Monday, June 21, 2010

Take a critical look at your financial health

You work and you plan and you save – to pay everyday expenses and to achieve your longer term financial goals, whatever they may be. And everything is going well. Then, on one extra-stressful day at work, your heart says, “I’ve had enough for now, thank you.”

Heart attack – but you know the symptoms and get fast medical attention. Your doctor is confident you’ll be fine … after a few months of quiet recuperation away from work. But in the meantime, the bills will keep coming in and how will you pay them? How will you pay for the many costs of your medical care that are not covered by your provincial health plan? Who will support your family?

That’s the kind of stress you really don’t need at a critical time – and there is a solution: Critical illness insurance.

Think it can’t happen to you?

You might think that you’re immune to a critical illness or that it is only older people who need protection but …
  • 1 in 2 men and 1 in 3 women are predicted to develop heart disease in their lifetime

  • There are 40,000 to 50,000 strokes in Canada each year

  • During their lifetime:

    • 1 in 2.3 men and 1 in 2.6 women living in Canada will develop cancer
    • 1 in 9 women will develop breast cancer
    • 1 in 12 Canadians will develop lung cancer
Over 400,000 Canadians will suffer from a critical illness this year. Mortgage experts tell us that more than 40% of home foreclosures are due to a critical illness.

The good news is that with the tremendous strides in medical technology, you are far less likely to die from a critical illness and may even make a full recovery. The problem is that most people don’t have the money to keep going until they can once again earn a living – and that’s where critical illness insurance comes in.

A financial safety net when you need it

Critical illness does not replace your basic medical coverage. Rather, it pays a lump sum of money if you contract a specified illness. There are no strings attached – once you qualify for the payout, you get a cheque to use any way you wish: You can seek private or out-of-country treatment, keep a business running, or pay debts including your mortgage – it’s your call.

Insure that a life-altering critical illness won’t cause a critical blow to your financial life. Talk to a licensed insurance consultant.

Tuesday, June 15, 2010

The 'flaw' of averages - your retirement isn't average ... it's personal

Famed novelist Mark Twain is reported to have said: "There are three kinds of lies - lies, damn lies and statistics." An 'average' is also a statistic of sorts. Statistics Canada puts out all kinds of 'averages' drawn from statistics - the average age of Canadians, the average income of Canadians, and so on. The investment community also likes statistical 'averages' - especially when it comes to the amount of retirement income you'll need. And although statistics can be a good way to get a handle on things from a very general perspective, as Twain astutely observed, the easy use of 'statistics and 'averages' can mask some important 'personal' truths.

As you move toward retirement, you're likely to see many 'averages' bandied about, including this very popular one: 'If you are 30 now (or 40 or 50) you will need to average a certain amount in savings and investment for your retirement.' The 'lie' in this statistic is that there is no average retirement.

You are an individual. Your retirement lifestyle will be 'personal' - different than anybody else's. Your family situation and financial circumstances are unique to you. So don't be fooled by the 'flaw of averages'. An easy statistic is no substitute for personal planning.

As you approach the next phase of your life you take a more active interest in designing the retirement lifestyle of your dreams. (And, in this case, statistics do help because they tell us that Canadians, generally, are retiring earlier and living longer, so you can reasonably expect to live through many years of retirement.) That's where a practical and 'personal' retirement lifestyle plan comes in - because it will help ensure your retirement dreams are built on your financial realities.

When you know exactly what you want to do in retirement, you're in a much better position to know what it's going to cost. Once you've established that basic requirement, you can begin working on other important financial details like organizing sufficient retirement income, tax planning, and your insurance needs in retirement.

You should also expect your plan to change. Life is always tossing curves at us - so flexibility is another important aspect of a successful retirement life plan.

If all that sounds like a lot of work, here's some good news - you can get help.

The Investors Group Retirement Readiness Quiz is designed to give you a head start on your retirement life plan. You'll find it at . A professional advisor can also help ensure your saving and investing levels will allow you to realize your retirement dreams. No statistics, no 'averages' - just the 'personal' plan that will work best for you.

