Susan Creasy Financial Inc.Susan Creasy Financial Inc.
613.384.1880

You can receive a guaranteed 20% rate of return in a RESP

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Giving a child access to a post secondary education is something all parents, grandparents, aunts or uncles hope to be able to do. The cost of post secondary education continues to increase over time. Many students are forced to take out loans to pay for their education after high school. According to Statistics Canada, university tuition fees have risen in excess of 135% in the past 15 years.

A parent, grandparent, or other relative can contribute to a Registered Education Savings Plan up to an annual maximum of $2500.00 per child for a cumulative contribution limit of $50,000.00 per child beneficiary. Contributions can be made to the plan for a maximum of 31 years from the effective date of the plan. The RESP must be liquidated no later than 35 years after it is set up.

In 1998, the Federal Government created the “Canada Education Savings Grant” program. This program provides an extra 20% in addition to the annual contributions paid into the plan by the subscriber up to a maximum of $500.00 per year per beneficiary (child). There is a lifetime maximum grant of $7200.00 per child beneficiary. The provinces also have various incentives to encourage families to save even more by supplementing the Federal Grant Program

The proceeds in the RESP grow tax sheltered and the withdrawal payments are taxable and paid to the child when he/she attends post secondary education which includes many trade schools.  Students’ incomes are generally modest, the amount of income tax paid on withdrawals from an RESP are relatively low. Proceeds from a RESP can be used to pay tuition, housing, food, school supplies, transportation etc. while attending post secondary school.

If the child decides not to attend a post secondary institution, the money is not lost because it can be transferred to the Subscribers RRSP if there is room.  In this instance, the grant money must be returned to the Government, however, the growth and contributions to the RESP can be rolled over to the RRSP of the subscribers, often the parents.

Education is an advantage that counts and is also an excellent investment as more than ever employers seek qualified, highly trained candidates with specialized skills. Two thirds of jobs require a post secondary education. With prudent investing and time the long term rate of growth is in excess of 20% with the grants added, RESP’s make a tremendous holiday or birthday gift for a child, grandchild, niece or nephew. You can help create a substantial education fund for a special child in your life over time.

Segregated Funds Provide Flexibility, Growth Potential and Unique Benefits

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With the financial markets looking more promising, many individuals are reviewing their investments with an eye towards capturing future growth. Diversification, a broad range of investment options and the services of professional money managers for a reasonable fee are all components of a good retirement portfolio. Segregated funds, sometimes called Guaranteed Investment funds offer the above features and more at a very competitive price.

A segregated fund contract is issued by a life insurance company. There are numerous investment options inside a segregated fund policy which are managed by many different fund managers in a wide range of investment classes. For example a segregated fund issued by an insurance company would offer investment options such as GIC’s , bond funds, money market funds, balanced or asset allocation funds, dividend funds, Canadian equity funds, International funds and specialty funds such as resources or real estate. Advisors can build a diversified portfolio for their clients using numerous professional fund managers all in one policy contract. Clients can switch between one fund and another within the segregated fund contract at no expense.

Segregated funds may also offer income protection from market downturns, maturity guarantees and guaranteed death benefits which can be reset and increased as the portfolio grows at no expense to the client.

 

There are numerous estate planning benefits of segregated funds. The death benefit guarantee insures that your beneficiaries are guaranteed 100% of all deposits made (minus any redemptions) even during a market downturn.

 

The proceeds of a segregated fund at death bypass the estate, estate fees, probate fees and long delays if there is a named beneficiary or beneficiaries. The proceeds of the investment pass privately and directly to your designated beneficiaries without the expense associated with settling an estate.

 

Segregated funds both registered in an RRSP, RRIF or Locked in RRSP fund or Non- registered investments are protected from creditors if the client runs into financial or business difficulties. This opportunity is ideal for professionals, such as doctors, lawyers, accountants, dentists and small business owners looking to help shield their personal assets from professional liability.

 

Additional advantages provided by insurance company segregated funds include strict monitoring and selection of outside fund managers who offer investment portfolios inside the segregated fund. These monitoring processes use stringent criteria to make sure the investment funds available represent the highest quality investment managers.

 

If you are interested in capturing the growth potential of the financial markets, wanting to diversify the risk in your portfolio or repositioning your retirement plan to provide income and security of your capital during market fluctuations, consider the benefits of a segregated fund. Speak to a qualified financial advisor about the opportunities a segregated fund provides for you and your family.

