making your money work - david gorveatte...make them a reality • maximizing your rrsp deposits by...

Making your Money Work

Presented by

David Gorveatte CFP CPCA &

Karen MacLean CFP

Investia Financial Services Inc. June 21st 2012

Agenda

This is an overview of what

we will be discussing today.

We have handouts for all of

the items to be discussed.

Review of questions that are commonly asked

Open for new questions

Discuss Personal Financial Planning

Closing remarks

Presentation given by David Gorveatte CFP & Karen MacLean CFP

Questions asked:

• Explain the advantages of a Tax-Free Savings Account

• Explain which is better for Retirement Savings: TFSA or RRSP

• Explain Tax Saving strategies available today - T-Swip & Corporate Class Investing • Explain efficiencies of Spousal & Family Trust


Tax-Free Savings Accounts

Tax-Free Savings Accounts were set up by the Federal Government to help people save money more efficiently and free from tax.

The plan was implemented in the 2008 Federal Budget to be effective Jan 1 2009.

To use this plan you have to set up a separate account with your Financial Institution or Investment Firm to track the contributions and subsequent deposits or withdrawals. Once open, the Government will inform you of your unused contribution amount annually, similar to RRSP limits.



Common misconceptions:

You have to buy one at a Bank.

You can only have a savings account type of Investment.

You can only earn interest on the account.

The rates are very low.

Why bother as banks don’t send us interest slips for under $100 anyway?

I will get to it when I have lots of money.

Please review the brochure in the handout outlining the features and benefits of this program.



Which is better ? - TFSA or RRSP The RRSP and TFSA have almost equal results when the marginal rate for RRSP contributions is the same as for RRSP withdrawals.

When is the TFSA better? : - If the marginal tax rate for RRSP withdrawals will be

higher than the marginal tax rate for contributions.

- If you are close to retirement age, and have little or no savings or pension.

- If RRSP/RRIF withdrawals may cause loss of Guaranteed Income Supplement (GIS) or other benefits.



When is the TFSA better? : Continued

- If further RRSP contributions will result in withdrawals which are high enough to cause a clawback of your Old Age Security. (see web links page for current tables)

- If there is no RRSP contribution room available.

- For savings goals such as vehicle, appliances, or other big ticket purchases.

- If seniors who are not eligible, because of age, to contribute to an RRSP (71+).

- For young people who are just starting out and in a low or no tax bracket and will be able to transfer the TFSA to an RRSP when their taxable income increases.


TFSA or RRSP

The RRSP is better if: - The marginal tax rate for RRSP withdrawals will be lower than the marginal tax rate when contributions are made. If you go to the links below you will see a TFSA vs. RRSP calculator that will help you decide which is better for you.

http://www.taxtips.ca/calculators/tfsavsrrsp/tfsavsrrspcalculator.htm




Emergency Funds

Tax-Free Savings Accounts (TFSAs) are a good alternative to an RRSP for emergency funds that are not necessarily last resort funds. If you're in a low tax bracket, it also may be advantageous to use the TFSA until you are in a higher tax bracket, and then make a tax free transfer to an RRSP.

The main disadvantage of TFSAs for emergency funds is that they are easy to access, so you might spend the funds when you really shouldn't. However, if you have high-interest credit card debt, you should pay off this debt before putting money into an emergency fund.


Tax saving Strategies

We work hard to save our money and we don’t want to pay more than we have to in taxes. We will go over some strategies to help reduce the tax burden on Investment returns in the next few slides. You should get a break if you work hard!


Tax Saving Strategy

RRSP Budgeting Tips

The biggest tip is to maximize your deduction with all the tools available! Know what tax bracket you are in so you can get the best return from the deduction you will be claiming. Also, consider Spousal RRSP’s if the conditions warrant. You can use the Tax Deduction at Source link to get the rebate up front for your RRSP deduction and compound the amount of saving. $ 100.00 deposited in an RRSP will save about 30% in taxes. So $ 100.00+$ 30.00 = $ 130.00 @ 30% = $ 39.00 saved. So $ 139.00 - $ 39.00 dollars saved in taxes = $ 100.00 out of pocket.

