All posts by meylec2

    Business as usual as much as possible

    Uncategorized

    We are currently living through interesting times and trying to make the best out of the situation.

    I would like you to know that I have been, and continue to be, able to work remotely through phone & video calls, file sharing, and online tools.  Although I love seeing people, a face to face meeting is not always possible or needed for insurance, investing, retirement or estate planning.

    In addition, the insurance and investment companies that I partner with are still operational at this time.  Their staff, for the most part, are also working remotely where possible.  They have been very open about their business continuity plans during this time.

    The portfolio managers at most investment firms have been very good a communicating how they are managing the current situation as it evolves through emails, newsletters, and webcasts.  One of the benefits of actively managed investments.

    Most importantly, they are here to support us.  Below is an example from just one of the suppliers I partner with.

    To close, during this unusual time, I will try to keep things as close to business as usual as possible.  Feel free to contact me. Even if you just want to talk.

    Please be patient, don’t panic, and above all, stay safe & healthy.

    Sincerely,

    Chris

    Note from Sun Life CIO

    P.S. I try to post helpful and informative articles on my Facebook and LinkedIn pages. Please check them out – links are at the bottom of the web page.

    How to calculate your investment growth

    Education, Investing

    Year end statements for 2019 are arriving, so I thought it would be a great time to share this short video from Edgepoint that explains the proper way to calculate your investment return.  It also goes over the difference between book value, market value, and net invested.  But wait, there’s more!  It explains what a mutual fund is and how distributions work.

    If you have 5 minutes, I highly recommend watching.

    P.S. It’s not boring at all!

    Decoding your investment returns

    Be resolute

    Cash flow & Debt-, Education, Retirement

    Happy New Year everyone.  I hope you all have a great year!

    Have you made any resolutions for 2020?  Have you set any goals?  Have you completed your goals in the past or are does your motivation decline as the days go by?

    I found a few tips in my inbox that may be helpful. They range from a fun quiz that determines the type of goal setter you are, to a personal contract, and steps to follow to help you achieve your goals.

    The links to these resources are below.  By the way, I have no connection to these sites, and I do not gain anything by sharing them, except knowing that they may help someone.  I do use a Rocketbook, however.

    I have also found that using a coach helps keep me on track through support & motivation.  A coach can also point out when you are going astray.  It also seems like an agreement made with a 3rd person is easier to keep than one to yourself.  I am not sure if there is any psychological reason for this, but it seems that people are often more worried about letting someone else down than letting themselves down.  Perhaps share your personal contract with a friend and ask them to check up on you.  If you have to buy your friend dinner if you don’t keep on target, you may be more motivated.

    And don’t be afraid of failure.  Failure is how we learn, a step towards success.

    If you need a financial coach, please contact me.  We can set up your financial goals and work out a process of steps to achieve them.

    Good Luck with your 2020 goals!

    What type of goal setter are you?

    4 tips for resolutions that stick

    The 1 reason you aren’t achieving your goals

    Neuroscience explains why you need to write down your goals if you actually want to achieve them

    Tis the season – of debt.

    Cash flow & Debt-, Education

    With the holiday season upon us, our credit cards are starting to take a beating.  For a lot of us, this time of year puts a strain on our finances.  Unfortunately, there is pressure to find the perfect gift for everyone and create a memorable holiday and this often leads to overspending.  As this illustration from Manulife points out, every generation has an issue with debt.

    There are tools that can help.  The government of Canada has a great budgeting tool.  This video gives a short explanation of how it works:

    The budget planner can be found here: Budget planner tool

    If you are serious about reducing your debit, it might be helpful to look at your bank account.  Did you know that if you are a homeowner, there is a bank product that applies every penny you deposit toward reducing what you owe?  In addition, you still have access to that money when there is an unforeseen expense.

    This short video explains how Manulife One works:

    I hope these tools help & inspire you to take control of your finances.  If you want to discuss or know more about Manulife One, contact me right away.  The longer you wait, the more money you will lose servicing your debt.  That’s a Christmas present the banks love.

