Most clients are worried about losing their wealth even before the recent market downturn. Today, they want help making smart decisions about their money. Many have lost confidence in their current advisors and even in the financial markets as a whole. Investors want to keep wealth safe from potential creditors, litigants, children’s spouses and potential ex-spouses, as well as from catastrophic loss.
Saving for the future is cornerstone of financial planning but it can be trickier to get to grips with than it seems. There are a wealth of different types of product on the market to choose from but the first step starts with identifying what your personal reasons for saving are. We all have a different purpose or objective, be it saving for a house, your child’s future education or even for your retirement and we will be able to support you in choosing the most appropriate savings option for your own situation. With this in mind, let’s take a look at some of the more common products available:
This option is best suited to those who prefer a lower level of risk, as it offers the protection of your original investment with the opportunity to earn interest at a predetermined, albeit probably lower, rate. These products have the benefit of offering you peace of mind and security from market fluctuations that may diminish the amount of your original investment. Many factors will influence your return, including the interest rate itself, the amount of your investment, length of the term etc.
These products are ideal for those looking to invest in the longer-term as they are subject to fluctuations in the market which can vary, sometimes losing value in the short term but potentially offering higher returns in the longer term than products with guaranteed interest payments. Take your time to research the funds available on the market which are targeted to your own investment strategy. Important information about mutual funds is found in the Fund Facts document. Please read this carefully before investing. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Unit values and investment returns will fluctuate.
Similarly to mutual funds, segregated funds are market-based but offer additional benefits due to the fact that they are insurance contracts. A big plus of this time of investment is the fact that your savings will be protected and you will be guaranteed to receive between 75% and 100% of your initial investment, less withdrawals, back upon the maturation of your contract or in the event of your death. Some segregated fuds also offer an income which is guaranteed for life.
There are a couple of common plans, as follows:
A TFSA can be an effective way to save for the future, even for those who are only able to save a little every year, as your savings will grow more quickly due to the fact that you do not pay any tax on the earnings. Here are some reasons to help you decide whether it would be financially beneficial for you to open a TFSA:
Provided that the earnings that you make from investments are not withdrawn from the RESP, you will not pay any tax on them, giving you the opportunity to grow your savings quicker.
The Canada Education Savings Grant, established by the federal government, will add to your RESP every year. What’s more, families on lower incomes might also receive money via the Canada Learning Bond. Some provinces, including Alberta, Quebec and Saskatchewan, also offer grants to eligible individuals.
Take full control of your finances by deciding which investments are best matched to your financial goals, appetite for risk and short / long term objectives. You can choose from a variety of options including GICs and mutual funds.
A friend or family member is able to set up a RESP for your child and they can contribute towards it too to help it to grow faster.
Educational assistance payments can be drawn by your child if they take post-secondary education but they are liable for the tax on the payments. This can be beneficial as your child, while studying, is likely to have little or no income and therefore the tax burden is likely to be lower than if you were liable for it yourself.
There are a few rules to be aware of relating to the time periods that apply to RESPs. For example, if you are eligible for disability tax credit, your RESP account can stay open for a maximum of 40 years. And if your child wants to take a break from studying before returning to education later, they may still be able to use the money invested in the RESP. The golden rule is to check the specific rules of your scheme in relation to every eventuality.
An annuity is simply a contract with a life insurance company where you pay a lump sum of money at the start of the term and, in return, the life insurance company guarantees to pay you a set income, in regular instalments for an agreed period of time.
You may want to consider an annuity if you have maxed out other tax-advantaged retirement accounts such as your Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA). There are also additional reasons why you would consider an annuity:
Please note that once you purchase an annuity, you can’t get your savings out, your annuity payments are locked in and you can’t change this for any reason. Therefore annuities can be extremely inflexible. There are a number of reasons why you should consider purchasing an annuity, please talk to us and we can help you consider your options.
A Registered Retirement Savings Plan (abbreviated to an RRSP) is a savings account which offers you a simple way to put money away for your retirement. A key feature of an RRSP is the fact that it is registered with the federal government. Here, we will explore five notable reasons to save for your retirement in this way.
A Registered Retirement Income Fund (or RRIF) is usually opened when you transfer money from an existing RRSP. It is a type of savings account which has the advantage of providing you with a consistent and regular source of income in your retirement. Here are some good reasons to consider opening a RRIF.
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