Newsletter July 2009

Volume II, Issue iv, July 2009

Changing Jobs?

What do you need to know about your pension and other workplace savings plans…

You may have one or several registered savings plans with your employer. As you leave your job, it is important that you understand your rights and options with respect to that money. There will be various options available and you will want to choose the one that makes the best financial sense for you. Different accounts and savings vehicles may be in place:

Registered Pension Plans (RPPs)

RPPs can be very complicated. There are different pension structures such as a Defined Benefit Pension Plan and a Defined Contribution Pension Plan. Pensions are subject to different laws, federal or provincial, as well as the rules under the Income Tax Act. However, there are some general rules that apply to all pension plans, certainly in regards to the treatment of pension benefits when an employee leaves a company. Here is some general information about how to transfer the value in your pension. You should contact your company’s Human Resources department or the pension manager to determine the specific rules and options that apply to your pension.

Although there are jurisdictional differences, generally, the options that may be available to you are:

1. Transfer to the pension plan of a new employer if that plan permits this

2. Transfer value to a Locked-in Retirement Account (LIRA) which is a Registered Retirement Savings Plan (RRSP) with locking-in provisions

3. Transfer value to a Life Income Fund (LIF)

4. Transfer value to a Locked-in Retirement Income Fund (LRIF)

5. Purchase of an Immediate (if allowed) or Deferred Annuity

6. In specific and limited circumstances, receipt of the pension

Other types of workplace savings plans

Deferred Profit Sharing Plans (DPSPs)

If you have been a member of your company’s DPSP, several options will be available to you. DPSP contributions are made by the employer alone and there will usually be vesting requirements, typically two years. If you have been a member of the plan for longer than two years, you will have the right to receive your share of the contributions and income earned. Your options will be:

1. Receive the money in cash. This is ordinarily not the preferred option since you will have to include the amount in your income in the year of withdrawal and this will likely boost your income taxes

2. Transfer to another DPSP

3. Transfer to a pension plan if allowed by the plan

4. Transfer to an RRSP

5. Transfer to a Registered Retirement Income Fund (RRIF)

6. Purchase an annuity

Group Registered Retirement Savings Plans (GRRSPs)

If you have been a member of your company’s Group RRSP you will be entitled to the market value of those investments on your departure from the company. Since GRRSPs are not pensions, the money will not be locked-in and there will be somewhat more flexibility in your transfer options. Generally, your choices will be:

1. Take the money in cash – This is ordinarily not the preferred option since you will have to include the amount in your income in the year of withdrawal and pay extra taxes

2. Transfer to a personal RRSP

3. Transfer to a RRIF

4. Purchase an immediate or deferred annuity

5. Transfer to a new group plan

Glossary of Terms

There are some very confusing terms in the world of pensions. Here are some common ones:

* Vesting: When you leave a company where you were a member of its pension plan, you will always be entitled to your contributions plus income earned. Vesting relates to your entitlement to receive the employer contributions plus income and will be a function of length of service. Although requirements vary across the country, it is often two years.

* Locking-in: Pensions are intended to provide income in retirement. Most jurisdictions require locking-in of pension benefits to ensure that money will be available for you in retirement. Therefore, when you leave your company plan you do have the legal right to pension benefits but may not be able to access the funds immediately.

Contact your financial advisor, or myself, to find out what options are available to you if you have recently left an employer or are thinking of leaving an employer.

What Should I Be Doing Right Now?

From a financial perspective, the past year has been tough. Canadian investors experienced some of the worst conditions in the stock markets since 1973, when a spike in oil prices and high inflation hit the global economy. The proof is in the returns. As of February 27th, 2009, the S&P/TSX Composite Index had fallen in value by 46 per cent, the S&P 500 Index by 49 per cent and the MSCI World Index by 48 per cent from their 52-week highs.1 As a result of the global selloff, many investors are understandably concerned about their financial plans and are wondering what they should do next.

IF YOU ARE WAITING FOR GOOD NEWS TO APPEAR BEFORE YOU DECIDE TO INVEST, CHANCES ARE YOU’LL MISS OUT ON SOME OF THE BEST DAYS THE MARKET OFFERS WHAT SHOULD I BE DOING RIGHT NOW?

