IMPORTANT information for anyone who has an IPP (Individual Pension Plan) with B2B Trustco

In a recent decision by B2B Trustco, a division of B2B Bank and a wholly-owned subsidiary of Laurentian Bank of Canada, they are getting out of the IPP business Effective May 1^st.  They are citing reasons of increased complexity and are unable to keep up with regulatory requirements.  This is forcing all IPP clients with B2B Bank/B2B Trustco to find a new home.  IPPs offer business owners an incredible opportunity no other Canadians have available to them, allowing them to save significantly more for their retirement while taking tax advantaged dollars out of the business as an expense.  If you find yourself with a B2B Trustco IPP and need to find a new home we would be happy to help, and can offer you lower IPP administration fees, lower Investment Management Fees (IMFs/MERs) and better investment options with a track record of great returns. 

 

Contact us today as the May 1^st deadline is approaching quickly. Office: (416) 855-9892 or Email us at info@c2inc.com

If you don’t have an IPP, here is a list of some reasons you should consider an Individual Pension Plan:

• Further tax sheltering in excess of RRSP contributions
• Additional tax deductible lump sum contribution at retirement on sale of assets of the company or sale of the company itself
• Full creditor protection
• Pre-planned retirement income
• Succession planning within a family business
• No payroll tax levied on IPP contributions (depends on province)
• All costs associated with the pension plan are tax deductible to the company – including IMFs (Investment Management Fees)
• Prescribed rate of return within the IPP by Pension Legislation, ensuring your retirement portfolio is always growing as it should

Mortgage Insurance

Your insurance should protect you, not your bank.

Mortgage insurance is designed to protect the bank. Protecting your mortgage with life insurance protects you.

Are you aware of the difference?

Let's take a closer look at how personal life insurance compares with the mortgage insurance that's offered by most lending institutions.

Lending Institutions' Mortgage Life Insurance

• Decreases as your mortgage is paid down
• Premiums remain level, even though your mortgage is decreasing
• Terminates when your mortgage is paid off
• Proceeds are paid directly to the bank
• The lending institution owns the policy
• You cannot switch your mortgage insurance to another lender. If you find a better rate, you may have to re-qualify medically for the mortgage insurance protection.
• Premiums are determined by the lending institutions insurance provider and based on the value of the mortgage

Personal Life Insurance

• Coverage remains level for the duration of the mortgage
• Premiums remain level, while your coverage remains level
• Coverage remains in effect after your mortgage is paid off
• Coverage is paid directly to your beneficiary and used according to their needs
• You own the policy
• You are free to switch your mortgage while maintaining your life insurance coverage
• Premiums are determined by the insurer and are based on many factors including insured amount, age, health and time frame. Often personally owned life insurance cost less than mortgage insurance

Contact our office today and let us help you build a life insurance plan that will protect you and your estate.

info@c2inc.com or (905)332-6633

Reviewing your statement

Mutual Fund Investing
Understanding cost and value

 The following breaks down the cost of investing in mutual funds, and what you need to know about MER's (management expense ratio).

Management Expense Ratio (MER)

• You don't pay it directly
• It's the built-in cost of owning a mutual fund
• It's taken out of the fund before the performance is calculated

Example

Portfolio value: $100,000

Approximate value to invest in first year: $2,200 (2.2% MER)  

Breakdown the ongoing cost to invest

Mutual Fund Company

Investment management expertise

• Fund research
• Analysis
• Insight

Mutual Fund Dealer

• Processes investments
• Partners with investment representatives to keep your best interests top of mind
• Pays a portion of the trailing commission to your investment representative

Investment Representative

• Provides financial advice, service and a plan to help you stay on track
• Adjusts your plan for different stages of your life
• Helps you create savings habits that can pay off in the long run
• Offers access to a strong and stable company built on a foundation you can trust

Why it's worth partnering with an advisor
Partnering with a financial security advisor to create a sound financial security plan can help you deal with the inevitable bumps in life. On average...

