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in RESP
Cohabitation Agreement |
Go to a lawyer and get one. It will probably cost less than a wedding, but it will determine how assets and debts will be dealt with if the union fails. Decide if you want to put any assets, including investments, in joint-ownership. |
Will |
Get a will and the other important estate documents professionally prepared as that will lay out exactly how you want your things dealt with when you die or become seriously ill. Consideration needs to be made for previous support obligations. |
Life Insurance |
Work with an insurance and financial advisor to make sure you have adequate coverage and review beneficiary designations. Make sure obligations will be properly met on death. |
Accident & Sickness Insurance |
This includes disability insurance that can provide an income if you can’t work because of illness or injury; critical illness insurance that pays a lump sum if diagnosed with a listed critical illness; and, long-term care insurance which pays a benefit to offset the costs of caring for someone who can’t look after themselves. |
Certainly most of the above recommends apply in any situation. Nobody really wants to be a burden on someone else. Extra steps and attention should be taken in a common-law relationship as each person entering into it is more vulnerable than they may wish to believe. |
in RESP
in RESP
Registered Retirement Savings Plans (RRSPs) have evolved into the most popular savings vehicles in Canada since being introduced in 1957. It is important to be aware of the key features of RRSPs in order to maximize the benefits:
Income Tax Savings – First and foremost, it may go without saying that any contribution to RRSPs can result in an immediate tax savings. These deposits are deducted from the contributor’s income at the highest tax rate they must pay first.
Tax-Postponed Growth – Any growth than an RRSP earns does not attract income tax until it is actually withdrawn from the plan. This maximizes the benefit of compound interest.
Income Splitting – When income is taken from an RRSP after age 65, an election can be made on the tax returns of a married or common-law couple to split qualified income between them. This generally means a lower overall income tax bill, in many cases significantly lower.
Deferred Deduction – A contributor can choose to make a deposit to an RRSP but delay deducting all or part of it until a later tax year. This makes sense if income in a future year would put them into a higher tax bracket. In the case of someone who receives a financial windfall and has unused contribution room, a large deposit can be made initially and deductions from income only used to reduce their highest taxed income in several future years.
New Home Purchase – If certain conditions are met, funds can be withdrawn from an RRSP tax-free and used towards the purchase of a new home. The funds need to be paid back into an RRSP within fifteen years or they may become taxable.
Education Funding – The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance full-time training or education for you or your spouse or common-law partner. You cannot participate in the LLP to finance your children’s training or education, or the training or education of your spouse’s or common-law partner’s children.
Instant Tax Break – If you are making regular contributions (say, monthly) to an RRSP, you can apply to the Canadian Revenue Agency (CRA) to get permission for your employer to deduct the RRSP contributions from your income before calculating the amounts that need to be withheld and remitted.
RRSP Loans – Many contributors borrow to invest in their RRSP close to the annual deadline. They then use their tax refund to reduce or pay-off the loan.
Name a Beneficiary – You can name a beneficiary and, in some cases, a secondary beneficiary for an RRSP on death. This means funds can be paid directly to that person or persons and avoid the delays and cost of being processed in your estate.
It is wise to work with someone experienced in the area of RRSPs and retirement planning to help set up and monitor your program. Avoid making RRSP decisions at the last minute because of the deadline. A well planned strategy can mean retirement comfort. -M Dumond
in Estate Planning, GIC, Insurance, RESP, RRSP, Tax Strategies
No, this is not a John Lithgow long-distance plan commercial. Remember these numbers, however, when allocating your paycheque.
All too often, people experience financial stress when something happens and they haven’t done a proper job of allocating their income. Ideally, an allocation plan will become a habit that leaves you prepared for just about any eventuality. Here’s how:
10% for Lifestyle Protection – Disasters happen and most rarely make the news. You have likely experienced at least one already. Very few people are in the financial position where they can cover the cost of an event without the help of insurance. Use life insurance to cover debts, last expenses and income replacement on death; vehicle insurance to cover the costs of damages or injuries; property insurance to replace lost or damaged property; critical illness insurance to help recover from a serious illness; disability insurance to replace a portion of your income if you can’t work because of illness or injury; travel insurance if you become ill while travelling outside your province or country.