The history of boom and bust cycles helps explain why it is important to stay focused on your long-term financial plan. Investors who attempt to time the market when conditions are volatile often do so to their own detriment. It’s important to remove emotions from your decision-making process and rely on the time-tested investment strategies that serve investors well through good times and bad.

Consider speaking with your advisor about the following three investment strategies to help you through these tough times.

1 TAKE ADVANTAGE OF DOLLAR-COST AVERAGING

Dollar-cost averaging is the process of investing equal amounts of money at regular intervals over time, usually monthly or quarterly, no matter what the markets are doing. You buy more units of a fund when the price is lower and fewer units when the price is higher, reducing the average cost of your mutual fund units. When markets turn volatile, dollar-cost averaging is a proven investment strategy that has the potential to produce superior returns while minimizing risk.

With dollar-cost averaging you don’t have to worry about committing an entire lump sum investment at once. You can do small monthly contributions.

2 DIVERSIFY YOUR INVESTMENTS

Diversification – by asset class, sector, geography, manager, style and company – is a good defense against market volatility. It’s important not to be overly concentrated – and even an S&P 500 Index fund, which may sound like a great alternative during volatile times due to its broad composition of leading companies, cannot provide the benefits of a fully diversified portfolio.

3 CONSIDER A PRODUCT ALLOCATION STRATEGY

Having the right mix of investment products is important for investors approaching retirement who will require a steady stream of income. Due to the unique risks that retirees face, such as longevity and inflation, it is important to have a mix of guaranteed and non-guaranteed investment products in your portfolio. This strategy is known as Product Allocation, and it provides retirees with growth potential and income guarantees. To create a sustainable retirement income plan, consider the following:

• The investment vehicles most suitable for you to achieve your retirement income goals

• The amount of your savings you should allocate to these products

• The share of your savings you should commit to securing guaranteed income

If you are nearing or in retirement, we suggest that you discuss a Product Allocation strategy with your advisor.

Upcoming Events

This fall we are hosting P.I.N.K, a four workshop series designed exclusively for women by women. P.I.N.K is designed to educate and equip Canadian women of all ages and income levels with the information, acumen and solutions needed to help grow their capital, provide for retirement and protect their personal, business and family assets.

P.I.N.K embraces all the key elements of a financial plan:

Protection – preserve your capital and protect your family

Investment – grow your money and manage your wealth f

Need – understand the unique financial challenges facing women

Knowledge – access to insightful financial information and a network of expertise

Join us for this exclusive four-seminar event

presented For Women By Women!

To register, or for more information email janea@performancefinancial.ca

You must RSVP to register as this event is by invitation only.

The first seminar is scheduled for Tuesday, September 29, 2009 at the Willows Golf & Country Club

Planning a Trip? Talk to me about TRAVEL INSURANCE!

If you have a group health plan at work, check into its travel policy. Most of the time the group plans do not cover travel outside of Canada and the US. Thus if you plan a hot holiday or a European vacation you are going to need some additional travel insurance. And its CHEAP! Your travel insurance can include a combination of things:

- Health benefits in case you or your family members have a health issue and need international medical attention

- Trip cancellation and interruption insurance in case you need to cancel your trip OR in case the carrier you booked with suddenly goes bankrupt

- Baggage Loss in case of loss or damage or theft

For a quote on travel insurance, go to: http://www.janeabellay.com/living-benefits/travel-insurance/

Janea Bellay, Insurance & Investment Advisor

Janea Bellay is an independent insurance and investment advisor, specialized in a unique 360 degree financial planning approach for individuals and families:

Liquidity accounts – Your spending, savings and retirement accounts

Family Security – Maintaining life insurance for all life’s unexpected financial needs

Family Protection – Maintain your current lifestyle even if there are unexpected illnesses such as cancer, heart attack or a stroke

Retirement Planning - Are you putting enough away and into the right investments to retire successfully?

To remove your name from our mailing list, please click here.

Questions or comments? E-mail us at mailto:janea@janeabellay.comor call 306-281-3891.

LEGAL DISCLAIMER

Janea Bellay is an independent self-employed insurance and investment representative, licensed to sell insurance and investment products and services through Performance Financial Services Inc. This is an independent MGA brokerage, and part of the United MGA Group of Canada. Mutual funds are offered though Desjardins Financial Security Investments Inc. Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investment. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information in this article is not intended nor should it be considered as providing specific legal or tax advice. Individuals should consult with their individual advisors to ensure that any information is applicable and appropriate to their specific situation.