    Have a great Christmas and New Year!

    Sincerely,

    Chris

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Some of the ways OAS can affect your retirement income

    Education, Retirement

    Figuring out your income when you retire can be difficult.  There are tons of books and articles that seem to offer easy to follow recipes about how to manage the multiple sources of your income in retirement.  There is, however, no simple cookie cutter solution for everyone. How you manage your income will be unique to your needs and your situation.  To complicate matters, the way you need to manage your income may change over time.  You may find that the amount of income you need may grow or even decrease as you get older or you may want to increase your tax efficiency, for example.

    The short video below from TD, answers a couple of common questions surrounding CPP & OAS and offers a few strategies that may be right for your situation.  However, please seek professional advice before making any changes.

    Managing the OAS clawback

    I am happy to discuss your retirement situation with you, if that would be helpful.  You can call, email, or message me.

    Thanks, Chris

    Two alternatives to traditional life insurance

    Education, Estate Planning, Insurance

    In my last two articles about life insurance and critical illness insurance, I said that they are often underappreciated financial tools that can help a family in a time of tragedy.  This month, I will take a closer look at a life insurance tool that, because perhaps of past marketing, is often thought of as coverage for final expenses.  I am talking about simplified issue (also called no medical) and guaranteed issue life insurance.

    We have all seen the commercials targeted at seniors, but these two types of life insurance fill an important niche beyond final expenses.  For people who have been denied traditional life insurance due to health or lifestyle, these tools can provide important coverage and protection.  Follow these links for an unbiased description of simplified issue and guaranteed issue life insurance.

    While not having a medical or being guaranteed for coverage sound great, remember that the coverage amounts may be lower and the premiums higher than traditional insurance.

    That being said, if you have a medical condition such as diabetes or a dangerous hobby or occupation, and you need life insurance to cover a debt or replace a salary (see April) these two types of insurance may provide an important solution for your family.  It is worth having the discussion with an advisor that you trust.

    Like critical illness and life insurance, simplified and guaranteed issue insurance is provided by most insurance companies in Canada.  Not all policies are the same, however, so it is important to find coverage that works for your situation and is budget friendly.

    By the way, simplified and guaranteed issue critical illness insurance is also available in Canada.  Again, however, be diligent, talk to someone you trust, and make sure that the coverage is the right tool for you.

    Feel free to comment or ask me any questions that you may have.

    Sincerely,
    Chris

    Surviving an illness doesn’t have to make your family finances sick

    Cash flow & Debt-, Estate Planning, Insurance, Retirement

    Last time I talked about the importance of life insurance and how it can help your family if a life ending tragedy were to occur.  This time around I would like to discuss another under appreciated insurance product that can save your family finances: critical illness insurance.  Unlike life insurance, critical illness or CI pays you (yes, you are the beneficiary) if you survive an illness such as heart disease, stroke, or cancer.  The Financial Services Commission of Ontario (FSCO) website has a great description of CI.

    FSCO – Critical Illness Insurance

    Note however, that not all policies cover all illnesses and when finding a policy that fits your needs, you should be aware (beware?) of the limitations of the policies that you are comparing.

    That being said, an illness can have a drastic impact on the finances of a family.  If a spouse develops cancer, for example, he or she may be unable to work for an extended period, perhaps longer than the group disability coverage at work allows.  Is the family budget able to absorb that change of income?  What if the other spouse needs to reduce working hours to care for the sick partner or a nurse or caregiver must be hired?  At this point what happens to the family’s education and retirement plans?  CI can cover these and other expenses by paying a tax free, lump sum payment.  There are no requirements on what the money can be used on.  It can cover the examples given above or be used for medications, treatments in another country, modifications to make the residence accessible, or even a trip to celebrate surviving.  The point is that a major illness does not have the jeopardize the family’s financial well being.

