Economic downturns or recessions can severely impact the person on a fixed income or who relied almost entirely on equity investments. Appropriate diversification is an important component of having a reliable retirement income.
Our professionals will discuss your desired level of risk. Once we have set some benchmarks, we are able to monitor your account and advise about economic conditions and possible alternate scenarios.
There is no reason you should travel through retirement without good counsel and a financial advisor.
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MDL 6 Step Financial Planning Process
Without a GPS, you can’t get to your destination. The same can be said about financial planning. With our help, we will help you get to where you want to go.
- Initial Consultation
At your first meeting with your MDL Advisor, you will learn about the services we provide, what to expect from our financial planning process and how we are paid. Together we will determine how decisions will be made and how frequently we should meet. - Gather information, discuss goals and objectives
You will be asked to provide personal data and financial information so that we can review your current financial situation. By examining your current cash flow, net worth, insurance, investments and other financial areas, we will be in a better position to analyse your financial position and discuss your future goals and objectives. - Analysing Financial Situation
Using proprietary tools and resources, your MDL Advisor will analyze your finances to determine whether your goals and objectives are realistic, and if you should consult with other professionals as part of your overall financial plan. - Developing & Presenting Financial Plan
Your MDL Advisor will develop your financial plan and make recommendations. If the plan involves other professionals (lawyer, accountant etc.) they will present the parts specific to their expertise. Remember this is your plan, so you MDL Advisor will not any concerns you might have and revise recommendations when necessary. - Implementing Plan
Once you have agreed to recommendations and timelines, it’s time to put your plan into action. Your MDL Advisor will help you prioritize what needs to be done, complete any relevant paperwork, and coordinate meetings with other professionals. - Monitoring & Reviewing Financial Plan
Financial planning is an ongoing process. At subsequent meetings, you will review your progress with your MDL Advisor and identify any changes in your circumstances (having a baby, divorce, death in family etc.) or objectives (change of career, wanting to buy a new property etc.) that would require changes to your financial plan.
Tax Free Savings Account (TFSA)
This is a registered savings account that accumulates tax free within the account. While contributions are not tax deductible, the withdrawals are not taxable. It applies to any individual who is a Canadian resident, over the age of 18 and eligible to establish the account. The CRA determines the contribution based on the filed TI. It allows individuals to contribute up to:
- An annual maximum ($6,000 for 2020)
- Withdrawals in the previous year are added to the contribution
- Unused contributions from the previous year are added
The TFSA can hold the same investments as a registered retirement savings plans, including:
- Mutual funds
- GIC
- Fixed income investments
- Certain shares of small businesses
If this sounds like something you might be interested in, contact our office for more details.
Registered Retirement Savings Plan (RRSP)
A Registered Retirement Savings Plan is sponsored by the federal government that lets you and your spouse (or partner) contribute until the plan holder reaches age 71. The CRA allows any contributions to be deductions on your annual tax return and the earnings are tax exempt. However, the tax is due with withdrawals from the plan. It can hold a number of different types of investments:
- Mutual Funds
- Segregated Funds
- GICs & Term Deposits
Other options include:
Spousal RRSPS – This is when you can allocate any or all of your maximum contribution to be placed in your spouse’s RRSP. This splits the income and with a spouse’s lower tax rate, the eventual tax is reduced. There are some options for withdrawal:
- RRIF (Registered Retirement Income Fund)
- Home Buyers Plan – This will let you withdraw money to buy a home for yourself or a relative that is disabled.
- Lifelong Learning Plan – This includes training or education for you or your spouse or partner.
If you have questions about this RRSP program, let us know.
Segregated Funds
These are known by several names: Guaranteed Investment Funds, Segregated Funds, or Individual Variable Insurance Contract. They are all enhanced mutual funds that are protected by an insurance company.
This is a deferred annuity between an insurance company and the policy holder. You make deposits and the insurance company invests it. The funds are actually an asset of the insurance company but are similar to money held in trust. Because the funds are segregated, you are protected if the insurance company becomes insolvent.
The deposits are insured by Assuris and/or another underwriter. Assuris guarantees a minimum of 85% of the insurance benefits contracted for. The insurance benefits can include death benefits, health expense, monthly income and cash values. Deposit type products include accumulation annuities, universal life overflow and dividend deposit accounts. If the insurer becomes insolvent, Assuris guarantees 100% of the accumulated value of a deposit account up to $100,000.
The life insurance company purchases assets and the segregated funds run for a specified period. Withdrawals before the end of the period can carry a penalty.