Newsletter June 2009

Find us on the web at www.janeabellay.com
Volume II, Issue iii, June 2009

Recession? Time to spring clean & refocus

Recessions are usually regarded as nasty times as unemployment soars, home prices fall, stock markets sputter and public confidence decreases.
The US is calling this time “The Great Recession”. And although we aren’t feeling the recession as greatly as the US, we are feeling the repercussions.

But it is a great time to take a clean sweep of your financial plan and ensure you are focused on paying down debt, putting money into your savings account for emergencies, and saving for retirement. Here are a few steps to do just that:

1. Analyze your credit card statement. What is your interest rate? Call your credit card company and find out if they will reduce the interest rate on your card. In some cases, if you have been a good client, they will reduce it for you.

2. Are you paying for Balance Insurance? This is a waste of money. Balance insurance, which you pay dearly for, is an insurance on credit cards that if you cannot pay your balance due to disability or death, the credit card company will pay it off for you. Seems like a good plan, right? Not really – The credit card companies will make it very hard for you to claim this should something happen. Talk to your financial advisor about alternative ways to protect your debt.

3. Do you have a monthly payment plan set up to pay into your savings account for emergencies and special projects? The government this year introduced Tax Free Savings Accounts. A great way to boost your savings without paying tax on the interest earned.
4.
5. Do you have a monthly payment plan set up for retirement? Its never too early or too late. Take advantage of the low markets NOW!!

Talk to your advisor to get your spending under control and your savings started. Economists say we are at the bottom so now is the time to get focused and start a plan!

Retirement = Doing What You Want To Do

Retirement doesn’t always have to mean you quit working completely. Gone are the days when at age 65 you define the line between work and no-work. Retirement means that now you can sit back and do what you love to do. Whatever you plan on doing, it should be worked into your retirement planner.

New changes to CPP legislation this year says that you don’t have to retire-or fake your retirement-to start collecting CPP at age 60. You have a choice to collect it, even if you decide to keep working past age 60.
Some people decide to keep working past retirement because:

• They love working, they find considerable enjoyment and satisfaction in keeping busy doing part-time work. Whether its handyman projects on the side, volunteering for a local charity or working part-time in retail, you can continue to work beyond your retirement age.

• For people who love to interact with others, work life provides a chance to stay connected with people and meet new friends.

• Post retirement part-time work also provides income! By working part-time income into your retirement plan will ensure you can stretch your pension and RRSP’s further!

By giving your retirement some planning and thought, and discussing your dreams with your financial advisor, you can ensure you won’t outlive your savings and you can enjoy a more meaningful retirement!

Upcoming Events

This fall we are hosting P.I.N.K, a four workshop series designed exclusively for women by women. P.I.N.K is designed to educate and equip Canadian women of all ages and income levels with the information, acumen and solutions needed to help grow their capital, provide for retirement and protect their personal, business and family assets.

P.I.N.K embraces all the key elements of a financial plan:
Protection – preserve your capital and protect your family
Investment - grow your money and manage your wealth
Need - understand the unique financial challenges facing women
Knowledge - access to insightful financial information and a network of expertise

Join us for this exclusive four-seminar event
presented For Women By Women!
To register, or for more information email janea@performancefinancial.ca

You must RSVP to register as this event is by invitation only.
The first seminar is scheduled for Tuesday, September 29, 2009 at the Willows Golf & Country Club

Tax Free Savings Account – 3% Until June 30

Tax Free Savings Accounts – Earn 3% until June 30
Earn 3.00% on your savings . . . open a Tax-Free Advantage Account today
Open a Manulife Bank Tax-Free Advantage Account and your savings will get 3.00% from June 1 – June 30, 2009.1
Tax-Free Advantage Account is a great new way to shelter your savings without locking them in. Earn this high rate of interest and keep it all for yourself! At a time when growth is vital, Manulife Bank gives your tax-free savings a strong start.
Call me at 306-281-3891 to open a Tax-Free Advantage Account today or visit www.manulife.ca to learn more.
—————————-
1 The minimum interest rate for the Tax-Free Advantage Account is 3.00% for the period June 1 to June 30, 2009. Interest is calculated on the total daily closing balance and paid monthly. After June 30, 2009 this rate is not guaranteed and is subject to change without notice.