• 60% of advised households feel they can deal with unexpected financial emergencies
• 65% of advised households believe they can deal with tough economic times
• 73% of advised households feel confident that their loved ones will be looked after financially if something should happen to them 

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Working with family- buisness and their advisors

When working with clients that are business owners my first instinct is to strive towards aligning the many advisors who may be around the table. 

The role taken by Continuum II Inc. is often as quarterback. We are the advisors responsible for keeping the eye on client goals and we do this with our Keys to Success™ document. We are also the ones, and often the only ones, who will have meetings with a focus on the softer and more emotional issues that may be at play.

When working with a number of advisors it is easy to end up with conflicting advice for clients, which can be confusing and frustrating for the business owner. This conflicting advice can sometimes come from the advisor’s, but it can also originate with the business owner themselves. (I call it the broken telephone – when someone tries to interpret what one advisor is saying and then tries to relay it to another advisor at a later date)

It may also stem from lack of awareness of the work that other advisors are doing. Things can get worse if advisors start angling for better positioning with the client and may criticize or minimize the work of others. (This is very difficult because how do you know if the criticism is warranted or not? There could be instances when one advisor is truly giving bad advice.) 

 Advisors must leave their ego and self-interest at the door to ensure everyone is truly working in the client’s best interest, but this is often easier said than done. Here are a few points which can help;

1. Clearly define roles and responsibilities of all advisors.

More than one advisor may focus on the same problem, with each being responsible for a different task. i.e. legal, accounting, insurance, investments. Each advisor should have a clear understanding of who is doing what, and be sure that no advisor gets left out of the picture. (this means you must know all the advisors and their roles and responsibilities)

2. Joint meetings with a well-defined agenda, clear objectives and expectations is KEY.
Clearly defining the goals and seeking input from each advisor all together pays huge dividends. This gives the opportunity for each advisor to hear what the others are planning. More importantly it gives the opportunity to give feedback on how what one advisor is doing and how it may be affecting the work of others (an example of this would be a lawyer suggesting a shareholders agreement shot gun clause which can clearly have accounting implications. OR an accountant suggesting the use of the capital dividend account for an insurance policy which the insurance advisor will need to set up with the correct ownership structure to have it work as the accountant intends). Sharing information contributes to successful teamwork and it is important for the advisors to agree on who will do what during the multi-party meeting.

3. Advisors should be able to give and receive constructive feedback.
This ensures that any hurt feelings are cleared and that disagreements can be put to rest to avoid negatively influencing future work together. There are likely going to be times when the advisors are not going to agree or may see alternative ways of solving a problem, this is normal and actually a healthy step towards ensuring the best outcome for the client. If there are never any tough questions and everyone is nodding their heads agreeing all the time, I would be concerned. In a fair and constructive way the advisors should be asking challenging questions of each other to ensure there isn’t a better way to achieve the clients’ goals.

4. Family meetings.
Once the advisors have found alignment, it's a good time to bring the family into the fold when it comes to a family run business. The family members, especially those not working in the business, don’t need all of the details but a big picture summary can often help set the stage for healthy relationships in the future. Conflicts between parents and children or siblings or spouses often arise when there is a lack of communication. (i.e. Dad didn’t want that, he wanted this!) All “dad” had to do was actually tell the adult children what he wanted and that future fight can be avoided. These meetings are often most effective when there is a third party moderator.

Overall, there is a lot that goes into building and running a successful family business, but one thing I know for sure is that it is worth spending the time to get it right! (and that may not be the first time).

RRSP Strategies

Top 10 RRSP Strategies

It seems that every year thousands of Canadians rush to make a last minute Registered Retirement Savings Plan (RRSP) contribution before the inevitable deadline. If this sounds like you, how do you know the decisions you are making are right for your financial future? It's important to remember that an RRSP should be individualized and must fit well with your own personal financial goals and plan.

