triheyftp, Author at Trihey Financial Group | Wealth Planning

Fall 2024 Financial Planning Report

Get a head start on year-end to-dos

With holiday planning and end-of-year financial deadlines, December can be hectic. But if you start your financial to-dos soon, you’ll have an easier time later.

RESP Contributions

Be sure to contribute $2,500 to your Registered Education Savings Plan (RESP) by December 31 to trigger the $500 Canada Education Savings Grant (CESG) for 2024.

TFSA Withdrawals

If you plan on withdrawing Tax-Free Savings Account (TFSA) funds in the near future, consider making the withdrawal by December 31. This way, you can replace those funds anytime in 2025 – instead of waiting until 2026 if you withdraw the funds in January or later.

Opening an FHSA

Do you have a child planning to use a First Home Savings Account (FHSA)? Contribution room only begins once an account is opened. If they open an FHSA by December 31, they gain $8,000 of contribution room for 2024 but could contribute the funds in 2025.

RRIF Withdrawals

By December 31, you may want to increase your Registered Retirement Income Fund (RRIF) withdrawals to the limit of your current tax bracket. You could pay less tax now than if those funds are withdrawn later or taxable to your estate.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

Why Digital Assets Belong in Your Estate Plan

Imagine if the person administering your estate needs access to the bills you pay online, but they can’t get into your bank account. That’s just one of many reasons why your estate plan should account for your digital assets.

Essentially, digital assets are any personal or financial text, media or information stored on your computer, cell phone or electronic device. Financial content may include bank and investment accounts, a PayPal account, tax records, a business website, cryptocurrency wallet, online bill payments and subscriptions.

Many estate planning professionals recommend keeping a digital property inventory. You list all digital items and accounts along with passwords and other login information. This record saves your estate administrator from an otherwise daunting process, prevents the potential loss of financial assets and can defend against financial fraud or identity theft.

You can name a trusted person to manage only your digital assets or assign the duties to your executor – also known as estate trustee, personal representative or liquidator, depending on the province.

Deciding When to Start QPP/CPP Benefits

If you start Quebec Pension Plan (QPP) /Canada Pension Plan (CPP) benefits before age 65, you receive a smaller monthly amount but for a longer period. Start later and you increase the benefit amount, but you must rely on other income sources until benefits begin.

The government determines the monthly benefit you can receive at age 65. This amount is reduced by 0.6% for each month you begin benefits before 65, or 7.2% annually. It’s increased by 0.7% for each month you delay past 65, or 8.4% annually.

Choosing when to begin isn’t always easy. Some retirement experts say to start QPP/CPP benefits the year you retire, even if that’s the earliest possible age of 60. Others calculate that you’re better off financially the longer you delay, especially to the maximum age of 70.

So how do you decide? To help out, here are some reasons why individuals start their benefits at certain times.

Starting Benefits Sooner

Your QPP/CPP benefit amount is based on your contributions to the plan. This table assumes a benefit of $1,000 at age 65. In 2024, the maximum monthly benefit at 65 is $1,364.60, and the average benefit as of January 2024 was $831.92.

Someone may choose to start QPP/CPP benefits at age 60 or another age before 65 because they need the money to help cover their cost of living. Another reason is if an individual has a health condition that may affect their life expectancy.

60	61	62	63	64	65
Monthly QPP/CPP Benefit When Starting Earlier
$640	$712	$784	$856	$928	$1,000

Your QPP/CPP benefit amount is based on your contributions to the plan. This table assumes a benefit of $1,000 at age 65. In 2024, the maximum monthly benefit at 65 is $1,364.60, and the average benefit as of January 2024 was $831.92.

Taking Benefits at 65

An individual may start QPP/CPP at 65 because that’s the traditional age to collect the benefit or because they count on this income to support their retirement lifestyle.

Note that the timing decision may be for reasons that are more personal than financial. Someone may understand their benefit increases the longer they delay, but they don’t feel comfortable losing out on several years of benefits.

Delaying Benefits

If you start QPP/CPP benefits at age 70, your monthly payment will be 42% more than starting at 65. By about age 82, the total benefits from having started at 70 equals the total amount had you started at 65. From this point on, you continue receiving 42% more each month for life.

Another reason to delay benefits after age 65 is if you’re still working and likely don’t need the extra money.

65	66	67	68	69	70
Monthly QPP/CPP Benefit When Delaying
$1,000	$1,084	$1,168	$1,252	$1,336	$1,420

When it’s time to decide when to start your QPP/CPP benefits, talk to us. The choice involves your retirement income strategy, so our input will be helpful.

Do You Involve Your Spouse in Financial Matters?

One spouse does the gardening and rakes the leaves. The other takes the car in for repairs. It’s common for each spouse to become responsible for specific roles. That’s usually a good thing, but not when it comes to financial matters.

Here’s why you’re better off when both spouses are involved in the couple’s financial life.

Achieve Goals Successfully

When making financial decisions, a second opinion often helps. For example, one spouse receives an annual bonus and wants to buy a large-screen television and home theatre. But the other spouse does a reality check – that money should be going to education savings. Making decisions together can help keep financial goals on track.

Prevent Conflicts Over Money Issues

If one spouse solely makes all financial decisions, trouble may await if the other disagrees. Say the spouse in charge decides to co-sign their brother’s loan, but the other spouse questions that commitment. It’s a conflict that could likely have been avoided if the couple had discussed the matter beforehand.

Benefit From Compromise

Some decisions regarding investing, budgeting or other financial matters are best reached through compromise. Perhaps one spouse wants an emergency fund that covers six months of living expenses. The other spouse believes that money should be invested. They arrive at a compromise, using a high-interest savings account to build an emergency fund covering three months of expenses.

All of this is not to suggest that a couple needs to perform financial duties equally – one spouse might take the lead. But it’s wise to share information about money matters, discuss financial issues together and make important financial decisions as a couple.

Helping Young Adult Children Save for the Future

Many young adults face a savings dilemma. They may understand that the sooner they begin investing, the greater the effect of compound growth in building wealth for the future. But they can’t put money away because they have more pressing financial needs now.

Do you have a child or grandchild in such a situation? They may be a post-secondary student or an individual who’s starting out and doing their best just to meet today’s cost of living.

You may be able to help them save for the future in one of the following ways.

Helping to Save for a Home

A young adult with the goal of owning a home may want to open a First Home Savings Account (FHSA). The time horizon is relatively short – an FHSA can only remain open for 15 years. This means that to benefit the most from compound growth, your child or grandchild should contribute as much as possible, as early as possible.

Ideally, they would contribute the maximum annual amount of $8,000 for five consecutive years to reach the $40,000 limit. That may simply be unattainable for many young adults. But with your help, they may reach or come closer to making the optimal contributions.

Topping Up RRSP Contributions

A young adult in the early years of their working life may be paying off a car loan, covering their rent or even a mortgage and doing their best to cover the cost of living. They’re generating Registered Retirement Savings Plan (RRSP) contribution room but might only be able to contribute a small amount. You can gift them funds so they can make their maximum RRSP contribution.

If your child or grandchild has a low income, let them know about deferring the RRSP tax deduction. They can defer the deduction to a future year when they have a higher marginal tax rate and will save more tax.

When Goals May Be Flexible

Some parents or grandparents may want to take advantage of a child’s or grandchild’s Tax-Free Savings Account (TFSA) for family income-splitting. Although the gifted funds are after-tax dollars, all growth and income earned in the account is entirely tax-free.

With a TFSA’s flexibility, a young adult can use the account to meet virtually any want or need, whether they’re saving for a vacation, a car or retirement.

If you have a child or grandchild interested in saving now for retirement – perhaps, thanks to your encouragement – a TFSA can be ideal. Gifting funds when they’re at a younger age gives them great potential to capitalize on compound growth over the long term. The young adult could even open two TFSAs, one for short-term and medium-term goals, and the other for retirement savings. This way, they can more efficiently allocate assets in their retirement savings TFSA to suit a decades-long time horizon. Also, they’re more likely to view funds in this account as untouchable, which may not be the case if all contributions are co-mingled in one TFSA.

The Gift of Compound Growth

How a $35,000 Gift Exceeds $285,000 by Retirement

A parent gives their child $7,000 to invest in a Tax-Free Savings Account (TFSA) upon the child turning 21. The parent continues making this annual gift for four more years, for a total of $35,000. This chart assumes an annual rate of return of 5.00%.

This chart is only intended to illustrate the general principle of compound growth and is not indicative of any investment.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

Summer 2024 Financial Planning Report

Will life changes affect your retirement plans?

You may envision your desired retirement lifestyle, reach your financial goal and retire at your scheduled retirement date. However, many couples and individuals encounter situations that make them wonder if they should change their retirement plans.

Say that someone receives an early retirement offer from their employer. The payout is tempting but less than their salary if they continue working until their original retirement date. This person isn’t sure what to do.

Another individual goes through a divorce in their late 50s. The couple’s property is divided and this person pays spousal support. Now this divorced individual questions whether their new financial situation will affect their retirement.

Evaluating the situation

Whenever a new situation or event makes you question your retirement plans, we can help. We account for the financial difference the life change makes to your savings at a specified retirement date and project your retirement income. With this projection, we can determine whether your retirement plans remain on track or need to be updated.

