“The greatest mistake we make is living in constant fear that we will make one.” – John C. Maxwell
Though there are many
misconceptions about financial planning, two common ones are:
it’s only for the
it’s only for ‘type
As’ with Herculean levels of self-discipline.
Even people in the throes of
planning – who are neither wealthy nor perfect – can find themselves deterred
by certain types of planning for fear of not having enough or making mistakes.
Estate planning, “the disposition
of assets during life and at death,”
is an example of planning that tends to inspire discomfort and aversion. At
first glance, estate planning focuses on things that require us to acknowledge
our eventual passing and really, relinquish our sense of control over our lives
and our assets. Think wills, powers of attorney and executors.
Good advisors, more than anyone,
know how hard it is to think about and plan for the time after we’re gone. Combine
these heavy emotions with the complexity of estate planning and it is
understandable why people might feel overwhelmed and prefer to ignore it
altogether. But estate planning is far more about gaining control than
relinquishing it and far less about ourselves and more about our loved ones.
For those who have been avoiding estate planning, here are three key questions
1. Do you have assets?
Although this is a straightforward
question, a lot of people overthink their answer. Young people especially, who
tend to have lower incomes and fewer assets, convince themselves they don’t
need a formal, legally binding will because they don’t have enough to bother. What
many of them don’t consider however, is their debt and how it too can be
inherited by loved ones after their passing.
Perhaps paying for a lawyer to draw
up a will isn’t practical or necessary for some but having a plan for their assets
(and debt) in the event of their passing is.
If this reasoning sounds familiar, consider writing a holographic will. It
is simply a letter of direction signed by two non-beneficiaries that outlines
how your assets are to be divided and distributed. Though more contestable than
a formal will, it is still a legally binding document unlike giving someone verbal
2. Do you have dependents?
The last thing anyone wants is for the
government to choose a guardian for our loved ones. Estate planning looks at
the impact our passing would have on loved ones and helps us determine the key
people we need to appoint (trustees, guardians, beneficiaries) to ensure our
minor children, dependents, and even pets will be taken care of in the manner
we approve. There’s no need to worry about making a mistake either, these key
players can be modified as life circumstances change.
Estate planning also addresses survivor income needs, often in the form
of life insurance. To be clear, different cultures have different opinions on
life insurance which means there is no one ‘right’ view. One way to think of it,
however, is as a method of compensating for the loss of your income and
ensuring your family has the time and resources to deal with your passing as
comfortably as possible.
3. What are your final wishes?
Rituals and practices surrounding
death vary all over the world. In Canada, having a funeral is commonplace and
so is having to make the very personal decision between burial, cremation, or
perhaps other options. Trying to plan for and make these kinds of decisions on
behalf of others can be extremely difficult and emotionally taxing.
Having a will that explicitly outlines final wishes (i.e. specific
funeral details, charitable intentions, burial or cremation preferences, etc.) can
help alleviate stress on loved ones and ensure they don’t grapple with the
choices they may otherwise be required to make.
Even if our natural inclination is
to shy away from estate planning – whether it is because we’re afraid of making
mistakes others will suffer the consequences of (i.e. triggering taxes) or
because of the unease thinking about death brings – it’s important to keep in
mind that having a plan keeps us feeling in control and at ease.
As difficult as it may be to
imagine the time after we’re gone, it is so much more comforting to know our
planning can help soften the impact of our eventual absence on our loved ones and
hopefully, enable their continued protection and prosperity.
For help establishing or revising your estate plan, contact us.
Money and how we deal with it is as unique as we are.
Some people are great at saving and planning while others struggle. When we
have only our individual accounts and goals to be responsible for, financial
accountability is black and white.
However, once you are married, in a relationship or have your
financial life interconnected with another, the situation becomes much more
In addition to aligning short- and long-term financial
goals, the day to day money matters must also be approached with a common sense
of purpose and commitment.
Conversations about money are notoriously difficult,
however having them often and routinely will help your joint future dreams and
goals become reality.
