Should I get permanent life insurance before maximizing RRSP and TFSA contributions?

Deciding whether to purchase permanent life insurance before maximizing contributions to RRSP (Registered Retirement Savings Plan) and TFSA (Tax-Free Savings Account) depends on your financial situation, goals, and needs. Here are some factors to consider:

1. Immediate Needs vs. Long-Term Goals: If you have dependents who rely on your income and you don't have enough coverage through employer-provided life insurance or other means, permanent life insurance may be a priority to ensure financial protection for your loved ones in case of your death. However, if your primary goal is saving for retirement and you don't have dependents or significant debts, prioritizing RRSP and TFSA contributions might be more beneficial.
2. Cost: Permanent life insurance premiums can be significantly higher than term life insurance premiums. Make sure you can comfortably afford the premiums without sacrificing your ability to contribute to RRSPs and TFSAs, which offer tax advantages and potential investment growth.
3. Tax-Advantaged Growth: The cash value accumulation within a permanent life insurance policy grows tax-deferred, meaning you won't pay taxes on the growth as long as the policy remains in force. This tax advantage can be particularly beneficial for retirement planning, as it allows you to accumulate funds within the policy without immediate tax consequences. Additionally, if you access the cash value through policy loans, the withdrawals are generally tax-free up to the amount of premiums you've paid into the policy.




*Disclaimer:

The above article is for informational purposes only and should not be considered as professional advice. Always consult with a licensed insurance broker or financial advisor before making any decisions regarding insurance coverage.