By city

Infinite Banking in Oakville

Oakville has one of the highest median household incomes in Canada. That makes it the city where the most common mistake is not starting too small, but committing to a premium the household could only carry in a good year.

The harbour town on the lakeshore

Oakville grew around two harbours where Sixteen Mile Creek and Bronte Creek meet Lake Ontario, and both still hold working marinas. Downtown Oakville and Bronte Village keep their nineteenth-century main streets, the Glen Abbey golf course sits inland, and the Ford assembly plant on the QEW has been part of the town since 1953.

What defines it financially is income. Oakville has one of the highest median household incomes in the country, a large professional and executive population, and a concentration of corporate head office employment along the highway corridor.

High income is not the same as spare income

This is the point the page turns on, and it is the opposite of the warning most cities need.

A household earning well is not automatically a household with surplus. Property taxes on an expensive home, two vehicles, private school or activity fees, a large mortgage taken at a high valuation, and the ordinary cost of maintaining a lifestyle that was set when income was rising, all consume the difference. A premium sized against gross income rather than against what actually remains at the end of the month is the commonest failure here.

And the consequence is worse in a high-income household, not better, because the premium committed is larger. Cash surrender value stays below cumulative premiums for many years, commonly more than a decade. If the contract draws an automatic premium loan against cash value to stay in force, that is a real loan with real interest owed to the insurer. A lapse with an outstanding loan and an accumulated gain is a taxable disposition.

Size the base premium against the month, not the year. Put bonus and variable compensation into paid-up additions if and when it arrives, because in most contracts the base premium is the binding obligation and additional deposits are the flexible part.

Where the corporate structure changes the question

A significant number of households here hold a professional corporation or an operating company. Where a corporation owns the policy, the credit arising in the Capital Dividend Account at death is calculated under subsection 89(1) by reference to the death benefit and the policy's adjusted cost basis. It is that credited amount which can then be paid to shareholders as a capital dividend, not the corporation's accumulated wealth generally.

The trade-off presentations leave out: accumulating surplus in the corporation builds cash value, and cash value is generally not an asset used in an active business, so it works against qualifying for the lifetime capital gains exemption on a future share sale. Those two objectives conflict rather than stack. Which matters more depends entirely on whether a sale is contemplated and when, and that is settled with an accountant who has done this work rather than with a brochure.

What the pension question looks like here

Head office and executive compensation less often includes a defined benefit pension than public sector work does. If you have no plan that promises an amount, the retirement argument applies more fully than it does in Ottawa or Kingston. But that is an argument for having a plan of some kind, not an argument for this one specifically. Compare it against the registered accounts you have not filled before treating it as the answer.

Ontario rules and where it does not fit

Insurance in Ontario is supervised by the Financial Services Regulatory Authority of Ontario, and a professional here holds the licence of a Life and Accident & Sickness Insurance Agent. Under the Financial Professionals Title Protection Act nobody may use the title Financial Planner or Financial Advisor without an approved credential, and a life insurance licence alone qualifies for neither. Verify the licence in the public register and ask how the person is paid.

A household early in a large mortgage, without an emergency reserve, or carrying high-interest consumer debt should deal with those first, and a large income does not change that order. Nothing on this page is advice. No assessment has been made of anyone reading it, and the author is not a neutral party: he is licensed to sell the contracts this strategy uses and is paid a commission when one is placed. Bring twelve months of what actually cleared the account, not the salary figure.