Unfortunately, all too frequently, people tend to hide
accounts, debts and spending from their life partners. Some statistics indicate
at least 40% of adults have financial secrets and the number is even higher
with millennials. These financial secrets are called financial infidelities.
Technology makes hiding and siloing spending, debt and
accounts from our partners easy for those who choose to keep their affairs
separate or keep secrets.
Financial infidelity can range from siphoning money out
to cover your daily coffee addiction, to hiding compulsive shopping or even a
gambling addiction. Some couples choose to build a budget that accounts for
‘free money’ for each person with no need to account for how it is spent. This ‘free money’ gives some freedom without
having to feel like you are cheating on your partner. Typically, this is
arrived at with planning and intention in connection with discussions and trust.
If this is not the mutually agreed upon arrangement and
instead one person is hiding spending or money transactions from the other,
then financial infidelity exists in the relationship.
Financial infidelity can have a similar effect on a
relationship as infidelity with another person would. For some, a secret
financial life is the same as a secret love life.
As with all partnerships, the strength of the partnership
is determined by the depth of both parties’ commitment and the quality and
transparency of communication between the people involved.
It is never too late to review your spending habits and
engage your partner in a discussion about your shared financial life and have
an unrestricted discussion.
Open, frank and frequent conversations about money and
spending are important to the success of all relationships where common or tied
financial goals are involved.
with an Intent Planning advisor to learn more about avoiding or recovering from
Let’s be honest, some days a financial windfall can be finding a toonie in your winter coat! A financial windfall can come in many forms from a tax return, an inheritance, or even a pay increase at work.
When we know or think we might be getting a financial
windfall, like a tax return, it is common for most of us to begin planning how
to put that money to use.
Perhaps you have been putting off buying a new
entertainment system for your family room or taking a much-needed vacation. Or
maybe your purchase desires fall into the more practical spectrum like
re-shingling your home or paying down debt. In any case, when a windfall comes
in there are multiple ways you can spend it.
A windfall is usually just that, an influx of unexpected
funds. The key word being unexpected. Because you weren’t expecting it, it is
easy to allocate it to a ‘special’ purchase; however, it is also a great time
to hive off a portion, or all of it and add it to your investment portfolio.
Using some of your windfall to deposit into your
investment portfolio comes with many benefits. At a minimum, an additional or
unexpected deposit will get you to your goals a little quicker and allow you to
benefit from buying and holding a long-term investment.
Using all or a portion of your windfall to pay down your
debt is also a practical way to get you closer to your financial goals. Often
interest paid on consumer debt is much higher than what you will benefit from with
an investment. Clearing the debt will help in both the long- and short-term.
A common ‘windfall’ is when you receive a pay increase at
work. You have likely deserved if for a while and may have even begun dreaming
about what impact a pay increase will have on your monthly budget.
Before you allocate the pay increase, consider this: If
you have built your budget around your current income, allocate the new pay
increase to savings or debt repayment.
Each of us, as we go through our adult lives and careers,
expand our responsibilities and list of ongoing expenses. How many are truly
necessities versus luxuries varies by person. However, one thing nearly all of
us are guilty of is lifestyle creep.
Lifestyle creep is when you become accustomed to the
income you have and as your income increases so does your lifestyle. Early on
in our careers this is appropriate as our expenses and responsibilities
increase to match our income. However, once you have achieved a certain level,
you should measure and consider each new expense you add to keep any lifestyle
creep to a minimum.
If you are happy with your income-to-expense ratio and
are living comfortably, consider using your pay increase ‘windfall’ as a way to
increase your savings or debt repayment. After all, if you are happy with your
lifestyle, you might as well put all or part of the ‘new’ money to a different
use. Allocating the increase to debt or savings right away means you won’t miss
it and your bank account will be none the wiser.
Additional, regular deposits into your investment
portfolio allow you to take advantage of dollar cost averaging, buy and hold
and achieving your goals at an accelerated pace.
with us to talk about the best way to put your next windfall to use.
