The two biggest areas that concern us are the taxes we pay and our mortgage payments each month.

Over the past 30 years, I have researched ways to reduce or eliminate both so you can free up money to invest and save for retirement.

Financial planners: incentives and experience

When you go to a Financial planner, 90% of them want to know how much money you have to invest and then tell you how badly you are doing and that they can help you do better.

Are they genuinely making a significant difference in your life, or are you thinking about how much commission they will make?

Most of the Financial planners today are under the age of 40 and have no experience in creating wealth, and financially are in the same situation as you.

So how can they tell you how to invest your money if they have not achieved success themselves, having lacked the time and experience to do so?

Even worse, the success rate of financial planners after three years of being licensed is only 11%, which means 89% do not succeed.

I suspect it is because of their lack of knowledge.

Do you want them to make mistakes while learning with your money?

The RRSP Trap

So, typically, the first thing they are going to show you is that they can help you save for retirement and get a tax refund now by buying an RRSP.

So most Canadians fall into this trap, which is the worst investment you can make if you do what most Canadians do: hold on to them.

I have many investors come to me for the first time with huge amounts of money in their RRSPs.

Here is the example of a person aged 45 who has $200,000 in RRSPs, looking for investment and retirement advice.

I pointed out that using a 10% rate of return and the rule of 72.

I can project that the $200,000 will double to $400,000 in 7.2 years at age 52.2.

A further 7.2 years will double their money to $800,000 by age 59.

At age 67, their money doubles one more time to $1,600,000.

The good news is you have $1,600,000; the bad news is it’s an RRSP.

So let’s assume you take out 10% a year as income, leaving the principal alone to keep producing this income every year.

That’s $160,000 a year that is 100% taxable.

At a 40% tax bracket, you will pay

CRA $64,000 every year for the rest of your life until you die.

Is that what you wanted?

BUT THAT IS NOT THE WORST PART OF OWNING AN RRSP!

When you die, the money does not go to your kids or your estate until the 100% tax on the remaining $1,600,000 is paid.

And anything over $225,000 is taxed at the highest rate of 53.55%. That’s over $900,000 to the CRA, leaving less than half to your beneficiaries.

Did your Financial planner tell you about this?

They did not in most cases or you wouldn’t have purchased a RRSP, and they would have lost a sale.

All the big Financial Institutions never show their advisers this because they are in the business to get your money.

RRSP Meltdown Strategy

So now what do you do if you have RRSPs? Is it too late to do anything? hell no. We convert them.

I studied for years to prevent this from happening and to think outside the box.

We have developed an RRSP meltdown strategy to convert your 100% taxable investments to 100% TAX-FREE investments by taking two steps.

We have done this for 20 years and helped clients save thousands in taxes.

Your average Financial planner, especially if they work at a bank, has no clue; they still believe that the RRSP is the best investment you can buy.

Another part of this strategy is asking the investor whether I can guarantee 40% on their investments.

Many want to say yes when they find out that for the last 10 years, by investing in the Nasdaq, our average rate of return per year is 35.34%.

I then point out that I can not guarantee that rate of return; I may do it by using my “Connecting the dots strategy,” but I can not guarantee it.

But I can guarantee them a 40% return if they are in the 40% tax bracket and I save them tax.

We use RRSPs to achieve a 40% rate of return on the money when we contribute to them.
We then invest that money using the “Connecting the dots” strategy to get that Nasdaq 10-year average return of 35.34%.

The total return on their initial RRSP purchase is a whopping 75.34%, and can be duplicated every year you buy a new RRSP, combined with using my ” Connecting the dots strategy to get the same results on all new RRSP purchases in the future.

I just showed you two ways to use RRSPs to build wealth.
First is to reduce your taxes by purchasing RRSP’S and earning a total return of 74.03% on your money every year.

If you can double your money using 10% in 7.2 years, what can 75.34% do?

The second portion of using RRSP’s is to not hold on to them but to convert them using an RRSP meltdown strategy.

THAT WAS PHASE ONE

How Do We Convert RRSP’s Without Paying Tax?

Let’s first understand you do not have to convert your RRSP to an RRIF to take money out of an RRSP.

RRSPs are liquid, but you will have taxes deducted on each withdrawal.

So to offset this tax, you need to purchase an investment that has a tax deduction that offsets any tax you would pay on RRSP withdrawals.

