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Focus your financial security picture

Posted by Admin on January 20, 2012

For legal advice, many Canadians work with a single lawyer who comes to understand their individual situation and concerns. For taxation matters, they look to a single accountant familiar with their bookkeeping needs and tax situation.

Yet, when it comes to financial security matters, many of these same individuals turn to two or more financial security advisors or institutions.

Having a number of accounts at several financial institutions may make it challenging to get a comprehensive view of your overall financial security picture.

Consolidating those assets with one trusted financial security advisor who knows and understands your needs can help bring focus and clarity to your financial security plan.

Provides a comprehensive view

Having a single financial security professional can help you get a comprehensive snapshot of your overall financial security picture. In addition, one financial security advisor will:

• Better understand your investments as a whole
• Be in a better position to give you advice on how your holdings fit with all your goals
• Be better able to provide recommendations appropriate for you
• Give you consistent information and advice

Helps manage risk

By working with a single financial security advisor, you’re dealing with someone who knows and understands where you are today and where you see yourself in the future. He/she is in a better position to make sure your portfolio is adjusted to reflect your changing needs and risk tolerance over time.

Simplifies your life

Consolidation also makes it easier to follow your investments, keep your portfolio on track to meet your goals and objectives, and adjust your portfolio when if your personal circumstances change. In addition, if you’re receiving an income, the funds come from one source.

Finally, your lawyer or accountant will also find it easier to work with one financial security advisor on overlapping matters, such as estate planning.

Bring your financial security picture into focus today

Talk to your financial security advisor today about ways you can bring your financial security picture into focus by consolidating your assets.

Disclaimers

Protect your retirement plans from the impact of a critical illness

Posted by Admin on January 20, 2012

Have you considered the impact of having to dip into your retirement savings? The cost of using RRSPs to cover expenses of an unexpected illness could result in the need to work longer or retire with less money than planned. Despite this, many Canadians don’t have an adequate plan for the unexpected.

In an Ipsos Reid survey³, 52 per cent of respondents indicated they would dip into retirement savings if faced with a major illness.

Critical illness insurance can help keep your retirement saving on track if you are diagnosed with a condition such as a heart attack, stroke or life-threatening cancer.

If you have critical illness insurance and satisfy the survival period, the benefit you receive can help pay those expenses, meaning you are less likely to have to dip into your existing registered retirement savings plan (RRSP) to help cover costs.

Consider this example

John is a 38-year-old male with annual earnings of $90,000. If he were to remain healthy until age 65, he could retire with more than $673,000¹ in an RRSP. But John suffers a life-threatening cancer at age 52. Since he has no critical illness protection he needs money to cover daily living expenses and medical expenses and/or treatments not covered though his provincial healthcare plan. He withdraws $200,000 from his RRSP to pay these bills. To maintain his goal of retiring at of 65 years with the original RRSP amount, he would have to triple his RRSP contribution from the time of his diagnosis or retire with less than $275,000¹, considerably less than planned.

However, if John invests slightly less each month in his RRSP, and use the difference toward a premium on a $110,000² critical illness insurance policy with a return-of-premium rider, his retirement plans can stay on track in the event of a critical illness. In this scenario, if John remains healthy until the age of 65, he can retire with more than $626,000 in his RRSP, plus, be eligible for a return of premium of $43,751 for a total of nearly $670,000 for use in retirement.

Regardless of whether John suffers a critical illness, using some of his monthly contribution toward funding a critical illness with a return-of-premium rider can help protect his savings.
The above example is for illustration purpose only. Situations may vary according to specific circumstances

Most people never prepare for a critical illness

Deciding to include critical illness insurance in your financial security plan can be an import way to reduce financial risk and help protect your savings. By using a portion of your planned RRSP contributions to fund critical illness insurance, you can help protect your savings and keep your retirement plans on track.

Your financial security advisor can help you tailor your coverage by discussing the various options available to you. Set up a meeting today to put plans in place to reduce your financial risk and help safeguard your retirement if you suffer a critical illness.

³ “Retirement plans threatened by disability”, Advisor.ca

¹ Assumes annual earnings of $90,000, a 45 % marginal tax rate, and 4 percent compounded rate of return on RRSP contributions.

² Critical illness policy based on 38-year-old , male, non-smoker, standard risk.