Janea Bellay, Insurance & Investment Advisor

Janea Bellay is an independent insurance and investment advisor, specialized in a unique 360 degree financial planning approach for individuals and families:

Liquidity accounts - Your spending, savings and retirement accounts
Family Security - Maintaining life insurance for all life’s unexpected financial needs
Family Protection – Maintain your current lifestyle even if there are unexpected illnesses such as cancer, heart attack or a stroke
Retirement Planning – Are you putting enough away and into the right investments to retire successfully?

Performance Financial Services Inc.
217-3501 8th Street East
Saskatoon, SK S7H 0W5
Tel: (306) 281-3891
Fax: (306) 956-3141
janea@performancefinancial.ca
www.janeabellay.com

SUBSCRIBE/UNSUBSCRIBE

To remove your name from our mailing list, please click here.
Questions or comments? E-mail us at janea@janeabellay.com or call 306-281-3891.

LEGAL DISCLAIMER

Janea Bellay is an independent self-employed insurance and investment representative, licensed to sell insurance and investment products and services through Performance Financial Services Inc. This is an independent MGA brokerage, and part of the United MGA Group of Canada. Mutual funds are offered though Desjardins Financial Security Investments Inc. Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investment. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The information in this article is not intended nor should it be considered as providing specific legal or tax advice. Individuals should consult with their individual advisors to ensure that any information is applicable and appropriate to their specific situation.

According to the Department of Finance, the following make up the sources of Canadian Retirement Income:

• 28% – CPP/QPP
• 28% – OAS & GIS
• 44% – RRSPs and Pension Plans

What is the Canada Pension Plan (CPP)?

The CPP is a federal program that provides pensions to qualified contributors in retirement. Any benefits paid by the CPP are taxable both federally and provincially. CPP operates throughout Canada. Quebec has its own similar but not identical program, the Quebec Pension Plan (QPP), which is closely associated with the CPP.

Who pays into the CPP?

With the exception of very few, every person in Canada who is over the age of 18 and is working pays into the CPP. Contributions are split equally between employers and employees. If you are self – employed, you are required to pay both the employer and employee amount.

How much do I pay into the CPP?

The amount you pay is based on your salary (self-employed contributions are based on your net business income). You pay contributions on your annual earnings between the minimum and a set maximum level (these are called your “pensionable” earnings). The minimum level is frozen at $3,500 while the maximum level is adjusted each January.

For 2009, the maximum level is $46,300 and contributions are 4.95% for both the employer and employee. As a result, the maximum employee contribution is $2,118.60.

When you file your personal tax return, the federal and provincial governments provide a tax credit for your CPP contributions. The Federal government credit is equal to 15% of your contribution.

When do I become eligible to receive CPP?

If you have made at least one CPP contribution in your lifetime and if you are:

• At least age 65; OR
• Between the ages of 60 and 64 inclusive and
  • Have ceased employment OR
  • Have low earnings

How much CPP can I expect monthly?

In general, your retirement pension replaces about 25% of the earnings on which you paid into the CPP. The exact amount of your CPP pension depends on how much and for how long you contribute. For 2009 – the maximum CPP retirement pension is $ 908.75 per month if taken at age 65. CPP pensions are adjusted for inflation every January.

Should I take CPP early? Age 60? Age 65? Age 70?

In most cases, the earlier you can take your CPP the better.

The age at which you decide to take your pension also affects the amount you receive each month. The normal age to start CPP is 65. However you can start receiving your CPP pension as early as 60 or as late as 70. By opting to take your CPP pension early, the pension will be reduced by 0.5% for each month the start date precedes your 65 the birthday to a maximum reduction of 30% at age 60. If you start receiving your pension before 65, you must have stopped working.

By opting to delay your CPP pension, the pension will be increased by 0.5% for each month the start dates surpasses your 65th birthday to a maximum of 30% at age 70.

Am I able to share my CPP pension with my spouse?

Yes … you are able to share your pension with your spouse or common law partner equally if you are at least 60 years old and have both applied for retirement pensions. This could result in income tax savings if one spouse was in a lower tax bracket than other spouse.

What are other benefits that CPP offers?