If a life event calls for a change to your retirement plans, the particular change depends on your own situation – and it’s a decision you make with our support and guidance.

A variety of solutions

Perhaps an individual decides to postpone their original retirement date by a couple of years, which not only increases their savings but also leaves fewer retirement years to fund.

Those who want to keep their planned retirement date have various solutions available. Someone retires from their full-time career but will continue to earn income as a consultant. A couple increases their savings in their final years of work, now that their children have left home and the mortgage is paid. Another couple modifies their retirement lifestyle, choosing to take Florida vacations in the winter instead of buying a property down south.

Whatever your situation, we’ll help ensure that your retirement date suits you and you’ll enjoy a comfortable retirement without worrying about outliving your savings.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

Naming your child as executor

It’s quite common to name an adult child as the executor of an estate (also known as estate trustee, personal representative or liquidator, depending on the province). Often, it’s a wise decision – but not always.

You must ensure your child completely understands all the duties and time involved or they may end up regretting that they accepted the role.

If you have two or more children, naming one child as executor can be desirable when that child is best suited for the role. However, in some cases the other children may disagree with the executor’s decisions, causing discord among siblings.

You can also name two or more children as co-executors. On the plus side, you treat your children the same and they can share the duties. The downside is the risk of disagreements or creating division if the siblings don’t share the work equally.

Naming a child as executor can be an excellent choice if you’re confident in your decision. If you have reservations, other options are your spouse, a relative, friend, lawyer, professional or trust company.

Be on the lookout for fraud

According to the Canadian Anti-Fraud Centre (CAFC), Canadians lost $567 million to fraud in 2023 – and the CAFC estimates that only 5 to 10 percent of fraud attempts are reported.¹

Advanced technology and sophisticated approaches are making more fraud attempts appear authentic. For example, in a recent scam, the target receives a text message claiming to be from the Canada Revenue Agency (CRA) that includes the recipient’s name and social insurance number. They are instructed to send a specific amount owing by e-transfer. Unfortunately, not all targets of this scam know that the CRA does not send texts to request payments.

You need to be on the lookout for potential fraud whether attempts are received by text, phone calls, mail, email or at the door. Anytime you’re asked to send money or provide personal or banking information, don’t reply or click any links. Confirm that the source is legitimate.

Also, consider advising any seniors in your life to be wary of any unsolicited request to provide personal information or money, as seniors are often targets of financial scams.

¹ Royal Canadian Mounted Police, Fraud Prevention Month news release, February 2024

Are your educational savings strategies securing your child’s future?

It can be quite common to base an education savings target on average tuition costs or current costs of residence and off-campus housing. But there are many reasons why education costs might end up being more than you expect.

Consider the unexpected

Say that a child has always enjoyed school and always loved their pets. For years and years, they talked about their dream to be a teacher. But in grade 11 they change their mind – now they want to be a veterinarian. According to Statistics Canada, the average undergraduate tuition for education is $5,358 and for veterinary medicine is $15,532.¹ An extra $10,000 per year takes quite a bite from education savings.

Another reason for education costs rising beyond your expectations is if your child or grandchild is midway through their program and decides to change programs. Or they add an extra year of study to make their course load more manageable, to boost their grade point average, for health reasons or because they applied for a dual degree. Perhaps a student completes a college program and then decides to go to university – or first university and then college. What if a child wants to be one of the thousands of Canadians who studies abroad each year?

You also need to account for increases in the cost of living. Off-campus housing costs have been escalating. Paying well over $10,000 a year to share a house with several students is common in many cities, and that’s just today’s cost.

If you intend to cover a child’s post-secondary education and the costs exceed your education savings, you would need to consider where the additional funding comes from – hopefully, not your retirement savings.

Making the most of an RESP

It’s important to ensure your education savings are on track to give your child or grandchild every possible opportunity. A Registered Education Savings Plan (RESP) helps meet that goal in two ways – through tax-deferred investment growth and grant funds.

To benefit the most from tax-deferred growth, the earlier you start, the better. You can open an RESP as soon after a child’s birth as you wish, though you’ll need the child’s social insurance number (SIN).

Your RESP receives “free money” in the form of a Canada Education Savings Grant (CESG) – 20% on the first $2,500 of annual contributions up to a $500 maximum each year. The lifetime maximum is $7,200.

Note that there’s no maximum to the annual amount you can contribute to an RESP, but the plan has a lifetime contribution limit of $50,000.

¹ Statistics Canada, “Canadian undergraduate tuition fees by field of study,” 2023/2024

The best time to invest is…

In the past few months, stock markets in Canada, the U.S., Japan and Europe reached record highs. In market extremes, whether it’s an upswing or downswing, many people wonder if they should invest differently.

When Markets Rally

When stock markets are rising, some individuals believe it’s an opportune time to invest. They’re tempted to increase their equity investments, perhaps even using savings from their emergency fund. But overinvesting has potential drawbacks. By increasing their allocation to equities, these investors will likely take on a level of risk beyond their comfort zone. They’re buying stocks that are now expensive, when other investments may offer more attractive prices and greater upside potential. Also, the market upswing could turn to a downswing.

During a down market

The other side of the coin is investing when markets are in a deep or prolonged downturn. Many people believe this is the best time to invest – buying when prices are low to profit when the markets recover. But even this tactic of buying the dip comes with warnings. If you hold a significant amount of cash while waiting for a market downturn, you can sacrifice returns when markets are on the rise. Also, just as can happen in a bull market, overinvesting in equities can push your risk beyond your tolerance level.

Investing regularly is best

So, if investing more in a rising market and down market both come with precautions, what is the best time to invest?

It all comes back to continuing to invest a consistent amount on a regular basis, regardless of the market conditions. This tried-and-true method gives you the best of both worlds. When markets are down, you buy low. When markets are rising, you participate in the growth.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

Spring 2024 Financial Planning Report

Why Goals-Based Investing Matters

The concept of “goals-based investing” has been appearing in the media, and it’s often touted as something new. Perhaps it’s new to some investors, especially anyone who invests on their own, but those with an advisor already follow the principles of goals-based investing.

Investing that’s not goals-based typically measures success by comparing a portfolio’s performance to benchmarks or market returns. Performance still matters with goals-based investing, but success is determined by achieving a goal.

The Process

You identify your goals and specify your individual investment objectives. Each goal has an asset allocation based on its time horizon and your risk tolerance. Progress is monitored periodically so you can stay on track toward achieving each investment goal. Note that it’s not only investment performance that’s monitored but also changes in any goal that may affect your financial objective.

Here’s an example to illustrate why meeting a goal can matter more than market performance. Say an investor approaching retirement is following the strategy of building a fixed-income reserve to help fund their initial years of retirement. This individual has no need to compare how their reserve fares against market ups or downs. Their goal is to keep their planned retirement date even if the markets tumble.

Benefits of Goals-Based Investing

Goals-based investing offers several benefits, both financial and psychological. The goals are more attainable because each one has its own investment strategy and is monitored along the way. You’re less likely to react to short-term market fluctuations, being tempted to either sell or buy, because you’re focused on the longer term. Also, when markets are volatile or falling, you’re less likely to worry – knowing that your long-term investment objectives have been set to account for periods of market volatility over time. Whenever you want to track how your investments are aligned with your goals, please get in touch.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

How to Use Your TFSA in Retirement

Just as a Tax-Free Savings Account (TFSA) meets a variety of needs during your working years, it can be equally versatile during retirement.

Providing Tax-Free Income

Drawing income without paying tax is already a win, but tax-free income also lends itself to various retirement income strategies.

Perhaps there are years when a retiree needs more income, and they’re at the upper threshold of a tax bracket. Drawing income from taxable sources would result in paying more tax on that amount, but they could withdraw TFSA funds without climbing to the next bracket.

Say that someone wants to defer their Canada Pension Plan (CPP)/Québec Pension Plan (QPP) and Old Age Security (OAS) benefits to age 70 to gain a larger benefit amount in the long run. The retiree can withdraw tax-free TFSA funds to help cover their cost of living during the years before they take their government benefits.

Some retirees might be in a position where their taxable income amount would result in a clawback of OAS benefits. They can avoid or minimize the clawback by making TFSA withdrawals, as these funds aren’t included as income for tax purposes.

Continuing to Invest

If you earn income during retirement from part-time work, a business, consulting or a rental property, you can continue to contribute to your TFSA – up to your allowable limit.

Some retirees have years when their minimum required Registered Retirement Income Fund (RRIF) withdrawal leaves them with more income than they need.

By contributing a portion of that withdrawal to their TFSA, the amount can grow tax-free.

Another way to grow a TFSA is by gradually transferring funds from a non-registered account. The non-registered assets are taxable whether they’re sold or transferred in-kind, but they would be subject to tax in the future anyway. With this strategy, you pay any tax owing now and benefit from future tax-free growth and withdrawals.

Leaving Assets to Heirs

Part of estate planning is managing or accounting for the tax payable on estate assets, but with TFSAs, planning for taxation is not an issue.

If you want to leave TFSA assets to your spouse, you can name them as a successor holder or beneficiary. Usually, successor holder is the better choice because your spouse simply takes over the existing TFSA – it’s a simple transaction. If a spouse is named beneficiary, there are rules to follow, a form to submit and potential tax consequences.