Not All GIC’s are the same!

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Not All GIC’s are the same!

Guaranteed Interest Investments with banks, Credit Unions or Online banks such as Tangerine etc. do not have the same benefits as GIC’s with the Life Insurance Companies.

GIC’s and other investments with banking Institutions are subject to probate at the death of the owner or owners of the GIC’s, bank accounts or other investments.  Life Insurance Company GIC’s and Investment Funds/Segregated Funds can have named beneficiaries and can easily bypass the Probate process thereby avoiding probate fees, legal fees, time delays and lack of access to “Frozen” accounts.

Probate is the Court procedure for:

  • A formal approval of the will by the Court as the valid last will of the deceased.
  • Appointment of the person(s) who will act as the executors(s) of the Estate.
  • Probate is the court process that gives the executor or executrix the authority to act on behalf of the deceased.  The probate process can take up to 3-4 months or longer to obtain the court’s approval for the executor to act.  
  • Assets subject to probate cannot be accessed, sold, disbursed or used to pay debts until the Court approves the will to be valid and an executor to act on behalf of the deceased.

Probate fees are determined provincially – in Ontario the fee is 1.5% of the value of the Estate.  Legal fees to prepare and file the application, serving notice to potential beneficiaries, costs of preparing consents and any cost of securing any bonds or sureties if required can all be charged to the Estate as part of the expenses related to the probate process.

The Life Insurance Company GIC or Investment has the wondrous ability to avoid the Probate process.  Generally the death claim can be processed by a claimant’s statement signed by each beneficiary and a proof of death (Funeral Directors Statement or Coroners Death Certificate) is usually all that is required.  Periodically, a copy of the deceased’s will is also needed.  The Advisor and the Life Insurance Company DO NOT charge a fee to process the death claim!  Beneficiaries usually receive their share of the investment by cheque or electronic fund transfer to their own bank accounts within a few weeks.

Be conscious of the benefits of Life insurance Company GIC’s, segregated or Investment Funds versus those investment products offered by banks and other financial institutions.  Life Insurance company investment products offer primary beneficiary designations (i.e. spouse/partners) as well as a secondary or contingent beneficiary designations (i.e. adult children or minor children in trust) your estate planning can be simplified by using Life Insurance Company Investment products.  Speak to a qualified Financial Advisor about the opportunities a Life Insurance Company GIC or Investment product provides for you and your family.

Planning ahead can ease the challenge of a Critical Illness

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Unexpected health problems can throw your plans and goals off track. Suffering a critical illness can be expensive especially when not all the bills are covered by provincial health care. With medical advancements, more people survive illnesses like cancer, stroke and heart disease. A person’s recovery can be long, difficult or financially detrimental.

Individuals can take action now to help protect their family’s lifestyle, savings and goals if they get sick later. If one is confronted with a serious illness and they have a critical illness policy, they can focus on their recovery and worry less about their finances.

A critical illness policy pays a one-time tax-free lump sum benefit after 30 days after diagnosis of a critical illness.

Critical illnesses covered under most plans include Alzheimer’s disease, aortic surgery, aplastic anaemia, bacterial meningitis, benign brain tumour, blindness, cancer (life-threatening), coma, coronary artery- bypass surgery, deafness, loss of limbs, heart attack, heart valve repair or replacement, kidney failure, loss of independent existence, loss of speech, major organ transplant, major organ failure on waiting list, motor neuron disease, multiple sclerosis, occupational HIV infection, paralysis, Parkinson’s disease, severe burns, stroke (cerebrovascular accident). Illnesses covered can vary in policies issued by the different life insurance companies.

Critical illness insurance can be used in many ways – there are no restrictions. The tax-free proceeds from a critical illness could be used for many purposes such as replacing your income while you take time off work to recover, paying for medical and wellness expenses not covered by your provincial health care plan, supplementing household income if your spouse needs to take time off work to support you, or to cover the expenses to seek alternative care or out of country treatment.

In Canada, 1 in 2 men and 1 in 2.2 women will develop cancer in their lifetime. Every year there are 70,000 heart attacks in Canada and more than 62,000 strokes.

