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Power of Attorney – A Financial Planning Component

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Power of Attorney – A Financial Planning Component

 

A power of attorney is an essential part of a financial plan.  If something happens to you, for example an accident or illness that impacts your ability to make financial or health care decisions for yourself, you will need someone to make those decisions for you.  Everyone over the age of 18 should have a power of attorney for personal care and property in place!

 

A power of attorney is a legal document that gives someone you trust the right to make financial or health care decisions for you.  There are two types of power of attorney: property and personal care.

 

A power of attorney for personal care can make decisions about your health care, housing, and other aspects of your personal life such as health care, meals and clothing.  Without a power of attorney, a family member may be able to make some decisions, but not all!

 

A power of attorney for property can enable your trusted family or friend to make decisions about your financial affairs.  Some of these decisions could include the payment of bills, bank transactions, maintaining or selling you home, managing your investments and continuing the operation of your business.  Without a power of attorney for property, family, your spouse or trusted friend cannot automatically step into make financial decisions for you.

The provincial court in Ontario would appoint a guardian in the event that an individual does not have a power of attorney.  Appointing a guardian through the court process is more costly and often takes time to complete.  Having a current power of attorney enables your appointed individual or individuals toto start making decisions about your financial affairs immediately unless you state otherwise.

 

Individuals should consult a lawyer when creating a power of attorney.  Obtaining  quality advice is worth its weight in gold!  You want the opportunity to create a power of attorney that meets your personal needs and if you run a business then the needs of the business must also be considered in the power of attorney.

 

Seek quality legal advice in creating a power of attorney that meets your needs both financially and personally!

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.

 

Submitted by

Susan M. Creasy

Susan Creasy Financial Inc.

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.

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.

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.

Rebalancing: Safe guard your investments

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During the high ups and high downs in the market, investors always need to ensure that they are properly positioned. You should always be thinking a few steps ahead of the market changes you see today; this is where rebalancing comes into play. During times of volatility, portfolios can shift one way or another, causing changes to the risk profile and the target asset allocation. The target asset allocation is the balance of bonds to equities in an investment.   As a result of the COVID-19 market changes, many investors are seeing their portfolios shift to a more conservative allocation

Rebalancing restores your target asset allocation

Rebalancing is the process of periodically comparing your original asset allocation to the current portfolio breakdown. If the holdings are outside of your threshold level, it may be time to rebalance your portfolio. When you rebalance you shift a portion of your portfolio from equities to bonds or vice versa. Think of this like loading a delivery truck, at the beginning each side has equal weight. However, if boxes are loaded faster on the left side, the truck becomes uneven. Moving some of the boxes from the left side to the right side will bring the truck back to balance. This is similar to what happens in your portfolio when the equities outperform bonds. This causes a greater proportion of equities in your portfolio than the target asset allocation. This now places the portfolio in a higher risk category and potentially increases the volatility of the investment.

Rebalancing during market volatility

The most ideal time to rebalance would be at the top and bottom of the markets, but knowing exactly where those are, only occurs after those events have already happened. During the current market downturn, portfolios likely have become more conservative, as equities saw a sharp sell-off. Being more conservative might be seen as a positive during these times, but it can also hinder your ability to quickly recover when the market rebounds. Rebalancing can be accomplished with the opportunity to invest new money in the market to increase your equity hold and effectively rebalance your portfolio at the same time.

Strategic changes to investments

Rebalancing is a natural opportunity to change up your asset allocation if you are not comfortable or confident in the current allocation. When life events happen, such as marriage, new job, or retirement is the other time asset allocations should be shifted to fit your needs. It is important to resist the urge to cut your losses and move your money to cash, as investing is long term and short term loses can be expected. Ensure you are reviewing your asset allocation with your advisor to ensure your portfolio is matching your risk.

Critical Illness Insurance is Worth Every Penny

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Critical Illness insurance is coverage against minor and major medical issues, such as cancer, heart attack and stroke. In fact, the number of conditions covered can range from 4 conditions up to 25, depending on the coverage you choose. All of these are paid out tax-free to you upon diagnosis or up to 30 days after diagnosis. Monthly premiums can be more affordable then you think, with options for term insurance up to a specific age or lifetime coverage. You can even obtain critical illness insurance electronically without any medical tests, depending on your age and the amount being requested.

What are the benefits?

The benefits of critical illness is taking comfort in knowing that you have financial protection against any costs that may occur and knowing that you can the time you need off of work to rest and recover. Having this protection will stop you have from having to cash-in your RRSP, TFSA, or take out a loan. One of the first things that most people do when money is needed quickly is to withdraw from their RRSP. Doing this can have huge impacts on your retirement, such as having to work longer or having your money run out sooner than expected in retirement.

Real world example

One of the best ways to pay for critical illness insurance is to re-allocate some of the money you are putting away into your RRSP or TFSA and use it to pay off the monthly premium. Let’s look at a real-world example of a healthy 45-year-old male saving $300 a month and in this case, $50,000 of coverage can be as little as $50 a month

As you can see, there is only a small change in the overall savings in the RRSP when insurance is purchased.  Would you rather have a $20,500 decrease in your RRSP or $181,000 decrease in your RRSP?  With the recent changes due to the COVID event, many insurance carriers have increased the coverage amounts that do not need medical tests. In addition, all insurance can be completed digitally with video conferencing software, and digital signatures. Now has never been an easier time to acquire the insurance protection you need as quickly and efficiently as possible.