If you leave TFSA assets to a child or another heir, you designate them as a beneficiary, and they’ll receive the proceeds tax-free.

A TFSA can also be used to help offset tax payable on estate assets by naming the estate as beneficiary. Also, if you wish to donate TFSA assets to a charity, the donation tax credit can be used to help offset an estate’s tax liability.

Please Note

In Québec, a beneficiary or successor holder can only be named on the TFSA form for insurance investment products, such as guaranteed investment funds or segregated funds. Otherwise, the TFSA beneficiary is to be named in the will.

Safeguard Your Assets With a Trusted Contact Person

Just over two years ago, the Canadian Securities Administrators (CSA) introduced the concept of a “trusted contact person,” which has now been adopted across the country.

An investor may give their advisor the name of a family member, close friend or trustworthy professional. The CSA recommends choosing a different person than the individual you appointed for your power of attorney or mandate. Suppose the advisor is ever concerned that the investor is becoming less able to make sound financial decisions or may be vulnerable to fraud or financial exploitation. In that case, the advisor can contact the trusted person to address these concerns.

If you haven’t yet named someone or wish to replace your trusted contact person, please feel free to contact us. Keep in mind that this measure was not only introduced to protect seniors who may be developing dementia. Younger individuals can suffer cognitive impairment from an illness or injury, and people of any age can be exploited financially.

Finding a Balance Between Spending and Saving

When it comes to spending versus saving, there is no exact balance that’s right for everyone. Each of us has our own money personality, perhaps one we’re born with, acquired by following – or rejecting – our parents’ habits, or developed on our own over the years.

Two Danger Zones

While there’s no exact balance, there are two potential danger zones. If someone is primarily a spender, they risk missing out on their long-term savings goals or taking on too much debt by living beyond their means. Someone who’s a diehard saver may suffer a different kind of missing out – saving for the future at the expense of enjoying life now.

Anyone close to either danger zone needs to recognize and acknowledge their situation. Awareness is key. You can always change your habits to arrive at a balance to provide for the future while living for today.

Finding the Balance for Couples

Anyone might think that a spender and saver living under the same roof spells trouble. But such a couple has the potential to find a healthy balance between spending and saving. It just requires understanding, communication and compromise.

Interestingly, two spouses who are both savers or both spenders could have the greater challenge. Although their money personalities match, the savers need to make sure they won’t one day regret missing out on life’s pleasures. The spenders must be watchful that they don’t sacrifice their lifestyle in retirement for the lifestyle they enjoy now.

When We Can Help

Sometimes you may face a situation where you wonder whether spending a large sum will affect your financial situation. Will a long trip to Europe mean you need to start budgeting? Will purchasing a vacation property force you to retire later? You can contact us when these situations arise. We can help you determine whether spending now will affect your current financial life or long-term goals.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

Fall 2023 Financial Planning Report

How is your financial wellness?

Financial wellness is not a measure of a person’s wealth. It’s about the ways that financial aspects in our life either support or undermine our well-being. Stress over financial issues can affect Canadians of all income levels and age groups.

Measuring financial wellness

A person in a healthy state of financial wellness feels secure about meeting their current financial obligations and is confident they’re on track to meet their long-term financial goals. They’re able to enjoy life and not worry about discretionary spending: for example, they can take a vacation without losing sleep over its cost.

That’s the ideal. But just about everyone experiences financial anxiety at one time or another. Sometimes it’s caused by external factors, perhaps the markets or inflation. Other times the reason is personal, such as dealing with job loss or significant unexpected expenses.

Why it matters

The Financial Consumer Agency of Canada identifies three pillars of good health. The first two may be obvious – physical and mental health; the third is financial wellness. According to this government agency, stressors in our financial life can negatively impact our physical health, mental health, personal relationships and performance at work. Conditions potentially arising from financial stress include anxiety, depression, sleep disorders and high blood pressure, among many others.

How we can help

From the financial wellness standpoint, investors with an advisor have an advantage over those without one. You can contact us whenever you feel anxious about a financial issue. Our help may involve providing market information, discussing specifics of your wealth plan, negotiating a life change, ensuring you’re on track to meet your retirement savings goal or any other type of assistance. Whatever the issue, we’re here to help allay your worries and take care of your financial well-being.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

Are you ghosting your RRSP?

When it comes to managing their Registered Retirement Savings Plan (RRSP), it’s very easy for many investors to fall into a routine. Make your contributions. Claim the tax deduction. Repeat. But there may be a problem if you only follow this routine, then ignore your RRSP. You could miss out on ways to make the most of your plan. Here are some helpful strategies to consider.

When a spousal RRSP saves you tax

Ever since retirees became able to split up to 50% of their eligible pension income with their spouse, the usefulness of a spousal RRSP came into question. A spousal RRSP can still offer tax advantages in three situations, provided one spouse is in a lower tax bracket.

You retire before age 65.

Splitting eligible pension income is only an option when you’re 65 or older. However, if you retire before 65, you can draw retirement income from your spousal RRSP and still have those funds taxed in the hands of the lower-income spouse.

You wish to split more than 50%.

In some situations where the higher-income spouse has employment, rental or business income, the couple may wish to split more than 50% of their pension income. The couple can achieve this by making withdrawals from a spousal RRSP or spousal Registered Retirement Income Fund (RRIF).

You earn income past age 71.

You must close your RRSP at 71, but if you earn income and have a younger spouse, you can make contributions to a spousal RRSP until the end of the year your spouse turns 71.

Your RRSP refund can boost retirement income

In retirement, your RRSP or RRIF withdrawals will be taxed at your marginal tax rate. But in your working years, you can take your annual RRSP refund or tax savings and invest the funds with the specific purpose of helping to offset the eventual tax on RRSP or RRIF withdrawals. You can invest your tax refund or savings in your Tax-Free Savings Account (TFSA) or a non-registered account.

Claiming your tax deduction in a future year

Normally, you claim your RRSP tax deduction in the year you make the RRSP contribution, but you’re able to claim the deduction in any future year. It can pay to defer the deduction if you expect an increase in your income – a higher marginal tax bracket results in greater tax savings.

Making a tax-smart donation

Any funds remaining in an RRSP or RRIF when the plan holder passes away are taxed as income, payable by the estate. But there’s a way to offset this tax liability. You name a charity as the beneficiary of your RRSP or RRIF, and the resulting donation tax credit is used on the final tax return to offset the tax owing on the plan’s assets. Note that in Quebec the charity must be designated as an RRSP or RRIF legatee in a will.

When to convert your RRSP to a RRIF

The latest you can close your Registered Retirement Savings Plan (RRSP) and transfer the funds to a Registered Retirement Income Fund (RRIF) is December 31 of the year you turn 71. There is no minimum age requirement.
When it comes to the timing of converting an RRSP to a RRIF, the first basic guideline is to open a RRIF when you need the funds for retirement income – regardless of your age. The second guideline is to wait until you’re 71 if you have other income sources to support your retirement. Waiting gives your RRIF investments more time to grow tax-deferred and can save you tax while you draw retirement income from sources that are more tax-efficient than RRIF withdrawals.

Factors and strategies

Some retirees can simply follow one of these two general rules, but there are exceptions to the rules – so the timing decision should be made with the guidance of your advisor.

Triggering a tax credit.

The pension income tax credit applies to $2,000 of eligible pension income, which includes RRIF withdrawals. You can open a RRIF at age 65 and transfer just enough funds from your RRSP to make a $2,000 annual RRIF withdrawal from age 65 to 71.

Delaying government benefits.

Do you plan on delaying Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP) and Old Age Security (OAS) benefits to age 70? You could open a RRIF – or make RRSP withdrawals – to help provide retirement income in your 60s.

Splitting pension income.

You may want to open a RRIF at age 65 to save tax through pension income splitting. Up to 50% of RRIF withdrawals can be allocated to your spouse.

Controlling your minimum RRIF withdrawals.

For some retirees, their minimum RRIF withdrawal at age 71 or 72 would push their income to a higher tax bracket. One solution is to transfer some funds from their RRSP to a RRIF from age 65 to 71, making annual withdrawals. The result is a smaller RRIF at 71 and a lower minimum withdrawal.

Is the latte factor valid?

The idea behind the latte factor is that you eliminate or cut down on any unnecessary item you regularly purchase, whether it’s a specialty coffee or something else. You then invest those savings, and over time you have a significant sum. Whether this concept is valid or not has been much debated.

Latte factor supporters point to the math. For example, say that someone invests just $5 a day. After 30 years, based on a 5% annual rate of return, they would accumulate about $125,000.

Critics of this practice question why you would sacrifice one of your life’s pleasures when there are other ways to save, such as the pay-yourself-first method where you dedicate a set amount of each paycheque to savings.

What it all comes down to is that how you save is personal. Any saving method or variety of methods is valid, as long as you meet your saving and investment goals.

Introduce your teen to investing

When your child reaches the age of majority, they’re able to open a Tax-Free Savings Account (TFSA) and First Home Savings Account (FHSA). So it’s a good idea if you can introduce them to some investment basics.

A helpful guide

To help determine which basics to cover, it’s helpful to know which topics your child should eventually understand as an investor. But this is only a guide – it’s not expected that a teen will know about all of these topics.