Disclaimers

Achieve your financial goals with the help of a return-of-premium rider

Posted by Admin on October 19, 2011

Critical illness insurance can be a vital part of your financial security plan if you’re diagnosed with a condition such as a heart attack, stroke or life-threatening cancer. If you’re diagnosed with a covered critical condition and satisfy the survival period, the benefit you receive can help you deal with unexpected expenses, meaning you’re less likely to dip into your existing savings to meet unexpected expenses.

But what if you don’t develop a critical illness?

Many critical illness insurance policies allow you to add an optional return of premium rider that rewards your continued good health. This return of premium rider could help you recoup some or all of the eligible premium paid if you never make a claim.

Here’s how it works.

Eligible premiums are returned if you don’t make a claim

If you remain healthy and have a return of premium rider, all or a portion of the eligible premium paid is returned.

Returned premiums can be used to supplement retirement savings

If you don’t make a claim and you receive a return of premium benefit, the money you receive can be used to fund other investment strategies as you near retirement. While the premiums are typically higher on a policy with a return of premium rider, you can invest the amount of premium returned under the rider.

Most people never prepare for a critical illness

Deciding to include critical illness insurance in your financial security plan is an important way you can reduce financial risk and help protect your savings. Adding a return-of-premium rider can help you continue to protect those savings and help fund your financial goals.

I can help you tailor your coverage by discussing the various return of premium options that may be available to you. Set up a meeting today to put plans in place to reduce your financial risk if you suffer a critical illness.

*The CRA generally accepts that CI policies providing no Return of Premium (ROP) are accident and sickness policies. The CRA has not provided its view regarding the tax treatment of CI polices containing ROP benefits. The taxation of optional ROP benefits is subject to interpretation by the CRA.

The Canada Revenue Agency and Revenue Quebec have not provided a formal ruling confirming that policies which include return of premium benefits are accident and sickness insurance for income tax purposes. The tax treatment of optional return of premium benefits is subject to interpretation.

Disclaimers

Consider insurance options when planning for your retirement

Posted by Admin on October 18, 2011

With concern about the availability of funds from government-assisted retirement programs, many Canadians are taking retirement planning into their own hands. While conventional registered retirement savings plans (RRSPs), pension plans and tax-free savings accounts are popular planning options, most individuals don’t realize permanent life insurance can also help them achieve their retirement goals.

You may be constrained by RRSP limits

RRSP limits allow you to defer taxation on up to 18 per cent of eligible earned income, but only up to the maximum prescribed in the Income Tax Act. If your income is in excess of the maximum prescribed threshold, or if you’re in a pension plan, your RRSP contribution room is often restricted. You may be looking for additional retirement saving options.

The opportunity

Besides providing your loved ones with a safety net in the event of your premature death, some types of life insurance can also be used to enhance your retirement income. By purchasing a permanent life insurance policy with cash value, you can benefit from the opportunity of tax-advantaged cash value growth within the policy. The policy’s cash value can later be accessed to provide you with additional funds during retirement. And, your loved ones can receive a tax-free payment at death from the remaining death benefit.

Under current income tax legislation, a permanent life insurance policy is exempt from annual income taxation on the growth of policy values, provided certain conditions are met. Withdrawals from the life insurance policy cash values are subject to taxation based on the rates and laws in effect at the time you withdraw the cash value.

When the time comes for you to access the policy’s cash value, you have choice. Generally speaking, there are three approaches to access your cash value:

• Collateral loan
• Partial surrender of cash value
• Policy loan

The approach that may be right for you depends on your circumstances. Each of these methods has its own tax implications, based on the rates and laws in effect at the time the policy cash value is accessed.

Find out how you can take control of your retirement dreams with permanent life insurance. I can provide more information on how to optimize your retirement income.

This article is for information purposes only and shouldn’t be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but laws and interpretations may change, therefore errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation for Canadian residents, which is subject to change, for implications as they relate to individual circumstances, consult with legal or tax professionals.

Information is provided by London Life Insurance Company and is current at June 2010.

Disclaimers

Periods after weak markets, a good time to invest

Posted by Admin on May 02, 2011

Market volatility is neither new nor unusual. If you’re concerned about recent market behaviour, remember markets typically recover from downturns and go on to post positive overall returns.

Consider this: As of December 2010, the TSX posted a one-year increase of 13 per cent. The S&P 500 increased nine per cent over the same period¹. These increases are consistent with the story history tells us: in periods after a weak market, markets have tended to offer above-average returns.

