TFSAs Kill RRSPs

I know it is a bold statement, but I believe that the Tax Free Savings Account (TFSA) has leap-frogged over the RRSP as the top vehicle for retirement savings. Imagine 20 years down the road a pool of money generating income that is totally tax free. This is not to say that the RRSP cannot play a role, just that it should come after the TFSA has been maxed out and Here are my top 10 reasons why you should open an account: 

1- Contributions can be made retroactively, if you have never started one you could deposit $51,000.00 that would be working for you tax free.

2 - The limit for TFSAs has been increased to almost double the yearly amount to $10,000 per year.

3 - TFSAs can hold the same investments as an RRSP.

4 - TFSAs will not lose contribution room if you withdraw money.

5 - You can withdraw money any time with out incurring taxes.

6 - TFSAs are available from many sources not just the Banking industry.

7 - All growth within the TFSA is tax free. For retirees this means it is not included in your income and reduces the chance of claw backs on pension earnings.

8 - TFSAs do not have a set draw down amount. Meaning that you can withdrawwhen and how much you need when you need it unlike RRIFs.

9 - Contributions are not base on your annual income everyone gets the same opportunity unlike RRSPs which have both an income percentage and maximum limit.

10 - No age limit for TFSAs and you can assign a beneficiary making it an ideal estate planning tool. 

TFSAs are a great way to save whether you are saving for the short-term or the long-term. The TFSA has some characteristics in common with the RRSP, but is different in many ways as well. This account is designed to offer much more flexibility and liquidity. 

If you are a Canadian resident, 18 or older and have a Social Insurance Number (SIN), you can open a TFSA. You can now save up to $10,000 a year, and any unused contribution room is carried over indefinitely. 

To learn more about your options download one of these free guides.

Or visit www.protectingwhatmattersmost.com

How much does your Ontario Health Care Cover?

Did you know that you already buy Health Insurance? That’s right every year as a Canadian you pay for your extended health benefits provided by OHIP, just check out your last tax return and you will be able to find out what premium you pay on a yearly basis.

For as long as I can remember, Canadians have said that Heath care is one area that they are happy to have better than their US counterparts. But does your Provincial health plan cover as much as you think? And what about your employee benefits at work?

According to a recent report from Sunlife, “A substantial number of Canadians surveyed in the 2013 Sun Life Canadian Health Index believed they wouldn’t need to pay anything at all for medical costs such as physiotherapy, living in a nursing or retirement home, or prescription drugs. The fact is, however, that provincial health plans are mandated by the Canada Health Act to cover only “medically necessary” services such as those provided in a hospital.”

Understanding Health Care in Ontario is a great resource for finding out who can access a variety of health care services in your community. Knowledge is power and everyone should know what is covered and what is not. The most at risk demographic is of course is our growing and aging population. Reported in the, “2014 Sun Life Canadian Health Index found that two-thirds of Canadians are worried about their health deteriorating as they age, but only one-fifth had saved money or otherwise planned financially to deal with the cost of poor health.”

Retirement Planning should include not only include travel itinerary, vacation spots, living arrangements & income sources but just as important is insurance that will cover these gaps. The top five concerns are:

Extended Health Insurance - Covering things left out of your Provincial Plan.

Critical Illness – A lump sum benefit designed to cover ongoing medical expenses during recovery from a major illness.

Long Term Care – Designed to assist those who can no longer able to look after themselves

Disability Insurance – Pays a percentage of your salary if you are still under 65 and have been previously working.

Travel Insurance – Is another form of health care coverage for when you are out of Province.

As with your finances, it is just as important to review your coverage with an independent advisor from time to time to ensure that you have the right products for your current life style.

To learn more about your options download one of these free guides.

Why Insurance should be a part of every divorce.

You may think divorce is cut and dry, a simple signing of forms, a couple of lawyers, a court date and judgment and you’re done. But if child or spousal support is involved; things can get complicated, and you’re financially united for richer and for poorer. Most divorcing couples focus on splitting assets and hammering out support payments, too many neglect one major post-divorce reality: insurance.