The good news is more people are surviving illnesses more than ever before. In Canada, 60% of those diagnosed with cancer expect to survive, approximately 95% of Canadians who have a heart attack and are hospitalized survive this illness.

In 2020, Canada Life paid over 48 million dollars in claims for individually owned critical illness policies.  The illnesses related to the $48 million in claims at Canada Life are cancer (67%), heart attack (13%), stroke (5%), bypass surgery (3%), multiple sclerosis (3%) and other (9%).

Those that own a critical illness policy or receive a critical illness claim have the benefit to access world-renowned specialists through Best Doctors at no expense. Best Doctors brings together the best medical minds to help you get the best diagnosis, treatment and information.

Best Doctors was founded by Harvard Medical School physicians, Best Doctors has access to a global network of 50,000 peer-nominated physicians who represent the top 5% of the specialists in their fields. During the life of the policy, policy owners can use the services of Best Doctors for any medical condition as well as accessing medical expertise for their spouse and children under the age of 21 or age 25 if the child is a full-time student.

Morneau Shepell Ltd, a well-known counselling firm offers professional counselling, family support services, registered dieticians, legal and financial consultation, and online stress management services for up to one year after diagnosis of a covered Critical Illness for both the insured claimant and their primary caregiver.

A critical illness can be both emotionally, physically and financially draining. Individuals should have the protection they need when they need it the most.

Charitable donations make a huge difference

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Canadian non-profit organizations are broadening their horizons to support essential local community needs during exceptional and unprecedented times. The Limestone Learning Foundation, the charitable arm of the Limestone District School Board is one of those organizations. For over 20 years, the LLF has funded inspiring excellence in “education” projects for students in the Limestone District School Board.  Its mandate provides funding that is not provided by the Ontario Ministry of Education in the fields of Literacy, Numeracy, Science and the Environment, Visual Arts, Music and Health, Wellness and Technology. To date, over $1.8M has been given to over 645 unique projects such as musical instruments, robotics, drone mapping, videography, grow gardens and Indigenous Culture – Honouring the Land.

Most recently, the LLF turned its efforts to the importance of student readiness through good nutrition, by donating $100,000 to the Food Sharing Project. Recognizing the impact of the Pandemic on family income, the foundation realized there was an immediate role to play in keeping students fed and learning. The FSP provides nutritious snacks and meals both at school and for those learning at home. This essential service fits into the LLF mandate and the foundation is privileged to contribute.

Building a strong community through giving to educational foundations such as the LLF allows donors to ensure the health and wellness of our students.

Individuals can make tax-deductible donations to local charities that are near and dear to them.  If the donation of stocks, cash or Life Insurance are made before the end of 2020 an appropriate tax-deductible receipt is provided by the charity.

If you are in a position to pay income tax in 2020, why not give a donation to a local charity, make a difference in these times of the Covid 19 pandemic, and reduce your tax burden in April 2021.  Speak to your Financial Advisor to obtain further advice.  Don’t delay as the year-end is fast approaching.

The Benefits of a RESP

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We all want the best for our kids and grandkids, and we do everything that we possibly can to support them. However, figuring out the best method to save up financially to support them can be a challenge. Starting a Registered Educational Savings Plan (RESP) is one of the best ways to achieve this goal. There are many benefits to an RESP that can help you and your child or grandchild pay for their education.

Grants

One of the greatest benefits of an RESP is the government grant money that gets deposited into the account. For every dollar you invest, the government will put in 20 cents; that’s an instant 20% growth in your investment! The maximum amount of grant money that you can receive each year is $500 per child, up to a life-time maximum of $7,200. If you did not get started right away, you can still receive grants until your child’s 17th birthday, and you can even buy back previous years’ grants. This grant money can be invested just the same as your monthly or annual deposits and allows you to achieve greater growth in the account.

Withdrawal date

Another benefit of an RESP is that you don’t have to use the account funds right away. If your child or grandchild decides to not attend post-secondary school right away, you can keep the account open until the 31st year after opening the account. This means that the account can still remain open and continue to be invested in the market, achieving financial gains to help cover the costs of their education. You can even continue to deposit money into the account, without receiving grants, until their 25th birthday.