Tuesday, June 8, 2010

Your cottage and keeping it in the family

Ahh, your cottage – a place of sanctuary, family fun and warm memories. But passing along a cottage to the next generation can set off complex financial and family issues. Here are some suggested steps to ensuring cottage continuity.

Know what your kids want You know that cottage ownership is a big personal and financial responsibility that is not for everyone. Discuss this with your children and if any of them are not interested in inheriting the cottage, avoid family squabbles by making sure they are treated fairly in your will.
If you decide on shared ownership, keep in mind that it can be a difficult proposition. That’s why it can be useful to obtain legal advice when you put an agreement in place – about such things as who uses the cottage and when, who pays for repairs, maintenance and upkeep, and the other nitty-gritty aspects of joint cottage ownership – to avoid protracted disputes and misunderstandings.

Manage the tax burden If your cottage has appreciated in value, your estate can face a significant capital gains liability that could force its sale by your heirs.
Capital gains taxes are based on the difference between the cost of your property and its current fair market value at the time of your death. The cost of your cottage is what you initially paid for it plus the value of any capital improvements you made to it over the years – a new deck or roof, for example, including the cost of anyone you hired to do the work for you – so keep your receipts to account for all these costs to help offset capital gains. General upkeep costs such as painting the cottage are generally not considered capital improvements.
Consider taking advantage of the primary residence exemption. You are allowed to name a primary residence that is exempt from tax on capital gain. The residence must be a property you ‘ordinarily inhabited’. It can be either your city home or your cottage. You are allowed just one principal residence at a time but you can choose to exempt the property with the bigger gain.

Have a succession plan Include an effective strategy for passing on your cottage. One option is to purchase life insurance with tax-free death benefits that will cover the capital gains on your cottage and/or other expenses and avoid the forced sale of estate assets. Life insurance is also a good way to equalize an estate where one child wants to keep the cottage, whereas other children would prefer to sell it and divide the proceeds of sale.
Some of these estate planning options may not work in your situation, so it’s a good idea to talk to your professional advisor about your wishes for your cottage and the financial and estate planning options that will work best for you.

Wednesday, June 2, 2010

Dreaming of a new summer toy? Here's how to make it a reality

When the mercury plummets and the wind howls across our frozen landscape, summer dreams are born. Dreams of a new RV . or watercraft . or four-wheeler . or .? Well, your dreams are your own - but if they are filled with visions of a new summer toy, the first thing you need is the money to buy it. So, in the interests of getting through a woeful winter and into a summer of scintillating fun, here's how you will be able to afford your new summer toy: It's called saving and here are a few keys to developing a savings strategy that works:

Pay yourself first. Whether you're saving for a summer toy, a vacation, your retirement, or anything else, this is one of the best available saving strategies. Pay yourself first by saving an amount each pay period that you can comfortably afford -- either a fixed-dollar amount or a percentage of your income (3% is an often used guideline). You're unlikely to miss it, and it can allow your nest egg to grow nicely.

Get max growth from your savings. Get your savings out of low-interest bank accounts and into investments that generate higher returns yet are easy to access when you've reached your goal amount. Money Market Mutual Funds can be a good choice - they usually offer competitive returns and can often be redeemed in a few days. Guaranteed Investment Certificates (GICs) or Term Deposits are good, too - but, you lock your money in for a fixed period in exchange for a higher interest rate. Government Savings Bonds are another option - cashable at any time (usually with a small interest penalty) and often available for purchase through an automatic payroll deduction program that can be a great pay-yourself-first strategy.

Look around. By saving before you buy, you can also save on what you buy. You have the time to check out the best prices and times to buy - like at the beginning or end of a season when merchants are clearing stock.

Pay with real money. Don't finance your toy through high-interest credit cards or by 'stealing' money from investments or savings destined to achieve other goals, like a comfortable retirement. Buy what you can afford with cash on hand - that way you'll also eliminate the costs of financing and may be able to negotiate a better 'cash deal' with the merchant.

With some smart savings strategies, you can realize your summer dreams and with the help of a professional advisor, you can realize your lifelong dreams, as well.