See web links page at end of slides for link to form: Presentation given by David Gorveatte CFP & Karen MacLean CFP

Tax Saving Strategy

T-Swip Plans

The T-Swip is a product used for non-registered investments to generate tax-efficient Income. You can have an investment pay you the equivalent to a refund of principle instead of receiving taxable income and capital gains. The T-Swip calculator is used to show what portion of the income generated from an investment can be counted as principle and lower the ACB on the account. This defers the tax liability to as much as 20yrs later. Here is the calculator to show how it works:

https://www.fidelity.ca/cs/Satellite/en/public/education_planning/calculators/tswp_calculator_inv

See web links page at end of slides for link to overview of T-Swip:




Tax Saving Strategy

Corporate Class Investing

The Corporate Class or Capital Class version of a mutual fund allows the investor to hold their investments through a single corporation as opposed to holding each investment individually.

This provides two key potential benefits:

• flexibility to rebalance your investment portfolio without triggering an immediate capital gain • tax-deferred growth through the potential for reduced taxable distributions means more money staying in your account to grow

To learn more visit the Web links page at the end of the slides. Presentation given by David Gorveatte CFP & Karen MacLean CFP

Tax Saving Strategy

Spousal Trusts

The advantages of a Spousal Trust allows you to control your capital from the grave. This is more for people who are in second marriages or someone with a large estate and has children. The Spousal Trust allows someone to assign a portion of their estate, via a clause in the will, to a Spousal Trust and the spouse will become the income beneficiary and the surviving children will become the principle beneficiaries once the spouse passes away. This allows a Legacy to be passed to the children and protects the capital from creditors or a new spouse if the surviving spouse remarries.

See Web Links at the end of the presentation. Presentation given by David Gorveatte CFP & Karen MacLean CFP

Tax Saving Strategy

Family Trusts

The Family Trust allows funds to be sheltered in a Trust and allocations of income to be paid to minor children allowing for sprinkling of income. Due to higher costs to maintain a Family Trust it should only be considered for people with larger assets and /or corporate assets. See Web Links at the end of the presentation.


Fundamentals of Personal

Financial Planning:

Overview of Personal Financial Planning



Financial Planning:

Two Essential Requirements for Financial Success are:

1. Financial goals

2. A Financial Plan to achieve those goals



Financial Planning:

Key Areas in Financial Planning are:

• Earning Income

• Budgeting: Prioritizing, Spending & Saving

• Investing for your Future

• Managing your Taxes efficiently

• Managing and Getting out of Debt! “I used to live beyond my means now I live beyond my

Wildest Expectations!!!” Author Unknown!



Financial Planning:

Setting Financial Goals

Goals vs. Desires or Wishes

Financial goals should... - Be realistic - Be stated in specific, measurable terms - Have a time frame - Indicate the type of action to be taken.

Goals depend on a person’s values, life situation, and their attitude towards money.



Financial Planning:

A Financial Plan is a report that...

• Summarizes your current Financial situation: - Analyzes your Financial needs. - Recommends future Financial activities.

• Your Financial Plan can be:

- created by you - done with the assistance of a Financial Planner - structured using money management software



Financial Planning:

The Financial Planning Process:

1. Determine your current financial situation. 2. Develop financial goals. 3. Identify alternative courses of action. 4. Evaluate the alternatives. 5. Create your personal money MAP: (MAP = Money Allocation Plan)

6. Implement the financial action plan. 7. Re-evaluate and revise your plan as you go.



Financial Planning:

Determine your current financial situation

Two types of personal financial statements:

1. Balance Sheet - Assets (what you own) - Liabilities (what you owe) - Net Worth (difference between your assets and liabilities)

2. Monthly Cash flow statement (your income and your expenses)

- Find out if you have cash surplus or deficit



Financial Planning:

Implementing your financial plan

•Develop good financial habits - Use a spending plan (budget) to stay within your income

•Achieving your financial objectives requires - A willingness to learn - Appropriate information sources - Discipline - Patience


Retirement Planning

Common mistakes!


Retirement Planning

Retirement Planning: • Calculating how much income you will need at retirement

• How your pensions will integrate with CPP, if applicable

• Taking stock of your retirement goals and dreams to make them a reality

• Maximizing your RRSP deposits by using government money to help boost your deposits by up to 40% +/-

• Use current software to project where you will be at retirement and, if you are short, make changes now to get back on track


Retirement Planning


This is not considered a good retirement plan but many people are hoping that it works.

Taxes

• Death and taxes are both facts of life. It doesn’t matter how hard we try, nobody gets out alive. All we can do is to try to maximize our time here on earth and pay the least amount of taxes we legally can.

• Most of us don’t even know what tax bracket we are in. We will now review the 2012 tax tables on the next page.


