Spend Less, Save More

As we 'spring' into May, many of us are receiving an income tax return. Should you save it or spend it?

If you choose to save, it presents the question of whether to invest in a TFSA or an RRSP. This debate comes up often here at Continuum II and here is what we suggest: 

There are both pros and cons to TFSAs and RRSPs.

RRSP Pros
- Used to save for retirement.
- Contributions are tax deductible and investments grow tax-free within the account.

RRSP Cons
- Contributions are taxable once they are withdrawn.
- Withdrawals are considered income and can affect eligibility for federal-income benefits and tax-credits.
- Once you withdraw from your RRSP the contribution room is gone.

TFSA Pros
- TFSAs can be used for both retirement and extra savings.
- Investments grow tax free within the account.
- Withdrawals do not count as income and therefore do not affect your eligibility for federal-income benefits or tax-credits.
- Contribution room is not lost upon withdrawal of investments, it is added to your limit for the following calendar year.

TFSA Cons
- Contributions are not tax deductible.
- Must be 18 years or older to have a TFSA account.
- Contributions are limited, and there is a penalty for going over your limit.

Which is right for you? While there are pros and cons to both a TFSA and an RRSP- the ultimate choice on where to invest your savings will depend on your unique financial situation.

If you are in a low income tax bracket, a TFSA might be more beneficial to your financial situation. Based on your income, the tax savings of an RRSP are less significant and you risk being in a higher tax bracket when you eventually make a withdrawal.

If you are in a middle tax bracket, we suggest having both a TFSA and an RRSP. By having both types of investment plans you could contribute to your TFSA now and accumulate RRSP room to be used later if you move into a higher tax bracket. This can help you to optimize the tax benefits attached to both types of accounts.

For those in a high tax bracket, having both an RRSP and a TFSA can also be beneficial. For similar reasons to those in the middle tax bracket-an RRSP might be a better choice if your current tax rate is higher than you expect upon withdrawal of your savings. You'll benefit from the tax deduction given on contributions and your withdrawals will be taxed less when you withdraw during retirement. You can also use your tax refund from your contribution benefit to fund your TFSA.

Talk to your Continuum II advisor today and let us help you determine the best tax-advantaged savings strategy that meets your needs.

CRA Accounts

No one knows more about your tax position than the CRA (Canadian Revenue Agency). What most people don't realize is that anyone who pays federal tax can go directly to the source through a secured, personal online account or mobile app called My Account (My CRA). If you haven't heard of the My CRA account, here's why you should sign up now.

By signing up for a My CRA account you can track your refund, access past returns, statements, updated assessments, and T-slips, check your benefit and credit payments, set up direct deposit,  or receive online mail. You can also find how much you have contributed to your registered retirement savings plans (RRSP) and tax-free savings accounts (TFSA). Also view how much contribution space you have left, which can help you to avoid nasty penalties if you contribute over the limit.

Set up account alerts, so that you can be notified of any changes that are made, or need to be made, to your personal information. i.e: If you forget to change your address after moving, your account will notify you that something is incorrect to ensure that all information is up-to-date.

Similarly, starting this year, personal online accounts will include information on your Canada Pension Plan (CPP) including contributions and benefits. View all past and present contribution amounts and asses what you can expect to collect at age 60, 65 or 70.

This is a great tool for tax, retirement and financial planning, as financial advisors we encourage all Canadian's to sign up for a My CRA account. Your financial information belongs to you. With a My CRA Account you can have immediate, secure access to all of your information in seconds.


For more information on how to sign up; check out our Facebook Page here, or go to http://www.cra-arc.gc.ca/loginservices/

Financial Planning Code of Ethics

You may have noticed that over the last few weeks there has been a lot of negative press in the media about Canadian banks; their practices, education, lack of ethical behavior and lack of fiduciary responsibility. We would like to extend our concern and regret to anyone this has affected. 

At Continuum II Inc. we take all of these areas very seriously.   With a quick look at our website, you will find ALL the credentials the team has worked particularly hard to earn and maintain. Please take a moment to have a look at what the credentials mean and why they are important to you - http://c2inc.com/credentials.htm. As an office we have always held the Certified Financial Planner (CFP)  designation in the highest regard, which is why Lise, Lori, Stuart and Peter all felt it was so important to attain this premier qualification.  We are dedicated to continually build our education as investment professionals and insurance specialists, and rely on the CFP Continuing Education credits to keep us sharp all the time. 