    I encourage you to read these two articles on the disability insurance through employee benefits and CI.  Just think about how CI can help if your disability stops.

    Cancer patient cut off from work benefits – Global News

    Is critical illness insurance worth it? – Globe & Mail

    With life insurance, there is no question that at some point the owner of the policy will die.  But will the owner of a CI policy get sick?  No, not everyone will develop a critical illness, but let me give you some numbers from the Canadian Cancer Society: 1 out 2 people will develop cancer.  Thankfully, 3 out 4 people with cancer survive.

    You can find out more from The Canadian Cancer Society

    These statistics are both frightening and encouraging.  Surviving a disease like cancer can alter a family’s way of life, including their finances.  Even a partial loss of income for a relatively short period of time can alter lifestyle and impact education and retirement plans.  Not to mention that there are emotional issues to deal with – why add worrying about finances to the list of stressors?

    On a personal note, my immediate family has not been immune to critical illnesses and the non-medical collateral damage that they can cause.  I encourage you to carefully consider CI and if it could help your family in a time of need.  If you have questions or want to discuss further, please feel free to contact me.

    Sincerely,

    Chris

    Avoiding financial catastrophe

    Cash flow & Debt-, Estate Planning, Insurance

    When people hear the term “financial plan”, life insurance probably does not pop into their heads.  No surprise there.  It is certainly not the most exciting finance tool around, but arguably, it could be the one of the most important.  It should be a cornerstone of most financial plans.  Think about what would happen to your retirement plans if your spouse died.  Would you continue to save money in your RRSP or would you withdraw money from it to pay the monthly bills?

    How does life insurance work?

    A life insurance policy is a contract between you and an insurance company.  You agree to pay the insurance company a premium (monthly or annually) and they agree to pay a person of your choice (the beneficiary) an agreed upon amount of tax-free money.  Essentially life insurance has 2 main purposes (although there are others):

      • To pay off debts – like mortgages, credit cards, & loans
      • To replace a salary – either yours, your spouse’s or both

     

    You can cover both situations or one, depending on your personal circumstances.   A young family, for example, should probably cover their debts and salary so the survivors continue to enjoy the same standard of living.  An empty nester couple on the other hand, may not need to replace salaries because once the debts are paid for, a single salary will be enough.

    The amount and type of life insurance needed is very much determined by individual circumstances and it is very important to understand what is needed.  This video from Empire Life does a great job outlining the need for insurance:  Why do I need life insurance?

    When to think about life insurance

    Whenever there is a major change in life, your life insurance needs should be considered.  Here are some important milestones, but, there may be others:

        • Getting married
        • Buying a house or taking on a large debt
        • Having kids
        • Protecting your business

     

    This video, also from Empire Life, talks about calculating how much insurance you may actually need.  Don’t worry, its not complicated:  How much life insurance do I need?

    A note about mortgage insurance

    Mortgage insurance offered by your bank, not to be confused with CMHC insurance, is just life insurance to cover the outstanding balance of our mortgage.  If you buy it from your bank, the bank gets the money, not a beneficiary you name.  Keep in mind that it does not cover other debts or replace a salary.  In Ontario mortgage insurance is not mandatory so do not feel pressured to accept the bank’s offer when you sign a mortgage. Take your time and explore your options and find out what your insurance needs really are.  This article from the Globe & Mail explains how the banks’ mortgage insurance works:  Do you need mortgage insurance

    If you do have mortgage insurance through a bank, it can be cancelled in most instances if you want to replace it with your own policy.

    A final note

    Even if you do not have a personal insurance policy, chances are you may have some insurance through your benefits plan at work.  Take some time to find out what type of coverage you have.  Some questions to ask are:

        • Is it enough?
        • Does it cover your family?
        • What happens if you stop working for your current company?

    If you have any questions, please feel free to reach out.  I would love to talk to you, and I have resources that I can share.