Compound interest. Understanding compound interest will encourage your child to save when they’re able to. Their money makes money, and the original and new money makes even more. You could show them an online compound interest calculator.

Stocks and bonds. It’s helpful to know why stocks are typically used to meet longer-term goals, why bonds are used to meet shorter-term goals and how they work together in a portfolio.

Asset allocation. When they start investing, your child should know that their proportion of equities and fixed income is based on their financial goal, their risk tolerance and when they’ll need the money.

Diversification. You can let your child know that different types of stocks and bonds perform differently at any given time, so it’s wise to have a variety of investments.

Discussion ideas

A great lesson is to talk about the investments in the child’s Registered Education Savings Plan (RESP). You can explain why the focus shifted from equities to fixed income over the years.

You could also tell your child that at age 18 or 19 (depending on your province) they can open a TFSA, then explain the account’s benefits.

You may want to ask your teen if they’ve learned about compound interest in school. If they haven’t, you could explain the concept.

These are only a few ideas. You can come up with your own approaches that suit you and your teen. All you need to do is provide an introduction, so they won’t feel intimidated or overwhelmed when they start to invest.

Beware of following the herd

Whether in politics, the social sphere or the financial world, joining the crowd can make us feel reassured and bring us comfort. But when making investment decisions, following the herd can lead to financial loss.

Chasing outperformers. A common herd behaviour is investing in an outperforming stock or fund that has attracted a multitude of investors. The trouble is that you’re buying when the investment has become expensive. Also, the price could escalate beyond the investment’s true value, risking a collapse.

Taking a flight to safety. Another behaviour to be wary of is following the crowd who sells their investments when markets plummet. In March 2020, when COVID hit and markets fell, mutual funds in Canada recorded over $18 billion in redemptions.¹ Over the following months, many investors missed one of the fastest market recoveries in history.

An advantage of working with an advisor is that we base your investments on your goals, time horizon and risk tolerance – not on what’s trending. If you ever do experience fear over a falling market or missing out on a popular investment, let us know.

¹ _{The Investment Funds Institute of Canada, IFIC Monthly Investment Fund Statistics – March 2020, April 22, 2020}

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Summer 2023 Financial Planning Report

The goals-based approach to TFSA investing

When The Tax-Free Savings Account (TFSA) was launched in 2009, it was common to primarily choose fixed-income investments –to hold the most highly taxed investments in a tax-free environment you’re your TFSA account grows in value the focus shifts on equity investments, based on the idea that you’ll gain the most from equities when growth and withdrawals are tax-free.

One vehicle, multiple uses

You can use your TFSA for virtually every wealth planning need. You can achieve a short-term goal, like saving for a kitchen renovation, and after the withdrawal you can replenish the funds the very next year, or immediately if you have contribution room available. Parents can use a TFSA for education savings, supplementing a Registered Education Savings Plan (RESP). TFSAs can be a valuable income source during retirement, as withdrawals are tax-free and don’t affect Old Age Security (OAS) benefits. In estate planning, TFSAs can meet a variety of needs, including helping offset taxes payable by the estate. As a tax-planning measure, you can split income by gifting funds to your spouse or children, which they can contribute to their own TFSAs.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

Tips and tactics for an FHSA

The First Home Savings Account (FHSA) is being widely praised as a tax-smart way for first-time home buyers to help fund a down payment. Account holders can contribute up to $8,000 a year, to a lifetime limit of $40,000. Contributions are tax-deductible, reducing taxable income by the contribution amount. Investments grow tax-free and withdrawals are tax-free.

Helpful ways to use an FHSA

Several strategies are emerging to make the most of the recently introduced FHSA – here are some helpful tips and tactics.

Team up with a TFSA.

A prospective homeowner can withdraw funds from their Tax-Free Savings Account (TFSA) and contribute the amount to an FHSA. This manoeuvre gives them a tax deduction for the FHSA contribution. Going a step further, they could even use the resulting tax refund to help replenish their TFSA, when they have contribution room available.

Help your child.

When helping a child or grandchild make a down payment, it’s common to gift the funds at the time the home is being purchased. But those dollars make a greater impact if you give funds earlier, which the child deposits into their FHSA. Now the child benefits from tax deductions, tax-free growth and tax-free withdrawals.

Helpful ways to use an FHSA

An FHSA can be opened at age 18, or the age of majority in your province. But it can only remain open for a maximum of 15 years (or until the end of the year the account holder turns 71). So you need to consider when you imagine yourself buying a home. One person might choose to open an FHSA at 18, while another may prefer to wait until they’re in their early 20s.

Timing also matters when it comes to choosing investments. A 25-year-old aiming to buy a home in about 10 years might favour equities for greater long-term growth potential. But another individual of the same age may focus on less risky fixed-income investments if they hope to buy in five years. Keep in mind that all account holders, including conservative investors, benefit from tax savings provided by the tax deduction on contributions.

Your lifestyle in retirement

Do you ever find yourself daydreaming about how you’ll spend retirement? Or if you are already in retirement planning you next project, whether you’re exploring the wonders of Barcelona or strolling through the woods with your grandchildren, these daydreams are more than pleasant thoughts. They’re key elements in the development of your wealth plan.

Retirement lifestyle and retirement goals

The amount you need to retire comfortably is based on several factors, but none is more important than your retirement lifestyle. An individual who plans on downsizing and enjoying their favourite pastimes will have a different financial goal than someone who intends to purchase a vacation property for Canadian summers and a condo down south for winter.

Your desired retirement lifestyle affects your projected retirement income needs, savings objective and estimated retirement date. For example, a couple planning to travel the world after reaching their savings goal has a more flexible retirement date than an overworked business owner set on a life of leisure who’s entered into an agreement to sell the business.

Plans can change

Since your retirement lifestyle affects your wealth plan, it’s important to inform us if your retirement plans change – and they can change for a variety of reasons. Caring for an aging parent can affect when you’ll retire and where you’ll live. Perhaps you decide to turn one of your interests into a small business. Or you’re entertaining the notion of moving permanently to another country. Divorce often calls for re-evaluating a retirement plan, for either spouse. Remarriage can definitely lead to changes, as a new couple may have different ideas of how they’ll spend retirement.

Working together

When you keep us up to date on your retirement plans – and any changes – we can make sure your investment program remains aligned with your retirement savings goal. It’s all about working together so you can enjoy the retirement lifestyle you envision.

Risk during retirement

A retiree’s tolerance to risk can change for some of the same reasons as during their working years, such as going through a divorce or receiving an inheritance.

Also, taking your time horizon into consideration still applies, since you’re investing for a period of 20 to 30 years, or more. Upon retiring, many investors will hold a significant proportion of their portfolio in equity investments to help support a long retirement. If markets suffer a downturn in the earlier years, time remains for markets to recover. But as the years go by, the market risk increases, so an investor typically reduces their equity investments and increases their fixed-income investments. Another way to defend against a market downturn is to establish a cash reserve: by drawing retirement income from the reserve, you give your equity investments time to recover.

Some retirees are concerned about the risk of outliving their savings. A combination of methods addresses this concern, commonly involving deferred government benefits, a personalized withdrawal strategy and, for some retirees, an annuity.

Avoid the sideline trap

Throughout the ups and downs of a market cycle, situations arise when some investors may be tempted to hold off on investing.

A significant downturn

In a prolonged correction, an investor might consider keeping their money on the sidelines, worried about investing during a falling market. The trouble with this approach is determining when to resume investing. In all likelihood, you’ll buy back in when prices are higher than when you had stopped.

A volatile recovery

If a market recovery is volatile, some investors might consider waiting until a bull market is under way, rather than risk new investments losing value. But if the market takes off, you miss out on the rebound. If the volatility continues, you miss out on buying opportunities ahead of the recovery.

A new market high

When the stock market reaches an all-time high, an investor may be tempted to halt their contributions – concerned the market can only tumble. But no one can reliably predict a market downturn, and bull runs can hit numerous all-time highs.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

Spring 2023 Financial Planning Report

Will you need an emergency fund in retirement?

Canadians can expect retirement to last 20, 25 or 30 years, or even more, thanks to our increasing longevity. From a financial perspective, the first thing many people think about when it comes to living longer is making sure they don’t outlive their savings.

But there’s another matter to consider. Over a period of two or three decades, many unexpected situations can arise – and these can have financial consequences.

You could cover unexpected costs from the same fund sources that provide your retirement income. But there’s a problem with relying on that method. If you need the money during a period when markets are down, you could be withdrawing funds at a loss.

Also, there’s the peace-of-mind factor. If you have savings designated for retirement income and a separate pool for emergencies, you’ll sleep better at night. You’ll know that if the unexpected happens, you can access funds easily without putting your retirement income at risk.

Here are some of the more common and costly situations that could occur during retirement.

Health care expenses

During your working years, you may have been protected by health benefits through your employer’s group plan. Now you’re responsible for dental, vision and any other health-related expenses not covered by the government. You could have surgery and want to hire a private nurse to care for you at home while you recover. You might need expensive dental work. Perhaps you develop issues with your mobility and require bathroom modifications and other accessibility renovations to your home.