This week, Peter spent the morning with the Financial Planning Standards Council (FPSC) enrolled in a session specifically tailored to ethics in this industry. The FPSC (completely independent 3^rd party governing body) has always taken ethics seriously, thereby creating the Guidance to FPSC® Code of Ethics, that  holds all  CFP professionals accountable to a higher level of service. 

Guidance to FPSC® Code of Ethics

http://www.fpsc.ca/guidance-code-of-ethics  

Principle 1: Client First

Principle 2: Integrity

Principle 3: Objectivity

Principle 4: Competence

Principle 5: Fairness

Principle 6: Confidentiality

Principle 7: Diligence

Principle 8: Professionalism 

Hopefully you will gather that we take your financial success extremely seriously, including an immense focus on education, caring, and consistently doing the right thing all the time.

Fraud Prevention

Did you know that March is fraud prevention month?

Every year, thousands of Canadians are defrauded out of millions of dollars. As your financial advisors we want to help protect our clients from all sorts of fraudulent activity. Protect yourself from falling victim to fraudulent activity by taking these preventative measures.

• Suspicious email? Protect your identity and never divulge personal information. Always make sure it’s legitimate before providing anything.
• When shopping online make sure you’re purchasing from a secure website – these can be distinguished by a lock or key symbol, or an “https” in the URL.
• Don’t believe every phone call. Scammers have been known to pretend they’re from the Canada Revenue Agency, collecting fake overdue tax debts.
• Be wary of responding to text messages from unknown numbers.
• Always treat your wallet and credit cards like cash. Never leave them around.
• Avoid sending money to a person or organization that you don’t know and trust.
• Keep your passwords secure. Don't leave them on notes in your wallet or around the house.

Stop fraud today! If you or someone you know believe you are a victim of fraud-report it. Contact the Canadian Anti-Fraud Centre at http://www.antifraudcentre.ca, or call 1-888-495-8501. You could save yourself and others from falling victim to fraud.

Utilizing your retirement income

Retirement Planning

For many of us, retirement will mean big changes to our financial lifestyle.

When the time comes, you might find yourself asking, how do I go about dipping into my retirement savings?

As financial planners, we have heard it all. One of the biggest myths we hear is that people believe they should use their non-registered money first, so that their tax-deferred registered money remains sheltered from tax until needed. While it appears a sensible plan at first glance, it wouldn't be our first suggestion.

What do we suggest? We recommend using a combination of both registered and non-registered funds together.

• Non-registered funds, pertain to funds that are not registered with CRA, otherwise known as open accounts. These types of savings plans don't typically have restrictions in terms of how and when you access your money, as well as how much you can contribute to them.
• Registered funds, pertain to funds that have been registered with the CRA such as RRSPs and TFSAs. These types of savings plans offer great potential for investment growth, as well as tax deferred growth.

Because both types of plans have different benefits, it is always a good idea to hold both in your investment portfolio-allowing you the opportunity to pull from both during retirement.

Why? By using a combination, you could find that your retirement income lasts longer and there's the potential to see after-tax savings. 

To help you get a better understanding of just how beneficial combination withdrawals can be in retirement, take a look at the following case study.

The study was based on the following client information:

•         Retirement assets totalling $1,725,000
•      $500,000 is non-registered and $1,225,000 is registered 
•         Requires $62,500 per year in retirement income
•        Tax rate is 15% on the first $40,000 of income and 40% thereafter
•        Zero growth is assumed on the investments

Make the most of your retirement savings. Contact our office today and let us help you plan for your future.

What would you do for better retirement benefits?

What would you do for better retirement benefits?

A recent survey finds that more than half of Canadians are worried about retirement.

When asked, 77% of Canadians said they would consider leaving their job, with all else equal, for better retirement benefits.

As an employer, these statistics should be alarming. If you had seven out of ten of your employees wanting to leave your company, it's time to make a change.

Acknowledging the desire Canadians have for an attractive retirement package, employers can take the opportunity to reevaluate their current offerings. By making even the smallest changes to your retirement offerings, it could help to retain current talent and become more attractive to new prospects.

More specifically, mid-sized to smaller companies should take note of what's being done by their larger competitors. A defined pension plan is something often offered by larger companies and is something that mid-sized companies may want to consider to help make their business more appealing to employees.

Ultimately, if reevaluating you retirement benefits is in the cards for your company, it is important to ask for your employees input. You might be surprised what they may want, or what they may forgo, to help provide security in retirement.

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