Taking action sooner rather than later can help position you to benefit from this trend.

How will you be invested?

While being hesitant about getting back into the market is a normal reaction, sitting on the sidelines can mean you could miss key periods of market appreciation — periods that can make the difference between reaching your investment goals or falling short.

If you’re uneasy about investing, here are a few things to consider.

The basics

Maintaining a long-term view and being properly diversified are two key principles for managing volatility.

Diversification can be easy to achieve. A well-diversified portfolio that is matched to your risk tolerance is something, I can help you put in place.

Select the right investment

Segregated fund polices offer several features that can help protect you from the potential risks associated with investing. I can help you determine whether insurance-based investment vehicles such as segregated fund policies are appropriate for you.

Build the right portfolio

I have access to investment tools that can help you determine the right mix of investments for your investment portfolio. I can help you make sure these decisions are based on your unique situation and your risk tolerance.

Get financial security advice regularly

It’s important to remember your risk tolerance may change over time, so maintaining contact with your financial security advisor is important. This will ensure you have the current information and advice about how to structure your portfolio to reflect your risk tolerance.

Whether you’re in the savings phase of your retirement plan or drawing an income, I can work with you to review your plan and, if appropriate, determine if there are opportunities for you to reinvest in it.

¹ Source: Fun capital market facts, The Globe and Mail, Dec. 10, 2010.

A description of the key features of the segregated fund policy is contained in the information folder.

Any amount that is allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.

Disclaimers

Cancer survivor reveals why, “it is worthwhile to have insurance”

Posted by Admin on May 02, 2011

Karen Timchuk is a critical illness insurance policyholder who, when faced with a critical illness, was able to keep her retirement plans on track. This is her story.²

In late 2009, only a few years after purchasing her policy, Karen suffered sudden back and abdominal pain which, when investigated, revealed both non-Hodgkin’s lymphoma and colon cancer. “Needless to say, December was dark and gloomy for me,” Karen says. “The fact I was going to get $100,000 was the only good news I got that month.”

Karen used the funds to cover the cost of chemotherapy-related drugs not covered by her health plan, take a holiday with her spouse in between chemotherapy treatments and keep up her pension plan contributions.

“I was on long-term disability from my job and had to pay over $10,000 into my pension for the 11 months I was off,” she explains. “My plan is to retire in 2014. If I couldn’t afford the pension contribution, I wouldn’t be able to retire on schedule.”

Karen also had some concerns knowing non-Hodgkin’s lymphoma can recur. But the benefit amount she purchased allowed her to set aside some funds as a security blanket in case of a relapse.

Karen says she is thankful she made the decision to go with the insurance. As her parents both had a history of cancer, her policy was rated. “The premium was around $50 a month more with the rating,” says Karen. At that time, I was in my early forties and felt invincible,” she says. “But even with the rating, I still felt it was a good deal for me. I’m a believer and tell everyone it is worthwhile to have insurance.”

It’s important to remind ourselves that serious health problems can strike any of us at any time. Unforeseen events can derail your carefully thought-out retirement plans and have a devastating impact on your family finances.

Imagine having to dip into your registered retirement savings plan (RRSP) savings or cease contributions to make mortgage payments and pay for drugs. Situations like these not only expose you to greater taxes, but can also short-change your retirement nest egg.

Planning for the future involves more than just saving money; it involves planning for the unexpected.

I can provide more details on this important piece of a comprehensive financial security plan.

² The information and views expressed are solely those of the individual represented but may have been edited for brevity.

Disclaimers

Managing retirement risk to protect your savings

Posted by Admin on January 01, 2011

Even if your retirement is far off, reducing your risk exposure to a comfortable level is just as important while saving for retirement as it is when planning your retirement income.

Know the risks, plan to manage them

Whether they are close to, in, or saving for retirement, many individuals have concerns about their retirement income; questions like:

• Will I have enough saved to generate the income I need to retire?
• Will my savings last as long as I live?
• What can I do to ensure my savings aren’t eroded by poor market performance?

They’re good questions.

Canadians are living healthier and longer

The risk of outliving your savings is real:

• Canadian life expectancy hit 80.4 years of age in 2008, an increase from 77.8 years in 1991.¹
• One in every two people aged 65 today will live to see age 90.

Successful retirement planning considers you might live beyond your life expectancy.