It is called a loan

Any time you borrow money to invest, any carrying costs such as interest on a loan become tax-deductible.

So the strategy is: by withdrawing money from the RRSP to pay the loan interest, you offset the tax on the RRSP withdrawals with the loan interest, which is tax-deductible.

You are moving money out of RRSPs into a non-registered investment that can grow 100% tax-free when you add the last strategy.
Which is the Cadillac of all investments.

We have three options for creating a loan program.

Two use the equity from your home, and the other is when you do not have equity in your home but can still qualify for a loan funded by your RRSP withdrawals.

So we will address this one first.

B2B Bank offers investment loans and uses the money you borrow to buy segregated funds with an insurance company and then assigns the contract back to them as the collateral for the loan.

• You invest that money into the Nasdaq and S&P 500.
• The ten-year average returns are 35.34% and 22.29%, respectively.

Many of my clients have used this strategy with great success by using the ” connecting the dots strategy” with the borrowed money.

The only holdback is the money you borrowed. You can only use the profits that are available to you, not the original loan that serves as collateral for the loan.

Over the last three years, we’ve increased your investment by 100%, doubled it, and converted a portion of your RRSP at the same time.

So let’s talk about the next two options that use your home’s equity.

The Smith Manoeuvre and Mortgage Costs

First, you need to understand how much a mortgage really costs you.

According to Robertson Smith, whose father created the Smith Manoeuvre in the 1980’s.

If you have a $300,000 mortgage balance over 25 years, besides paying back the $300,000, you also will pay approximately another $200,000 in interest payments to the Bank.

We all know this part.

But what you fail to realize is that you’re using pretax dollars to pay this $300,000 mortgage off.

If you are in the 40% tax bracket, you have to earn $829,000 to pay off this mortgage within the 25 years.

As I mentioned, paying your mortgage and overpaying taxes are keeping you from creating wealth.

We have addressed how you can use RRSPs to reduce your taxes and then convert them to a non-registered investment.

Using the Smith Manoeuvre will reduce your mortgage to nine years from 25 years, saving the average Canadian $400,000 in interest payments and taxes.
You can use this to build a million-dollar retirement portfolio, and even higher with my “Connecting the dots strategy.”

Here is the best part: there is zero increase in your monthly payments; all you need to do is change the type of mortgage you have to a re-advanceable mortgage.

Now, along with that RRSP deduction, you can write off a portion of your mortgage, giving you an ever-increasing tax refund each year.

If you use non-registered funds instead of using your RRSPs, you can use the interest tax deduction against your income and get a tax refund that you can use to reduce your mortgage further.

Chip Reverse Mortgage Strategy for Seniors

The second way I use for seniors is a Chip Reverse Mortgage. The results are the same, but because a Chip Reverse Mortgage has no monthly mortgage payments.

I decrease a senior’s mortgage payment to zero and can set up a monthly withdrawal plan from the investment to increase the family income by about 50%. This eliminates the fixed income issues seniors face in retirement.

So now you have reduced your taxes and mortgage.

Recycling RRSP Profits

So right now we know the housing market values peaked in 2021, and we saw a 20% drop in value.

All our clients that used the Smith Manoeuvre may have lost money on the value of the home, but did not lose the value of the equity that was there because we moved it to a separate account.

That earned a return of 45% in 2023, 35% in 2024 and 20% last year using the Nasdaq borrowed funds.
Instead of losing money in a downward-spiralling real estate market that continues to bleed money.

As Douglas Andrew stated, home equity has no rate of return when it is trapped in the home.

The most important elements of home equity management are maintaining liquidity and safety of principal and creating an opportunity for home equity to grow in a separate side fund, where it is accessible in the event of an emergency.

This strategy can increase your net spendable retirement income by as much as 50 percent.

So far, we have shown you how to reduce your taxes using the Smith manoeuvre and RRSP’s.

We have also shown you why you should convert those RRSPs so they do not become a tax time bomb when you start withdrawing money from them.

We have also addressed paying down your mortgage at a much faster rate without any additional costs out of your pocket.

So, on to the last phase: how to create wealth with the money you have saved in taxes and the money you make from your borrowed funds.

