Building Wealth

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Financial Investments

BUILDING WEALTH

We are living longer and leading more active lives than ever as seniors.  Do you know when you can retire?  Have you started planning for your retirement?  Do you know how much money you’ll need to have in order for you to retire and how to manage your money after you stop working?  Do you know how to plan for your retirement? As a full-service financial brokerage, the Blackmore Levy Group can give you all the answers. We custom design and build or rebuild your Financial House. Together we’ll build it right!

 

 

TFSA – Tax-Free Savings Account

Although “savings account” is in the name, it’s actually not a savings account. Think of a TFSA as an investment chest that you can put different types of investments into, such as Cash, GIC’s, Bonds, Stocks, Mutual Funds and even Segregated Funds. The “tax-free” part means that any growth on the investments is tax-free.  Annual contribution limits apply and if you don’t use it all in one year, it rolls over to the next and accumulates from previous years.  You can use it for both short-term savings, such as a vacation or emergency fund. It’s also well suited for your long-term and retirement savings as the money deposited into a TFSA is not taxed when you withdraw it.  The retirement bonus!  Your withdrawals are not considered income, as they’re not taxed and they don’t impact government benefits or pensions.

RRSP – Registered Retirement Savings Plan

An RRSP is also an investment chest that you can put different types of investments into, such as Cash, GIC’s, Bonds, Stocks, Mutual Funds and Segregated Funds. There are annual contribution limits that are based on your income, with the maximum contribution amount set as 18% or a set annual maximum. The traditional use for an RRSP is for your long-term savings and for your retirement.  RRSP’s have some special tax advantages.  Any growth on your investments grows tax-free. You get immediate tax relief by deducting your RRSP contributions from your income each year.  Therefore, your contributions are made with pre-tax dollars.  You will, however, pay tax when you withdraw the savings from your RRSP.  As you’ve deferred this tax liability to the future when your marginal tax rate will be lower in retirement than it was during your contributing years!  RRSP’s have to be closed at the end of the year you turn 71 so that’s when you can either, convert it into a RRIF, buy an Annuity or withdraw it all in cash

SRRSP – Spousal Registered Retirement Savings Plan

A spousal RRSP is registered in the name of your spouse or common-law partner. They own the investments but you contribute to it.  You get the tax deduction for any contributions you make to the spousal RRSP.  However, any contributions you make reduce your own RRSP deduction limit for the year.  They won’t affect how much your spouse can contribute to their own RRSP.  The growth on the investment also grows tax-free.  A spousal RRSP is a way for you and your spouse to split your income more evenly in retirement. That means the combined income tax you pay as a couple may be lower than what you would pay if all your savings were in a single RRSP. You may want to do this if you earn more money than your spouse and you’re likely to be in a higher tax bracket when you both retire. Or if you have a pension plan and your spouse doesn’t.

RRIF – Registered Retirement Income Fund

A RRIF is a registered account that gives you a steady income in retirement.  You open a RRIF by transferring the money from your RRSP by the end of the year you turn 71.  You won’t pay any tax when you convert your RRSP to a RRIF and your savings will continue to grow tax-free, as long as it stays in the RRIF.  You only pay tax on the withdrawals you make.  A RRIF can contain the same mix of investments as a RRSP, including GIC’s, Bonds, Stocks, Mutual Funds and Segregated Funds.  As the RRIF is a transfer of money from your RRSP, direct deposits into a RRIF are not allowed.  While there is a minimum withdrawal amount from your RRIF each year and this amount increases as you get older, there is no maximum withdrawal limit.