For financial advisors,
being able to adapt to the unique needs of clients is integral to deliver
sound, relevant advice. Increasingly savvy clients with easy access to
technology – online information, advice and investment tools – continue to
challenge the financial industry to prove the value of professional,
At the same time,
changing social and cultural norms are redefining certain needs advisors have
historically associated with specific life stages and genders.
generation of Canadians is forcing us to reconsider our notions of things like wealth,
marriage, homeownership and retirement.
Depending on your
situation, finding an advisor who understands and can adapt to the evolving
needs of different generations can be the key to realizing your financial
Here are two groups of Canadians
who are redefining societal norms and in doing so, challenging wealth management
professionals to stay relevant.
We have all read
headlines like: “Millennials are killing the (blank) industry.” From diamonds
to department stores, millennials have earned a reputation for rejecting industries
and practices traditionally viewed as culturally important, even necessary.
Younger generations are
approaching homeownership, marriage and divorce – key events when it comes to wealth
management – differently than previous generations. When it comes to
homeownership, many millennials are waiting longer to take the plunge: 30.6% of
young adults aged 20-34 in 2001 lived with at least one parent whereas 34.7%
did as of 2016.
Younger adults are also
putting off getting married and having children. This means when it comes to
divorce, “Millennials tend to have fewer assets to divide, and they’re more
likely to have similar incomes,” making spousal support a nonissue. Our society
– advisors included – tends to view divorce as an event which should take a substantial financial toll
on one or both partners.
When you combine
inconsistent incomes due to freelance or “gig” work, high rates of student
debt, and the cost of raising children, the reality is many married millennials
can’t “afford to buy [their partner] out of the matrimonial home.”
Millennials’ finances are requiring them to be more frugal, even democratic,
than previous generations and advisors should be prepared to accommodate their
As the largest
generation in Canada,
millennials have a huge impact on our economy and, despite their purported
financial irresponsibility, spend a lot of time thinking about and managing
their money. A 2019 report from BMO found, “millennials [are] outpacing [their]
baby boomer counterparts” when it comes to retirement savings and “continue to
hold higher amounts [in RRSPs] over time, accounting for the highest percentage
increase with 87 percent since 2016 ($28,821 vs $15, 377 in 2016).”
Millennials may not be buying diamonds, but they are being mindful of their
Today, women account
for approximately half of the labour force (up from less than a quarter in the
and “directly control no less than $2.2 trillion of personal financial assets.”
By 2028, that number is expected to rise to $3.8 trillion.The archetypal investor – historically a man – is quickly changing to
reflect the increased number of women, both married and
unmarried, who are directly participating in the Canadian economy and making
more household financial decisions.
In fact, a 2019 CIBC study found, “three-quarters (73 per cent) say
they’re actively involved in their own long-term financial planning – a number
that grows higher the older they get, rising to 82 per cent among
women aged 55+.”
Most Canadians need
better-defined retirement plans (about 90% do not currently have an adequate one)
however, advisors should be prepared to provide advice which accurately
reflects women’s needs, especially given their burgeoning control of financial
Employed married women “in the core-working age demographic… now
account for a record-high 47% of family income, almost double the share seen in
Women also live, on average, four years longer than men
meaning many will likely inherit assets from their spouses later in life.
Yet, despite women
having more (control over) money, they are also more likely than men
to forgo incomes and therefore pensions for the sake of their families. “Almost 1 in 3 (30 per cent) women say they’ve reduced or stopped
saving as a direct consequence of childcare or eldercare responsibilities.” A good financial plan will account for and work to
minimize the impact these kinds of events have on women’s retirement savings.
When it comes to wealth management, finding a professional who
understands the unique situation and need of each individual client makes all the
difference between stellar and just average financial advice. Millennials and
women are two demographics frequently on the receiving end of stereotypes – most
of which have the potential to impede their ability to achieve their financial
goals if their advisor subscribes to them.
Advisors who approach
common milestones like homeownership, marriage and divorce from an outdated standpoint
and disregard the way social norms are changing, will likely have a harder time
relating and remaining relevant to those clients whose circumstances challenge them
to go above and beyond “business as usual.” Make sure your advisor is a fit for
Connect with us to learn how an advisor
and a customized financial plan can benefit you.
