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How annuities can help fund a full lifestyle in retirement

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By Jean Salvadore, Director, Wealth Insurance, RBC Insurance

(Sponsored Content)

Summary: While Canadians want to live a full lifestyle in their retirement, a majority (62 per cent) are worried about outliving their retirement savings. The majority are missing annuities in their portfolio that can help guarantee an income stream in their retirement. 

If you’re like most Canadians, your vision for retirement includes a full roster of activities such as travel, dining out and shopping for the things you want. But while many of us look to our retirement years as a time to enjoy life to the fullest, having enough money to support that lifestyle is a real concern. Canadians are living longer than ever before and, according to a recent survey by Ipsos for RBC Insurance, the majority (62 per cent) are worried that they’ll outlive their retirement savings.

In fact, even with various financial tools in place such as RRSPs and TFSAs, almost half of Canadians are still not confident that they will be able to afford the lifestyle they want. And perhaps not surprisingly, what’s most important to that lifestyle is keeping a sense of independence. Among those between the ages of 55 to 75, eight out of ten want to live at home for as long as they can and 72 per cent say it’s important to own a car. On top of that, almost three-quarters (68 per cent) would like to be able to travel at least once a year, shop for the things they want (62 per cent), and go out for lunch or dinner a few times a week (53 per cent). Continue Reading…

U.S. Tax Reform: What’s in it for Canadian businesses?

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By Dan Lundenberg, BDO Canada LLP

Special to the Financial Independence Hub

For Canadian businesses that have been wanting to explore their prospects south of the border, the United States’ recent tax reforms could provide that impetus to finally make that happen.

In mid-December, the U.S. Congress agreed to aggressively cut its corporate tax rates from a maximum of 35 per cent to 21 per cent.  In addition, the U.S/ reduced its top personal tax rate to 37 per cent and this can be reduced for certain owners of pass-through entities to 29.6 per cent.  These changes open the door for Canadian business owners to invest or set up a shop in the U.S. without fear of higher taxation.

The U.S. tax reform comes on the heels of the Trudeau government’s move to roll out proposed tax changes that would make it more difficult for Canadian businesses to use private corporations to be tax-efficient. After receiving backlash from small business and industry groups, Finance Minister Bill Morneau in October unveiled a gentler tax plan geared to target mainly high-income Canadians.

But still, the revised tax changes would constrain the ability of businesses to implement tax efficient structures through income “sprinkling” with family members. Using small business corporations as a vehicle for making passive investments would also be more cumbersome under proposed changes.

While Canada is making it harder for private corporations to reduce taxes on certain income, the U.S. just widely opened its door to slash taxes for private businesses. In Ontario alone, assuming profits are paid to its shareholders, an integrated top rate of 54 per cent would apply. In the U.S., the tax hit in a pass-through vehicle would only be roughly in the mid-30s, depending on the state where the business is conducted.

Winners and Losers

So, what does this new U.S. tax environment mean for Canada?

Continue Reading…

How to pass on Money values to your kids

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By Matt Matheson

Special to the Financial Independence Hub

(Part 2)

When we had kids, both my wife and I discussed how to be intentional about teaching them about money. We’ve read books, articles, and looked at resources online.  We wanted to be sure that they knew what a healthy relationship with money looked like in the areas of faith, family, and work ethic. We wanted them to know what a truly wealthy life looks like.

Our plan to do this was to model handling our money responsibly. And we wanted to give them real-world opportunities where they could begin to make financial decisions on their own, at first in a supported environment, and later on, independently.

With our first child, our daughter Gemma who’s getting ready to turn 5, we’re in stage 1 of teaching her to be a wise manager of her money. She’s being supported, taught and encouraged to make good choices with her money. She’s also being given lots of opportunity to fail with money. Also known as non-catastrophic failure, it is an essential element to learning, and one many kids are being robbed of by overprotective parents.

So how are we doing it? By teaching her the basics of how to give, save and spend…in that order.

Give

Gemma has been on commission for about four months and it’s been going quite well.  Every Saturday she gets paid $1.50 in six quarters. Some people may think that’s cheap, but I prefer frugal. 

My wife decorated three old loose tea containers with fancy wrapping paper and glitter letters to store her bounty.

The first thing we do when she gets paid is put 25₵ in the Give container. As people of faith, we tithe a percentage of our income to our local church and other charities.  We want to instill the value of generosity and gratitude in our children, and so before we’ve spent or saved, this money goes into the Give fund.

Recently, we went out and used her money (she has stockpiled $4) to buy some gifts for an Operation Christmas Child shoebox. Before we went out I showed her a short video and we talked about how some kids don’t have much money, and how we can give to them.  It was awesome to see her picking out the items for the box and growing her giving muscles right before my eyes.

