SPRING 2016

All in the family

When a family member is struggling with a financial issue – perhaps your parents

or in-laws, or an adult child – do you ever wonder if you can ask us for advice? The answer is yes.

Maybe a parent can’t determine if they should start Canada Pension Plan (CPP) benefits earlier or later than age 65. Or they’re unsure if naming both you and your sibling as co-executors is a good idea. Perhaps they live in the United States six months a year and wonder if they should hold some investments in U.S. dollars. These are big decisions that often require research along with professional advice.

Let’s say your son or daughter purchases a first home and asks if they should buy mortgage insurance from the bank or choose personal life insurance. Or they’re curious whether a spousal Registered Retirement Savings Plan (RRSP) still helps for income splitting. Maybe they are debating whether to open another Registered Education Savings Plan (RESP) for their second child or use a family

RESP. It’s important to arm yourself with information when these decisions arise.

Advice mattersYou could research financial issues on your own, but information alone may not solve the dilemma. If your parents are considering a reverse mortgage to convert equity in their home to tax-free cash, for example, research will show it’s controversial. Some experts claim it’s a high-interest trap that erodes home equity, while others maintain that, in certain situations, it’s a viable solution.

Or maybe your child starting out wants to save for retirement and questions whether to choose an RRSP or Tax-Free Savings Account (TFSA). Favour a TFSA, research tells you, if the marginal tax rate will be higher in retirement; use an RRSP if the rate will be lower. But how can you forecast several decades ahead?

When information doesn’t provide the answers you seek, you need professional advice and guidance. So if a family member needs help with a financial issue, feel free to talk to us. n

Samuel (Sam) Madio

CPA, CGA, CFP, EPC

Senior Financial Advisor

Telephone: (416) 840-3843

Cellular: (416) 576-2975

Email: smadio@assante.com

Barb Smith

Administrative Assistant

Telephone: (416) 840-3838

Email: basmith@assante.com

Assante Capital Management Ltd.

303 – 1 Eva Road,

Etobicoke, ON M9C 4Z5

Fax: (416) 626-2569

It’s been a long, cold winter that we

thought may never end. But now, with

spring around the corner, it’s time to

come out of hibernation and look

ahead.

This is a great time to give a spring

“tune-up” to your finances and make

sure all your savings and investment

plans are on track for the coming year.

We can also talk about how to make

the most of your tax refund – whether

contributing it to your RRSP or TFSA work

best for you.

Let’s discuss how we can fine-tune your

planning to get you closer to your short

and long-term goals.

2

RETIREMENT PLANNING

Is managing your finances like juggling?

Remember when you started out? Your financial life was pretty easy. You had a bank account and when

you landed your first good job you opened a Registered Retirement Savings Plan (RRSP). That was about it.

But over the years, as your life evolved, things became a little more complex. That RRSP of yours gained a lot of company. Like a mortgage, life insurance, non-registered investment account, Registered Education Savings Plan (RESP), and Tax-Free Savings Account (TFSA). You may even have other financial vehicles or insurance products to tack on to this list.

Complicating the juggling act is an assortment of ever-changing financial decisions, just to give you a few more balls in the air. Fortunately, all of this doesn’t need to be overwhelming – because you’re not alone when you have an advisor. Here are two examples of couples facing multiple financial issues at once, and how their advisor helps take the worry out of their financial life.

The ParkersThe Parkers are juggling issues involving critical illness insurance, market worries and giving while living.

Bryan has critical illness insurance through his employer’s group plan. Jillian does not have coverage. What she does have is a friend diagnosed with breast cancer, which makes Jillian think she should get critical illness protection. But she’s worried about cost. They meet with their advisor who finds a way to meet Jillian’s cost concerns. She recommends a product covering only the most common critical illnesses, for a coverage period of 20 years.

The couple have been planning a three-week trip to Italy in the summer. But it’s currently a period when the markets are underperforming and Bryan questions whether this is the right time for an expensive trip. Their advisor puts Bryan at ease, explaining that vacation funding will come from his Tax-Free Savings Account (TFSA), where conservative investments for this purpose are holding their value.

The Parkers see their son and daughter-in-law waiting to purchase their first home. They would like to give a cash gift to cover the down payment, but the Parkers want to know if it would affect their retirement plans. To help them make a fact-based decision, their advisor presents the Parkers with several options. A gift equal to 10% of the home’s cost will not disrupt their retirement plans. Other options for larger gifts involve either delaying their retirement or increasing their monthly investment contributions to keep their retirement objective on track.