Closure of the account

When the time comes to withdraw funds for their education, your child or grandchild ends up paying the tax on the portion that is taxable (i.e. the grant money and interest earned). Since they are in school and likely not earning a significant salary, they will be taxed at the lowest levels. If there is money remaining in the account after they have completed their post-secondary education, it is not lost. Any deposits you made can be withdrawn tax-free back to you, the grant money will be returned to the government, and any growth can be rolled over tax-free to your RRSP.

In addition to these features, you can also have multiple children or grandchildren sharing one account, rather having an individual account for each child. Also, anyone can contribute to the account, which allows uncles, aunts, grandparents and other family members to contribute. Take the time now to open an RESP, or if you have one already, continue utilizing it for all of its benefits.

What is Office Overhead Expense Insurance?

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If you operate a business this sensible insurance will help pay the bills for your business in the event that you become disabled due to accident or sickness.  Office overhead insurance provides peace of mind knowing that many of your bills will be paid and your business can continue to operate.

Expenses are reimbursed by this type of insurance.  Generally, the premium paid for this type of coverage is tax-deductible to your business.  Expenses such as rent, salaries, utilities, property taxes, lease expenses for equipment and other normal operating costs are covered by this plan.

Coverage for office overhead insurance is usually purchased by professionals such as a physician, accountant, lawyer or principal/owner of a closely held business or practice.  Office overhead insurance should be non-cancellable until age 65, guaranteeing you that the coverage cannot be cancelled by the insurance company.  Should you be in a position to no longer need the coverage then you have every right to terminate the plan. Benefits from office overhead insurance are usually paid for a period of months, ie. 12, 15 or 24.

This coverage is vital for businesses and practices in which the owner’s ability to generate income makes a difference between the office/business being open or closed. There are generally a few circumstances when the office overhead insurance will not be paid if the disability is due to:

  • An act or accident of war, whether declared or undeclared.
  • Normal pregnancy or childbirth (disabling conditions of either of these are covered).

The plan reimburses eligible expenses on a monthly basis.  A list of business expenses is submitted to the insurance company at the time of application and underwriting. Office overhead insurance is just another sensible step business owners can take to protect their business and personal cash flow.  This type of insurance allows business operations to continue until the insured owner either returns to work or makes a decision regarding the future of the business.

Why Disability Insurance?

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Disability insurance is not the 1st thing that anyone wants to talk about. Canadians generally are more comfortable talking about life insurance or critical illness insurance than the ability to protect their income during their prime earning years.

The reality is 1 in 7 Canadians have indicated they have had a disability and 33% of workers between the ages of 30 to 64 will experience a disability greater than 90 days. Furthermore, less than 10% of disability claims are due to accidents; most are due to illness.

Canadians take their ability to earn an income for granted!  If you buy insurance for other assets in your life (house, car, cottage, boat, jewellery, art, etc.) why would you not want to protect your most valuable asset –you. The quality of life you have built and become accustomed to for you and your family will be difficult to maintain without a regular paycheck

Disability insurance or income protection insurance are most often purchased privately or under an association or employee benefit plan. The insurance company agrees to insure you for a percentage of your income under a group plan or a fixed dollar amount per month with a private plan. The plans cover a disability due to accident or sickness and have a waiting period before the monthly income benefit will start. Disability benefits are generally paid until you return to good health or until the end of the disability coverage whichever comes first.  The disability benefit is usually tax-free as long as you paid the premiums for the coverage.

Definitions of disability can be complex and vary according to the type of plan you have. Group employee benefits, association plans and private plans will have various levels of definitions, benefits and optional coverages. Individual disability plans are owned by you, contractual and non-cancellable. The coverage is portable and can move with you to various careers and premiums are guaranteed not to increase unless you opt to change or add to the coverage. Private disability plans can offer a refund of premium benefit over time and generally provide coverage to age 65.

Anyone interesting reviewing the best type of disability coverage for themselves should consult a professional life insurance advisor to tailor a plan to meet their personal needs. Make sure your earning potential is protected

Is a robo-advisor right for you?

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Over the last few years, there has been a growing trend of utilizing ‘robo-advisors’ in the industry. If you are unfamiliar with the concept, essentially there is very little to no human contact when handling your investments. Your investments are all completed online or on your mobile device, where you, as the client, answer questions and you are placed into a pre-built portfolio based on an algorithm. One of the main advantages of a robo-advisor is the lower fees associated with these accounts. Paying less is always great, but does that mean robo-advisors are right for your needs?

