Blog Archive

Archive for 2013 year

(Linkedin Post by Sallie Krawchek past president of Merrill Lynch, US Trust, Smith Barney)

If you believe much of the media, you hire a Financial Advisor to try to outperform the stock market. Never mind that this can have very little bearing on whether you can live or retire as you would like. Never mind that research has shown that even the hottest hedge fund managers struggle to outperform the markets. (Ok, they don’t struggle to; they don’t.)

The better reasons to hire one are to:

Press you to answer questions you don’t want asked, like how you plan to take care of your aging parents if you need to, whether your will is up to date, how you are going to send your kids to college, what you will do if you lose your job. These are the types of questions that make most of too uncomfortable to ask ourselves.

Put together a financial plan. Very few people ever, ever do this on their own. And most drag their feet on doing it with their Financial Advisor, too. It takes time and it can hurt. But it matters.

Identify risks in your portfolio that you might look right past, like being overweight the US (which is most of us in the US) or being mostly invested in tech stocks, when you’re in the tech industry.

Talk you through market volatility. Most of us energetically claim we don’t need this. It’s hard to project forward an image of ourselves being nervous or scared, and our recollection of past pain has been shown to fade over time. (Just ask any woman who has been through childbirth more than once!) But another voice besides your own during tough markets can be invaluable.

Identify your biases. This is a biggie. Many of us think we don’t really have any….which is exactly the point. One big one: women tend to be more risk-averse than men. That is neither good nor bad of itself, but it is something that should be tested and pushed at a bit, given that women as a group also earn less and live longer than men. As a result, they could perhaps tolerate a bit more risk.

Yes, Financial Advisors cost. But if they are able to provide the services above — and particularly if they can do it earlier in one’s investing life — their value can be meaningful.

No one worries more about the future than those who care for family members with prolonged and severe physical or mental impairments. The Government of Canada introduced the Registered Disability Savings Plan (RDSP) in 2007 to help parents and other family members fund the long term financial security of such persons.

The only qualification to be a beneficiary of such a plan is that he or she qualify for the federal disability tax credit and continue to so qualify for each year that the RDSP is in effect.

The RDSP is modelled after the RESP in that contributions are not tax deductible, but growth accumulates tax free in the plan and becomes taxable only when it is paid out to the beneficiary. The contributions to the plan are paid out as tax-free capital to the beneficiary. The contribution limit is $200,000 making this a useful device in estate planning for a disabled child.

In Ontario, having RDSP assets and income will not disentitle the beneficiary from receiving provincial disability income (e.g. ODSP) or other Government benefits.

Canada Disability Savings Grant (CDSG)

The CDSG provides matching contributions to an RDSP from the government, depending on ‘family income’ and the amount contributed by the family. The parental income forms part of ‘family income’ as defined by the CDSG rules only up to the beneficiary’s 18th birthday. Thereafter only the income of the disabled person and his or her spouse is taken into account. The beneficiary will be eligible to receive up to $70,000 in CDSG payments into the Registered Disability Savings Plan before the end 2 of the year in which he or she reaches the age of 49. The CDSG payments out of the plan will be taxable in the hands of the beneficiary.

Lower-income families and beneficiaries will also qualify for the Canada Disability Savings Bond (CDSB) of up to $1,000 per year to a maximum of $20,000 until the end of the year in which the beneficiary reaches the age of 49. CDSB money is taxed in the hands of the beneficiary.

As a Certified Financial Planner I can help you establish a RDSP and take advantage of the available government grants. You can telephone me at 905-984-2100 ex 27 or drop me an email at to arrange a free, no obligation, one hour consultation. We can meet at my office or in your home, as you prefer.

Did You Know That There Are Canadian Government Grants To Help You Create a Registered Education Savings Plan for Each of Your Children?

There are indeed. It is one of the many reasons why every newborn in Canada should have a Registered Education Savings Plan (RESP) begun to secure his or her post secondary education even though the contributor doesn’t get a tax deduction for the money contributed to an RESP.

