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Planner’s Perspective


November 30, 2016

Year-end Planning: Are you paying too much in taxes?


As we draw towards the close of the year, our minds can often be preoccupied with the Christmas season. However, the end of the year marks an important time to review your financial situation and consider relevant tax planning strategies. Please review the following questions, there may be important tax planning strategies for you to implement.


Is your income higher than usual this year? – If your income this year is unusually high you may find yourself in a higher tax bracket than is normal. This may mean an increase in the benefit of a lump sum contribution into an RRSP.  In addition, if contributing to a spousal RRSP is an option, making this contribution before December 31st can have tax planning implications.


Have you received EI this year? – If you have received EI payments this year then there may be tax planning to consider.  If you receive EI and have other income during the year, the government may require you to payback your EI. Proper planning can help you keep your EI payments.


Been laid off or planning some time off? – Your income may be going down in future years if you are nearing a work stoppage due to sabbatical, retirement, etc. If this is the case then you may want to consider a lump sum contribution to an RRSP this year as your income will be high relative to the ensuing years.


Is your income lower than usual this year? – If your income is lower than usual, you may want to consider withdrawing a lump sum from your RRSP/RRIF and rolling it over to your TFSA. This can help to significantly reduce the lifetime taxes you may pay on your RRSPs/RRIF.


Are you retired with growing RRSP balances? – With recent tax changes, the highest tax rate in NB on income over $200,000 is greater than 53%.  This affects very few people while they are living but can be relevant to your estate. It may be better to pay taxes now at a lower rate to save yourself from paying more than half of your estate to the government.


If you have answered yes to any of these questions, or know anyone who falls into one of these situations, you should meet with a financial professional who can help you take advantage of the tax situation.



March 09, 2016

Registered Education Savings Plan: The Government will help pay for school!


It can often be overwhelming when we look to the future and think of our potential financial obligations. With the rising costs of education, parents often wonder “Will my son or daughter be able to afford going to college or university?” or “Will I have enough saved to help pay for my children’s education?”


Scholarships, grants, savings, and student loans are all good tools for funding a post-secondary education. However, they are all short-term planning tools and as financial planners, we encourage clients to prepare today for an education that may be 5, 10, 15, or 20 years in the future. The Registered Education Savings Plan, or RESP, is the best tool to prepare for your child’s future education.


RESPs are great savings tools for two main reasons. First, any investments in the plan are able to grow tax-sheltered until withdrawal, and potentially tax-free if managed properly. Second, contributions to the RESP result in various grants and bonds from the government, which increases the value of your savings.


These grants and bonds can significantly increase the return on your education savings portfolio. The primary grant, that all residents qualify for, can be up to $7,200 over the life of the plan. The other grant and bond are for families with low income and can result in an additional $2,000 over the life of the plan, if your income is below $44,700.


With Registered Education Savings Plans, as with any other investments, the specific situation of the individual is key to maximizing savings. RESP planning involves calculating the appropriate annual investment to maximize grants and bonds, analyzing investment risk, adjusting contributions to account for the age of the child, and determining the most tax-efficient method of withdrawing the funds. Therefore, an involved financial advisor who knows your situation and your investment goals is an important element of saving for your child’s education.



January 28, 2016

RRSP Contributions - Are they for Everyone?


Taxpayers have until the end of February to purchase an RRSP.  That is the easy part.  Knowing whether you should buy an RRSP is the more challenging issue.  Was your income high enough last year to merit the purchase of an RRSP?  Did your income rise last year to an unusually high level?  Did you earn E.I. and show income of over $60,000 last year?  Do you expect that this year or a year in the near future to result in much lower income (i.e. retirement or a planned/unplanned work stoppage)?  There are things to consider and as planners, that is one of the things we do.  We drill down to discover the opportunities that are not easily seen at the surface.  It is worth every minute it takes to have the peace of mind that no opportunities have been overlooked.  



July 7, 2015

How Can Silver Diversify your Portfolio?


As I review portfolios and consider the most conservative positions, virtually everything has some exposure to the stock market.  The stock market is up more than 175% in 6 years.  In addition, the most conservative products have considerable levels of non-stock investments like bonds and mortgage backed securities.  The investments that rely on interest rates have a ‘wall to overcome’.  As interest rates begin to rise, this will present a drag on performance for almost anything invested in income producing products.  There is very little ‘upside’ to bond and bond like investments and with an inevitable ‘reset’ to the rise in the stock market, looking to diversify seems prudent at this time.  What investment can be considered that has already experienced considerable downside?


We are always looking for investments that are ‘on sale’.  Bullion (gold, silver etc.) are hedges to risk and inflation.  Both gold and silver are trading significantly below (Gold is 40% and Silver more than 60%)  their peak prices of a few years ago.  Of the two metals, silver has industrial applications in electronics and many other uses.  I would consider investing a portion of any portfolio in silver. This allocation would be primarily invested in the metal itself with a smaller portion in the companies that mine for silver.  The silver bullion is considered a medium risk investment.  However, the companies that mine for silver and their stocks trading on the stock market are considered as high risk investments.  These companies and their shares are highly variable (fluctuate wildly) and will normally accelerate faster as silver drops and similarly as it rises. 