The LeungsThe Leungs are approaching retirement and have multiple financial issues involving estate planning, retirement planning and long-term care insurance.

Raymond and Kim recently reviewed their wills, as they now have reason to worry about their youngest child inheriting a large lump sum. Their advisor explains how the child can receive a series of smaller payments over time using a trust or an annuity settlement.

Raymond is seven years older than Kim and they earn similar incomes. They’re having difficulty trying to figure out whether they’ll retire at the same time and, if they do, what year that could be. The couple mentions the issue to their advisor. He helps guide their planning by making projections that show estimated retirement income for various retirement dates and scenarios.

Thinking ahead, the Leungs don’t want their children to be burdened with taking care of them if they suffer failing health when older, and they wish to have a plan in place. Their advisor presents the cost of long-term care insurance starting at different ages. He also gives them a general idea of the amount needed if they prefer to self-insure through savings.

Your life might be different than that of the Parkers and Leungs, but at times you may easily imagine juggling two or three financial issues of your own. When that happens, talk to us. We’ll work with you to find solutions that bring order to your financial life. n

3

INVESTMENT PLANNING

Goodbye, one size fits all. Hello, custom tailoring.

It doesn’t seem that long ago when a couple with children was considered the traditional Canadian family. But in

Canada today, couples with children account for only about one in four households.1 The new normal is a variety of living arrangements – and each requires its own financial approach. Here’s a glimpse of various household types, highlighting one financial approach especially important for each.

A couple with childrenAs education costs rise, education savings become more critical for parents. Start contributing early to a Registered Education Savings Plan (RESP) or you could miss out on “free money” from the Canada Education Savings Grant (CESG), up to $7,200 per child. Starting early also gives your contributions and grant money more time to grow and compound. And consider a Tax-Free Savings Account (TFSA) or trust to bolster your RESP. A couple without childrenCouples should devote time to finessing a financial plan – for example, establishing relevant tax strategies. A Spousal Registered Retirement Savings Plan allows couples to shift substantial future income to the spouse expected to have fewer investment and retirement assets down the road. With a spousal loan, investment income attracts less tax. If you own a business, you may be able to hire your spouse and shift income to a lower tax bracket. In certain situations, transferring Canadian dividend income from one spouse to the other reduces overall tax.

A blended familyIf you’re in a new family and have children from your first marriage, estate planning becomes a key issue. You may plan to make your spouse the main beneficiary of your estate, but want to leave your children a significant inheritance. One solution is a spousal trust holding investments that provide your spouse with lifetime income, after which your children receive trust assets. Another solution is making your children beneficiaries of a permanent life insurance policy on your life.

Single with childrenWhen you’re raising a child or children on your own, insurance protection is vital. You need adequate life insurance to support your children until adulthood should you pass away unexpectedly. It’s also a good idea to have disability insurance or critical illness insurance or both. You want to ensure your children are provided for if a disability or critical illness prevents you from working.

Single without childrenWhen you’re single, an emergency fund takes on greater importance. If you experience a financial setback, like losing your job, there’s no second income to provide a safety net. A TFSA can be ideal to hold emergency funds, or use a non-registered account if your TFSA is dedicated to other investment goals.

A multigenerational familySome couples take in an aging parent who can’t live independently or a young

adult child who’s returning home while looking for desirable employment. This unplanned situation may cause a change in your financial plan. You may need to delay a plan to downsize or start budgeting so the unexpected expenses don’t affect your savings for retirement.

Financial planning today is far from one size fits all – as evident in these glimpses of household types. Custom-tailored approaches involve education savings, investments, budgeting, insurance, taxation, retirement and estate planning. And the more we know about your life, the better we can develop a unique financial plan.

So please keep us informed, especially when changes occur. We’ll make sure the financial side of your life is in tune with the way you live. n� 1 Statistics Canada, Private households by household type, 2011 Census

The new normal The so-called “traditional family” of a couple with children is no longer so common. In fact, for the first time, Canadians who live alone outnumber couples with children. In addition, almost one in eight couples with children is a blended family.