¹ Source: “Life expectancy in Canada hits 80.4 years: Statistics Canada”, CBC news, Monday Jan. 14, 2008

It costs more to live

The impact of inflation becomes greater in retirement because expenses can keep increasing while your income may not.

At just a one-per-cent inflation rate, the purchasing power of one dollar in 25 years will be reduced to just 78 cents.

Market volatility hits those in early retirement the hardest

Market declines early in retirement when you’re withdrawing an income can erode your savings at an accelerated rate.

You need individualized solutions

Addressing these concerns requires product solutions and strategies that provide you with:

• Growth potential to keep up with inflation
• Guarantees to help maximize your retirement income and ensure it lasts
• Ways to manage market uncertainty
• Access to a wide choice of investment funds for all levels of risk

Consider the protection and versatility of segregated fund policies

Segregated fund policies are flexible solutions that can be structured in a number of ways to meet your specific life circumstances. They provide a number of fund choices, and options that give you the ability to generate income for life when you start drawing on your savings. They also can provide risk protection against volatile markets and growth potential from exposure to equity markets.

Combine all these elements with the benefits segregated fund policies can provide

• like potential creditor protection and various options for maturity and death benefit guarantees, and they can become a powerful part of your retirement income solution.

Disclaimers

Critical illness insurance for children

Posted by Admin on January 01, 2011

Although no one wants to consider anything critical happening to their children, planning today for the unexpected may help reduce considerable financial hardship tomorrow.

Imagine your child became critically ill. It could be, for example, a life-threatening cancer, Type 1 Diabetes, loss of speech, deafness or perhaps bacterial meningitis.

• Where would you want to be?
• Would you want to take time off work to be with your child?
• Would you value access to a second medical opinion on your child’s diagnosis and treatment plan?
• Would a lump sum of money help you focus on your child’s recovery instead of financial concerns?
• Would you like to establish your child’s critical illness insurability for their adulthood?
• And if your child thankfully remains healthy, would you like your premiums returned?

If you’ve answered yes to any of these questions, you may want to consider child critical illness insurance (Child CI). Child CI is designed to provide families with the financial
resources to help support recovery and care of a child in the event of a critical condition and help ensure the child’s future insurability.

Money at a time when it’s needed most!

Child CI pays a lump-sum benefit if your child is diagnosed with one of the critical conditions defined in the policy and the survival period (usually 30 days) is satisfied.

Added support at a time when it’s needed most!

• Most offer medical referral services that can provide a second medical opinion on the diagnosis, recommend treatment options, identify leading doctors and co-ordinate treatment in medical facilities outside Canada.
• Some also include critical illness counselling and support services to help you and your child cope with the many issues that may be experienced (e.g., child or elder care resource referrals, stress management, financial consultation).

Protect your child’s insurability

Some insurers offer a conversion option upon policy expiration — usually around age 25 — without underwriting, to an adult critical illness insurance policy.

No claims – consider return of premium benefit

Look for a policy that offers a Return of Premium Rider if you are interested in recouping 100 per cent of the eligible premium paid if a claim has not been made.

This benefit can be used any way you like. You may choose to share money with your child to help:

• Recover the costs associated with your child’s education
• Provide for a down payment on a vehicle or home
• Fund a trip to explore another part of the world

For more information about how Child CI may fit your needs, ask me.

Disclaimers

Tax-efficient investing beyond RRSPs

Posted by Admin on September 29, 2010

The tax advantages registered retirement savings plans (RRSPs) offer make them the default choice for many Canadians. Investors often use them to save, and then roll the money into registered retirement income plans at retirement.

While typically the right strategy, RRSPs have restrictions that limit how much you are eligible to invest on a yearly basis when working towards your retirement goals. Many investors are not familiar with the options available to help them invest for retirement beyond their registered plans to further reduce taxes payable each year.

Whether you are in the process of deciding what products to use to save for retirement or are starting to consider from where you will take your income at retirement, there are many things you can do to help you reach your retirement income goals, while strategically deferring tax.

Increasing your savings

Tax-free savings accounts (TFSAs)

Many Canadians have considered TFSAs as short-term options. They allow funds to grow tax-free and withdrawals do not affect investor eligibility for income-based credits like old age security, age and certain tax credits. When used over the long term, they are a useful product for saving but should not be considered a normal savings account. A penalty of one per cent per month is levied for over contributions so speak to your financial security advisor about how to structure a TFSA within your financial security plan as to ensure you do not over contribute into the account.