The greatest potential expense is long-term care or assistance with daily living, provided at either your home, a long-term care facility or an assisted-living residence. With our increasing longevity, there’s a greater probability that you or your spouse will need such care. Almost 30% of Canadians aged 85 and older live in a special-care residence.¹

Helping a family member

Over the two or three decades of retirement, situations may develop involving one or more family members. Investments set aside for the unexpected give you the ability to help out when you wish, especially knowing the funds are separate from your retirement income needs.

Each family is unique, and any situation from a vast number of possibilities may arise, but here are just a few examples. A child’s business endures a difficult year and the child needs assistance to support their family. A sibling is involved in a court case and asks for financial help to pay legal bills. A grandchild has special needs and you want to contribute a Registered Disability Savings Plan (RDSP).

Expect the unexpected

Beyond health-related and family situations, anything can happen. A retired couple’s child and spouse move to Australia, have a child, and the retirees want to travel to Australia once or twice a year. A retiree had counted on income from a part-time job, but the job didn’t last long. Over the retirement years, a couple’s aging home needs new appliances, a new furnace, its roof replaced and a leaking basement sealed.

You never know what may arise, but when the unexpected strikes, an emergency fund can see you through.

¹ Statistics Canada. A portrait of Canada’s growing population aged 85 and older from the 2021 Census. April 27, 2022

If you’re asked to be an executor

The term may differ by province – executor, estate representative, liquidator, estate trustee, personal representative or administrator. But the duties are essentially the same, and they might be considerable.

A relative, friend or business associate asks you if you’ll be the executor of their estate. This is an honour. It means they trust you, and they’re confident in your ability to carry out the required duties.

Understand what’s involved

It’s important to know what’s involved before you decide to accept or decline the role. The executor works with a lawyer to obtain probate of the will; identifies all assets, determines their value, and may liquidate some assets; notifies creditors and pays any debts; manages any life insurance claims; files a final income tax return and annual returns for the estate; and distributes assets to the beneficiaries. But those are only some of the key tasks, so it’s best to look into the complete duties of an executor.

Also consider the estate’s complexity. If you’re primarily dealing with a principal residence and retirement savings, your work may be straightforward. But it could be another story if the estate also involves a stateside vacation home, a spousal trust and a rental income property.

Making your decision

If you’re up to the task, serving as an executor can be a satisfying experience. Your acceptance of the role is a show of friendship or love in helping your friend or family member. Ultimately, you’ll feel gratified to have fulfilled the individual’s wishes for their beneficiaries.

If you decide to decline, you may want to explain to your friend or relative why you’re not accepting the role. This way, they’ll understand it’s not personal, and your reasons might help them choose another executor.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

The smooth move of the in-kind transfer

There’s a wide variety of ways to make an in-kind transfer, moving an investment from one account to another without selling it. Here are several methods that offer unique benefits.

Donating to a charity.

If you donate appreciated stocks or mutual funds to a charity as an in-kind transfer, the charity receives the full value of the investment, and you receive a donation tax receipt for the full value – no tax is payable on the capital gain.

Converting an RRSP to a RRIF.

You can roll over Registered Retirement Savings Plan (RRSP) assets to a Registered Retirement Income Fund (RRIF) on an in-kind basis for a smooth transfer.

Making a RRIF withdrawal.

What if the markets are down and you’re forced to make your minimum required RRIF withdrawal at a loss? You can make the withdrawal as an in-kind transfer to a non-registered account and give your investments the potential to recover.

When should you get a power of attorney?

A power of attorney for property, or mandate in Quebec, is a legal document in which you appoint an individual to manage your financial affairs if you lose the ability to do so. It’s easy to put off. After all, dementia typically occurs later in life. When you’re of a healthy mind, what’s the rush?

If you don’t already have a power of attorney, here are three reasons why getting one sooner is better than later.

First, being of a healthy mind is when you want to act. You’re not legally able to sign the document if you have a cognitive impairment, which is a risk you take by continually delaying the task.

Second, sooner is better than later because you can suffer a cognitive decline at any age from an illness, stroke or injury.

Third, some people don’t get a power of attorney because they believe their spouse could simply take over their financial matters. But that’s not true. Without a power of attorney, your spouse would need to apply to the courts to be approved as your representative.

Quiet the noise

If you want a forecast of our economy, you don’t need to search a financial newspaper for an expert’s opinion. Forecasts come at us anytime, anywhere – online, through social media, on TV and radio, and in the press.

The trouble is that media outlets are vying for our attention, and we can get inundated with predictions about a prolonged bear market, ongoing inflation or a long recession. What may be a normal and expected phase of the market cycle becomes warnings of doom and gloom.

Reasons to tune out the media

Alarming media reports can make you worry about your financial future and feel distressed. It’s important to consider that media outlets may be magnifying the situation to gain a captive audience. For your own peace of mind, you have reason not to let the noise get to you.

Another concern is when the messages of impending doom cause some investors to question their investments – and worse, to change their strategy. For example, an individual saving for retirement in a down market could be tempted to stop investing in equities until they regain confidence in the market. But they would buy back in when prices are higher and end up holding fewer shares or fund units.

Focus on sound principles

Your investment program is based on contributing regularly to a well-diversified portfolio that’s designed for your personal risk tolerance, time horizon and investment objective. Staying true to your program is the best way to weather a down market or capitalize on a bull market.

Also, recognize that turbulence is temporary, and time is on your side. Market downturns are historically followed by recoveries.

Keeping these principles in mind can help tune out the media noise. But if media reports ever cause you distress or make you wonder whether you should change the way you invest, please talk to us.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

Winter 2023 Financial Planning Report

Achieving multiple financial objectives

It’s human nature to generalize our goals. “I’ve got to start exercising” is a common one. But a key to achieving a goal is to first identify one specific step. For example, starting to exercise becomes taking a brisk walk every day.

The same idea applies to financial goals. Say a parent’s general goal is to get on top of their Registered Education Savings Plan (RESP) contributions. They’ve always made contributions just before December 31 to trigger the Canada Education Savings Grant (CESG). Now the parent identifies a specific step to break the last-minute habit. They will contact their financial institution to set up automatic monthly contributions to mutual funds in their RESP.

Make a resolution

If you have a financial goal you want to work toward, think of an attainable first step to take. You may even want to make your step a financial New Year’s resolution – the good kind, one you will keep.

Let’s say a couple’s overall goal is to start that emergency fund they’ve always been thinking about. Their specific step could be for each spouse to invest a manageable amount from each paycheque in a money market mutual fund in their Tax-Free Savings Account (TFSA).

Or say that someone wants to catch up on their Registered Retirement Savings Plan (RRSP) contribution room. A first step could be to contribute their annual bonus to mutual funds in their RRSP. They could do the same when their RRSP refund arrives.

Involve us

Please feel free to talk to us about the goal you wish to accomplish. First of all, telling someone about a step you want to take can motivate you to commit to the task. Also, we can offer advice and guidance to help you along the way.

Do you have questions for any of these topics?

Contact our team for additional financial recommendations.

Are your and your spouse’s investment personalities a match?

You would think it’s always ideal for both spouses to have the same investment personality – and often it is. But sometimes similar approaches may spell trouble, and opposite investment personalities can be beneficial.

When investment personalities conflict

Say that a couple is investing with the goal to fund their retirement. One spouse prefers to invest conservatively and not have to worry about the markets, accepting the need to save and invest more. The other spouse is comfortable with investing aggressively, feeling confident that a portfolio heavily favouring equities will provide higher returns over time.

There are two different ways their conflicting approaches can actually benefit each spouse. The first is by finding a compromise, which would be to develop a relatively balanced portfolio. There would be little or no cash equivalents or speculative investments. This way, the conservatively minded spouse benefits from greater exposure to market opportunities, and the aggressively minded spouse won’t put hard-earned savings at unnecessary risk.

Another route is simply for each spouse to invest independently according to their own risk tolerance. This way each has the satisfaction of staying true to their own investment personality. As a couple, their portfolios in combination achieve a healthy balance between capital preservation and long-term growth potential.

When investment approaches are alike

Usually, a couple may consider themselves fortunate when they have the same investment personality. But sometimes the similarity calls for caution.

Say that both spouses are ultra-conservative investors. Since their investments earn relatively moderate returns, they’re saving and investing more to meet long-term objectives. This couple may need to watch that their budgeting doesn’t come at the expense of enjoying life now.

A couple in which both spouses are aggressive investors needs to make sure they don’t go too far. A portfolio that’s too high-risk could jeopardize their retirement plan or other financial goals.

Financial Briefs

When to defer an RRSP deduction

The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) allow a couple to balance out their pension amounts, to a degree. A portion of the higher-income spouse’s CPP/QPP pension is shifted to the lower-income spouse’s pension.

Known as “pension sharing,” it’s most effective when a couple has been living together for a long period. The government uses that period in determining the amount of pension dollars that can be shared.

Here’s an example of a couple who lived together during all the years they contributed to the CPP or QPP. Originally, Elyse received a $900 monthly benefit and her spouse, Robert, received a monthly benefit of $300. With pension sharing, the sum of $1,200 is equally split, so each spouse receives a $600 monthly benefit. They now save tax as a couple by having less pension income taxed at a higher rate and more taxed at a lower rate.

You don’t have to claim a Registered Retirement Savings Plan (RRSP) tax deduction in the same year you made the contribution. The deduction, in whole or in part, can be deferred to any future year.