The 2016 contribution deadline is March 1, 2017. Consider these RRSP strategies:

1. Contribute early: Make your contribution as early in the year as possible. Tax-deferred compounding makes those early dollars grow dramatically. Early in life, and early in the calendar year; both make a positive difference.

2. Contribute the maximum: Take advantage of compounding and get the maximum tax break by contributing your limit. In respect of 2017, you can invest up to 18% of your 2016 earned income, to a maximum of $26,010, less your pension adjustment or past service pension adjustment for 2016. Remember, while you can "carry forward" any unused contribution room to subsequent years (until age 71), you can never replace the lost growth opportunity.

3. Invest monthly: Many investors find it easier to reach their annual RRSP maximum by making contributions every month. You may find it easier to have the RRSP contribution automatically deducted from your bank account each month, or you may choose to belong to a Group RRSP and make your RRSP contribution by payroll deduction through your employer. Remember, it's a good idea to increase your monthly contribution if your income rises, and be sure to keep up with inflation.

4. Contribute to a spousal RRSP: A spousal RRSP allows the spouse with the higher income to contribute to an RRSP owned by the lower-income spouse. The spouse with the higher income takes the immediate tax deduction, but the money in the RRSP should be taxed in the other spouse's hands, usually at a lower rate, when it is withdrawn later into retirement. This is an excellent way to income split in retirement and reduce your combined tax rate.

5. Diversify: Different types of investments react differently to economic events. By diversifying your portfolio and holding various types of investments, you protect yourself against the day-to-day fluctuations in any one category. To achieve long-term growth you should diversify. Some investors limit themselves to fixed-income investments. The biggest danger with conservative type investments is inflation which can erode your purchasing power. If this sounds like you, consider a small amount of diversifying into growth oriented securities - such as equities and equity mutual funds - to earn returns that can protect you against inflation and provide long-term growth potential

6. Resist the 'dip' into your RRSP: Usually there is nothing to prevent you from accessing the money in your RRSP - but consider the consequences before you do so. First of all, withdrawals attract tax at your marginal tax rate. Tax withholding at the time of the RRSP withdrawal may be as low as 10%, or as high as 30%, but you should determine how much more tax you'll have to pay when you file your tax return. Secondly, you cannot restore the lost contribution room. The amount you can contribute to an RRSP in your lifetime is limited and a withdrawal erodes some of this potential.

Special circumstances can help you access money in your RRSP without these consequences. The Home Buyer's Plan and Life Long Learning Plan allow tax-free withdrawals with the ability to re-contribute. However, even in these plans there is no ability to replace the tax-deferred growth that was lost when you made the RRSP withdrawal.

7. Consolidate your investments: If you are the type of investor who doesn't want to spend a great deal of time managing several plans, you may want to consolidate your investments into one portfolio. Yes, you should have a diversified portfolio of investments working for you, but you can usually combine them under one RRSP umbrella. This strategy also means you will get one consolidated statement, which may make it easier to track your plan.

8. Designate a beneficiary: Consider who should be designated to receive the plan assets in the event of your death. Without a designated beneficiary, the account will go through your estate and be subject to probate and other fees. You should talk to us about the tax and other consequences of designating a beneficiary to your RRSP. Who you appoint as beneficiary is also very important, as there are different rules depending on if it is a spouse or other party. This strategy does not apply in Quebec.

9. Get expert help: We are here to help you make the right long-term investment decisions. Together, we should review your plan at least once a year to make sure that it is still on track with your long-term goals.

10. Have a Plan: Investing, whether in an RRSP or non-registered, is part of a financial plan, but it is important to clearly understand that investing alone is not a plan. If we have yet to work together to build your personal financial plan, call or email us today to get the ball rolling towards achieving your retirement and other financial goals.

