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Financial Planning- Don't Get Caught Unprepared

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Financial Planning- Don't Get Caught Unprepared

  1. 1. Susan Creasy Financial Inc.<br />Don’t Be Caught Unprepared<br />
  2. 2. Emotions and Ignorance = Financial Illiteracy <br />2 out of 3 Canadians will fail to realize one or more of their important life goals because they have no financial plan<br />Money is still a mystery…a taboo<br />Greed and Fear lead to emotional financial planning <br />Lack of knowledge leads to fear and mistakes<br />For seniors it is critical that you have proper planning so you ensure you do not outlive your money<br />
  3. 3. Costly Financial Mistakes<br />Living on more than you make- Income reductions as senior vs. in your working years<br />Buying newer, bigger and better than you can afford or need now<br />Taking money from your RSP’s early if you are not yet retired<br />No emergency fund<br />No Savings <br />Not having a budget that you stick to!<br />
  4. 4. Seniors need help and sound advice<br />Too many financial products and choices available today<br />Drowning in financial information from a variety of sources – how can you stay on top of things<br />Insurance and Investment issues and needs change as we age “problems with Term Life insurance” <br />How do you determine what to believe and then what to do with that knowledge<br />
  5. 5. Where are you getting your advice<br />Many people are getting bad advice from un-educated and uniformed people who are not keeping their information current- Friends and media<br />Some advisors tell clients what they want to hear not what is the reality<br />Not using a well informed educated and designated advisor to assist you in your planning<br />
  6. 6. When I was young, I thought I would live forever…<br />Now I am afraid that I might!<br />
  7. 7. Seniors issues <br />Snowbirds- tax and medical needs<br />Health issues- Sudden and chronic<br />Possible long term care needs<br />Estate planning- trillions of dollars in intergenerational transfer<br />Outliving my money<br />Emergency needs for cash<br />Who gets the cottage? The business?<br />
  8. 8. Loans to Family<br />A recent study shows 64% of Canadians have loaned or borrowed more than $500.00 from friends or family<br />Needs to be well documented in writing to avoid estate problems between other heirs.<br />
  9. 9. Joint Ownership – Pros and Cons<br />Pros<br />No probate fees will be payable with respect to asset on death<br />Ease of transfer their survivor will not experience any delay in receiving the asset on death<br />The asset is removed from the scope of will Variation Act in British Columbia<br />Cons <br />Loss control over the asset<br />Possible triggering of immediate tax consequences such as a capital gains or property transfer tax<br />Possible future tax consequences if for example asset is a principle residence transferred to a child.<br />Exposure of asset claims made against joint owner from creditors or even spouses on marriage breakdown<br />
  10. 10. Tax-Free Savings Account<br />Individual > @18 but not a trust<br />Accumulated $5,000/yr contribution room.<br />Excess contribution subject to 1% tax/mo.<br />Non-deductible deposits versus RRSP’s.<br />Contributions grow tax-free, no tax implications at withdrawal.<br />May name a beneficiary if invested with a Life Insurance Company.<br />May use various investments i.e.. GIC’s, Stocks, Bonds and Investment Funds<br />Opportunity to transfer wealth between generations<br />
  11. 11. Tax-Free Savings Account<br />Individual > @18 but not a trust<br />Accumulated $5,000/yr contribution room.<br />Excess contribution subject to 1% tax/mo.<br />Non-deductible deposits versus RRSP’s.<br />Contributions grow tax-free, no tax implications at withdrawal.<br />May name a beneficiary if invested with a Life Insurance Company.<br />May use various investments i.e.. GIC’s, Stocks, Bonds and Investment Funds<br />Opportunity to transfer wealth between generations<br />
  12. 12. Tax-Free Savings Account<br />Income, losses, gains, withdrawals not included in:<br />income tax calculations<br />determining income-tested benefits or credits<br />OAS<br />GIS (Guaranteed Income Supplement)<br />Child Tax Credit<br />GST credit<br />Employment Insurance Benefits<br />Age credit<br />
  13. 13. Life Insurance – A Planning Tool!<br />Joint Life, last to die plans are cost effective<br />Pays income tax at death from disposition of an asset(e.g. family cottage/investments)<br />To equalize an estate – if one child is left a property, business, farm, the other child can be treated equally with tax free death beneficiary from Life Insurance<br />To pay income tax at death on a RRSP/RRIF if there is no spouse or minor children<br />
  14. 14. Insured Annuity<br />Provides an attractive alternative to today’s low, fixed income investments and GIC’s <br />Tax efficient, lifetime income and preserves or increases the original capital for the estate.<br />Prescribed annuity provides lifetime income<br />A life insurance policy preserves the capital<br />Maintenance free, no ongoing investment decisions are needed to maintain lifetime income<br />With named beneficiaries, the capital passes directly to your heirs, without probate, legal fees or delay!<br />
  15. 15. Example: Male and Female age 70 Non-Smoker<br />$200,000 Joint Last Survivor Life Annuity $ 13,340<br />Taxable portion $ 2,977<br />Less tax @ 35% $ 1,041<br />Less premium for Life Insurance $ 3,750<br />NET Income for Life $ 8,549<br />Net Rate of Return 4.3%<br />Equivalent Before Tax Rate of Return 5.8%<br />(average 10 GIC rate 2.75%)<br />At death $200,000 tax free is returned to your estate!<br />
  16. 16. THANK YOU !<br />Susan Creasy Financial Inc.<br />

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