secure funds for your retirement. You may already have an idea of how you’ll use those funds and what you’d like life after work to look like.

Heart Attack, Stroke or Cancer

What if illness interrupts your plan?

Some people think of an RRSP as the key to retirement and a safety net for unexpected events. However, what would happen to your financial security if you became critically ill? A life-threatening illness can affect your family, your ability to work and your future, well beyond recovery.

A serious, life-altering illness strikes one in three Canadians in their lifetime.*

Cancer, heart attack and stroke account for 85 per cent of critical illness insurance claims paid up until 2013 in Canada.*

*Source: Munich Re, Individual Insurance Survey, 2013

Would you need to withdraw from your RRSP early?

If you had to withdraw funds unexpectedly, how much would the money from your RRSP be worth? It might be less than you expect after taxes and applicable fees if it’s withdrawn earlier than planned. You’d also miss out on accumulated long-term growth.

Could you get back on track?

If you’re unable to work because of a critical illness and have to withdraw money from your RRSP to cover expenses, what would you do once you recovered?

Ten years of retirement savings could quickly disappear in just one year. How would you get your retirement plan back on track? In this situation, you could:

  • Retire with less and change your retirement lifestyle,
  • Work longer and retire later

Help protect your retirement

By protecting your retirement now, you’re helping to ensure you have the retirement lifestyle you
want. Creating a safety net will help protect your retirement savings so your long-term financial plans aren’t interrupted by a serious illness.

With Great-West Life critical illness insurance, you’ll receive a one-time payment if you are diagnosed with a critical illness as defined in your policy and the survival period (usually 30 days) has been satisfied.* You can use these funds however you want—supplement lost income, pay for private nursing or cover mortgage payments.

great-west-life-insurance-critical-illness

The choice is yours.

How critical illness insurance can work for you

Let’s say you have invested $50,000 in an RRSP and contribute $500 a month. You expect to retire with $359,274.** However, your savings at retirement could be very different if you become critically ill. To understand how you can help protect your family, lifestyle and retirement savings, let’s look at how critical illness insurance could work for you.

Retire with$359,274

  • No critical illness insurance
  • No critical illness
  • Contribute to RRSP as planned

Retire with $333,847

  • Buy critical illness insurance with return-of-premium
  • Reduce monthly RRSP contribution
  • Never make a claim
  • RRSP grows to $286,067
  • At retirement premiums returned ($47,780)

Retire with $314,152

  • Buy critical illness insurance with return-of-premium
  • Reduce monthly RRSP contribution
  • Get $100,000 insurance benefit if sick
  • Return to work, continue RRSP contributions

Retire with $105,825

  • No critical illness insurance
  • Critical illness (cancer or heart attack)
  • Withdraw $166,667 from RRSP
  • Taxes are $66,667
  • Return to work, continue RRSP contributions
The above example is for illustrative purposes only. Situations may vary according to specific circumstances. Based on the example above, if you suffer a critical illness, aren’t protected and dip into your RRSP to cover expenses and replace income, when you recover, you’ll retire with only $105,825. But if you become ill* and are protected by critical illness insurance, you could still retire with $314,152.
  These scenarios do not take into account the tax savings at time of RRSP contribution.

**Case assumptions: Male, 38, non-smoker, standard risk earning $120,000 per year with $50,000 invested in an RRSP, making RRSP contributions of $500 per month, plans on retiring at age 65; marginal tax rate of 40 per cent, and interest rate of three per cent. Where critical illness options are indicated, premiums are $147 per month for 27 years, based on a policy that includes a return-of-premium rider (age 60+). Critical illness insurance policy is Oasis level benefit lifetime, paid-up at age 100, with $100,000 benefit.

Source: Great-West Life’s living benefits illustration (version 5.4).

Plan for a safety net

By taking part of your regular RRSP contributions and purchasing critical illness insurance, you’re creating a backup plan that could help protect your retirement but doesn’t restrict your lifestyle. Your retirement is worth protecting. Isn’t having a safety net worth it?

Protect your retirement with critical illness insurance

Help cover unexpected financial expenses that can arise due to a critical illness with Great-West Life critical illness insurance.

What if you never make a claim?

Enjoy the added benefit of setting up your policy so that if you never make a claim, you can get back up to 100 per cent of the money spent on premium. Either way, protecting your retirement pays off.

Talk to me to understand how critical illness insurance fits with your retirement plan.

Support retirement planning with RRSP options and Oasis critical illness insurance from Great-West Life.

At Great-West Life, we take pride in our history of serving the financial security needs of Canadians. For more than a century, we have helped clients develop their financial security plans.

Founded in Winnipeg in 1891, Great-West Life is a leading Canadian insurer. We offer a wide range of investment, retirement savings and income plans, as well as life, disability, critical illness and health insurance for individuals and families.

At Great-West Life, personal service is the key to helping clients find the right solution to their financial security planning needs. We are committed to providing the highest quality service, backed by our history of strength and stability. Great-West Life is a member of the Power Financial Corporation group of companies.

The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. The information provided is general in nature and is not intended to be legal or tax advice. You are encouraged to consult with your professional tax and/or legal advisor about your particular circumstances.

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