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Question #4: Investment & Insurance Planning. You are 40 years old (very successful in your career), are in the highest (53.53%) tax bracket in Ontario Canada, have used up all of your RRSP and TFSA room, but would like to save (more) money in a tax-efficient manner. It seems you have an extra $50,000 to save every year for the next 20 years, which in theory you could invest in an exchange traded fund (ETF) that charges 30 basis points and invests in a globally diversified portfolio of stocks from around the world. The (expected) pre-tax rate of return on this ETF is 6% per year, of which 2% is dividends and 4% is capital appreciation. However, because most of the stocks are invested outside of Canada, the 2% dividend yield will be taxed at your (highest) marginal tax rate and the capital gains (when you eventually sell the ETFs or the manager rebalances holdings) will be taxed as capital gains. a Now, an eager life insurance agent approaches you with the following proposition. You can spend $50,000 on something called a variable universal life (VUL) insurance policy which will be invested in an underlying portfolio of mutual funds, but will generate absolutely no tax liability for the next 20 years because all the inside growth and investment build-up is accumulated tax free. No annual tax liability. Then, if and when you (ever) need the money, you can borrow against the cash-value of the policy, which doesn't incur any tax liability either. Finally, if and when you happen to die, the entire account (plus a death benefit) will go to your beneficiaries - also tax free. Basically the insurance agent claims), it's a win-win-win situation, and the government will never get access to your money. Of course, nothing in life is free and there is a 3% annual fee on the value of the mutual funds inside the insurance policy in addition to any mortality risk charges. The insurance agent claims that 3% is much lower the 53.53% percent

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