Disability Pension – To receive a disability pension from CPP you must be disabled according to the terms of the CPP legislation (physical or mental disability which is both severe and prolonged), under the age of 65 and not in receipt of a CPP retirement pension.
For 2009 – the maximum CPP disability pension is $1,105.99 a month.

Death Benefit – A death benefit up to a maximum of $2,500 may be paid to the estate of a deceased contributor.

Other Benefits -Benefits are available for:

• Children of disabled or deceased parents
• Survivor spouse benefits
• Guaranteed income supplement for low income earners

What is Old Age Security (OAS)?

OAS is a federal government program that provides a basic amount of retirement income to all individuals who meet certain residency requirements. The amount of OAS that you receive is not dependent on your past employment or salary. Any benefits paid by the OAS are taxable both federally and provincially.

Who is eligible to receive OAS?

To receive OAS you must be:

• a Canadian citizen or legal resident of Canada
• at least 65 years of age
• lived in Canada a minimum of 10 years after reaching age 18

How much can I expect from OAS?

From January to March 2009 – The maximum OAS pension is $516.95 per month or $6,203.52 yearly. OAS pensions are adjusted for inflation quarterly. In order to qualify for the maximum OAS pension, you must have lived in Canada (after reaching age 18) for at least 40 years.

If you have lived in Canada for more than 10 years but less than 40 years, you may be eligible for a partial pension.

What is the OAS clawback and when does it apply?

The OAS ‘clawback’ requires the repayment of OAS benefits by high-income earners. For 2009, the threshold at which the OAS ‘clawback’ starts is $66,335. If your net income (including OAS benefits) exceeds the threshold ($66,335), 15% of the amount of income above the threshold is deducted from the basic pension. Your OAS pension will be entirely clawed back if your net income exceeds $107,692. For example, if you had a net income of $90,914, your OAS pension would be reduced by 15% of the amount over the threshold. That means that your annual OAS pension will be reduced to $2,516.67 or $209.72 per month.

For more information, visit the Service Canada website.

If you have questions specific to your retirement and would like a review of your investments and when to take CPP, please contact me at janea@janeabellay.com.

I have to re-post this CBC Marketplace Expose on Bank Mortgage Insurance. I met with a couple about a month ago who were denied their Bank Mortgage Insurance claim. We met to apply for a life insurance policy that can never be cancelled by the insurance company. We applied so this would never happen to them again.

The key to remember is the banks are not licesnsed to sell mortgage insurance or life insurance. You must speak with a licensed life insurance agent like myself to obtain proper insurance. Say no to your bank mortgage insurance. You are not required to purchase it.

Do volatile markets give you the jitters? You’re not alone! The closer you are to retirement, the greater the risk to your savings. Your lifestyle and how long your savings last can change drastically if the value of your investments were to drop just as you are about to retire.

That’s why guaranteed investment funds are worth looking into. It is part of a new generation of investments that allow you take advantage of market upturns and protect you against the downturns.

A guaranteed investment fund is a type of investment offered by insurance companies. It allows clients to invest in low risk to high risk mutual funds (dependent upon the client`s risk tolerance) while promising that the initial investment will be available at the fund maturity (usually 10 years) or when the client dies.

There is an additional charge to have this type of guarantee. Usually when you purchase mutual funds from your financial service provider, you pay a small fee to have someone else manage your money. This can be 0.5% to 3%. To have a guarantee put on your investment, can cost you an additional 0.5% to 1%. These are known as Management Expense Ratios and come with any type of mutual fund you purchase.

But — How much are you willing to pay to know that at least your deposit is guaranteed to be there while you invest in mutual funds and take advantage of increases in the market?

In addition to the guarantee on your initial deposit there are also other features of guaranteed investment funds that are worth looking at:

1) Annual resets -

Each time the market increases, this gives you the opportunity to reset your guaranteed investment. This allows you to lock in your investment when your investment increase in value because of market increases.

For example – suppose an investor near retirement age had invested $500,000 into this fund and after a incredible bull run, his investment grows to $542,500 in a year. By resetting the guarantee at this point in time, the investor has now guaranteed that he will at the very least receive $542,500 when he decides to retire and start to receive income from his investment.

2) Bonuses -

Within some of the guaranteed investments, the insurance company offers a bonus on the initial investment for each year you leave your investment in the fund and do not withdraw any of the funds.

For example – In the Desjardins Helios contract, you can receive a 7% Annual Bonus for the first 10 years you leave your money in your investment.