The Canadian Education Savings Grant (CESG) is a payment of 20% on RESP contributions to a maximum of an additional $500 per year into each child’s RESP until the end of the calendar year in which the child turns 17. So it is not just the contributor investing in the child’s future.

The RESP grows accumulating capital value, dividends and interest income tax free until money is paid out to the child for post secondary education as Educational Assistance Payments. The growth is then taxed in the hands of the student. Because many students have little or no other income, they can often withdraw the money tax-free.

If your child does not attend a college or university full time right after high school you will find that the definition of post secondary education to be elastic enough to cover many forms of training and the qualifying time period for further education is also elastic within limits.

If your child does not pursue further education within the time limits, your contributions will be returned to you as tax free capital. The accumulated growth will be paid to the contributor and taxed at his or her marginal tax rate in that year. Or it can be rolled tax free into the contributor’s RRSP, provided there is contribution room available.

A child can have more than one RESP so long as the total contributions to all of his or her RESPs taken together do not exceed $50,000, and the maximum CESG contribution by the Government of Canada does not exceed $7,200 for that child.

Grandparents and aunts and uncles may prefer to donate to a child’s existing RESP or set up a separate one rather than buying yet another toy or electronic gizmo for birthdays, Christmases, Bar and Bat Mitzvahs and First Communions.

For low income families there is also the Canada Learning Bond (CLB) under which the Canadian Government will contribute an initial payment of $500, and then $100 per year up to age 15 in each year the family is entitled to the National Child Benefit Supplement to a total of $2,000.

If you would like to discuss setting up an RESP for your child or grandchild, niece or nephew, telephone me at 905-984-2100 ext 27, or drop me an email at to set up a free, one hour, no-obligation consultation. We can meet at my office or in your home as you prefer.

Are you surprised by that title? From my 13 years as a lawyer practising Family Law I know that the one thing all troubled marriages have in common is ongoing disputes about how money is earned, spent or saved.

According to Statistics Canada, in 2010 the average Canadian 2-income family had an after-tax disposable income of $89,600. That sounds like lots of money. But the average family also has a substantial mortgage, car loans, consumer credit card debt, and all the usual monthly bills. How is such a family to meet month to month financial obligations and also save for the children’s education and for their own retirement?

Let’s look at one client couple, we’ll call them ‘Frank’ and ‘Joan’, in their mid 30s with two children, born in 2004 and 2006. Frank and Joan were both employed, but the family was living paycheque to paycheque. They worried that they would never be able to help their children with college or save for their own retirement. Neither could say easily where their money was going. They had begun to hide credit card statements from each other and were quarrelling daily about money.

We began with Frank and Joan each keeping a detailed ‘spending diary’ for one month, recording every expenditure, no matter how small, and no matter what it was for. Then we met to analyse their diaries.

Frank and Joan both habitually bought their morning coffees and breakfasts at fast food outlets on the way to work. Each was paying about $6.00 for breakfast 20 days per month for a combined $6 x 2 people x 20 days = $240.00 every month.

That’s a whopping $2,880 per year in after-tax dollars. Frank and Joan needed to earn about $3,500 in gross income just to eat fast food breakfasts in their cars on weekday mornings. They were astounded. And that was not the only money ‘leakage’ we found.

Now Frank, Joan and the children get up a little earlier in the morning. They eat breakfast together at home where eggs and toast or cereal with milk costs the four of them less than $4.00 a day. The whole family are now planning and packing their homemade lunches to work and school for even more annual savings.

As a Certified Financial Planner I helped Frank and Joan to establish a family budget that reflects their shared priorities and eliminates financial waste. The word ‘budget’ is not very popular. It sounds to many people like the word ‘diet’, and as such it sounds restrictive and no fun at all. So I suggested that we call it something positive.We came up with ‘Income Allocation Blueprint’ instead.

Using the budget/blueprint they have identified their individual and shared financial goals. They no longer quarrel about money. They feel like they are both pulling in the same direction. Money that once went for fast food breakfasts is paying down credit card debt and building a Registered Educational Savings Plan for each child.