• Given the rise of AI and robotics, we should be able to continue making 30% as we have on the Nasdaq for the last 10 years.
• Here is a tip for creating an RRSP deduction every year, just by recycling your existing RRSPs and no cash out of your pocket.
• So let’s say your $100,000 borrowed money made the 30% last year, and now you have a Capital gain of $30,000.
• If you have unused RRSP contribution room or if you have taxable income that qualifies you to buy a new $30,000 RRSP for this year.
• Use the $30,000 to purchase an additional $30,000 in RRSP contributions.
• You just decreased your taxes and eliminated the capital gains tax by recycling your profits into more RRSPs.

Which you can do every year you have profits.

So it goes like this: you have an existing RRSP.

You withdraw enough money from your RRSP to fund borrowed money.

That money makes a profit and is used to buy all future RRSPs, getting you a large tax-free refund every year.

At the same time, your portfolio grows at a faster rate because you have more money with the borrowed money.

When I put this on LinkedIn years ago, it went viral; someone even said, “I found the goose that lays the golden egg.”

Just think, every future RRSP you need is now purchased from your original RRSP and it is the CRA who is paying for it.

So now comes the fun part: you are about to see how I turned an RRSP tax time bomb into tax-free income for the rest of your life.

Life Insurance: Canada’s Ultimate Tax Haven Strategy.

Life insurance is a powerful tax haven backed by special laws you can leverage for your advantage rather than questioning why it exists.

The life insurance industry is a tax haven, and will likely always enjoy that status, because of all the special laws created just for it.

You can spend time wondering why, or you can use their heavily favoured status to your advantage!

One popular strategy is the Life Insurance Tax Shelter.

Over the last 15 years, Canadians have stuffed millions and millions of dollars into these programs.

The reason is that they allow either tax-deferred or TAX-FREE treatment of your investment dollars, with no risk.

It’s the best onshore tax avoidance investment strategy available!

What Is An Insurance Tax Shelter?

An Insurance Tax Shelter is a plan issued by a life insurance company that allows you to deposit any amount of money and shelter all of the growth of the investment from income tax.

How Does It Work?

Revenue Canada allows insurance companies to issue these plans and maintain their tax-sheltered status as long as they satisfy certain conditions.

These plans are considered “exempt” by Revenue Canada under sections 12.2 and 148 of the Income Tax Act.

The insurance company must maintain a minimum amount of life insurance on each plan to keep it tax-exempt.

The amount of life insurance necessary is based on a Revenue Canada formula, and each plan must meet an annual test to keep the policy exempt.

What Makes The Strategy Work?

Why do these plans outperform other non-sheltered investments?

First, your earnings build up TAX-FREE within the plan
Second, the annual expense charges of the plan cost less than the tax, which would have to be paid on the annual investment earnings of a similar non-sheltered investment.

EXAMPLE: Assuming a 10% annual rate of return.
A couple, both age 45, in a 50% tax bracket would have to pay a total of $43,244 of income tax on the earnings of an investment of $10,000 per year over 10 years.

By contrast, if they invested $10,000 per year for 10 years into a tax-sheltered insurance account, earning the same rate of return, they would pay only $10,701 in total expense charges to the insurance company over the 10 years.

These plans are flexible, allowing you to vary the amount of your deposits and choose the type of investments, from GICs to investment fund indexes, with no restriction on foreign content.

How Do You Get Your Money Out?

When it comes time to take income, you can generate income from your plan one of two ways:

You can make direct withdrawals, TAX-FREE from the tax-sheltered account, up to the adjusted cost base (ACB) of the plan without incurring any tax.

In other words, the ACB equals your deposits minus the cost of insurance.

Once you have withdrawn the TAX-FREE portion of the account, Revenue Canada will consider any further withdrawals to be taxable.

Your insurance company can tell you what the ACB is for your account so that you don’t withdraw more than you want to.

Under a special arrangement, you can leverage your account with a bank.

This is the real benefit of an Insurance Tax Shelter!

The leveraging of your account is what allows the plan to outperform other investment vehicles, because a loan is never taxable!

How Is It Structured? When it comes time to take income from your plan, the bank will accept your plan as security for a loan.

You can then make a single loan or a series of annual loans that you will use as income.

The bank will capitalize the loan payments, so that you never have to make payments on the loan.

Because the tax-sheltered growth within the plan continues to grow TAX-FREE, the bank has an ever-increasing asset with which to secure each year’s loan.

The loan is eventually repaid from the TAX-FREE insurance payout, when you die.

And then, the insurance payout in excess of the bank loan balance is paid out TAX-FREE to your beneficiaries.

