Here are 4 places you can put your money that are not subject to income taxes. This is not an exhaustive list, but this is a list of places that MOST people can have access to.
- Inside a specially designed MORTGAGE. If you setup your home mortgage as a ManulifeONE mortgage, you are essentially setting up the equity in your house as a giant line of credit. Once you have your house paid off, you can keep putting money in there and it will grow compounded with simple daily interest until you take the money out. When you take the money out to live, it is not considered income according to the government (because it's a loan), so it is not taxable.
- Inside a Tax Free Savings Account (for Canadians, that's what it's called). As Canadians, we are allowed to put in a certain amount into a tax free savings account (TFSA) per year. If you don't put money in one year, it is carried over to the next. Once you put the money into the TFSA, you can invest it into whatever you want (Mutual funds, GICs, Stocks, Bonds, etc) and whatever growth on that money that occurs is not taxable (and the seed money you put in is also not taxable). So this is a great place for wealth to grow tax free, and when you take it out, it's also not taxable (as opposed to having your money in an RRSP which IS taxable when you redeem the money). If you are from another country, ask a financial advisor if you have something equivalent in your country.
- Inside a Specially Designed Whole Life Insurance Policy. A whole life policy, designed the right way, is probably the best place to store your money in order to save for retirement. The way that the policy is setup allows you to take a loan out against the value of the policy. Since the money is a loan, it's not taxable income. You might be thinking, but now I'm incurring loan interest on my retirement income...which is true....but your policy money is still invested as well and is MAKING you more money than the loan is costing you in interest....so in the end you are still ahead, and everything is taken care of when you die and the full death benefit is paid out.
- An actual vault inside your house. The good thing about this is that it's accessible to you at any time, and it's not taxable money....but it's not growing at all....and, in fact, it's shrinking because of inflation and because the goverment keeps printing more money and making the money you have less valuable.
Great list and I completely agree. For the vault, I always tell people to put gold and silver in it. Sure it is not growing in troy oz but it is also maintaining value vs paper dollars.
Regarding the ManulifeOne–this would apply to any HELOC correct, not just them?
No, we haven’t found any other bank that has the same features as a Manulife ONE. Any Home Equity Line of Credit mortgages that are provided by other banks are still not the same as the Manulife ONE. If you have found one that is, please let us know. Here are a bunch of questions to ask when looking at these other mortgages that “seem” similar to a Manulife ONE:
1. Will you consolidate all my debt into a single account at a competitive, low interest rate(s)?
2. Can I deposit all of my savinges into the account to keep my debt as low as possible?
3. Can I have my income automatically deposited into the account?
4. Can I use this account for my everyday banking and transactions?
5. Can I track a portion of my debt and interest payments seperately within the account?
6. Will you let me lock-in some of my debt at competitive rates?
7. As I pay down my debt, can I still take money out again – up to my borrowing limit – whenever I need and without asking?
8. Will I get a single statement that covers everything so that I know exactly where I stand each month?
9. When I have paid off my debt, will I earn a high rate of interest on the positive balance?
Great points Andrew, it has made me think. I suppose another thing is that it changes an amortized debt into a revolving one, vs a HELOC that creates a separate revolving debt but you keep the amortized portion as well.
Thank you for your thoughts