    Life insurance may be the most important financial tool that you may never have thought about since its main purpose is to make sure that your death is not financially catastrophic to your family.

     

     

    Evolving retirement

    Investing, Retirement

    There is no question that our concept of retirement is changing.  There are different expectations between generations and genders.  Even spouses may have different expectations.  Have a look at this article by Peter Wouters for some interesting statistics.

    Do you know what you want out of your retirement?  There is a good chance that you only have a vague picture of travelling or spending time on a hobby.  Is that how you will spend your entire retirement?  Many people will be retired for close to 20 years.  Some people may be retired closer to 30 years!  Is it realistic to think that your retirement won’t evolve while you are experiencing it?

    Just as your retirement is evolving, planning for your retirement should evolve.  Each person’s financial situation is unique with everyone having a different mixture of income sources and expenditures that will change over time.  A retirement plan that was created at 55 without evolving will probably not work at 65.  Likewise, a static plan made at age 65 will probably not reflect the reality of age 75.  Retirement planning is a process, not an event.  The way we save for retirement must be flexible to meet changing circumstances while providing a stable and understandable framework with a clear purpose and rationale.    Mindlessly saving in an RRSP that the bank talked you into is not planning for retirement.  Are you sure that you are saving enough?  Are you saving too much?

    Sit down and think about your retirement assumptions.  Is 65 really the best age to retire?  Originally 65 was the age chosen by the Germans in the 1880’s to start a government pension.  At the time, most people did not live past 50.  Does retirement at 65 make sense for you 130 years later?

    Do you think that you will require the same income in 20 years of retirement?  It seems that after age 70, many people tend to start spending less.  A trend that continues as they get older.  Perhaps there is less travel, or there is no desire to buy the latest and the greatest gadgets.  Was this potential change in spending considered at the beginning of retirement?  Which is worse – to outlive your savings or for your savings to out live you?  Do you want to save throughout your life only to have money near the end of your life that you will not be able to enjoy?

    There are no easy answers to these questions and to complicate matters, our answers may change with our age and circumstances. By working with a third party, with an advisor, one can consider these and other questions so that retirement can evolve both before and after retirement.

    If you have questions or comments, I would love to hear them.

    Sincerely,

    Chris

    Why have an RRSP?

    Investing, Retirement, Taxes

    Since we are in the middle of RRSP season, I thought I would list some of the great reasons to open a Registered Retirement Savings Plan (RRSP) to save for your retirement. Here are the top 6 reasons to open an RRSP:

    Contributions are tax deductible
    You can claim your RRSP contribution as a deduction on your tax return and even carry forward unused space to a future year where you may have a higher income. All of this combined means that your retirement savings pot can grow even faster.

    Savings grow tax free
    You won’t pay any tax on investment earnings as long as they stay in your RRSP. This tax-free compounding allows your savings to grow faster.

    Convert RRSP to receive regular payments
    You are able to convert the money saved in your RRSP into a RRIF or annuity when your time comes to retire. You’ll pay tax on the regular payments you receive each year- but if you’re in a lower tax bracket in retirement, you’ll pay less tax.

    Spousal RRSP can reduce your combined tax
    Reduce your combined tax burden. If you are married and you earn more money that your spouse, a spousal RRSP may benefit you as you can add to their tax-free savings to build a joint retirement income which is likely to mean that you pay less tax in the long run.

    Borrow from RRSP to buy your first home or pay for your education
    You can borrow money from your RRSP under certain conditions

    If you want to buy your first home (Home Buyer’s Plan) or pay for your education (Lifelong Learning Plan), you can take out up to $25,000 (HBP) or $20,000 (LLP) respectively from your RRSP to fund it without paying tax on the withdrawals (providing that the money is paid back within the specified time).

    Finally, the best reason to open an RRSP is to actively save for retirement!

    Don’t forget the RRSP contribution deadline for the 2018 tax year is March 1!

    If you have questions or need advice, I would be happy to help.

    Sincerely,
    Chris