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.
 

How to get the most from your savings

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:
 

Products with guaranteed interest

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.
 

Mutual funds

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.
 

Segregated funds

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.

Tax-advantaged savings plans

There are a couple of common plans, as follows:

  • An RRSP (registered retirement savings plan) offers you a personal savings and investment account which also benefits from tax benefits.
  • A TFSA (tax-free savings account) provides the opportunity to save for the future, without paying tax on any growth.

Tax Free Savings Account (TFSA)

Great benefits of opening an TFSA

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:

  • If you are looking for a flexible way to save, a TFSA could be a good option as it allows you to carry forward any unused contributions to subsequent years. In addition, you are able to credit any withdrawals that you have made back into the TFSA to enable you to benefit from the maximum savings potential.
  • You may already be investing the maximum amount possible into an RRSP. In this case, investing money into a TFSA allows you to draw income from it when you retire, without paying any tax on the withdrawals.
  • If you are on a low income and therefore receive money from government schemes such as the Canada Child Tax Benefit, your TFSA will not affect the amount of benefit that you receive.
  • You should bear in mind that you have already paid tax on the funds that you invest into your TFSA. Therefore, if you expect that your tax rate will have increased by the time that you withdraw your funds, you will have paid fewer taxes in total. Remember that the opposite applies for your investment in a RRSP.
  • A TFSA offers you the option of keeping investments that would usually be subject to a higher rate of tax sheltered, as you do not pay tax on the earnings.

Registered Education Savings Plan

Great benefits of opening a RESP

  • Benefit from tax-free savings


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.

  • Take advantage of government grants


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.

  • You can choose your investment options


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.

  • Others can contribute towards a RESP


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.

  • Your children are liable for the tax of EAPs


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.

  • Benefit from your RESP account for up to 36 years


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.

Annuities

What are Annuities and How Do They Work?

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.
 

When To Consider An Annuity?

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:

  • You aren’t comfortable with the fluctuations in the investment market. Since equity-based investments can decrease and increase in value, annuities can protect your principal to ensure your investment remains intact to earn income in the future. This is of particular importance when you’re nearing retirement or in retirement. Annuities can provide income and relieve the worry of making up potential losses. Annuities can also be used for fixed expenses in retirement.
  • You want guaranteed and predictable income. You can buy an annuity and have it pay an income stream immediately or you can defer it until later. While annuities offer you an income stream, you will know exactly how much you will receive and for how long, once you decide to take it. There are also options to suit your individual needs such as if you’re married, you can add options that guarantee income for as long as either you or your spouse lives.
  • You want guaranteed income for life. When you buy a life annuity, the life insurance company pays you a guaranteed income for the rest of your life.
  • You want to achieve specific financial or estate goals. Annuities can be used for other financial goals, such as providing money for your beneficiaries, estate or charities. Annuities can be used to provide a steady income during your lifetime and used to fund life insurance to pay your beneficiaries a lump- sum amount on death. Annuities can be used to provide income for a disabled child.

 

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. 

Registered Retirement Savings Plan

Great benefits of opening an RRSP

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.

  • Your investment is tax free This is a great feature of an RRSP. Providing that you keep your investment earnings in the plan, you won’t pay any tax on them. This, of course, means that your savings have the potential to grow at a faster rate.
  • Your contributions are tax deductible
  • You are able to show the contribution that you make towards your RRSP as a deduction on your annual tax return, which can add up to considerable savings for those in the top tax bracket. What’s more, you can carry forward this allowance to future years, if your income in one year is lower than usual.
  • You can save even more tax by taking out a spousal RRSP
  • Another great tax benefit of these plans is the fact that you can combine your tax-free savings within a spousal RRSP and then more equally split your retirement income between you, again leading to potential further tax savings.
  • You can transfer your RRSP when you retire: This means that you can easily move the funds invested in your RRSP to an annuity or a RRIF at the time of your retirement to receive regular, staggered payments – though you should note that you will have to pay tax on these payments on a yearly basis.
  • You can withdraw from your RRSP under certain conditions: You won’t pay tax on withdrawals from your RRSP in particular circumstances. For instance, you are permitted to withdraw up to $25,000 for a down payment on your first home, or up to $20,000 to pay for education costs (funding rules apply).

Registered Retirement Income Fund

Great benefits of opening an RRIF

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.

  • You retain control over how your money is invested. You can choose between investment options such as mutual funds, segregated funds, and GICs for example, depending on your circumstances.
  • You benefit from tax-free savings. When you transfer funds from your RRSP to a RRIF you won’t pay any tax on your investment earnings or on the funds that remain in the RRIF, though you will have to pay tax on any money that you subsequently withdraw.
  • On the topic of withdrawals, a RRIF offers good flexibility providing that you withdraw the agreed minimum amount every year. There is no maximum amount that you have to withdraw and it is your choice as to how often you make withdrawals or the frequency or value of them.
  • You have the option of stating your spouse as your beneficiary so that they can inherit the funds in your RRIF in the event of your death, without paying any tax. In fact, if you choose to name your spouse as a “successor annuitant” then they are able to take the RRIF over so that they can receive payments from it directly. In addition, your RRIF is not classed as part of your estate and is therefore exempt from exclusion in probate fees.
  • A final benefit of an RRIF is that the minimum annual withdrawal amounts depend on your age and are lower the younger you are.  The age of your spouse can be used to base these minimum annual withdrawals on and, if they are younger than you, this could potentially reduce the amount of tax that you pay on withdrawals.