With millennials entering
the global workforce and baby-boomers on the cusp of retiring from it, the
world is experiencing a substantial transition; one accompanied by rapidly
changing technology and social norms.
It can become easy to
focus on perceived generational differences instead of similarities with many
generations of people interacting and working alongside each other. This is
especially true with finances and financial planning.
Despite what media
headlines might say, financial literacy – or the lack thereof – is not
exclusive to one group of people. General unease with the intricacies of financial
planning coupled with the highly complex emotions surrounding money means many
Canadians of all ages are reluctant
and/or unsure how to seek professional financial advice.
According to a
September – October 2018 survey done by the Financial Planning Standards
Council, “one-in-three Canadians fail
the [financial] stress test, meaning they somewhat or strongly doubt their bank
account can withstand a financial emergency… [and] nearly three-in-ten are not
confident they will achieve their financial life goals.”
The same survey found “two-thirds of Canadians
have not engaged the services of a professional financial planner.”
Many Canadians clearly share a reluctance to seek professional financial advice
and this reluctance is having a serious impact on their sense of financial
stability and well-being.
The survey listed the following reasons for why
Canadians avoid seeking financial advice:
I don’t have a big enough
I do not know who to trust
It is too confusing and
overwhelming for me to consider at this time
I’m embarrassed by my
I do not know where to find
Although those who reported having never sought
professional financial planning help were predominantly Gen X and Gen Y (18 –
44), a lack of financial know-how is not exclusive to younger generations.
50% of the respondents who
had not sought financial advice stated not having a big enough portfolio as
their reason why. This misconception was significantly more of a concern for
individuals 45 years and older.
Remarkably, this tells us
that from millennials to baby boomers, a major reason why Canadians are
avoiding seeking financial advice is because of the misconception that they
don’t have enough money to warrant it.
We only need to look at the
reasons listed above to know guilt, shame and mistrust are emotions with a
profound impact on our ability to make healthy financial decisions. Moreover,
the way these emotions impact us can differ depending on social demographics.
For example, the survey found although
significantly more women than men listed feeling too confused and overwhelmed to
consider seeking financial advice, significantly more women than men also felt
confident in their ability to achieve their financial goals and withstand a
financial emergency. Likewise, significantly more people listed being too
embarrassed by their financial situation to seek help if they made less than
The take away is: regardless of age, gender or
income, many Canadians are stressed about their finances to the extent that it
impacts their ability to secure their financial well-being. A good financial
advisor will be understanding of the unique challenges faced by different
generations and will craft a personalized plan based on his or her client’s lifestyle,
timeline and goals.
If a fear of judgement is preventing you from
seeking financial advice, you are not alone. Advisors understand the emotions
experienced by investors and should take care to meet each person where they
Connect with us to learn how you can start working towards securing your financial well-being.
On Tuesday, March 19, 2019, Finance
Minister Bill Morneau presented the Government of Canada’s 2019 budget. Here
are some highlights of these proposals for individuals. Please note, these are
not yet law.
Employee Stock Options: The current
tax rules provide preferential personal tax treatment to holders of employee
stock options in the form of a stock option deduction which, if available, can
effectively tax the stock option benefit at a personal tax rate similar to a
Budget 2019 proposes to limit the tax-preferred treatment
of employee stock options to annual grants of $200,000, based on the fair
market value of the underlying shares at the time the options are granted. This
limit will only apply to stock options issued to employees of large,
long-established, mature firms, and is not intended to apply start-ups and
rapidly growing Canadian businesses.
It should be noted draft legislation, including
definitions of these terms, has yet to be released. Stock option benefits
realized on options in excess of this limit would not be eligible for the stock
option deduction and will be fully taxable at the employee’s personal tax rate.
Annuities for Registered Plans: To provide
greater flexibility for retirement planning, the 2019 budget is proposing to
permit two new types of annuities for certain registered plans: Advanced Life
Deferred Annuities (ALDA) and Variable Payment Life Annuities (VPLA).