Shape up your finances for 2017

January is the month of resolutions, commit yourself to taking control of your financial house. When making your list of financial resolutions, we encourage you to consider the following;

Be honest with yourself
To help establish a budget, lay everything on the table, debts and all. It’s only when you know how much money you owe that you can realistically start to develop a financial plan to pay it off. Need a little extra help? Try using an app like Mint or Expense Manager to track your day to day expenses.
Think ahead
Build an emergency fund to cover unforeseen expenses. As financial advisors, we always encourage our clients, if they can, to save enough to cover at least three months worth of expenses.

Do your homework
Once your goals are clarified, make your plan. When establishing your plan, be sure to explore all of your investment options.

Ask an expert
Need a little extra help with your homework? Don't be afraid to ask for help. A financial planner, like our experienced team here at Continuum II, will help you to look at your financial situation as a whole. We will take into consideration your goals, your habits and your retirement needs and help you better forge a plan to save.

Be consistent
Start small with your investments and grow over time. Don’t start with anything you can’t afford to maintain. It is more efficient to make continuous investments, than to do large sums every once and awhile. Be consistent, it will pay off in the long run.

Establish goals
Set goals for yourself so you know how to allocate your savings, then create savings plans for each goal. Consider making automatic monthly payments to each goal. Note: It's important to prioritize your goal. While you may be longing for some sunshine, paying off your taxes is more pressing.

Focus on your finances.
Take a break from all the day-to-day responsibilities that stand in the way of planning your financial future. Many people take more time planning for their summer vacation than they do for retirement. This year, focus on your financial future.

Year End Tax Tips

Year End Tax Tips

Time flies during the holiday season and before we know it December 31st will sneak up on us. Here are some helpful tips from Moneysense.ca that will help you get every tax break coming to you for 2016.

1. Give a little

If you want to claim charitable donations on your 2016 tax return, the deadline is December 31. Remember, the First-Time Donor’s Super Credit is available until 2017 so take advantage of it if you can. (This credit boosts the tax savings for a new or lapsed donor.) To qualify for an extra 25% federal credit, a donation must be in cash and only the first $1,000 qualifies. To qualify as a first-time donor, neither the taxpayer nor his or her spouse can have claimed a donation credit since 2007.

2. Pay attention to the date

Your province of residence is decided on December 31 of the tax year and it determines your provincial tax rate for the year. “So if you live in Alberta for 11 months of the year and then move to Ontario in December—where tax rates are higher—your tax will be be calculated based on Ontario tax rates,” says tax expert Cleo Hamel. “And that means you may have to pay more taxes than you originally thought.” Hamel recommends that if you plan to move to another province, you should take some time to look at what the difference is in tax rates between the two provinces and time your move accordingly. “If you’ve already moved, check the tax rate of your new province of residence and compare it to the rate you paid while living in another province earlier in the year. “That will give you a good idea of if you’ll have to pay a couple of extra thousand dollars in taxes and if so, you can plan for it now.”

3. Plan your TFSA withdrawals

If you’re planning to take funds out of your Tax Free Savings Account (TFSA), you may want to withdraw it before the end of the year. Then you can replace the amount in 2017. 

4. Explore tax loss selling

“A lot of stock investors hate selling at a loss because they’ve been conditioned to buy low and sell high,” says Hamel. “But selling at a loss can be advantageous, especially in high-income years. And if you sold a stock that did well in 2016, then it may be worthwhile to review your portfolio now to see if you can take a loss on another stock to help offset your capital gain and reduce your tax liability. “Losses can be written off against any gain in the year they are incurred, back three years, or forward indefinitely,” says Hamel. Just remember, that any transaction needs to be settled on or before December 23 in order to qualify for your 2016 tax return.

5. Use these credits before it’s too late

This is the last year students will be able to claim Textbook and Education Tax Credits. But remember, starting in 2016, students will not have to repay their student loans until they are earning at least $25,000. 

Want a little extra help organizing your savings before the year end.

 Contact our office today  (905)332-6633

or

info@c2inc.com