SRRIF – Spousal Registered Retirement Savings Plan

SRRIF is a registered account that gives you a steady income in retirement.  You open a SRRIF by transferring the money from your SRRSP by the end of the year you turn 71.  You won’t pay any tax when you convert your SRRSP to a SRRIF and your savings will continue to grow tax free, as long as it stays in the SRRIF.  You only pay tax on the withdrawals you make.  A SRRIF can contain the same mix of investments as a SRRSP, including GIC’s, Bonds, Stocks, Mutual Funds and Segregated Funds.  As the SRRIF is a transfer of money from your SRRSP, direct deposits into a SRRIF are not allowed.  While there is a minimum withdrawal amount from your SRRIF each year and this amount increases as you get older, there is no maximum withdrawal limit.

LIRA – Locked-In Retirement Account  or a Locked-In RRSP

Are you one of the lucky ones that had a job where the Company had a pension plan?  Well, if you landed a new job, quit or were laid off from that job that had a defined contribution (DC) or defined benefit (DB) pension plan, then your pension entitlement was probably transferred to a LIRA or a Locked-in RRSP.  That pension money cannot be withdrawn until you start your retirement.  As a pension is meant for retirement and is to be paid out over time, the “locked-in” part of the name is for exactly that.  A LIRA locks in the previous pension money and can contain a variety of investments, such as GIC’s, Bonds, Stocks, Mutual Funds and Segregated Funds. You can’t directly contribute to a LIRA or start receiving income from this pension money until you are ready to retire or reach the age of 71.  Then your money is converted into a LIF, LRIF – Locked-In Retirement Income Fund or a Life Annuity.

LIF – Life Income Fund or a LRIF – Locked-In Retirement Income Fund

If you left a job where you had a pension plan and transferred your pension entitlement to a LIRA or to a locked-in RRSP then that money cannot be withdrawn until you start your retirement.  So when you’re ready to start receiving an income from this pension money you’ll convert it into a LIF, a LRIF or a Life Annuity.  A LIF is what a LIRA turns into or it can be used for other pension funds. One way to think of a LIF is a LIRA in reverse.  As a LIRA is meant to save money, a LIF is used to provide an income at retirement.  Your money is invested in GIC’s, Bonds, Stocks, Mutual Funds and Segregated Funds that continue to grow tax free. While there are rules governing minimum and maximum withdrawal requirements every year which is a percentage based on your age.  Direct deposits into a LIF are not allowed and the withdrawals are taxed as income.

Annuity

An annuity is a contract with a life insurance company. You deposit a lump sum of money, and they agree to pay you a guaranteed income for a set period of time — or for the rest of your life. Annuities are most commonly used to generate retirement income.  An annuity is a contract between you and an insurance company in which you pay a lump sum of money to the insurance company who agrees to pay you a guaranteed income for the period of time set out in the contract for the rest of your life. Essentially, the money is returned to you in regular payments with interest. Annuities are commonly used for income during retirement and the initial lump sum payment can come from an RRSP, RRIF, LIRA, LIF or non-registered funds.

 

Case Study

I met this couple 5 years ago, they were in their late 50’s with 2 grown children.  He had been working at the same company for 38 years and they wanted to know when he would be able to retire.

Home Location: Burlington

Home value: $650,000.00

All they needed was the right plan in place so that they could structure their savings and pension properly to continue building their Financial House the right way.

Home

RRSP’s

Pension

Total

$   650,000

$    45,000

$   335,027.61

$1,030,027.61

Mortgage

Line Of Credit

Car Loan

$ 190,242.00

$     5,173.00

$    24.326.00

$ 964.00

$ 300.00

$ 534.08

New Mortgage: $220,000.00 total monthly payment: $1,115.00

That’s a total monthly savings of $683.00

The clients have the option to pay the lower amount extending the length of the mortgage or they could accelerate the mortgage using all the pre-payment privileges so that they are completely out of debt sooner.

With the monthly savings they;

  1. Put the right Life Insurance in place.
  2. Accelerated the mortgage to pay it off years sooner

Call the Blackmore Levy Group at 1.888.520.6520 for a complimentary assessment. One of our Financial Architects will be able to custom design and build or rebuild your Financial House.

 

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