Advanced Life Deferred Annuities will be permitted under a Registered
Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Deferred
Profit-Sharing Plan (DPSP), Pooled Registered Pension Plan (PRPP) and defined contribution
Registered Pension Plan (RPP); and
Variable Payment Life Annuities will be permitted under a PRPP and
defined contribution RPP.
With the creation of an Advanced Life Deferred Annuity
(ALDA) under an RRSP, RRIF, DPSP, PRPP or defined contribution registered
pension plan, life annuity payments under the ALDA can be deferred until the
end of the year in which the annuitant turns 85, which is an extension
from the existing age 71 requirement.
measures will apply to the 2020 and subsequent taxation years.
Home Buyers Plan:The 2019 proposed budget proposes measures that might
help first time home buyers an ability to better manage buying a home and
ongoing costs. The budget proposes to increase the withdrawal limit from
$25,000 to $35,000 for 2019 and subsequent years. As a result, a couple will
potentially be able to withdraw $70,000 from their RRSPs to purchase or build
their first home. The changes also propose other measures to protect home
ownership after the breakdown of a marriage or common-law partnership, couples
who separate or divorce no longer have to be a “first-time home buyer” to
First Time Home Buyer Incentive: The proposed budget recommends an incentive for
first-time home buyers an option with The Canada Mortgage and Housing
Corporation (CMHC) to help finance a portion of their home purchase through a
shared equity mortgage with CMHC, with maximum limits of 10% for a newly
constructed home or 5% for an existing home for household annual income of less
than $120,000. This may reduce the mortgage and borrowing costs for first time
buyers. Additional details on any required repayments and the plan are still to
Individual Pension Plans: Individual pension plans (“IPPs”) are registered plans
which provide retirement benefits to owner-managers in respect of their
employment. If an individual terminates membership in a defined benefit
registered pension plan, there’s a tax-deferred rollover available. The
pension’s commuted value is transferable to another employer-sponsored defined
benefit plan or up to 50 per cent of the commuted value can be transferred to an
RRSP or similar registered plan.
Planning is being undertaken that seeks to
circumvent these prescribed transfer limits. This planning is affected by
establishing an IPP sponsored by a newly incorporated private corporation
controlled by an individual who has terminated employment with their former
employer. The individual then transfers the commuted value of their pension
entitlement from the former employer’s defined benefit plan to the new IPP.
This planning seeks to obtain a 100-per-cent transfer of assets to the new IPP
instead of the restricted transfer of assets to the individual’s registered
retirement savings plan.
To prevent this type of planning, the budget
proposes to prevent tax-deferred transfers of assets from a former employer’s
defined benefit plan to an IPP. The proposal would prevent an IPP from
providing retirement benefits in respect of past years of employment that were
pensionable service under a defined benefit plan of another employer. Any
assets transferred from a former employer’s defined benefit plan to an IPP that
relate to benefits provided in respect of prohibited service will be considered
to be a non-qualifying transfer that is required to be included in the income
of the member for income tax purposes.
These measures apply to pensionable service credited
under an IPP on or after March 2019.
Canada Training Credit (CTC): One of the main reasons, according to the OECD
Survey of Adult skills, why people don’t upgrade or learn new skills is that
the expense of getting additional training or education is due to the cost. The
budget proposes a new refundable tax credit intended to cover up to half of
eligible tuition and fees associated with postsecondary or occupational-skills
training. Eligible working adults between the ages of 25 and 65 will accumulate
$250 each year in a notional account, which can be claimed in the year eligible
training expenses are incurred. The CTC
accumulates automatically each year up to a lifetime limit of $5000, and is
designed to offset training costs at colleges, universities and other eligible
institutions. In order to be eligible for the CTC in a year an individual must
meet certain criteria.
Canada Student Loans – Lower Interest Rate: The budget
proposes a significant reduction in the interest rate charged on Canada Student
Loans and Canada Apprentice Loans. Starting in 2019-2020, the fixed rate will
be reduced from prime plus 5% to prime plus 2% and the popular variable
interest rate will drop from prime plus 2.5% to only prime.