0

10

20

30

40

50

60

70

80

90

100

Couples with children

Statistics Canada, Private households by household type, 2011 Census

%

Couples without children

One-person households

Shared households (families or non-family)

One-parent families

26%30% 28%

6%10%

This material was prepared for and published on behalf of the advisor named herein and is intended only for clients resident in the jurisdiction(s) where their representative is registered. This material is provided solely for informational and educational purposes and is not to be construed as an offer or solicitation for the sale or purchase of any securities or as providing individual investment, tax or legal advice. Consult your professional advisor(s) prior to acting on the basis of this material. Insurance products are available through advisors registered with applicable insurance regulators. Individual equities are available only through representatives of Assante Capital Management Ltd. In considering any particular investment, please remember that past performance is no guarantee of future performance. Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. Neither Assante Financial Management Ltd. or Assante Capital Management Ltd. nor their affiliates or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever in respect of the use of this material. Certain names, logos or graphics herein may constitute trade names, trade-marks or service marks (“Trade-marks”) of CI Investments Inc. and/or its affiliates or of third parties. The display of Trade-marks herein does not imply any licence has been granted to any third party. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Copyright © 2016 Assante Wealth Management (Canada) Ltd. All rights reserved.

Tax tip at 65Starting at age 65, you can claim the pension income tax credit, a 15% federal credit on up to $2,000 of eligible pension income (a provincial pension income tax credit is also available). It’s a credit worth taking advantage of, since it saves many taxpayers hundreds of dollars a year.

Eligible pension income includes income from a Registered Retirement Income Fund (RRIF), payments from a registered pension plan (RPP), annuity payments from a Registered Retirement Savings Plan (RRSP) and other sources. Canada Pension Plan (CPP) and Old Age Security (OAS) benefits are not eligible.

So if you have a pension plan from your employer or other eligible pension income, you’re good to go. But what if you don’t have eligible pension income at age 65? Fortunately, you can create it, with a proven strategy.

All you need to do, from ages 65 to 71, is convert a portion of your RRSP to a RRIF – just enough so you can withdraw $2,000 from your RRIF each year. That’s your eligible pension income that will trigger the tax credit.

If you don’t need the money to support your retirement, you may wish to keep the tax-smart moves going and contribute the $2,000 each year to your Tax-Free Savings Account (TFSA). By the end of the year you turn 71, the RRSP will be converted to your RRIF and you won’t need the strategy anymore.

If you’re interested in this pension income credit strategy, talk to us and we’ll determine if it works with your tax situation. n

If you’re lucky, the decision upon retirement of whether to stay in your home or downsize is an easy

one. Either you’re very happy where you are and have no reason, financial or otherwise, to move, or you’ve planned for years to move from the suburbs to relocate. For many retirees, however, deciding whether or not to downsize is a struggle. Here are some things to consider in making a decision.

Enriching your retirementSome people may have retirement dreams bigger than their budget, and a home that represents a sizeable amount of their net worth. Selling the home could be a ticket to world travel. Others may consider such a sale to increase retirement income and ensure they won’t outlive their savings. Downsizing purely for economic gain can be especially tempting if it’s the difference between postponing retirement or working part-time during retirement years.

It’s important, however, to weigh the sale of the home against the purchase of your next home and the cost of living elsewhere. Downsizing doesn’t always net as large of a gain as hoped. Also, there’s more to the story than dollars….

Practical reasonsYou may wish to downsize for less home to take care of. A smaller house means less maintenance, and a condo means no lawn to mow, no snow to shovel, little work at all. Perhaps you’re selling because you don’t need the house – you’ll spend winters down south and stay up here during warmer months at your vacation property.

On the flip side, you may have practical reasons to stay. You want to

hang on to your home in case an aging parent or unemployed child moves in. Or you want to stay for now, with the option to sell in the future if the need arises, like covering the cost of a retirement residence.

From real estate to estateEstate planning can be a factor in whether or not you sell the house. You may wish to stay in the home, since the principal residence becomes a large, tax-free inheritance for your children. On the other hand, selling the home and downsizing may enable you to give your children a cash gift now.

Matters of the heartFor some people, downsizing is not an option simply because your home is your home. It’s the source of warm family memories, the place where you feel most comfortable. And perhaps your neighbours and neighbourhood are meaningful to your life. Leaving would be difficult emotionally, plus there’s the stress of the move itself.

If you find yourself wondering about downsizing, talk to us. We’ll assess the financial picture while you think about the emotional side. n

Is your home a nest or nest egg?