RRSPs and Universal Life

Q – I am considering transferring the funds in my RRSPs to universal life. Why are the benefits, cautions, and disadvantages? – R.R.

A – I posed your question to insurance company executive Paul Grimes, author of The Facts of Life: How to Build Wealth and Protect Your Assets With Life Insurance. He says that some companies offer programs that combine universal life with a retirement savings plan but in general he does not recommend going this route. He feels it is more efficient to separate your insurance program from your RRSPs.

I concur with this view. Universal life can be a useful way to build tax-sheltered assets once your RRSP contribution has been maximized. In effect, you create a completely different asset-building program. The advantage of the universal life plan is that you can adjust your investment payments to fit your financial situation, while maintaining full insurance coverage. – G.P.