Yet again, I have come across a situation with a retiring couple where what they thought would happen is definitely not going to happen. For many years Mr and Mrs had been putting money into a life insurance contract that was supposed to pay them enough to retire on. This was the story that was told to me when I first met with Mr and Mrs. I asked to see the plan that was to be a miracle and was not surprised to see that it was a Universal Life insurance plan with an annually increasing cost of insurance.

I asked to see the illustration that had been used in the initial recommendation and when they showed it to me, it again came as no surprise to see a rate of return used that was inane. No person in their right mind should have illustrated at 12% but the previous advisor had done this many years ago. I asked Mr and Mrs when the last time was that they reviewed this with the previous advisor and they said when he delivered the insurance policy to them – that was almost 20 years ago.

Why am I blogging about something that is negative and something that bothers me to no end? Because, I am hoping that in doing so one advisor and/or one purchaser will learn from it.

To all advisors out there, make sure that you do not simply go by what you are told. Ask why, ask what the worst case might be, ask what the caveat emptor is to the concept you are peddling. Seek the advice of a senior advisor; do not be afraid to split a case with them so that you learn. If you are not well versed in all areas of financial planning, then build a team until you learn the ropes yourself. I could go on further, but you get the picture.

To all potential consumers, if it sounds too good to be true – it is! Let’s be realistic, if you think you are going to replace $140,000 of income in retirement by investing $400 per month into an insurance contract for 20 years then you share in the responsibility of the crashing down of the dream. Do not be afraid to ask for other options, to draw comparisons between the vehicles available to you. In Canada there are a few programs that allow you to save for retirement; none of them are singular in nature. What I mean is that if you depend on one method to fund your retirement, you are apt to fall short. Rather retirement planning is multi-faceted and may involve many of the following items: pay off all debt as soon as you can; maximize your retirement savings plans such as RRSP’s and TFSA’s; investigate the costs of where you intend to spend time in your retirement early to make sure that it is within your means.

At the end of the day, it is becoming more and more common for people to become realistic. The only question is when reality hits you – when you are young or when you are older? For those who are realistic in their youth, they will be the ones who retire comfortably in the future because they have taken the reality check and the steps to make sure that they are always ahead of the game. For those who wait until they are older, retirement may not come at 55, 65 or even 75 and then retirement may not be spent under palm trees in the winter months.

Should you avoid insurance as part of a retirement plan, absolutely not! If you are young, protecting yourself in the event that something happens that causes your plans to go awry through insurance is a very intelligent thing to do. If you are older, making sure that you are able to have funds in the event you cannot work until you die is important.

The most important thing that a person can do so that they do not find themselves in a situation similar to Mr and Mrs is to enlist the services of an advisor who is either versed in all areas of financial planning or is part of a team that is versed in those areas.

As always, if you have questions, please send me an email at and I will be happy to advise.