3) The choice of a Lifetime Benefit or a Minimum Benefit

Within some of the guaranteed investments, there is a choice of how you want to receive your retirement income.

• Guaranteed Lifetime Withdrawal Benefit: This allows minimum withdrawals from the invested amount without having to annuitize the investment (i.e. take regular distributions). The amount that can be withdrawn is based on a percentage of the total amount invested in the annuity. In most cases, if you were to access the funds in the annuity you would have to either annuitize it, which creates regular distributions, or face fee penalties. The GLWB allows access to the invested capital, regardless of the performance of the investment, and continues to maintain and invest in the annuity. The percent of the allowable withdrawal will depend on the contract, but can be increased in most cases if the date at which the annuity payments begin is delayed.
• Guaranteed Minimum Withdrawal Benefit – Allows you the ability to protect their retirement investments against downside market risk by allowing the annuitant the right to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.The best aspect of this guarantee is that it protects you against any investment losses that have been incurred without losing the benefit of upside gain. For example, suppose that Jamie’s initial investment was $100,000, but due to downturns in the economy, the investment is now only worth $85,000. Since Jamie had purchased a guaranteed minimum withdrawal benefit with a rate of 10%, she will be able to withdraw a certain percentage each year (in this case, $8,500) until the entire $100,000 is recovered.

Guaranteed Investment Funds are a good way to protect your retirement investments. You should speak with your financial advisor to determine if this is the right investment for your portfolio.

I was pleased to read an article in the Financial Post today if couples (or singles!) should use an RRSP or a Tax Freee Savings Account (TFSA) as a vehicle to save for a new home.

In the past Financial Advisors would recommed to their clients, who were buying their FIRST home, to possibly utilize their RRSP under the Home Buyers Plan. Under this plan, you can take out maximum $25,000 of your RRSP as a loan to purchase your first home, tax free. You must repay this loan starting in 2 years from when you take it out, and must pay it back into your RRSPs within 15 years. This is a great tool for someone who is young enough to repay the loan back and who has some savings in their RRSP.

However, the problems some people faced in the past was repaying the loan from the RRSP back. And it is only available to first time home buyers.

Now, I would recommend saving for your down payment in a TFSA. I like the idea of not touching your RRSPs. Your RRSPs should be set up as a pre-authorized payment each time you are paid (remember: PAY YOURSELF FIRST!) and those savings should be kept specifically for retirement purposes.

EXAMPLE 1: Each spouse saves $400/month and has this amount taken from their account automatically on the 1st of each month. If they put it into a non-risky investment earning 3% interest, at the end of 3 years they would have $30,171.69 saved for a down payment on a new home!

EXAMPLE 2: If the couple decides they can incur some risk and saves it into a riskier investment and if the markets turn around and go back up, they could earn up to 8%. They would have $32,644.64 saved for a down payment on a new home. And they would be able to take out these savings TAX FREE!

The major differences between saving for a down payment in the RRSP Home Buyers Plan, or using a TFSA:

1. You do not have to repay the loan you take out from your TFSA; With a Home Buyers Plan you have to pay it back within 15 years.
2. You can use the TFSA for any down payment or expense; With the Home Buyers Plan you can only use it for first time home purchase, no other purchase.
3. If you earn little or no income you can invest with a TFSA; you must have earned income to invest in an RRSP.

Each individual has a different scenario therefore it is advisable to sit down with an Advisor and find out which route is best for you. Your Advisor will be able to show you which plan is more suitable to your lifestyle!

What can you do to keep investing in your future and take advantage of potential growth?

1.  Pay Yourself First -

Do you have a pre-authorized monthly savings plan set up that follows your pay schedule? Setting aside part of your income, one for savings and one for retirement, even if its small amounts will grow significantly over time.

2.  Realize the advantages of NOT having your money at the bank -

If you have all of your investments with the bank, when you die all of your savings, retirement accounts and chequing accounts will have to go through your estate to get passed down to your beneficiares. This can take MONTHS. And trust me your lawyer will take his fees off the top. However if you have your investments and savings with a licensed agent, when you die your savings and retirement funds get immediately passed to your beneficiaries bypassing your estate. This can take DAYS. No fees. Be a positive person and think of your family, be prepared.