10% for Savings – There will come a time when you will need funds for a certain event in your future. Put aside these funds regularly for things like education, home down-payments and, perhaps most importantly, an emergency fund. Eventually your savings should be at a level that will allow you to allocate some of these funds to other things.
10% for Investing – An investment is something that will generate an income, either right away or sometime in the future. This includes retirement savings, a business, income generating real estate, or funds that generate a regular income.
10% for Giving – There are financial benefits to you for giving to charity. The first $200 generates a non-refundable tax credit or 15%. Everything above that, within limits, gets a credit at the top tax rate no matter what tax bracket you are in. In Alberta, for example, the maximum credit is actually 50% which is 11% higher than the maximum tax bracket of 39%.
60% for Lifestyle – This is where everything else comes from – your home, your vehicle(s), your food and clothing, your vacations, your entertainment and hobbies. All too often, this portion gets too much income allocated to it and is the first to suffer when something goes wrong.
Your income is what makes your lifestyle possible. However, if your income stops due to illness, injury or death, will there be adequate funds for you and your family to maintain your lifestyle? Will your resources be adequate if you experience a short period of unemployment, when a child is ready for post-secondary education, or if you need legal help with an unforeseen problem? Will you have enough independent income in the future or will you have to keep working at a time when you would have preferred retiring?
If you don’t have a problem tipping a server 15% to 20%, why not pay yourself a little better than that? – M Dumond
in RESP, Uncategorized
At this time of year families are planning for the return to school and the costs associated with that. If your family has kids in highschool you already know all too well what I am talking about.
Are you financially prepared for the teenage years? Plans should be made if you have children approaching their adolescent years. This can be a turbulent time, not just the emotion and drama it can bring, but also the associated expenses that get added to the family budget. When you think of your family financial planning, it is wise to consider each and every phase of life. Many families don’t consider just how expensive the adolescent years can be and that can be their downfall.
New Situations Mean New Expenses
When you consider all of the obvious alone, the adolescent years can be quite costly. You may think that the baby and toddler years drain the bank account, but consider “normal” expenses that adolescents can bring.
Consider starting a savings program now for future expenses like extracurricular activities, summer camps, school trips, sports teams, clothes, increased food costs, and lessons and tutors that may be required for school. Don’t overlook the car and driving lessons that can be a huge financial drain, even though necessary. Remember, many of your regular expenses can expand just because you are adding a teen to your list. Insurance, fuel, maintenance, these things and many others can quickly strain a budget.
Those are the standard expenses assuming that your child doesn’t require any additional help in the way of counseling, summer school, or even more extreme measures depending on their ability to adjust to changing and turbulent times. There really is no telling what the teen years bring. Just beyond them is setting your child up for life beyond your walls. Suddenly the list is growing indeed.
Let’s face it, adolescence can be a tough time! It’s not just tough for kids going through it but often for the parents as well. Many parents think about their monthly expenses and consider the one thing they have to save up for in their childrens’ future is post-secondary education. Setting up an RESP in your children’s early years will go a long way toward reducing the debt they come out of university with. While this is true and is a great thing to consider in advance, you could be in big trouble when all of the expenses need to be met. As you consider all your financial planning needs and look at the years ahead, giving special attention to the adolescent years can be greatly important.
Planning Ahead Can Mean Peace of Mind
Financial planning, should incorporate all the important phases of life, particularly those that will be full of additional expenses and unforeseen circumstances. The adolescent years are a time of uncertainty in every sense of the word. When you look at your family and consider all the financial needs that lie ahead, include adolescent years in your overall plan. Teach your kids about money. Get them to start saving when they get that first job. If you could somehow make the adolescent years a little bit easier for them, you would do anything.
Thinking through the financial needs of this turbulent time of life can be a great start toward making things much smoother. – M Dumond
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