Since a loan is not taxable, this plan allows you to EARN ALL OF YOUR INCOME TAX-FREE!

BONUS – If you die before you can spend or withdraw all of the money in your plan, the balance of the tax-sheltered account, plus the insurance amount, is paid TAX-FREE to your beneficiaries. And, insurance payouts avoid probate.

Retirement Income Strategy

The following is an example illustration supplied to me by a certified financial planner who represents one of the 35 insurance companies that offer Insurance Tax Shelters.

Don’t get hung up on the numbers, because every illustration is unique, relative to variables such as age, gender, smoking status, interest rates, etc.

The purpose of this example is to show the effect of the TAX-FREE income that can be generated from these plans.
Your financial planner can generate a personalized illustration for you:

EXAMPLE: This illustration assumes you deposit $13,500 annually into the plan for 18 years and then start to take a TAX-FREE bank loan starting in the 24th year.

The lending institution would extend to you annual TAX-FREE loans of $78,905, adjusted annually for a 2% cost-of-living adjustment, for the next 31 years.

By contrast, if you attempted the same thing with an RRSP, depositing $13,500 for 18 years and then took the same level of after-tax income starting in the 24th year, you would exhaust your RRSP in as little as 9 years.

That’s the impact of TAX-FREE income in retirement.

Plus, with the Insurance Tax Shelter, since you had no taxable income, you still qualify for the maximum Old Age Security payments.

Now, if we examine what would happen if we used a non-tax-sheltered investment, the effect is even more staggering.

Using the same assumptions of: Deposits, rate of return and income at retirement, a fully taxed investment would be exhausted in slightly less than 5 years.

That’s because it does not enjoy the tax-sheltered growth of either an Insurance Tax Shelter or an RRSP.

Another observation of the Insurance Tax Shelter reveals what happens if you don’t live until retirement.

Suppose you died after 10 years of making deposits.

The Insurance Tax Shelter would provide $1,000,000 TAX-FREE to your beneficiaries.

While the RRSP would only be worth approximately $200,000, Revenue Canada would grab half of it, leaving your family a TAX-FREE equivalent of only $100,000!

10 Times more For Your family!

Look at it this way- 20 years from now, you’re either dead or alive.
If you’re alive, no other plan will pay you more after-tax income.

And if you’re dead, no other plan will pay more money to your family- and do it TAX-FREE!

Retirement Income Strategy – When you start to use your assets to fund your retirement income, use the funds from your least tax-efficient investments first.

As we saw from the example, a non-registered investment can only provide income about half as long as an RRSP and an RRSP less than a third as long as an Insurance Tax Shelter.

Therefore, it is prudent to use funds from your non-registered (non-sheltered) investments first, then your RRSP assets and finally tap your Insurance Tax Shelter.

This strategy will give you the best bang-for-the-buck while you’re alive!

And after you die, all the value left in your Insurance Tax Shelter will be paid out TAX-FREE directly to your named beneficiaries, avoiding your estate and probate tax.

Who Else Says So?

Besides the insurance industry and me writing this book telling you how great these plans are at exploiting the tax laws, it’s always good to know if there are other credible recommendations from other professionals.

Accountants are recommending these plans to their clients.

This is what they are saying.

Let’s review the features and benefits of owning an Insurance Tax Shelter:

• Deposit flexibility-You can change both the frequency and amount of your deposits.
• TAX-FREE build-up of earnings within the plan
• TAX-FREE income through an innovative loan program when required
• TAX-FREE money to heirs upon death
• Creditor-proof-money in the plan can never be seized by creditors.
• Complete choice of investments with no restriction on foreign content
• Assets in the plan can be used as collateral.
• No mandatory or minimum income payments in retirement- if you don’t need the income, you can continue sheltering the growth within the plan
• Since income from the plan is not included in taxable income, the plan could prevent clawbacks on Old Age Security payments or other benefits.

An Insurance Tax Shelter is truly a Win-Win-Win plan.

Your investment stays TAX-FREE while it is building up within the plan in retirement.

And when you’re gone, the rest of the money goes to your heirs TAX-FREE! Revenue Canada never sees one red cent in this strategy. In my books, that’s WINNING!

Again I want to remind readers that I no longer sell Insurance or investment products; I only advise as a consultant, which I am allowed to do as I spent 35 years in the Financial service industry.