The deduction amount is based on your marginal tax rate – the higher your marginal rate, the greater your deduction. So it can pay to defer claiming your RRSP deduction if you expect to have a greater income and higher marginal tax rate in the future.

This strategy can be especially beneficial if you’re gifting funds to a child or grandchild who’s a student or just starting out. Say they have RRSP contribution room but aren’t financially able to make contributions. You provide the funds for them to contribute, but they defer claiming the deduction until a year when it will result in significant tax savings.

Make the most of charitable donations

It’s an easy habit to slip into. When filing your tax return, report just your own charitable donations made only during the tax year. But you might have a better choice.

When you report charitable donations, you receive a federal charitable donation tax credit of 15% on the first $200 of donations and 29% on donations over $200. But you have choices in how you report your donations. You can combine your tax receipts with your spouse’s receipts or carry donations forward to any of the next five years – or even do both. Pooling your donations gives you a larger sum that exceeds the $200 threshold, which receives a tax credit at the 29% level.

This strategy is worthwhile whenever the pooled amount is over $200, and it becomes even more effective when you factor in the provincial donation tax credit. Either spouse can claim the credit, but typically more tax is saved when the higher-income spouse makes the claim.

Sharing CPP/QPP benefits to save tax

The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) allow a couple to balance out their pension amounts, to a degree. A portion of the higher-income spouse’s CPP/QPP pension is shifted to the lower-income spouse’s pension.

Known as “pension sharing,” it’s most effective when a couple has been living together for a long period. The government uses that period in determining the amount of pension dollars that can be shared.

Here’s an example of a couple who lived together during all the years they contributed to the CPP or QPP. Originally, Elyse received a $900 monthly benefit and her spouse, Robert, received a monthly benefit of $300. With pension sharing, the sum of $1,200 is equally split, so each spouse receives a $600 monthly benefit. They now save tax as a couple by having less pension income taxed at a higher rate and more taxed at a lower rate.

A powerful partnership to help reach your goals

To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us

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Taking Care of Your Financial Peace of Mind

Market corrections can come out of nowhere. Investors generally felt optimistic when 2022 began, following a banner year of stock market performance. In the U.S., the S&P 500 Index reached record highs in 2021, and at home the S&P/TSX Composite Index posted a 25.1% total return. But markets turned volatile in the early months of 2022 and when the correction struck during spring, investors saw their portfolio value drop.

It’s perfectly normal to feel anxious when your investments lose value, but there are ways to look at the situation that can help you stay calm.

Ways to view volatility

First of all, bear markets or corrections have always been with us, and every time the markets have recovered. The market plunge triggered by the 2020 pandemic was followed by a quick recovery, whereas the market fallout resulting from the 2008 financial crisis had required a longer recovery period. Patience may be required, but market corrections are historically followed by recoveries and, eventually, bull runs.

You can also look at a down market as a buying opportunity. By continuing to invest, you accumulate more shares or fund units when prices are lower, aiming to profit when markets eventually recover.

Another important thing to keep in mind is the longer time horizon. Say an investor is 10 years away from beginning to withdraw funds to provide retirement income. That’s typically plenty of time to allow for a market recovery and to position their portfolio to fund their retirement. Focussing on the long-term objective, not on short-term volatility, can be helpful psychologically.

Talk to us

Finally, if you feel anxious about the market’s effects on your portfolio, please talk to us. We can help reassure you that temporary pullbacks won’t prevent you from achieving your longer-term goals – and that support can go a long way to giving you financial peace of mind.

Achieving multiple financial objectives

Do you remember the days when multiple financial goals meant saving for the down payment on your first home while putting a little away in your Registered Retirement Savings Plan (RRSP)?

Then life happened. Add education savings to the mix, an emergency fund, and saving for family trips or a vacation property. Soon enough you’re juggling half a dozen or more financial goals, and it can feel overwhelming.

Two traps to avoid

If you ever attempted to meet multiple financial goals before you had an advisor, you may be aware of two common traps. The first is over-committing to near-term goals, which is tempting because they’re more easily attainable. But that spells trouble if you underfund long-term goals that rely on early contributions for compound growth.

The other trap is spreading your money thinly among too many goals without prioritizing needs over wants. You then risk falling behind on everything.

Understanding these traps can give you a better appreciation of what’s behind an effective plan.

Creating a balance

Your investment program is the result of a strategic plan that properly distributes your monthly savings amount across short-term, medium-term, and long-term goals.

The process. It all begins by listing your current goals, categorizing them by time horizon, and prioritizing your goalsaccording to needs and wants. Next is determining each goal’s total cost and breaking down that sum into an amount to save annually, and ultimately each month or pay period. This stage requires some give-and-take to find a balance where shorter- term goals can be realized without putting longer-term goals at risk.

Next, we recommend which registered or non-registered vehicles (or a combination) suits each goal. We then choose the asset allocation between fixed-income, cash-equivalent, and equity investments appropriate for each goal based on the given time horizon and on your personal risk tolerance.

Targeted or blanket approach. Most often, when matching goals to investment vehicles, we use a targeted approach. This is where a goal is assigned to one or more vehicles, with specific investments designated to meet that singular goal. For example, the goal of building an emergency fund for retirement years might be assigned to one spouse’s Tax-Free Savings Account (TFSA), using a conservative mix of fixed-income and equity investments.

Sometimes a blanket approach is used where a pool of investments covers several goals with similar time horizons. An example is a large allocation of fixed-income investments in a non-registered account that meets a variety of short-term needs, like a bathroom renovation or the down

payment on a new car.

Monitoring your goals

We regularly review your goals to make sure they remain on track – and make adjustments if needed. Also, we monitor each goal’s time horizon, making the asset allocation more conservative as you approach the period when you’ll begin to access funds.

Changes are also made if a life event affects your financial status. For example, someone who makes an equalization payment in a divorce may need to scale back some spending, whereas a couple who just paid off their mortgage may be able to fast-track one or more goals. Whatever your situation, we’re here to help you keep your finances in tune with your goals.

Tell us when your goals change

As life evolves, financial goals change: a child becomes engaged and you’d like to cover the wedding costs; you wish to go on a long overseas trip; your child announces they aim to study medicine out of province.

All of these life changes have financial consequences. You may face the challenge of needing to save more, or to decrease the amounts you dedicate to existing goals. Alternatively, you may find you have freed-up cash flow to apply to other goals. Whatever your situation, keep us up to date when your financial goals change, and we can help you keep your finances on track to meeting them.

What to do if you’re asked for a loan

One of these days, a friend or relative might ask you for a loan. Sometimes, whether or not to grant their request is an easy call. If the person is close to you and has a genuine need, you may be inclined to provide the funds. But if the person isn’t always responsible and you question how the money will be spent, you might want to say no.

Weighing your decision

It’s the decisions in the grey area which are more difficult, but here are some considerations that may prove helpful.

You can begin with the loan amount. If it’s a large sum, perhaps capital for a start-up, consider whether the loan might affect your financial situation. Will there be tax consequences in accessing the funds? Will you put your own savings goals at risk?

Think of the consequences if the loan doesn’t remain confidential. Other friends or relatives might approach you for loans at any time.

Imagine your reaction if your relative or friend was unable to pay back part or all of the money. If you’d feel resentful, you should ask yourself if helping out is worth the risk of a weakened relationship. But, if you imagine no ill will, granting their request will be much easier.

Saying yes or no

If you decide to say yes to the loan, consider the terms. Are you fine with keeping the loan open-ended, or do you prefer to discuss the timing of repayment? If you decide against the loan, it may be easier to say that it’s not personal. You could explain that money issues have been known to harm relationships, and you don’t want to take that risk.

Choosing the beneficiary for your RRSP or RRIF

Tax planning is often behind the choice of a beneficiary for a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund(RRIF). If you name a “qualified beneficiary,” they can receive RRSP or RRIF assets tax-deferred. A qualified beneficiary is your spouse or a financially dependent child or grandchild. If you name any other beneficiary, your RRSP or RRIF assets would be taxed as income on your final return.

Designating your spouse. When you designate your spouse as the beneficiary of your RRSP, the plan will be wound up upon your passing, and assets can roll over tax- deferred to your spouse’s RRSP.

With a RRIF, you have a second option. You can name your spouse as a successor annuitant, in which case your spouse simply takes over the existing RRIF. It’s a smoother transfer than that of a beneficiary designation, with less planning and reporting required. But, naming your spouse as the beneficiary of your RRIF does offer flexibility. For example, there may be tax-planning reasons to leave some RRIF assets in the estate, with the balance going to the spouse’s RRIF or RRSP.

Naming a non-qualified individual. If you name a non-dependent child, grandchild or another person as the beneficiary of your RRSP or RRIF, they’ll receive the assets tax- free. But keep in mind that your estate pays the tax, so you must plan for that tax liability.

Leaving a charitable gift. If you plan on leaving a charitable gift, naming a charity as the beneficiary of your RRSP or RRIF offers significant tax benefits. Your estate would receive a tax credit for the donation equal to the amount of the RRSP or RRIF assets. Typically, the tax credit offsets the tax payable on plan assets – so the estate pays no tax on the RRSP or RRIF proceeds.

Naming your estate. Some financial commitments or tax situations may call for naming the estate as the RRSP or RRIF beneficiary. For example, you may need to help fund a trust or cover capital gains tax on a vacation property.