For help establishing your family’s Income Allocation Blueprint and learning how you can afford to save for your children’s education telephone me at 905-984-2100 Ext 27 or drop me an email at to set up a free one hour no-obligation consultation.We can meet at my office or at your home as you prefer.

If there was ever a ‘no-brainer’ in financial planning the Tax Free Savings Account (TFSA) is it.

Since January 2009 Canadians aged 18 and over have been able to put up to $5,000 per year into a TFSA where the growth of that money accumulates tax free in the plan. The $5,000 limit will increase along with inflation year by year rounded to the nearest $500 increment. Contribution room not used in a given year carries forward indefinitely.

Contributions are not tax-deductible. But any money taken out of the TFSA comes out tax free. And it can be put back into the TFSA without penalty, subject to easy rules, where it grows tax free once more. You can borrow from yourself.

The TFSA is generally permitted to hold the same investments that qualify for inclusion in an RRSP, so capital gains, dividends and interest may all add to the value of the TFSA tax-free.

On death of the owner, the complete TFSA and its accumulated increase in value can be rolled over into a spouse or common law partner’s TFSA tax free without reducing the survivor’s contribution room in his or her own TFSA. You can start contributing with small monthly automatic withdrawals from your bank account. What are you waiting for?

I can help you set up a TFSA that takes its useful place in your financial plan. You can telephone me at 905-984-2100 ex 27, or drop me an email at to arrange a free, no-obligation, one hour consultation. We can meet at my office or in your home, as you prefer.

For every wealthy person there are thousands of financially secure people behind each of whom stands a good financial advisor. As a Certified Financial Planner I have the education, experience and integrity to be your good financial advisor.

The trick to financial security isn’t so much earning money as it is keeping that money for yourself, and putting it to work for you. That requires the sort of knowledge and investment discipline that a Certified Financial Planner will give you. I think of Financial Planning as Resource Management and Income Allocation, giving you control over your financial future.

You want to enjoy today. You want to enable your children to pursue an education. You want to prepare for the sort of retirement you dream about. And you need to construct that future using the income you have now.

Working to achieve your goals requires a balanced and diversified portfolio of investments that will grow your capital safely over time and let you sleep soundly when markets are volatile.

I’ll sweat the details for you, and I promise that as we work together you will learn about how your money can be making more money for you, for your family, for your future – all while you are sleeping soundly.

You can telephone me at 905-984-2100 Ex 27, or drop me an email at to arrange a free one hour no-obligation consultation. We can meet at my office or in your home, whichever you prefer.

If you are like 85% of working Canadians you are thinking, “I know when and how I’m going to retire.” Do you? Really? Not according to a recent Ipsos Reid poll
released by RBC in September 2012, that canvassed adults over age 50 with household assets of at least $100,000.

That poll found that of already-retired baby boomers 62% had less than 6 months notice of their departure from work. 20% had notice of less than a month. The three main reasons given by respondents for forced retirement included “request by employer,” health issues, and the need to care full time for another person.

The results illustrate the importance of what I and other Certified Financial Planners emphasize to our clients: Do not postpone contributions to your RRSP. Many people carry forward RRSP contribution room intending to build up their contributions “some day.” If your employer closes or down-sizes, or you have to care for a spouse with dementia, or you become disabled, that “some day” will never come.

The sober facts of life for 62% of middle income Canadians over age 50 also illustrate the wisdom of maintaining diversified investments outside the RRSP as well to achieve growth, hedge against inflation, and allow for liquidity.

A private disability insurance policy is a vital part of financial planning to cover each breadwinner in the family especially if self-employed or otherwise without access to group benefits. If you pay the premiums on your own private disability policy then the benefits flow to you tax-free if disability strikes.

I can help you as a Certified Financial Planner to maximize the utility of your RRSP. I can also help you design a non-registered portfolio and disability insurance that will work together with your RRSP if you are one of the 62% of Canadians whose retirement date is a surprise.

You can telephone me at 905-984-2100 ex 27 or email me at to arrange a one hour, no-obligation consultation. We can meet at my office or your home, as you prefer.