Werner C. Duever

Financial Security Advisor
Investment Representative
Freedom 55 Financial

Think income stream

You’ve already set up your passive income stream (not government or company-funded) to pay all your bills and vacations and you’re enjoying a cool beverage while sitting on the beach in some exotic location. You don't have to go back to work, however, you do because you love the work you do now more than ever and you aren’t pressured to earn a paycheque.

Think this scenario is impossible? Well, for most of Canadians it is unless they’re determined to make it happen.

When I was young, I learned about creating income by delivering papers in a small northern Ontario town. It was my first job and I loved that I could buy my own candy and hockey cards. I even saved enough to buy a bike. But if I didn't show up I didn't get paid. If I’d been smart like Tom Sawyer who hired kids to paint a fence for him, I would have started a newspaper delivery business and hired other kids to do the delivering, creating an income stream by simply managing people.

Dividends offered by segregated and mutual fund companies are another way to create an income stream. As a Canadian, you could have earned $43,000 in dividends in 2014 and if this was your only income, you would pay no income tax on those earnings. If both you and your spouse each earned $43,000 in dividends , for a total of $86,000, and earned no other income, neither of your would pay income tax. Dividend mutual and segregated funds may offer potential opportunities for growth, when the underlying companies in which they invest increase their dividends through the splitting of stock.

There are many ways to generate income but for this article, I’m focusing on income from financial products only.

Since working with Freedom 55 Financial, I’ve discovered interesting ways to create income streams like payout annuities (both fixed and variable), income from whole life insurance and investment income.

Fixed annuities are provided by a life insurance company and provide you with an income after you deposit a lump sum premium. You can set up an annuity for life or for a set period of time. The older you are, the less you have to get the same amount of income. You may also add indexing to help offset the effects of inflation on your purchasing power.

Variable annuities are also commonly called segregated funds. They can be flexible. A London Life segregated fund policy can add a lifetime income benefit option to provide an income stream for life for a lump sum premium. Income with this product will never decrease (as long as an excess withdrawal is made) and if the markets do well your income level may increase. Interest on the income increases with age. If you delay taking an income each year, a deferral bonus may be added to your future income stream.

I recently placed some of my registered retirement savings plans (RRSPs) in this income vehicle and look forward to drawing an income from it someday. And I know that the income can last as long as I live. If your spouse is 50 years of age or older you may set up a joint-income account so when one of you dies, the income automatically transfers to the surviving spouse. There are other benefits with segregated fund policies like maturity and death benefit guarantees and probate avoidance and potential creditor protection.

Life insurance is important for protection of your family and estate but also can provide the potential for income. While the primary purpose of life insurance is to provide a tax-free lump sum of money to your beneficiary when you die, participating life insurance has a guaranteed cash value that grows inside the policy. With London Life participating life insurance, you participate in the experience of the participating account along with other policyowners, and may benefit from the earnings in the participating account through dividends. Also, did you realize that the guaranteed cash value in a whole life policy is vested? That means it will never drop below the amount that is presently in the policy even if the stock market crashes. I like to call this a ‘market bomb shelter’. Once you have enough funds in your participating life insurance policy, you have the option of taking an income. There are different means of taking value out of your policy and some may have tax consequences. To learn more speak with your financial security advisor.

The freedom to choose. The power to get there.™ It’s not just a slogan. Let me show how you can grow your income stream, helping provide the financial independence to choose not to work or if you enjoy working, do the work you always dreamed of doing.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

A description of the key features of the segregated fund policy is contained in the information folder.

Any amount that is allocated to a segregated fund is invested at the risk of the policy owner and may increase or decrease in value.


This newsletter contains general information only and is intended for informational and educational purposes. This newsletter should not be taken or relied upon as providing legal, accounting or tax advice.