7 Ways To Help Your Finances Now

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These are uncertain times, as businesses have closed their doors, people have been laid off, and every business has to adapt to the current situation. People and business alike are struggling to make ends meet without further negative financial impacts. Even though things look grim, it is not a bad time to review your finances and make some positive improvements. Here are seven things you can do today to help improve your financial situation.

Pay down debt

Paying down your debt, and most importantly your high interest debt such as credit cards, can help provide some breathing room in your budget. Even if you are currently tight on money, paying down this type of debt will enable you to focus on saving more for the future. Having these burdens off of your back will help alleviate stress and allow you to free up cash that you can put towards emergency savings. Set deadlines by when you wish to pay each credit card off and don’t just assume that paying the minimum amount is enough.

Emergency Savings

This is a pool of cash that is specifically reserved for financial hardships, such as being able to afford the necessities of life or large expenses. Even when focusing on paying down debt, it is important to still focus on savings. If you are focusing solely on paying down debt and an emergency arises, you will have no choice but to take out additional loans or use credit cards. Emergency funds should be stored within a high-interest savings account, where the money is safe and still maintains some growth to keep up with inflation but is easily accessible without penalty if you need to dip into it.

Cut back and live within your means

By looking at your monthly expenses, you can identify where your money is going, as well as which items or services are an absolute necessity and which are ones are really a ‘want,’ meaning you do not need them to survive. Your spending money should account for no more than 30 percent of your net income. A monthly budget can help identify how much you are currently spending. Items, such as rent or mortgage, utilities, car insurance and groceries are necessities of life; items such as new furniture, electronics, subscriptions, or cable are not. Take a look at your spending month to month, for example, February’s spending in comparison to March, and the numbers might shock you. Use that money now to pay down debt or funnel it into your emergency fund.

Time is your friend

Do not make changes to your portfolio due to a negative impact in the market. Market timing, or trying to pull money out at the peak and invest at the valley, never works out. Missing out just on a few days in the market can decrease your average rate of return by half or more. Having a financial plan that is suited to your needs and investing regularly, especially during a downturn, is crucial for financial success. Do not jeopardize your long term financial security based on short term events.

Risk tolerance

With the downturn in the market, this is an advantageous time to review your risk tolerance, or how much risk you can withstand. This market downturn has highlighted how much risk or loss you are personally willing to handle without concerns. Working with a financial advisor, you can gain a better understanding of your real risk tolerance. Your time horizon and your personal feelings will determine if you should be looking at GIC and bonds, or stocks and equities.

Education and build skills

You are currently at home with a large amount of free time; this would be the best time to further your education or build a new skill that will help further your career and can have huge financial benefits for yourself. Not only are you improving, but you are giving yourself a leg up on the competition for promotions or new job offers. Set yourself apart from your competition with a few new skills to add to your resume or current abilities.

Re-evaluate your priorities.

When times are tough, it is a great time to re-assess what your goals and priorities are. When faced with difficult decisions, you will have a true understanding of what is important to you and what you want to achieve. Use this time to focus on what you have been doing, whether or not it has been working for you, and what you could be doing better to achieve the goals that are important to you.

There is no crystal ball that says when a market downturn is going to happen or when an emergency will occur; neither can we use past data to predict what the future will hold. We have not seen markets react like this since the market crash in 2008, and we are in unprecedented times with how long this downturn will last. It is never a bad time to review your finances and ensure you are on track. If you feel nervous or uncertain about things, seek guidance and help from professionals.

I want to help the best way I know

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In these uncertain times, I want to help the best way I know-how

All of our worlds came screeching to a halt overnight.

We are all dealing with minimizing the impact COVID-19 not only in our life but also in our community. At Susan Creasy Financial Inc., we are doing our part to minimize the spread by limiting our physical interactions with clients.

Like many of you, I am working from home while trying to entertain a child and working very different hours outside of the traditional 9-to-5. I am finding that I have to work later into the evenings or take time off in the mornings to play with my child. Things have changed in our lives, and I am sure that you are also feeling the same pinch and change to your schedule.

Rest assured, I am still working to provide assistance to clients and the community. As a seasoned financial planner with a large number of resources at my fingertips, I want to do my best to answer any questions you might have related to your finances. It could be about budgeting, paying down debt, minimizing spending, investing, or even how to plan for retirement when there is financial strain.

Here is my proposition to the community

I am opening my hours up from 9 am to 9 pm, 7 days a week. Yes, I will work weekends and late into the evening to meet when it is most convenient for you during this stressful time. All meetings will be over the phone or through gotomeeting video conferencing.  Follow the link provided to schedule your meeting or email me directly to set up a time.

I wish you the best and look forward to helping each and every one of 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

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Fri : 9 a.m. - 4:30 p.m.

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