Taxes

NEW BRUNSWICK TAX TABLE

Combined Federal and Provincial Tax 2012

TAXABLE INCOME (for over age 65, see *NOTE)

Lower Limit Upper Limit Interest and Regular Income

$ 0 to $ 10,822 0.00%

$ 10,823 to $ 15,359 15.00%

$ 15,360 to $ 34,032 * 27.10%

$ 34,033 to $ 38,191 24.10%

$ 38,192 to $ 42,707 27.10%

$ 42,708 to $ 76,380 * 34.10%

$ 76,381 to $ 85,414 34.40%

$ 85,415 to $124,178 38.40%

$124,179 to $132,406 40.30%

$132,407 and up 43.30%

* Additional clawback taxes for income thresholds over $32,691and $67,668 based on 2011


Conclusion

This concludes the session for today and we would like to know if there are any questions from the group?

Thank you,

David Gorveatte CFP & Karen MacLean CFP

Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus of the mutual funds in which you invest. The information in this email newsletter is general information only and is not intended to constitute specific legal, accounting, financial or tax advice for any individual.


Web links:

• Tax Free Savings Accounts information:

• http://www.cra-arc.gc.ca/tx/rgstrd/tfsa-celi/menu-eng.html

• TFSA vs. RRSP Calculator:

• http://www.taxtips.ca/calculator/tfsavsrrsp.htm

• Tax deduction at source forms:

http://www.cra-arc.gc.ca/E/pbg/tf/t1213/README.html

• T-Swip and Corporate Class Overview:

https://www.fidelity.ca/cs/Satellite/en/public/products/taxs

mart/solutions/overview

• Retirement Planning Guide:

http://www.financialwisdom.ca/pdf/You're_Nearing_Retire

ment-Are_You_Ready.pdf


http://www.budget.gc.ca/2008/pdf/pamphlet-depliant2-eng.pdf

http://www.cra-arc.gc.ca/tx/rgstrd/tfsa-celi/menu-eng.html







http://www.taxtips.ca/calculator/tfsavsrrsp.htm




https://www.fidelity.ca/cs/Satellite/en/public/products/taxsmart/solutions/overview

https://www.fidelity.ca/cs/Satellite/en/public/products/taxsmart/solutions/overview

http://www.financialwisdom.ca/pdf/You're_Nearing_Retirement-Are_You_Ready.pdf







Web links:

• Information on AGE 65+ clawbacks:

• http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/oa

srepay.shtml

• Calculation sheet for clawbacks:

• http://www.cra-arc.gc.ca/E/pbg/tf/5000-d1/5000-d1-11e.pdf

• Useful calculators from the Federal Government:

• http://www.canada.gc.ca/forms-formulaires/tools.html

• Free Retirement Readiness calculator:

• http://www.fidelity.ca/cs/Satellite/en/public/education_plan

ning/calculators/snapshot


http://www.servicecanada.gc.ca/eng/isp/pub/factsheets/oasrepay.shtml



http://www.cra-arc.gc.ca/E/pbg/tf/5000-d1/5000-d1-11e.pdf










http://www.canada.gc.ca/forms-formulaires/tools.html




http://www.fidelity.ca/cs/Satellite/en/public/education_planning/calculators/snapshot



Web links:

• Information on Family Trusts:

• http://www.theglobeandmail.com/globe-investor/personal-

finance/home-cents/the-truth-about-family-

trusts/article615586/

• Information on Spousal Trusts:

• http://www.sunlife.ca/advisor/v/index.jsp?vgnextoid=c70d7

1943662f110VgnVCM1000009b80d09fRCRD&vgnextfmt=d

efault&vgnLocale=en_CA

• Information on working with a Lawyer to draw up a will:

• http://www.legal-info-

legale.nb.ca/en/publications/you_and_your_rights/You_and_

Your_Lawyer_EN.pdf

David Gorveatte’s web site www.davidgorveatte.com

David Gorveatte’s e-mail [email protected]

Karen MacLean’s e-mail [email protected]


http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/the-truth-about-family-trusts/article615586/















http://www.sunlife.ca/advisor/v/index.jsp?vgnextoid=c70d71943662f110VgnVCM1000009b80d09fRCRD&vgnextfmt=default&vgnLocale=en_CA



http://www.legal-info-legale.nb.ca/en/publications/you_and_your_rights/You_and_Your_Lawyer_EN.pdf









http://www.davidgorveatte.com/

mailto:[email protected]

mailto:[email protected]

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