Since I work in the industry, I have heard a lot of bad things about Manulife Income plus from its competitors and a lot of good things from its representative… Hum it sounds like any other innovative investment products. However, when I took a closer look at the whole strategy, I found that this type of mutual funds show a great advantage compared to any other funds if held in a RRSP account (tax sheltered account).
Instead of writing about what the product was designed for (i.e. safe withdrawal at retirement), I will explain how you can use Manulife Income Plus during your accumulation period. It’s basically like using peanut butter with chocolate and create Reese’s instead of putting the peanut butter on your toast in the morning… it’s simply amazing 😉
So how Manulife Income Plus, a retirement investment tool can help me out when I’m building my retirement account?
All right, let say that you are 40 and you want to retire at the age of 60. You have been a good little boy and been saving periodically. Since you always had a great asset diversification, you now have 300K invested in your RRSP account.
So if you decide to switch your investment to Manulife Income Plus and you wait at the age of 60 to withdraw your money, they guarantee you a “plan B” if the market crashes during that period.
So Manulife is offering a “virtual” bonus of 5% of your original amount for each year you stay with them. So after 20 years, you have “virtually doubled” your investment. Therefore, they will offer you a life income fund of 5% of 700K (the first 300K being your original capital and the other 300K being your “virtual bonus” offered by Manulife). Therefore, you have the possibility of making 35K for the rest of your life.
But there is something cooler than this!
Actually, every year, Manulife will look at the value of your portfolio and they will determine their “virtual bonus” on the bigger of 5% of your original capital or the value of your portfolio at the end of the year.
If you are lucky enough so your investment worth 400K in 5 years, they will add a bonus of 20K per year until you start withdrawing. If it ever goes down, you keep your 20K per year until it goes up again.
While that 5% is a nice bonus, you basically wish that you will never use it. Why? Because having 700K on 300K invested for 20 years is the same thing as investing in a GIC at 4.33%. However, you are better off with this investment solution guaranteeing you 4.33% yield than investing in another mutual fund and having no clue what you end result will become.
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