Currently there is a six-month grace period after
graduation, where the new graduate does not have to make any payments, but
interest still accrues. The budget proposes to eliminate interest charges on
student debt during this six-month grace period.
Tax Credit for Digital Subscriptions: The Budget proposes a 15%
non-refundable tax credit for eligible digital news subscriptions up to an
annual maximum of $500 in costs for an annual maximum credit if $75. This includes
combined digital and newsprint subscriptions for amounts paid after 2019 and
Medical Expense Tax Credit: The budget
proposes to expand the range of cannabis products eligible for the medical
expense tax credit, applicable for expenses incurred on or after October 17,
Guaranteed Income Supplement: The budget provides enhancements to the Guaranteed Income
Supplement (GIS), including making self-employment income eligible for the earnings
exemption; and increasing the exemption of annual employment or self-employment
income for GIS or allowance recipients and their spouse by:
Increasing the full exemption from
$3,500 to $5,000 per year for both the recipient and their spouse; and
Introducing a new exemption of 50%
of an additional $10,000, beyond the above-mentioned $5,000 exemption for both
the recipient and spouse.
Registered Disability Savings Plans (RDSPs): A
Registered Disability Savings Plan (RDSP) is intended to assist with the
long-term savings and financial security of individuals eligible for the
disability tax credit (DTC). Savings in these plans are supplemented with
Canada Disability Savings Grants and Canada Disability Savings Bonds.
Currently, once an individual beneficiary of an RDSP is
no longer eligible for the DTC, they cannot make additional contributions to
the plan, and no government grants or bonds will be paid into the RDSP. In
addition, the plan must be closed by the end of the year following the first
full year that the individual is no longer eligible for the DTC, unless a
medical practitioner certifies that it’s likely the beneficiary will once again
qualify for the DTC.
Closure of the plan will result in repayment of government
grants and bonds paid into the plan within the preceding 10-year period, the
“assistance holdback”. The budget is proposing to remove the two-year time
limit on the period that an RDSP can remain open after the beneficiary is no
longer eligible for the DTC and eliminates the requirement for medical
As a transitional measure, financial institutions will
not be required to close an RDSP on or after Budget Day and before 2021 simply
because the beneficiary ceased to be DTC-eligible.
detailed rules and criteria proposed in the 2019 Budget for the above items and
all other proposed changes that can be accessed at www.budget.gc.ca.
Feel free to connect with us for
clarity or to understand how some of the proposed changes may impact you.
Where the famed work/life balance is an aspiration of
many business owners, it can be virtually unattainable – and even undesirable –
for farmers. “Farming life throughout the world is characterized by the almost
inseparable, intimate integration of home, work, memories and family.” 
More than just a job, farming is the locus of many families; a foundation that
informs identity and gives purpose.
As with anything business related, the financial side
of farm succession often eclipses the equally valuable, personal side of the
process. If you were to ask Revenue Canada Agency, a farmer is “the person who
is assuming all of the risk in a farming operation.”
While useful for tax purposes and estate planning, this definition grossly
understates what it means to be a
Agriculture and farming contribute an impressive
amount to the Canadian economy – roughly 6-7% or $111.9 billion of gross
domestic product (GDP) annually.
The economic importance of farming, coupled with the “greying” of farmers as a
demographic (globally, not just in Canada), means intergenerational farm
succession is increasingly lauded as the key to future agricultural viability.
Much of a farmer’s assets are in the form of physical
capital – land, animals, and machinery – which tend to have substantial
sentimental value. Some
farmers may shy away from transition planning given how emotionally and
personally invested they are in their farming identities.
How does one begin to answer questions about what life
after farming might look like when it is all life has been? For many, answers
to these difficult questions come only after seeking outside help.