3.  Take advantage of Dollar Cost Averaging -

When you invest on a regular basis such as a pre-authorized monthly payment plan, you are taking advantage of different rates in the market. So for the same dollar, you buy more units when the value is lower and less units when the value is higher, averagining out to a lower cost over time. So although the markets are low right now, this is a great time to start up a monthly plan to start saving money. Take advantage of it now that the price is low.

4.  Chip away at your mortgage -

By putting a few extra dollars on top of your mortgage can drastically chip away at that interest and principal saving you thousands of dollars overtime. Or, have you considered a home equity line of credit? Every month you pay down on the principal and the interest is caluclated at the end of the month. You can take years and thousands of dollars off your interest.

5.  Use credit cards wisely -

Never never never carry a balance. Pay it off every month. If you have a balance, make it a priority to pay it off immediatly. Let’s say you purchase a $1,000 Plasma TV. You put it on your credit card that has an 18% interest rate. If you only make the minimum payments, that TV can end up costing you over $1,640. So not only do you get a poor credit rating but you end up paying almost double for your TV by putting in on your credit cards. Waste of money.

6.  Claim all your tax credit and tax deductions -

Don’t leave any cash on the table. Take advantage of what you can claim and deduct. This may include the Children’s Fitness Tax Credit, your RRSP contributions, Tax Credit for Public Transportation, the Energy Savings Credit. For a complete list of what you can claim and deduct, click here.

With the launch of the new TFSA accounts this year, many are wondering if they should contribute to one and what the benefits are. Let’s explore 10 reasons why contributing up to $5,000 per year to this savings account is the best plan for your short and long term savings goals.

1.  Emergency Funds

Emergency funds or rainy day funds, parked in a high interest savings account, guaranteed investment certificate (GIC) or money market fund, if they are non-registered savings will generate taxable income each year. Save yourself some taxes and keep your savings in the same type of account, but switch it into a TFSA to save you tax money.

2.  High Risk Investment Speculation

TFSAs can be a great place to invest in equities and other high risk assets such as speculative stocks or penny stocks. The entire amount of interest you would gain from these investments would be tax free. What if you lose your investment? Beside the value of your investment, you would lose the ability to claim a $5,000 capital loss.

3.  Collateralized Lending

Unlike RRSPs and RRIFs, you can pledge your TFSA assets as collateral for a loan or secured line of credit, which may lead to a lower interest rate than an unsecured line. This is a great advantage especially if your TFSA builds up value over future years.

4.  Protecting Government Benefits

For Canadians with low and modest incomes, the TFSA can help preserve income-tested government benefits since TFSA withdrawls are not considered to be income. For young people who are receiveing GST credit or the Child Tax Benefit, they can protect these funds by investing in a TFSA and having withdrawls anytime. For seniors receiving Guaranteed Income Supplement or Old Age Security, again the funds can be protected in a TFSA. Neither TFSA contributions nor its earnings affect eligibility for the Guaranteed Income Supplement, Old Age Security, the Canada Child Tax Benefit or other government benefits based on income.

5.  Tax Rate Planning

For Canadians with limited funds who are in a lower tax bracket but who expect to be in a higher tax bracket upon retirement (i.e. farmers, selling a business, etc) contributing to a TFSA may be more beneficial. Ultimately as you get into a higher tax bracket before retirement, TFSA money can be moved into an RRSP, tax-free, moving the individual into a lower tax bracket and restoring TFSA contribution room.

6.  Retirement Planning

Taxpayers who cannot contribute to RRSPs — i.e. someone over the age of 71 or with no earned income or with a large pension adjustment — can use a TFSA to invest for retirement on a tax-free basis with no forced minimum withdrawl.

7.  Education Planning

While RESPs are the vehicle of choice of saving for education because of the federal and provincial grants, TFSAs can be another vehicle to save for education.

8.  Income Splitting with Spouse and Kids Over 18

You are permitted to give your spouse or partner funds to open up their own TFSA without having normal attribution rules for income and capital gains apply. You may also give each child over age 18 money to open up a TFSA. NOTE: You cannot open up an “in-trust for” TFSA.

9.  Estate Planning

The entire TFSA will be tax free upon death if you have named a beneficiary, bypassing estate and savings probate fees.

10. Emigration Planning

Clients wishing to emmigrate from Canada can still hold a TFSA. No future contributions can be made without paying a penalty.