Corporate class mutual funds

Corporate class funds are structured to provide maximum tax efficiency in non-registered accounts. The funds can reduce ongoing distributions and defer taxes when switching to other funds to rebalance portfolios. The funds are also designed so clients receive tax-preferred capital gains or dividend distributions from the fixed income and cash management funds.

Planning an income

Tax-efficient systematic withdrawal plans (TSWPs)

You can set up tax-efficient withdrawals from investment funds. They pay you tax-deferred monthly payments that consist primarily of your original investment – return of capital – plus any income. Return of capital isn’t immediately taxable when you receive it. TSWPs are also offered with corporate class funds, allowing clients to combine the tax-deferral benefits of both products.

Whether you’re saving for retirement or beginning to think of ways to draw income from your non-registered funds, there are tax-efficient solutions to help maximize the efficiency of your financial security plans. As your financial security advisor, I can help you determine what combination is most beneficial for you.

Understanding the new federal mortgage lending requirements

Posted by Admin on September 29, 2010

Earlier this year, the federal government introduced new lending criteria for government-insured (high-ratio) mortgages. The intent of the change is to help ensure homeowners can afford their home if interest rates rise.

With a conventional mortgage, you need a minimum down payment of 20 per cent of the purchase price. High-ratio mortgages are available that can reduce your down payment requirement to as little as five per cent of the purchase price. This type of mortgage requires mortgage loan insurance that is obtained through the Canadian Mortgage and Housing Corporation (CMHC) or private mortgage insurers.

What this means to you

Homebuyers seeking a high-ratio fixed rate mortgage with a term of less than five years or a high-ratio variable rate mortgage of any term must now qualify for a five-year fixed rate mortgage, even if they choose a mortgage with a lower interest rate and shorter term. Buyers would still pay the rate in effect for the mortgage selected.

For conventional fixed rate mortgages with a term of five years or longer, the actual contract interest rate would be used for qualification.

Find out how much you can afford

Pre-qualifying for a mortgage will help you set realistic expectations when shopping for a new home. The process also will tell you the maximum amount you can afford to pay for a home.

If you’re buying a home or renewing your mortgage, as your financial security advisor, I can refer you to a mortgage planning specialist who can help you find a mortgage that works for your individual situation.

Maximize the flexibility of a TFSA: Think long term

Posted by Admin on August 26, 2010

The tax-free savings account (TFSA) has proven to be a popular vehicle for Canadians to reach their short-term savings. Many have used the account to invest in guaranteed investment certificates (GICs), high interest savings accounts and term deposits. Using this account type to meet short-term needs may be appropriate for you, but a TFSA is most powerful as part of your long-term financial security plan.

Most Canadians view the registered retirement savings plan (RRSP) as the primary vehicle for long-term retirement savings, but a TFSA has benefits, like tax-free growth, that complement long-term savings too. Withdrawals do not increase taxable income and don’t affect eligibility for income-tested credits like old age security, age credit, or the goods and services tax (GST) credit.

Which to do first, if you can’t do both

Investing fully in both accounts would offer the most tax savings, but not everyone is capable of doing so. Deciding to which you should contribute at any given time – RRSP or TFSA – depends on several factors, including your current and future tax rates. When combining both savings vehicles with a long-term view, it’s important to consider when you intend to withdraw money from your account. Although what you do will depend on your unique situation, consider the following:

TFSA: Quick facts

• Available to individuals age 18 and over who have a social insurance number
• Contribute up to $5,000 per year. The contribution limit is indexed to inflation
• Carry forward unused contribution room indefinitely, like an RRSP
• Pay no tax on investment income and withdrawals
• Give money to a spouse to contribute to his or her TFSA without tax consequences

If you are planning for retirement, close to retirement, or even in retirement now, a TFSA might be right for your financial security plan. I look forward to speaking with you about how a TFSA fits for both the short and long term.

Neither Freedom 55 Financial, a division of London Life Insurance Company, or its financial security advisors can give fiscal, legal or accounting advice. You should seek independent professional advice on such matters from your lawyer or accountant.

Taming your financial elephants

Posted by Admin on August 26, 2010

When there’s a huge, important issue that no one wants to talk about, it’s often said, “There’s an elephant in the room.”

If an elephant threatens to trample your financial security, it’s important to start taming it, by discussing it with a financial security advisor.