Financial advisors who understand farm succession is
equally an emotional and financial process can help farmers envision and plan
for a life after farming that invokes feelings of comfort, even excitement, and ensure the continued success of the
If you have questions about your farm succession plan
or if you need help making yours, connect
I., Lobley, M., and Baker, J., 2012. “From generation to generation: drawing
the threads together”. Pp. 213-240 in Farm
Succession, inheritance and retirement: Challenges for agricultural futures.
International Farming Systems Association (IFSA), 2012, pp. 2-16.
2 – Canada, Growing
Opportunities, et al. “A Legal Guide to Farm Estate Planning in Manitoba.”
Manitoba Agriculture, 202, pp. 1-64.
3 – “An Overview of the Canadian Agriculture and
Agri-Food System 2017.” Statistical Overview of the Canadian Fruit
Industry 2017 – Agriculture and Agri-Food Canada (AAFC), 10 Nov. 2017, www.agr.gc.ca/eng/about-us/publications/economic-publications/an-overview-of-the-canadian-agriculture-and-agri-food-system-2017/?id=1510326669269.
A great deal of time is spent
considering and planning for income during retirement. However, there are other
factors that go into a successful retirement plan. Debt management is one of
The closer we get to retirement the more
effort should be focused on reducing or ideally eliminating debt, especially
consumer debt. More and more Canadian seniors are beginning their retirement
years still in debt – either mortgage or consumer (credit card, etc.)
According to a 2017 Sun Life Financial
survey, one in five retirees are making a mortgage payment, one in four are
making a car payment and about two out of three are have unpaid credit cards
(consumer debt). While a home is an investment that will likely grow in value,
the consumer debt and vehicle payments are for items that depreciate in value
and typically have much higher interest rates.
As much as you spend time defining and
building a financial savings plan, it is also important to determine a debt
payment plan so you can transition into your life after work with only
necessary or minimal debt. Afterall, your retirement income plan was likely not
designed to support debt.
When we are in the working phase of our
life, usually a substantial part of our monthly budget goes to paying off debt – mortgage, car loans, credit
cards, lines of credit, etc. Debt is one of those things that is very easy to
find ourselves in and can take a long time to get out from under.
In the years
leading up to retirement, it is recommended we avoid adding consumer debt
whenever possible. Pretty much everything outside your mortgage is considered consumer
debt. If you borrowed money to consume a product that isn’t appreciating in
value, pay it off as soon as you are able and avoid carrying it into
Like all financial
planning, debt repayment should take all areas of your current financial
situation and future goals into account. As mentioned, paying off debt is
important but so is saving for retirement and planning your future income.
To build a debt
repayment plan, first you need to gather all the information for your current debt.
This includes interest rates you are being charged and all current outstanding
There are two
methods recommended for paying off consumer debt:
The first one is
called the snowball method. This method has you pay the minimum on all but your
smallest debt. Add whatever extra money you can afford onto the smallest debt
until it is paid off. Then add the amount you were paying on that debt to your
next smallest until they are all paid off. As you continue to pay off more and
more debt, the amount you are paying off begins to build like a snowball
rolling down a hill.
The other method is
similar but is based on the size of the interest rate rather than the size of
the balance. Once again you pay the minimum on all, except this time you pay
more on the one with the highest interest rate. You begin by paying off the
debt with the highest interest rate and snowball the payments onto the next
highest interest rate until they are all paid off.
This second method
makes the most sense mathematically since you are saving more interest payments
by doing it this way. However, the psychology at play with seeing results
quicker can make the first option better for some. Being able to eliminate your
smallest debt quickly allows you to see results early and helps motivate you to
continue paying off debt at an accelerated pace.
Either option will
get the job done. Choose the right one for you. The one that will help keep you
motivated. Most importantly, stop using your credit cards and line of credit if
you are not able to pay off balances on a monthly basis. After all, if you find
yourself in a hole, the first thing you should do is stop digging.
Some debt is better than others. To find out if
you have the best debt re-payment and retirement income plan in place, feel
free to connect
‘Plan for retirement.’ This phrase is something many of
us have heard since the time we landed our first full-time job. But even now,
as it was back then, it is a pretty vague directive.