Note that Quebec residents must use their Will, not an RRSP or RRIF form, to indicate how they want registered plan assets distributed.

Financial Briefs

Is a spousal RRSP still useful?

Contributions to a spousal Registered Retirement Savings Plan (RRSP) are tax- deductible to the higher-income spouse, and withdrawals are taxable to the lower- income spouse. But is this tax advantage still worthwhile in light of pension income-splitting provisions?

Today’s pension income-splitting rules enable the higher-income spouse to allocate up to 50% of their eligible pension income, which includes Registered Retirement Income Fund (RRIF) payments, to the lower-income spouse. Although this makes spousal RRSPs less significant, there are situations when a spousal RRSP still offers unique benefits.

Retiring before age 65. If you’re under age 65, pension income-splitting is primarily limited to payments from a registered company pension plan. You must be 65 or older to split income from a RRIF. But, if you retire before 65, you can supplement retirement income with spousal RRSP or spousal RRIF withdrawals taxed at the lower-income spouse’s rate.

Contributing to an RRSP past age 71. If you have a younger spouse, you can continue to contribute to a spousal RRSP after you turn 71. This way, if you still have earned income, you can benefit from the RRSP tax deduction.

Splitting more than 50% of pension income. Pension income-splitting rules allow you to split up to 50% of eligible pension income. But, you can split more than 50% of your pension income by making withdrawals from a spousal RRIF, which can help equalize spouses’ taxable income.

Timing TFSA withdrawals

When you plan your year-end financial to-dos, it’s a good idea to keep any upcoming Tax-Free Savings Account (TFSA) withdrawals in mind. Say that someone has always contributed the maximum annual amount to their TFSA and plans to withdraw funds in the next few months to pay for a bathroom renovation. If they take out the money in January 2023, they can’t replace those funds until 2024 – the year following the withdrawal.

But if the withdrawal is made by the end of December, the amount will be added to next year’s TFSA contribution limit. They would have the favourable option to replenish the withdrawn amount anytime in 2023.

Note that this year-end strategy applies to individuals who have contributed their current lifetime limit to their TFSA. If you have TFSA contribution room available, you can contribute up to your allowable limit at any time.

How often should you check your investments?

There was a time when investors would only view their investment performance every month or quarter. Today, with up- to-date account information available online or on a smartphone, many investors check their balances a couple of times a month, weekly, or even daily.

Active investors who are constantly buying and selling shares would have good reason to check their investments frequently. But traditional investors with well-diversified portfolios and a long-term objective are usually fine monitoring their investment performance monthly, quarterly, or at even longer intervals.

If you do check your investments frequently and it doesn’t affect your wellbeing, you’re fine. However, it’s a different story if you’re prone to worrying.

While markets, historically, trend upward over time, any short-term period may consist of a series of upswings and downturns. Constantly witnessing this volatility reflected in your portfolio can be stressful. In this case, you may want to check your portfolio less often for greater peace of mind.

Taking care of your financial peace of mind

Taking Care of Your Financial Peace of Mind

Market corrections can come out of nowhere. Investors generally felt optimistic when 2022 began, following a banner year of stock market performance. In the U.S., the S&P 500 Index reached record highs in 2021, and at home the S&P/TSX Composite Index posted a 25.1% total return. But markets turned volatile in the early months of 2022 and when the correction struck during spring, investors saw their portfolio value drop.

It’s perfectly normal to feel anxious when your investments lose value, but there are ways to look at the situation that can help you stay calm.

Ways to view volatility

First of all, bear markets or corrections have always been with us, and every time the markets have recovered. The market plunge triggered by the 2020 pandemic was followed by a quick recovery, whereas the market fallout resulting from the 2008 financial crisis had required a longer recovery period. Patience may be required, but market corrections are historically followed by recoveries and, eventually, bull runs.

You can also look at a down market as a buying opportunity. By continuing to invest, you accumulate more shares or fund units when prices are lower, aiming to profit when markets eventually recover.

Another important thing to keep in mind is the longer time horizon. Say an investor is 10 years away from beginning to withdraw funds to provide retirement income. That’s typically plenty of time to allow for a market recovery and to position their portfolio to fund their retirement. Focussing on the long-term objective, not on short-term volatility, can be helpful psychologically.

Talk to us

Finally, if you feel anxious about the market’s effects on your portfolio, please talk to us. We can help reassure you that temporary pullbacks won’t prevent you from achieving your longer-term goals – and that support can go a long way to giving you financial peace of mind.

Achieving multiple financial objectives

Do you remember the days when multiple financial goals meant saving for the down payment on your first home while putting a little away in your Registered Retirement Savings Plan (RRSP)?

Then life happened. Add education savings to the mix, an emergency fund, and saving for family trips or a vacation property. Soon enough you’re juggling half a dozen or more financial goals, and it can feel overwhelming.

Two traps to avoid

If you ever attempted to meet multiple financial goals before you had an advisor, you may be aware of two common traps. The first is over-committing to near-term goals, which is tempting because they’re more easily attainable. But that spells trouble if you underfund long-term goals that rely on early contributions for compound growth.

The other trap is spreading your money thinly among too many goals without prioritizing needs over wants. You then risk falling behind on everything.

Understanding these traps can give you a better appreciation of what’s behind an effective plan.

Creating a balance

Your investment program is the result of a strategic plan that properly distributes your monthly savings amount across short-term, medium-term, and long-term goals.

The process. It all begins by listing your current goals, categorizing them by time horizon, and prioritizing your goalsaccording to needs and wants. Next is determining each goal’s total cost and breaking down that sum into an amount to save annually, and ultimately each month or pay period. This stage requires some give-and-take to find a balance where shorter- term goals can be realized without putting longer-term goals at risk.

Next, we recommend which registered or non-registered vehicles (or a combination) suits each goal. We then choose the asset allocation between fixed-income, cash-equivalent, and equity investments appropriate for each goal based on the given time horizon and on your personal risk tolerance.

Targeted or blanket approach. Most often, when matching goals to investment vehicles, we use a targeted approach. This is where a goal is assigned to one or more vehicles, with specific investments designated to meet that singular goal. For example, the goal of building an emergency fund for retirement years might be assigned to one spouse’s Tax-Free Savings Account (TFSA), using a conservative mix of fixed-income and equity investments.

Sometimes a blanket approach is used where a pool of investments covers several goals with similar time horizons. An example is a large allocation of fixed-income investments in a non-registered account that meets a variety of short-term needs, like a bathroom renovation or the down payment on a new car.

Monitoring your goals

We regularly review your goals to make sure they remain on track – and make adjustments if needed. Also, we monitor each goal’s time horizon, making the asset allocation more conservative as you approach the period when you’ll begin to access funds.

Changes are also made if a life event affects your financial status. For example, someone who makes an equalization payment in a divorce may need to scale back some spending, whereas a couple who just paid off their mortgage may be able to fast-track one or more goals. Whatever your situation, we’re here to help you keep your finances in tune with your goals.

Tell us when your goals change

As life evolves, financial goals change: a child becomes engaged and you’d like to cover the wedding costs; you wish to go on a long overseas trip; your child announces they aim to study medicine out of province.

All of these life changes have financial consequences. You may face the challenge of needing to save more, or to decrease the amounts you dedicate to existing goals. Alternatively, you may find you have freed-up cash flow to apply to other goals. Whatever your situation, keep us up to date when your financial goals change, and we can help you keep your finances on track to meeting them.

What to do if you’re asked for a loan

One of these days, a friend or relative might ask you for a loan. Sometimes, whether or not to grant their request is an easy call. If the person is close to you and has a genuine need, you may be inclined to provide the funds. But if the person isn’t always responsible and you question how the money will be spent, you might want to say no.

Weighing your decision

It’s the decisions in the grey area which are more difficult, but here are some considerations that may prove helpful.

You can begin with the loan amount. If it’s a large sum, perhaps capital for a start-up, consider whether the loan might affect your financial situation. Will there be tax consequences in accessing the funds? Will you put your own savings goals at risk?

Think of the consequences if the loan doesn’t remain confidential. Other friends or relatives might approach you for loans at any time.

Imagine your reaction if your relative or friend was unable to pay back part or all of the money. If you’d feel resentful, you should ask yourself if helping out is worth the risk of a weakened relationship. But, if you imagine no ill will, granting their request will be much easier.

Saying yes or no

If you decide to say yes to the loan, consider the terms. Are you fine with keeping the loan open-ended, or do you prefer to discuss the timing of repayment?

If you decide against the loan, it may be easier to say that it’s not personal. You could explain that money issues have been known to harm relationships, and you don’t want to take that risk.

Choosing the beneficiary for your RRSP or RRIF

Tax planning is often behind the choice of a beneficiary for a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund(RRIF). If you name a “qualified beneficiary,” they can receive RRSP or RRIF assets tax-deferred. A qualified beneficiary is your spouse or a financially dependent child or grandchild. If you name any other beneficiary, your RRSP or RRIF assets would be taxed as income on your final return.

Designating your spouse

When you designate your spouse as the beneficiary of your RRSP, the plan will be wound up upon your passing, and assets can roll over tax- deferred to your spouse’s RRSP.