Just like when you were married, during separation you still need to consider your child(s) needs before your own. Whether you’re relying on or are responsible for paying support, or just setting up life as a newly single person, you need to make sure you maintain sufficient insurance coverage. Why is it so important? Start by asking yourself these four questions:

1. What if your ex dies — or you do?

 If you rely on support payments from your ex, could you manage if he or she died and the payments stopped? And if you’re the one making the payments, did you know that your obligations don’t generally stop when you die? Without provisions made to cover future support payments, your estate could be tied up for a very long time. Make sure the ex-spouse making the payments has a life insurance policy that names the other as the beneficiary, to cover spousal and/or child support. In fact, consider making it part of your separation agreement; arrange with your lawyers for the beneficiary designation to be signed at the same time as the separation agreement, to ensure that it gets done. To be sure the beneficiary is not changed later, make it irrevocable. And to confirm that all is being handled correctly, seek independent legal advice.

If your children are young, the amount of the policy should probably cover more than just the monthly payments. It should cover all the big expenses that raising kids will incur such as education savings, food & clothing, sports & hobbies, and out of school activities. How much insurance you need depends on how much support is being paid, as well as the age and stage your kids are at.

2. What if one of you becomes too sick to work?

 The death of a parent can only be eclipsed be the injuring of a parent. Just like life, the earning potential of a person must be protected. Whichever person is making the support payments has to pay his or her own bills as well, so there’s a good chance that employer-sponsored disability insurance might not provide enough coverage to go around. For the good of both of you, consider taking out a separatedisability insurance policy in the event that one of you is unable to work due to illness or accident.

 3. How will you pay unexpected medical bills?

 You may need to rethink some of your insurance needs; now that your partner and his/her work coverage is gone. Consider getting major medical insurance to cover the cost of big bills not covered under your province’s health insurance plan. If you no longer have access to work-based coverage, you now have to cover yourself when you go away, so make sure you factor this into the cost of travel insurance to ensure you’re protected in case you get sick or injured while abroad.

 4. Is your home or car covered under the right name?

 If you haven’t had home or auto insurance before, you’ll need to get coverage as soon as possible. You’ll also need to make sure the name on your insurance policies is the same as the name on your home title and car ownership or lease. A home or car insurance policy is an agreement between the insurance company and the owner of the home or car, says Sylvain Lachapelle, director, personal lines at belairedirect. “If you are not the owner or lessee, the agreement is not valid and in case of a loss you will not be covered.”

Although your living situation has changed it is a good idea to remember that your responsibilities to your dependents have remained the same. As with any major life change, it is important and essential for you to continue protecting your family, be careful to review your policies and make sure you have the coverage you need.

For more information and guides on life insurance visit:http://www.protectingwhatmattersmost.com/

The Big Insurance Question: Term or Permanent?

Life Insurance for most people is still a mystery even though we have more need for it today than ever before. How much coverage you need, and what type of life insurance to get are two of the most important questions to have answered. 

The amount of coverage you need is dependent upon several factors which can be calculated from your personal financial profile. It is also dependent on what you are using it for, is it temporary in order to offset a mortgage, is it permanent and meant to take care of final expenses or is it going to be used for estate planning or a combination? 

The best way to answer the coverage question is to consult with a broker who can provide an in-depth analysis for you. But to answer the second question what type of insurance should I get? 

In Canada, there are two types to choose from: term, and permanent. Here’s a quick overview of each: 

Term Insurance is the simplest, least expensive form of insurance and offers the lowest initial premiums in most cases. It is usually designed to fill a specific need for a specific period of time. For example somebody with a mortgage will often acquire term insurance so that, if death occurs while there is still an amount owing, the mortgage will be paid off. Term insurance will be inexpensive at a young age, but it gets more costly with age. There are no cash values associated with term Insurance so at the end of the term of your policy, assuming that no benefits have been paid, there is nothing concrete to show for having paid premiums. 