Save

The next place money goes is to her Save container.  It gets three quarters, the most of any jar.  Before she’s touched any cash to spend, this “invisible money” disappears into her saving fund so she doesn’t even miss it.

We want to impress upon her the value of delaying gratification. We want her to experience the joy you get from passing on the temporary good feeling of spending now, for the amazing feeling of satisfaction and self-control you have when you buy something you’ve been saving up for.

Right now, she’s not saving for a car, university, or a down payment on a house.  We’re not that crazy.  She saves for larger purchases that she wants but can’t buy on impulse and that we’re not going to cave in and get her on a whim.

A Teachable Moment

A few weekends ago, she and I were hanging out and she let me know that she had seen a Spirit Riding Free toy that she wanted to buy. (For those who don’t know, it’s a Netflix show, which is pretty solid for little kids. Continue Reading…

Money lessons for my newly engaged daughter: She’s 4 years old

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By Matt Matheson

Special to the Financial Independence Hub

My daughter is engaged.

Before you congratulate me, don’t.  I’m not happy.

It’s not that my prospective son-in-law is not a nice guy.  I mean, no one is ever good enough for your daughter, but he’s a solid kid.  Comes from a good family with good values.  I’m not totally sure what he wants to do with his life, but who among us knew exactly what we wanted to do when we were that age?

She says they’re best friends, and that’s definitely important.  I know every father who marries off a daughter probably feels this way when things get serious between his “little girl” and some new kid on the block, but they just seem so young.

They’re 4.

No Laughing Matter

That’s right. friends, last week my daughter announced she was getting married … at 4.

I know I should laugh and think it’s cute, but it actually kind of touched a nerve for me.  I mean, she’s only 4 and I know, Lord willing, that I’ve got a lot of years left with her before she strikes out on her own. But it made me realize that I don’t have as much time as I thought. It made me think that the time I do have, I need to be using wisely with her.

When we had our first child, I was chatting about parenting with a friend of mine who had kids in their teens.  He said that almost all the teaching and parenting he had done happened before 5. After that, he said, your job was to support and encourage your children.

I’m not sure I totally agree with him on that, but I will say that most of the impact you have on your kids will happen when they are young. That is, without question, true.

Big Dreams

As my wife was relaying to me the particulars of how I would be in the Guinness Book of Records for having the youngest child ever married and I was calculating the cost of the wedding, she told me a few things that stood out as far as the impact we’ve had on our daughter.

First, she is her mother’s daughter in so many ways.

Just like my wife, G knows exactly what she wants.  Apparently, she and the new fiancé have already discussed getting a dog and a cat.  They’ve decided on sleeping arrangements which include a bunk bed. She wants three kids and a house that is “a little bit cool.” And they want a van, because of the sliding doors.

For me, this all seems a bit strange.  Not the bunk beds — that makes total sense to me if I think like a 4-year-old — but just the level of dreaming she has done.  We’ve taught her, somehow, to dream about her future.  I’m not sure exactly how we accomplished this. My wife and I talk about our future plans a lot, what our hopes and dreams are, and maybe that has rubbed off on her.

I’m glad she has dreams. I know they’ll change (I hope the cat never materializes) but I’m glad she feels safe to dream.  I want to make sure she never loses that, and to encourage her to think big and not limit her expectations of what life offers.

A Wealthy Life

Second, this conversation reinforced that what we are teaching her about money is sinking in.

As she and her new flame were discussing what they were going to spend their money on, he remarked that he was going to spend all the money on “popcorn and candy.” My daughter asked matter of factly, “Why do you want to spend all your money on that? You’re not spending MY money.” Continue Reading…

Financial Resolutions to stick to in 2018

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By Jamie Wharton

Special to the Financial Independence Hub

The new year is a perfect time to set goals for yourself to help keep your finances in check. It’s not too late to make a few resolutions to get your finances in order, so start your 2018 off on the right foot!

Cut down on needless expenses

An easy way to save money in the new year is to stop spending cash on things you don’t need. Cut out that daily run to your favorite coffee shop and make your own coffee before you leave for work. Do you get your nails done every two weeks? Make your salon trip exclusive for special occasions instead. Unnecessary spending habits can be broken, so cut costs where you can.

Tackle your debt

Make it a point to get your debt under control this year. If you can afford it, start paying more than the minimum required payment and pay off any interest you’ve accrued over the years. A majority of debt comes from student loans, so check out your options for refinancing. Earnest is a great option for student loan refinancing! The sooner you make a plan for repaying your debt, the better.

Set short-term goals

Don’t set yourself up for disappointment by setting a huge goal you know you can’t reach. Continue Reading…