With a RRIF, you have a second option. You can name your spouse as a successor annuitant, in which case your spouse simply takes over the existing RRIF. It’s a smoother transfer than that of a beneficiary designation, with less planning and reporting required. But, naming your spouse as the beneficiary of your RRIF does offer flexibility. For example, there may be tax-planning reasons to leave some RRIF assets in the estate, with the balance going to the spouse’s RRIF or RRSP.

Naming a non-qualified individual

If you name a non-dependent child, grandchild or another person as the beneficiary of your RRSP or RRIF, they’ll receive the assets tax- free. But keep in mind that your estate pays the tax, so you must plan for that tax liability.

Leaving a charitable gift

If you plan on leaving a charitable gift, naming a charity as the beneficiary of your RRSP or RRIF offers significant tax benefits. Your estate would receive a tax credit for the donation equal to the amount of the RRSP or RRIF assets. Typically, the tax credit offsets the tax payable on plan assets – so the estate pays no tax on the RRSP or RRIF proceeds.

Naming your estate

Naming your estate. Some financial commitments or tax situations may call for naming the estate as the RRSP or RRIF beneficiary. For example, you may need to help fund a trust or cover capital gains tax on a vacation property.

Note that Quebec residents must use their Will, not an RRSP or RRIF form, to indicate how they want registered plan assets distributed.

Financial Briefs

Is a spousal RRSP still useful?

Contributions to a spousal Registered Retirement Savings Plan (RRSP) are tax- deductible to the higher-income spouse, and withdrawals are taxable to the lower- income spouse. But is this tax advantage still worthwhile in light of pension income-splitting provisions?

Today’s pension income-splitting rules enable the higher-income spouse to allocate up to 50% of their eligible pension income, which includes Registered Retirement Income Fund (RRIF) payments, to the lower-income spouse. Although this makes spousal RRSPs less significant, there are situations when a spousal RRSP still offers unique benefits.

Retiring before age 65. If you’re under age 65, pension income-splitting is primarily limited to payments from a registered company pension plan. You must be 65 or older to split income from a RRIF. But, if you retire before 65, you can supplement retirement income with spousal RRSP or spousal RRIF withdrawals taxed at the lower-income spouse’s rate.

Contributing to an RRSP past age 71. If you have a younger spouse, you can continue to contribute to a spousal RRSP after you turn 71. This way, if you still have earned income, you can benefit from the RRSP tax deduction.

Splitting more than 50% of pension income. Pension income-splitting rules allow you to split up to 50% of eligible pension income. But, you can split more than 50% of your pension income by making withdrawals from a spousal RRIF, which can help equalize spouses’ taxable income.

Timing TFSA withdrawals

When you plan your year-end financial to-dos, it’s a good idea to keep any upcoming Tax-Free Savings Account (TFSA) withdrawals in mind. Say that someone has always contributed the maximum annual amount to their TFSA and plans to withdraw funds in the next few months to pay for a bathroom renovation. If they take out the money in January 2023, they can’t replace those funds until 2024 – the year following the withdrawal.

But if the withdrawal is made by the end of December, the amount will be added to next year’s TFSA contribution limit. They would have the favourable option to replenish the withdrawn amount anytime in 2023.

Note that this year-end strategy applies to individuals who have contributed their current lifetime limit to their TFSA. If you have TFSA contribution room available, you can contribute up to your allowable limit at any time.

How often should you check your investments?

There was a time when investors would only view their investment performance every month or quarter. Today, with up- to-date account information available online or on a smartphone, many investors check their balances a couple of times a month, weekly, or even daily.

Active investors who are constantly buying and selling shares would have good reason to check their investments frequently. But traditional investors with well-diversified portfolios and a long-term objective are usually fine monitoring their investment performance monthly, quarterly, or at even longer intervals.

If you do check your investments frequently and it doesn’t affect your wellbeing, you’re fine. However, it’s a different story if you’re prone to worrying.

While markets, historically, trend upward over time, any short-term period may consist of a series of upswings and downturns. Constantly witnessing this volatility reflected in your portfolio can be stressful. In this case, you may want to check your portfolio less often for greater peace of mind.

Get a head start on year-end to-dos

With holiday planning and end-of-year financial deadlines, December can be hectic. But if you start your financial to-dos soon, you’ll have an easier time later.

RESP Contributions

TFSA Withdrawals

Opening an FHSA

RRIF Withdrawals

Do you have questions for any of these topics? ​

Why Digital Assets Belong in Your Estate Plan

Imagine if the person administering your estate needs access to the bills you pay online, but they can’t get into your bank account. That’s just one of many reasons why your estate plan should account for your digital assets.

Deciding When to Start QPP/CPP Benefits

If you start Quebec Pension Plan (QPP) /Canada Pension Plan (CPP) benefits before age 65, you receive a smaller monthly amount but for a longer period. Start later and you increase the benefit amount, but you must rely on other income sources until benefits begin.

Starting Benefits Sooner

Taking Benefits at 65

Delaying Benefits

Do You Involve Your Spouse in Financial Matters?​

Achieve Goals Successfully

Prevent Conflicts Over Money Issues

Benefit From Compromise

Helping Young Adult Children Save for the Future

Many young adults face a savings dilemma. They may understand that the sooner they begin investing, the greater the effect of compound growth in building wealth for the future. But they can’t put money away because they have more pressing financial needs now.

Helping to Save for a Home

Topping Up RRSP Contributions

When Goals May Be Flexible

The Gift of Compound Growth

How a $35,000 Gift Exceeds $285,000 by Retirement

A powerful partnership to help reach your goals

Will life changes affect your retirement plans?

You may envision your desired retirement lifestyle, reach your financial goal and retire at your scheduled retirement date. However, many couples and individuals encounter situations that make them wonder if they should change their retirement plans.

Evaluating the situation

A variety of solutions

Do you have questions for any of these topics? ​

Naming your child as executor

It’s quite common to name an adult child as the executor of an estate (also known as estate trustee, personal representative or liquidator, depending on the province). Often, it’s a wise decision – but not always.

Be on the lookout for fraud

According to the Canadian Anti-Fraud Centre (CAFC), Canadians lost $567 million to fraud in 2023 – and the CAFC estimates that only 5 to 10 percent of fraud attempts are reported.1

Are your educational savings strategies securing your child’s future?

It can be quite common to base an education savings target on average tuition costs or current costs of residence and off-campus housing. But there are many reasons why education costs might end up being more than you expect.

Consider the unexpected

Making the most of an RESP

The best time to invest is…

In the past few months, stock markets in Canada, the U.S., Japan and Europe reached record highs. In market extremes, whether it’s an upswing or downswing, many people wonder if they should invest differently.

When Markets Rally​

During a down market​

Investing regularly is best​

A powerful partnership to help reach your goals

Why Goals-Based Investing Matters

The concept of “goals-based investing” has been appearing in the media, and it’s often touted as something new. Perhaps it’s new to some investors, especially anyone who invests on their own, but those with an advisor already follow the principles of goals-based investing.

The Process

Benefits of Goals-Based Investing

Do you have questions for any of these topics? ​

How to Use Your TFSA in Retirement

Just as a Tax-Free Savings Account (TFSA) meets a variety of needs during your working years, it can be equally versatile during retirement.

Providing Tax-Free Income

Continuing to Invest

Leaving Assets to Heirs

Please Note

Safeguard Your Assets With a Trusted Contact Person

Just over two years ago, the Canadian Securities Administrators (CSA) introduced the concept of a “trusted contact person,” which has now been adopted across the country.

Finding a Balance Between Spending and Saving

When it comes to spending versus saving, there is no exact balance that’s right for everyone. Each of us has our own money personality, perhaps one we’re born with, acquired by following – or rejecting – our parents’ habits, or developed on our own over the years.

Two Danger Zones

Finding the Balance for Couples

When We Can Help

A powerful partnership to help reach your goals

How is your financial wellness?

Financial wellness is not a measure of a person’s wealth. It’s about the ways that financial aspects in our life either support or undermine our well-being. Stress over financial issues can affect Canadians of all income levels and age groups.

Measuring financial wellness

Why it matters

How we can help

Do you have questions for any of these topics? ​

Are you ghosting your RRSP?

When a spousal RRSP saves you tax

You retire before age 65.

You wish to split more than 50%.​

You earn income past age 71. ​

Your RRSP refund can boost retirement income

Claiming your tax deduction in a future year

Making a tax-smart donation

When to convert your RRSP to a RRIF

Factors and strategies

Do you have questions for any of these topics?

Do You Involve Your Spouse in Financial Matters?

Do you have questions for any of these topics?

According to the Canadian Anti-Fraud Centre (CAFC), Canadians lost $567 million to fraud in 2023 – and the CAFC estimates that only 5 to 10 percent of fraud attempts are reported.¹

When Markets Rally

During a down market

Investing regularly is best

Do you have questions for any of these topics?

Do you have questions for any of these topics?

You wish to split more than 50%.

You earn income past age 71.

Triggering a tax credit.

Delaying government benefits.

Do you have questions for any of these topics?

Avoid the sideline trap

Throughout the ups and downs of a market cycle, situations arise when some investors may be tempted to hold off on investing.

A significant downturn

A volatile recovery

Do you have questions for any of these topics?

The smooth move of the in-kind transfer

Converting an RRSP to a RRIF.

Making a RRIF withdrawal.