Many people pretend their elephants aren’t there. However, the risks their elephants represent are very real: death, critical illness and disability, all of which can have dramatic effects on their families, businesses and quality of life.

Do you recognize any of these elephants?

• Elephant #1 – “If one of us died, or became disabled or critically ill, we might not be able to pay the bills.” In fact, 30 per cent of families with children say if a parent died, they’d immediately have trouble meeting everyday expenses (Source: LIMRA, Canadian Families at Risk, Life Insurance Awareness Month, September 2007).

• Elephant #2 – “We might never save enough to retire.” Sixty-eight per cent of Canadians say the biggest threat to reaching their savings goals is a serious medical condition or disability. Forty-nine per cent cite the death of a spouse or partner as a threat (LIMRA, Canadian Critical Illness Insurance Market Study, 2008).

• Elephant #3 – “My business might go under.” Only 10 per cent of small and medium-sized businesses have a formal, written succession plan (Canadian Federation of Independent Business, SME Succession: Update, October 2006).

• Elephant #4 – “My family might face a mountain of debt.” People near retirement often worry about future medical and living expenses. The average Canadian retires at 62. At that age, the average non-smoking couple can expect at least one spouse to live for another 30 years (The Long Stretch in Advocis Forum, December 2008).

If you have financial elephants in your home or business; take the first step to tackling them, managing them and sending them on their way. As part of a complete financial security plan, I can show you how various forms of insurance coverage can help you protect your family, business and quality of life.

Make sure mortgage features fit your circumstances

Posted by Admin on April 28, 2010

Ensuring you have the right type of mortgage for your circumstances, budget and lifestyle is the first step in managing this important piece of your overall financial picture.

Below is a quick overview of some of the more common types of mortgages on the market today.

Conventional mortgage:

Under a conventional mortgage, a lender will normally provide up to 75 per cent of the appraised value or purchase price of the property, whichever is less. You must be able to provide the balance of the purchase price.

High-ratio or insured mortgage:

Here the lender finances up to 95 per cent of appraised value or purchase price, whichever is less. This type of mortgage must, by law, be insured against non-payment by either Canada Mortgage and Housing Corporation or Genworth Financial Mortgage Insurance Company of Canada. You will normally have to pay a slightly higher interest rate than a conventional mortgage to cover the insurance fee.

Open mortgage:

An open mortgage allows payment of the principal, in part or in full, at any time without penalty. Open mortgages tend to be for a short term, usually a year or less. They typically have a higher interest rate than a closed mortgage because they offer greater flexibility.

Open mortgages are worth considering when interest rates are declining or if you have a short-term need.

Closed mortgage:

A closed mortgage features regular payments for the term you select. A penalty usually applies if you repay the loan in full prior to the end of the term.

Closed mortgages are available for short or long terms and are worth considering when interest rates are rising.

Convertible mortgage:

A convertible mortgage allows you to convert your mortgage to another mortgage type at any time without penalty. Often a convertible mortgage will specify what type(s) of mortgage can be selected.

Fixed-rate mortgage:

A fixed-rate mortgage has a set or fixed interest rate that does not change during the term of the mortgage.

Fixed rate mortgages are ideal for individuals who want their payments to stay the same and want to know the amount that will remain owing at the end of the term.

Variable rate mortgage:

Variable rate mortgages generally have a lower interest rate than fixed-rate mortgages with the potential to accelerate the reduction of the outstanding balance and, as a result, reduce your interest costs. The interest rate will fluctuate and may increase depending on market conditions.

Some variable rate mortgages offer a fixed payment for the full mortgage term. The portion of the payment that is applied to the principal fluctuates with changes in interest rates. This may either shorten or lengthen the amortization period.

Other variable rate mortgages have payments that fluctuate depending on the then-current interest rate.

Variable rate mortgages are worth considering if you’re comfortable with, and can manage, changing interest rates and/or changing payments.

Determining the right mortgage and options for your situation can be confusing. I can connect you with a London Life mortgage planning specialist who can answer all your mortgage questions.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of the writer’s knowledge as of the date submitted for publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.

How to protect your RRSP savings

Posted by Admin on April 28, 2010

Another registered retirement savings plan (RRSP) season has come and gone. If you’re like many Canadians, you’ve probably squirreled away some hard-earned dollars in hopes of a comfortable retirement.

However, your retirement planning shouldn’t stop there. Your RRSP savings are vulnerable to many different risks.

