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How to Cover Retirement Shortfalls with CSV Lines of Credit?

July 19, 2021 | Last updated on October 5, 2023
4 min read


Unprecedented change for retirees

The average lifespan of Canadians has increased dramatically in recent decades, inadvertently leading to a new set of retirement planning challenges.

Case in point: a 2020 survey shows that 70% feel they’re not saving enough,1 and another poll reveals that three out of five people are unsure how much they’ll need.2 Even for Canadians with robust financial plans, there’s a budding concern about maintaining quality of life through the Golden Years.

This retirement shortfall is made worse by prevailing macro conditions, such as the persistence of low interest rates. Retirees with substantial investment assets often rely on yield income to fund their living expenses. However, the low-rate environment has greatly weakened the earning power of fixed income, which is typically held as a core position in retirement portfolios. The result is that Canadians have grown anxious about living longer on less income.

As Baby Boomers move into retirement en masse, Advisors may notice this issue becoming a common theme in their client conversations. The number of people above age 65 is expected to surge to 60% over the next two decades, according to Statistics Canada. So the question is: are there alternative sources of income to address the savings gap?

Source: Statistics Canada, Projected population, by projection scenario, age and sex, as of July 1, 2019, medium growth scenario.

Unlocking tax-free cash with ease

Equitable Bank’s CSV FLEX Line of Credit3 offers a tax-efficient source of cash for Canadians with a whole life insurance policy. Here’s how it works: Policy holders borrow against the cash surrender value (CSV) of their policy, unlocking tax-free funds to supplement their retirement savings, CPP and OAS.

The underwriting process is deliberately streamlined to reduce hassle; there’s no application or transaction fee, and after an initial inquiry the loan does not report to the credit bureau. Add to this, the only collateral required is the underlying policy, and interest continues to capitalize so that proceeds are repaid by the death benefit, with the remainder going to the beneficiary.4

Ultimately, the core benefit to the policy holder is peace of mind. Clients who are either retired or retiring can use the CSV FLEX to delay collecting pension payments, help their adult children with a mortgage down payment or pay for home renovations. The key factor is they avoid making a choice between sustaining their lifestyle and outliving their savings.

This post-retirement of the client life cycle has often been neglected by the financial services industry, with greater focus being directed to the “peak earnings” years. At Equitable Bank Wealth Solutions, we aim to balance the scales with innovative new solutions tailored specifically for the decumulation side of your book. Get in touch with us at the number below to learn more.

Who’s eligible?

Canadian residents 50+ years who have:

  • A whole life insurance policy with one of Equitable’s insurance partners5
  • Adequate CSV available in their policy6

Use the Equitable Bank CSV FLEX Line of Credit Qualification Calculator to assess individual eligibility amounts and begin the application.

Ready for quick tax-free cash?

Learn how to leverage whole life insurance policies to achieve financial flexibility, and start the application process, or call our Senior Business Development Manager at 647-600-7559 for more information.

1 70% of Canadians Think They Won’t Save Enough for Retirement, Scotiabank Poll; February 11, 2020. 2 RRSP savings rising, but Canadians still unclear on goals, Wealth Professional; February 07, 2020. 3 Visit www.equitablebank.ca/lines-of-credit/csv to learn more and connect with your financial or insurance advisor to decide if the Equitable Bank CSV Line of Credit is the right solution for you. 4 The Equitable Bank CSV FLEX Line of Credit offers access to tax-free cash while the policy continues to grow, and payments are not required as long as the line of credit remains in good standing.  This is a demand credit facility, meaning Equitable Bank can demand payment of all or part of the outstanding balance at any time.  The outstanding balance must remain below 95% of the cash surrender value of the policy.  This option allows you to access up to a maximum of 90% of the cash surrender value of your policy (evaluated on a case-by-case basis).  Credit limits are subject to deductions based on required premium payments. Equitable Bank is in no way providing investment advice. Consult your financial advisor to discuss your unique tax situation and the tax-free benefits of an Equitable Bank CSV Line of Credit. 5 A full list of partner insurers can be found on the Equitable Bank website at www.equitablebank.ca/lines-of-credit/csv/our-partnered-insurers. 6 The amount of capital made available depends on the projected growth of the policy and the age of the borrower.