When it works

There is a subset of the population for whom investing with a robo-advisor works perfectly. If you fit into this population, take full advantage of the platform and start saving for the future. 100% fee-focused and want to pay less fees on your investments, this is a good option for you. Have a firm grasp on the general investing principles, the stock market and how investing works, this is a good option you. If you are just looking to get your “feet wet” and start looking at investing, this could also be right for you. There may be a few other situations where robo-advisors could be the right fit for you, but typically these subsets are the ones that benefit from robo-advisors the most.

When it does not work

There is a larger subset of the population where robo-advisors are likely not the right fit. For example, if you have a difficult time understanding investing or you don’t feel comfortable with investing, stick with an advisor. If you have complex plans, such as owning a business, retirement or being as tax-efficient as possible, working with an advisor is going be of greater benefit for you. Lastly, if you are looking for someone to provide help, guidance and a personal touch, do not go with a robo-advisor. There are numerous comments on Reddit that speak to outages, long wait times with different robo-advisor firms. Lastly, there is limited human contact, so you need to feel confident doing it 100% on your own.

Do the fees really matter?

Lastly, many of these robo-advisors market lower fees and saving you much more in retirement because you pay less. It is really hard to validate this, particularly when you can’t compare a robo-advisor’s portfolios to a financial advisor’s portfolio; it is like comparing apples to oranges. The thing to remember with financial advisors is that we work for you as the client and the fees you pay are for the service we provide. Similar to a furnace maintenance plan, you pay monthly instalments to get free annual service. If you didn’t pay for this, you wouldn’t get the free annual service. An advisor should be providing a service to you and supporting your needs. If your advisor is not doing this, maybe it’s time to look at your options and determine which one will provide a greater service then what you are currently getting.

Is market volatility affecting your retirement income

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Maintaining your income and outliving your income are two of the biggest concerns for people in retirement or who are about to retire. Investing in the markets can be emotional and can erode your retirement income faster than expected. We are going through a large dip in the market, the second one in 12 years, and it is not known when the markets will rebound. For young investors, this is not as large of an issue, as they have years to regain any losses; however, for those in retirement or who are about to retire, every year counts.  In this low interest rate environment, utilizing Guaranteed Income Certificates (GICs) alone is not enough and adding more investments to your portfolio may not yield the expected results.  The good thing is, there are some other options available to secure your money in retirement.

Guaranteed Minimum Withdrawal Bonus (GMWB)

With a guaranteed minimum withdrawal bonus, your investments will generate a guaranteed income for life regardless of the market conditions. A GMWB is an investment product within a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) or Tax-Free Savings Account (TFSA) that provides that guaranteed income. With each account mentioned above, you still invest the money in the market according to your risk tolerance.

With a RRSP and TFSA, your initial deposit predicts your monthly income in retirement. As your investment account grows over time, so too does your guaranteed income. If your investment account goes down over time, your income base will still increase until you are ready to retire based on the income bonus base.

In the case of a RRIF, your initial deposit sets your guaranteed income in life. If the markets go up, you have the option of withdrawing the additional funds without disrupting your guaranteed income level. If markets go down, your income level is still guaranteed, based on the initial deposit, for life.

Annuities

Similar to GMWBs, annuities give you guaranteed income for life. With an annuity, you are purchasing guaranteed income for life with your initial deposit from an RRSP, TFSA or non-registered account. The amount of income you will receive will depend on the initial deposit amount, your age, interest rates, and the guarantee periods. Guarantee periods ensure payments are provided to your beneficiary for a set period of time in the event that you pass away unexpectedly. You can also name a successor (secondary) owner, so upon your passing, the annuity will continue to pay out until their passing. This is a great way to ensure guaranteed income to a spouse, or even a child or grandchild at a reduced rate.

In these current market conditions, having guaranteed income leading up to or throughout retirement can relieve a lot of stress. Knowing that there will always be a predictable income stream can ensure that your retirement is everything you want it to be. Talk to your financial advisor about these options to see if they are the right fit for you.

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Location

621 Norris Court, Unit 5
Kingston, Ontario, Canada
K7P 2R9

Phone

Tel. 613.384.1880
Fax. 613.384.4679

Business Hours

Mon – Thurs : 9 a.m. - 5 p.m.
Fri : 9 a.m. - 4:30 p.m.

Evenings and weekend
by appointment only