Most term insurance sold in Canada today is renewable. This means that at the end of a set term, it is possible for the client to renew coverage without evidence of insurability. These terms usually last 5, 10, or 20 years. Upon renewal, the client can retain their coverage, but will have to usually pay a higher premium based on their age. The last option to renew will usually come about around age 65 or 70. Many term insurance contracts are also convertible, which means they can be converted into permanent insurance without underwriting. 

Permanent Insurance is a more expensive and more versatile insurance product, designed to stay in force for the life of the insured. Permanent insurance products are often used when there is a need for estate planning or estate preservation. 

There are, very broadly, three types of permanent insurance: 

Whole Life which features guaranteed premiums which may be paid for a limited period, or for the whole life of the life insured. It is usually more expensive at the policy's issue date than term insurance, but its cost will never increase. In this case the insurance company manages the reserve, and, if a policy owner terminates the policy, there is the opportunity for that policy owner to access the cash values associated with the policy. Coverage remains in force either until the policy is terminated by the insured or until the death of the life insured. 

The second is Universal Life which gives the policy owner great flexibility. It is still permanent insurance, but the policy owner is given flexibility to manage the policy reserve, the amount of premiums, and the coverage in force. It is somewhat more complex than whole life, and requires a degree of active management by the insured. 

The last product is called Term to 100 and is usually abbreviated as T-100. This is also a permanent insurance with no, or very limited, cash values. Because it lacks the cash values associated with whole life or universal life, it is less expensive. At the same time, it is a more basic product and provides the policy owner with less flexibility. 

Life can be complicated; thankfully life insurance doesn't have to be.  Knowing your own information is the key before meeting with a broker. This Virtual Shoe Box is a great tool to help you to keep track of your important personal and family documents – everything from insurance policies, bank accounts, investments and mortgages to health records and will and estate information.

For more information and guides on life insurance visit:http://www.protectingwhatmattersmost.com/

Bomb proof your retirement savings.

Nearly six of 10 older Canadians say they have experienced a “major life event” that disrupted the financial plans they had in place, according to a research report focusing on the financial well-being of older Canadians released Monday by the Ontario Securities Commission.

                       

The report, titled “Financial Life Stages of Older Canadians,” is based on surveys completed by more than 1,500 Canadians over the age of 50. It found that most people in the over-50 age group are guided by informal financial plans that are built on approximate ideas of what respondents need for the future – but that these informal plans can be disrupted by unexpected events.

I think that we can all agree that at age 50 your retirement planning is in full swing and that the path you have chosen is pretty much set in stone. I can see it now, only 15 to 17 more years before your retirement and you can enjoy more free time. Every time you make a deposit into your savings account you see your future getting closer.

STOP!

Imagine now that half of that money was to disappear, what would you do? Would you still be able to retire?  Could you afford to be out of work for 6 months to a year? These are the issues that some of the respondents faced. In the report it states that; among retired persons under age 75, more than one-third reported that they were forced to retire earlier than they wanted. For two-thirds of this group, it was health reasons that forced their early retirement.

Not being able to generate income in the latter years of your life can have a major impact on your financial planning and nest egg. It is the years between 50 and 65 where most of us will have the opportunity to put away the majority of our income for retirement purposes. Your children are now gone, the house is paid off and you have little to no debt and some might even have the chance to downsize their homes.

But what happens if you struck with a major illness, have a heart attack or stroke. Your nest egg is the only thing you have to keep you going, but if you use it what happens when you retire?

The only way to ensure that you do not eat into your retirement and protect your savings is with Critical illness insurance (CI). Basically CI becomes a bomb shelter for your investments. CI covers many illnesses and pays out a lump sum 30 days after diagnoses of a covered condition. This money can be used to cover medical expenses, medications, every day living expenses while you recuperate or what ever you want to use it for.

So protect your investments, protect your future, and protect what matters most.

For more information and guides on life insurance visit: http://www.protectingwhatmattersmost.com/