One key objective in portfolio composition is to create a balanced and diversified portfolio.  For many years balanced meant owning stocks and bonds but with very little future for bonds and inherent risks to an ever rising stock market, balance should incorporate something else.  At these prices and the industrial applications of silver, it rises above most other ideas.  Achieving an above average consistent return is a difficult art to perfect. 



June 10, 2015

Mutual Funds: Your Last Name Isn’t Irving


In this province, the name Irving leaves impressions of hard work and opportunity combining for tremendous success. If you were Mr. Irving you didn't need mutual funds in your portfolio. However, if he had any investment portfolio, what he had, looked a lot like a mutual fund, it was just called something different. A large pool of investments contributed by many different stakeholders with a management team to accomplish a specific objective using only prescribed investments is a pension plan, a private investment pool, a mutual fund.  For example, the Canada Pension Plan has an extensive management team.  Each of us with any amount to invest need someone experienced and more connected to investing to partner with us.  For all my personal experience in financial planning, I partner with management teams when it comes to investing.  


Anytime you use someone to cut your grass, clear snow, launder your clothes it will cost you. Similarly, investing will cost you money whether you see the fee or not.  Whenever and wherever (including the bank) you purchase a mutual fund there is a fee embedded which pays for all the management and services (stock/bond trading, statements, reports and now even the GST).  This fee you can discuss with your investment counselor.  The fee is worth considering but only after you first assess the competency and historical return of the fund.


Not all things are created equal and this is true in choosing a mutual fund.  Choosing the right fund at the right time can significantly reduce risk and improve returns.  There have been very good returns made over the years.  Mutual funds can be used in any investment plan including; RRSP's, TFSA's, RESP's, etc.


Mutual funds are for virtually everyone. If all you have ever bought for investments are savings accounts or GICs at the bank, you are effectively loaning your money to the bank for a very low rate (what they pay you) so they can use the money and invest it in comparable investments that you will find in mutual funds. There are so many different kinds of mutual funds that they can be appropriate for any person at any age in whatever circumstance. Once again professional and competent advice should be considered.



May 8,  2015

Tax Free Savings Account -
It is as good as it sounds!


There is often some doubt in what “the Feds” have in mind when they “innovate” and launch new ideas. The 8 year old investment plan, the Tax Free Savings Account, generated many similar thoughts.


However, it simply is as good as it sounds! This is how it works.


Investments:  The T.F.S.Account is an investment plan.  Many believe and are in fact guided to think that that a TFSA consists of only a low interest bearing 'savings account'.  Savings Accounts at the bank pay so very little today, who would even care whether the interest was tax free!?  You can invest your TFSA contributions in virtually any investment you would like.  From as little, to as much risk as you are comfortable.  If you are earning less than 5% per year since the TFSA was launched, you need a financial checkup!


Contributions:  Each year the government allows anyone 18 years or older to contribute. The annual limit in 2016 is $5500.  The annual contribution limit will increase over time but slowly as it is based on inflation rates.  If you have never contributed before you may be able to contribute up to a maximum of $46,500 (depending on your age).   This is because if in a given year you do not contribute any or all of your allowable contribution, it will be added to the subsequent years contribution limit. This accumulates each year.


Any amounts that are withdrawn are not taxed in any way or included in income.  In addition, the amount withdrawn will be added to next year’s contribution limit.


Strategies:  If you have any investments that are non-registered (open) and you have not "maxed" out your TFSA contributions, you should consider moving $$$ into the TFSA. However, consider any tax consequences on the open money first.


TFSA’s allow a spouse to be listed as the successor. This allows, upon a death of a spouse, the full transfer of the deceased’s TFSA balance to the surviving spouse's TFSA.  This is regardless of whether the surviving spouse has "maxed" their TFSA or not.


TFSA's allow the appointment of beneficiaries. This will convey a TFSA directly to the list of beneficiaries without attracting tax or the complication of probate.


Are you thinking of ‘swinging for the fences'? If you have any aggressive investments in your portfolios, consider investing those particular holdings in a TFSA. If you ‘strike it rich,’ all profits are tax free.



February  2015

Now is the time to invest in oil


As a financial planner we don't always focus on investments. However, occasionally the opportunity trumps all other discussions. Now is the time! Oil and the companies that play a role in it, may get cheaper but I don't think many will believe that the North American oil business is going out of business or that oil is going to zero! Oil on this continent survives at $75 or more per barrel. Whether oil ever gets to $100 again let alone $200 as some have forecasted, if it only gets back to $75 from its current price, it is a 50% gain. If you believe it will take six years for it to recover to $75 (few I speak with feel it will take this long), that is nearly an 8% per year rate of return. Shouldn't everyone consider some small exposure to oil? Right now I can only think of perhaps one more essential commodity to us then oil, oxygen…oh yeah, or water.  Update January 2016-We encouraged clients to buy on dips last year and at the present price of nearly $30 per barrel are readying each interested client to make any final allocations to oil/energy in the portfolios.  Many feel it is significantly oversold and holdings in this area will add growth to portfolio returns for those who patiently wait for higher oil prices.  There are never guarantees in the stock market but if you are looking for things that 'are on sale', oil is just one of those things!




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