By city

Infinite Banking in Sherbrooke

Sherbrooke is built where the Magog River meets the Saint-Francois, and its gorge runs through the middle of town. It is also one of the most university-dense cities in Canada, which moves this analysis in a specific and largely favourable direction.

A city where two rivers meet, and where people study

Sherbrooke grew at the confluence of the Magog and Saint-Francois rivers, and the Magog gorge drops through the centre of town. That water power built the nineteenth-century industrial city; the gorge trail now follows the same river. Lac des Nations sits at the heart of Parc Jacques-Cartier, and Mont Bellevue is inside the city limits.

What defines it today is the Universite de Sherbrooke, Bishop's University at Lennoxville, the Centre hospitalier universitaire de Sherbrooke and the CEGEPs. Sherbrooke has one of the highest proportions of students and university staff relative to its population of any Canadian city. That produces two effects on this page, and they pull in opposite directions.

The pension moves the question

A university and hospital city is a pension city. If you have a defined benefit plan, half the usual argument does not apply to you: it already provides a lifetime income that does not depend on markets, so the retirement income case is substantially weaker than in American material, which assumes you have nothing of the kind.

What remains is access to capital during your working life, because a pension is not collateral, and the survivor question, which depends on reading your own plan rather than accepting a general answer. One caution specific here: contract staff, sessional lecturers and research personnel do not necessarily hold the same plan as permanent staff, and sometimes hold none. Do not assume which you have; read it on your statement. It is the question that changes the answer most.

The cost of living works in your favour, and that deserves saying

Housing in Sherbrooke remains markedly more affordable than Montreal, and bears no comparison with Toronto or Vancouver. That is a real advantage for this strategy rather than a detail. The whole structure rests on premiums maintained without interruption for decades, and a household whose mortgage does not consume everything reaches the stable surplus the arithmetic needs far sooner.

The counterpart is that the usefulness question gets harder. When retirement is covered by a pension and housing is not squeezing, you should be able to name what the capital would be for: a child's education, a rental property, a transfer to the next generation. If you cannot, the honest answer is no, and a good practitioner will say so rather than find you a reason.

The two Quebec rules that bear on access

A designation naming a married or civil-union spouse is presumed irrevocable in Quebec unless declared otherwise. Elsewhere in Canada it is revocable by default. An irrevocable designation cannot be changed without the beneficiary's consent and can restrict the ability to request a loan or assign the policy as collateral. For a reader drawn to this strategy precisely because of the access, that is the first thing to verify, before signing rather than after.

Exemption from seizure is the second. It depends on the class of beneficiary, on when the designation was made and on the circumstances. It is never absolute and it disappears if the policy is assigned as security for a loan.

Where it does not fit

A reader with a strong indexed pension, no dependants, no corporation and no identifiable capital need is a poor candidate. So is a household early in a mortgage, without an emergency reserve, or carrying high-interest consumer debt. Cash surrender value is typically below cumulative premiums for many years and commonly for more than a decade, so an early exit is a loss.

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. Ask for the illustration in French, which is your right under the Charter of the French Language, read the guaranteed column first, check the licence in the AMF register, and take the answers to an accountant and a notary of your own choosing.

One closing word on a situation common in a university city: the household where one partner holds a permanent post with a pension and the other works on contract, in research, or for themselves. Those two halves face different questions, and giving them one answer would be wrong for both. The pensioned partner already has their retirement income; the other has to build it, and their income varies as well. Bring both statements to the same meeting. A practitioner who examines only the steadier partner will give you an elegant answer that is incomplete.