Usually the life insurance company partners with a mutual fund or a money management company. The partner invests the money and handles all the administrative functions while the insurance company sells the contracts and covers the guarantees.
The advantage is that a minimum of 75% of the initial investment (and sometimes 100%) is guaranteed when the policy matures or at the death of the insured. This is a guaranteed amount no matter what their market value may be at the time.
Because of the variables, you may want to discuss this option with one of our advisors. Just contact our office and one of our specialists will be glad to answer all your questions.
Estate Plan
The goal of an estate plan is to handle the distribution efficiently and as you designate. Without a plan, even in small estates, the costs of probate and other fees plus delays can seriously affect the value or amount of assets available for distribution.
In Canada there is no estate tax, however there is a “deemed disposition tax”. With a good estate plan in place, all the assets are titled appropriately to minimize taxes and any other financial exposure. It also provides for coverage if you become incapacitated and unable to manage your own affairs. It is a comprehensive look at your assets and liabilities as well as your wishes for their disposition. It is a critical planning tool that should not be overlooked or ignored.
Estate planning is neither complicated nor expensive. It should involve your financial planner, attorney or other key members of your family. Larger estates may require some additional preparation like trusts.
Our office is very happy to help you explain our role in your estate plan and to answer any questions we are able to address. We can also refer you to other professionals who are able to help resolve any issues.
Tax Planning
The Income Tax Act was created to establish a method for each citizen to pay their fair share of taxes in order to continue the efficient running of the government at all levels and to afford the rights of the citizens. The Act is also designed to allow for some adjustments to minimize the taxes legally.
Tax planning does not start in April. It should be a primary concern throughout the year. Financial decisions are often made on the basis of immediate need or circumstances. A good financial advisor like MDL Financial Group can help you understand the full impact of the decisions. They help deal with:
- Income exclusion rules
- Key tax credits
- Retirement plan contribution options
- Investment rules
It can affect saving, spending, borrowing and investment decisions.
The income tax rules change annually. Keeping on top of these differences can be a full time job. That is where a good financial planner comes in. They are able to monitor the changes from year to year and understand where the best decisions can be made to the benefit of the taxpayer.
The tax planner will help organize your finances to take advantage of the rules to help you keep the maximum amount allowed by law or to defer some items into the future. There are a number of different strategies depending on the type of assets and personal situation of the individual. It can involve:
- Income deferral
- Income splitting
- Retirement contributions
- Capital gains and losses
- Property ownership
- Charitable contributions
The tax and financial planner will help develop the right combination for your circumstances. They will always follow the rules but when applied correctly can prove to provide significant savings.
We are happy to advise on tax planning opportunities. Ask one of our specialists how we can assist.
Retirement Planning
Many people consider retiring from their jobs before the age of 60. This gives them many healthy years to enjoy leisure activities, family, and even start another career. A major step to achieve this goal is to begin a Retirement Savings Plan.
If you are just starting out or finally in a position to put a few dollars aside, there are some basic keys to succeed in your retirement planning.
Needs – A good place to start is to try to determine how much money you will need at and after retirement. Start with a budget to include a guesstimate of housing costs, food, personal entertainment and travel.
Save Now – Any time you start is a good time. The longer you are able to leave your investments to grow, the better chance you have of amassing the amount you need and want in retirement. A good option is a pre-authorized deposit plan. Even small amounts accumulate over time. The longer you hold investments, the more chance they have to compound in growth.
Diversification – With a broad spectrum of investments the greater your chance for successful growth. In that way as one type of investment falters (stock markets decline) another can be on the rise (bonds increase). Different types of investments are better for income or growth and with a successful mix you will weather the years.
Contributing to your RRSP or TFSA is a good strategy. If you would like more information contact us at our office to schedule a consultation. We have many helpful ideas that could benefit you in the long run.
Start Now – It doesn’t matter if you are in your 20s or 40s or beyond. Contribute to a retirement fund as soon as possible to allow it to grow over the years.
Contribute Regularly – Set aside small amounts that you will not miss from your regular spending. Payroll deduction is a painless method because you never really see the cash. Not many people can afford or rationalize a large deposit once or twice a year, but small amounts can grow just as easily.
Maximize – Whenever possible contribute the maximum amount to your RRSP or TFSA.
Don’t Touch – Consider your RRSP/TFSA off limits. Unless there is absolutely no alternative, leave those retirement accounts alone and let them accumulate as much as possible.