Events that can cut into your RRSP savings

While it’s only human nature to look forward to the positive, it’s important to remind ourselves that serious health problems and an early death are also a part of life. Unforeseen events can derail your carefully thought-out plans and have a devastating impact on your family finances.

Imagine having to dip into your RRSP savings, due to the sudden loss of your spouse, in order to make the mortgage payments and help with your children’s education. Situations like this not only expose you to greater taxes, but can also threaten your retirement income – especially if you have to sell investments when markets are down.

However, what if you have to withdraw cash from your RRSP? What if you just stop contributing to it during hard times? Unfortunately, that can also shortchange your retirement nest egg, as shown in the following example.

Example: The Campbells

At age 40, Bill and Amanda Campbell begin contributing $500 a month to their RRSPs. Five years later, a car accident leaves Bill disabled. The Campbells decide to postpone RRSP contributions until Bill has fewer medical expenses and can work again.

Four years pass before Bill fully recovers and finds a new job. The Campbells now feel financially comfortable again and resume their RRSP contributions.

By age 65, they have saved $270,964 ¹ for their retirement. However, if they hadn’t interrupted their RRSP contributions, their savings would be $339,790. That’s 25 per cent or $68,826 more than the current value of their RRSP.

In hindsight, the Campbells would be better off if they had made disability insurance part of their financial security plan. Now they’ll probably have to adjust their standard of living during retirement to make their reduced savings last longer. If this example involved early death or critical illness, their financial loss could have been much larger.

The benefits of having insurance

As we’ve seen, your financial security depends on more than RRSP contributions alone. That’s why, as you continue to pursue your financial goals, you need insurance to help protect your family and your retirement dreams.

For example, if you’re faced with a serious illness, premature death or disability, you may need cash quickly. Cashing out your RRSP savings in a hurry can negatively impact your investment portfolio. However, permanent insurance has a cash value component that can provide you with cash when you need it most, without interrupting the long-term growth of your retirement savings.

The cash value of permanent insurance can help protect you and your family by providing income during difficult times. You can use insurance cash value funds to:

• Pay the mortgage so your family can stay in your home
• Pay off debts and lines of credit
• Protect your family’s standard of living
• Ensure your children can afford college or university
• Help keep your business running
• Cover unforeseen funeral and medical expenses

Why start with insurance today?

As you get older, insurance available to you today may become more difficult to obtain and it’s likely to cost more. If a health problem arises before the policy is in place, your application could be declined, rated or issued with an exclusion. Therefore, it’s best not to delay.

Some people put off purchasing insurance, because they think they can’t afford it. They also don’t want to reduce the amount they can save for retirement. However, you don’t have to shortchange your retirement savings to buy the insurance protection you need. You can choose from many types of insurance, each with different levels of coverage, at prices to suit almost any budget.

I can help you determine how much coverage you need to meet your goals and stay within your budget.

¹ Assumes monthly growth rate of 0.5 per cent (6 per cent per year). No contributions or withdrawals made from age 45 to 49. Initial balance continues to grow to age 65.

This article is for information purposes only and shouldn’t be construed as legal or tax advice. Every effort has been made to ensure its accuracy. However, laws and interpretations may change, so errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation for Canadian residents, which is subject to change. For implications as they relate to individual circumstances, consult with legal or tax professionals. Information is provided by London Life Insurance Company and is current as of December 2009.

Setting your financial goals

Posted by Admin on July 28, 2009

Personal financial security planning is all about controlling your day-to-day financial affairs so you will have enough money to live comfortably, do the things that bring you satisfaction and ultimately reach your goals. To do this, you need to plan carefully, and possibly set a budget, then stick with your plan and budget. Saving money, controlling spending and investing in your future are all important factors in financial security planning, but setting specific goals may be most important. Goals are necessary to measure your financial success. Once you’ve set long-term attainable goals, choosing and following a course of action can help bring you closer to attaining them.

When setting your financial goals:

• Think about long and short-term goals
• Write your goals on paper and make sure they’re SMART (Specific, Measurable, Attainable, Realistic, Timely) goals
• Research
• Evaluate your progress

Questions to ask your financial security advisor and investment representative

Posted by Admin on July 19, 2009

1. Will my financial security plan offer me freedom and choice at all stages of my life?
2. How do your recommendations fit into my long-term plan?
3. How often should we review my entire financial security plan and make adjustments to fit my current life stage?
4. What other products and services do you offer?