When we are younger it translates to putting money away,
likely into a registered account. And for anyone under 25 that’s a great first
step. Sock away money and let compound interest work for you. Perfect. Done and
However, as you get older this approach to retirement
planning should evolve and become more formal, with defined goals and a clear plan.
A plan that can grow and change as we do, adapting to our lives and goals. This
is when the question ‘will I have enough’ begins to become part of the
If we peel everything away, each of us faces the fear of
NOT having enough saved by the time we retire to live out our retirement years
in relative financial comfort and provide enough income to meet our lifestyle
goals. For some, this fear can stop us from working with an advisor to build a
plan. Check out our blog ‘There
is No Time Like Now’ to learn more on this topic.
The easiest way to face any fear you have about the
retirement nest egg you are building is to learn the facts. Work with a
financial advisor to build a retirement plan based on both your current reality
and your future goals.
One of the first considerations is the type of retirement
you want. Do you hope to travel? Will you move into a different home? Do you or
will you have a vacation property? How many vehicles will you have? All choices
have an impact on your income needs during retirement.
Any company-based pension plans or savings plans and
their income during retirement need to be considered, in addition to RRSPs,
non-registered and TFSA savings you are putting aside for retirement. Company-based
pension plans are less common today than in the past, but if you have one, the
income they will generate during your retirement need to be factored in to your
retirement income planning.
In addition, any government income you will be eligible
for during your retirement need to be taken into account for retirement income
planning. Old Age Security (OAS) and Canadian Pension Plan (CPP) are two common
government benefits many of us look forward to receiving. There are some
options in terms of when you can begin receiving these benefits. Your specific
situation should be reviewed to know what is in your best interest. There are
strategies available to ensure you maximize your income options and minimize
For many of us, the concept of retirement planning feels
like a distant concern; one that ‘future me’ will be better equipped to deal
with. In fact, the earlier you can start, the better. There’s a Chinese proverb
that says, “The best time to plant a tree was 20 years ago, the next best time
is right now”.
Find a financial advisor you trust and connect with them to
help you build your retirement income plan.
A study of Canadians
done by the Investment Fund Institute of Canada found households who worked
with an advisor had as much as 2.73 times more assets after 15 years compared
to identical non-advised households.
You will benefit in many ways from having a financial planner — an expert in your corner keeping your best interests as their priority. They will work with you on a customized plan, help you stay on track and modify as needed. To review your personal financial plan and projection for your retirement income, please feel free to connect with us.
Annual holiday gift guides have been circulated. Wish lists have been compiled and shared. The annual review of gift-giving and the intentions connected to why we give gifts and to whom is well-underway.
For many of us, we give gifts to people who are important to us and try to focus on things they want or need. In today’s world, gifts tend to be geared towards instant gratification.
Rather than get caught up in the season’s hottest trend or coolest gadget, this year consider giving your children or grand-children a gift that will help them achieve future success.
Permanent life insurance and child critical illness may not be at the top of their wish lists, but they will be a gift much appreciated the older they get. Insurance is a wonderful foundation for them to build their dreams upon.
A child’s insurability will change with age and other factors, as will their insurance needs. One of the highlights of permanent life insurance and critical illness insurance for children is locking in insurance while the child is young.
When you purchase the policy, you can add on the ability to increase or extend coverage in the future even if insurability has changed. This option can prove very valuable should your child’s insurability become a factor as they go through life. Occupation, hobbies, travel and health issues can impact the ability to buy more insurance in the future.
Your child’s permanent life insurance policy contains a cash value that grows with time and can be accessed, allowing for opportunities that may have otherwise been financially difficult. This cash value can help with education costs, a down payment on a home or income when they need it.
Child critical illness insurance can include a return of premium option, if no claim is made it allows for premium payments to be paid back in a lump sum and to be used to support your child’s dreams and future plans.
Permanent life and critical illness insurance give you the opportunity to set your child or grandchild up for success and help them be prepared for unexpected events.
Learn how insurance can be one of the greatest gifts you give by connecting with us.