Play with Fire and Ignore the Possibility of Disability

Dr. S. S. Hueber chillingly describes prolonged disability as “living death” and surely it is that. For when a man or woman is disabled and unable to work, the ability to earn income stops.

…and what is income?

The foundation of hopes, plans, dreams
The source of the family’s well-being
Food on the Table, a roof overhead, clothes for the family
The car, TV, comfortable furniture, appliances
Recreation and vacations, the joyful times and the quiet times spent with the family

How can a family’s breadwinner let one day go by without insuring his or her income – the source of all the necessities of life and all the good things that make life worth living?

When the breadwinner dies, income stops, but what also stops, is the need for money to keep him or her alive.

When disability strikes income stops, but the need for money to keep the breadwinner alive does not. In addition to the basic necessities of life, medical attention is needed. Medical expense insurance – even the best plan – will not pay all of the doctor bills, hospital bills, drugs, medicines and hundreds of other items.

The high cost of death is insignificant compared to the high cost of staying alive.

Yet every day, millions of breadwinners face the threat of living death with little or no protection. They are vulnerable. They gamble with fate, and the stakes they play with are the highest anyone can own – financial future and the economic well-being of their families. Some may have group policies, but they don’t really know what the benefits are and for how long. Typically, they brush off any entreaties by financial planners to help them, only to find that it only pays them a small amount they can’t live off of and even then for a short time.
People buy insurance on their homes, cars, golf clubs, cameras… and yet so many times they fail to protect what has been called their most precious asset – their ability to earn income. If you had a machine in the basement that cranked out your income every two weeks, I bet you would insure it… and keep it well oiled.. and very well maintained…Well Guess What , that machine is YOU!

If one of my good clients became disabled, unable to work, feeling fearful for lack of money and the idea of having mounting unpaid bills, I’d like to be able to say “Don’t worry about money. That income policy we put in place is going to deliver a nice cheque to you, month after month, as long as you’re disabled?”

Remember, those that need insurance can’t get it, so you had better get it before you really need it!!

John Scholl
Financial Advisor - Desjardins Financial Security Inc.
CFP, CLU (Chartered Life Underwriter), CGA, B. Math., EPC
W – 416 743-1239
C – 416 731-3660

Long Term Care is Essential to Retirement Plan

If you fall within the Baby-Boomer or Gen X groups, you'll count among 9.8 million senior citizens by 2036, according to Statistics Canada. And if you're currently between the ages of 40 and 60, you've started planning for retirement by putting money away in an RSP or pension.

For some, this is the extent of their planning. Not many people consider what might happen if they become sick with a chronic illness. Current research shows that chronic illnesses like Alzheimer's will be become more prevalent over the next 30 years. In fact the Alzheimer Society of Canada predicts that 1.2 million Canadians will suffer from dementia by 2038, which means that the need for long-term care services will increase. Currently, assisted living services can cost up to $50,000 a year. In the next 20 to 30 years, it's expected that the need and cost for these types of facilities will increase substantially.

But taking time now to plan ahead is key to ensuring that you and your loved-ones won't become financially burdened if you lose your independence during retirement. Here's some facts about long term-care insurance:

What is long-term care insurance?
Long-term care insurance protects the insured and their family from financial hardship due to unforeseen medical and/or living expenses related to critical illness, which results in the loss of independence.

How much does it cost and how long would I need to pay?
The cost depends on several factors like your age, health, the insurance provider and the type of policy that you select. Some policies are set up with 20-year or lifetime periods. The actual term of the insurance will depend on the supplier and the policy.

Who's eligible for this insurance?
Anyone between the ages of 18 and 80 is eligible. However, people in their 40s and 50s should consider including it as part of their retirement plan.

Under what circumstance would I receive a payout from this insurance?
During your retirement, the insurance would payout if you became sick with a chronic illness that prevented you from living independently. This is determined if you are unable to eat, dress, move, use the toilet or bathe by yourself.

What does long-term care insurance cover?
Once it's been determined that you're no longer able to live independently, long-term care insurance will help pay for:
• Expert medical advice
• The ability to live at home with in-home and/or respite care
• Assisted living and long-term care facilities
• Senior day-care

How is it paid out?
Long-term insurance pays a tax-free monthly benefit that can be used to pay for any type of service that you choose. There's no need to submit receipts or wait for approval.

Which policy offers the most appropriate coverage?
Speak to your financial advisor to find out what would be best for you. That can only be determined once a full financial analysis is completed.

John Scholl
Financial Advisor - Desjardins Financial Security Inc.
CFP, CLU (Chartered Life Underwriter), CGA, B. Math., EPC
W – 416 743-1239
C – 416 731-3660

When it makes sense to borrow for your RRSP

Loans are a part of life for most Canadians. We take out loans to pay for our cars and our homes, for vacations, furniture and TVs. And, at this time of year, as the deadline for making your 2010 Registered Retirement Savings Plan (RRSP) contribution looms, you may be asking yourself if it makes sense to make one more loan – a loan to increase your RRSP contribution.

The right answer for you depends on the overall shape of your financial life.

Let’s look at the factors you should consider.

Makes sense to borrow …

 Because contributing to your RRSP can pay off in two ways: First, you’ll increase the size of your tax refund; second, you’ll have more tax-deferred money growing inside your retirement plan. But the first rule is this: The loan must fit your budget.

 When you intend to pay off the loan within a year. Remember: Interest on an RRSP loan is not tax-deductible. Consider a series a smaller RRSP loans with payments within your budget. Longer term loans are more suitable for purchasing non-registered investments (when the interest is tax deductible).

 When size of the loan maximizes tax savings. Tax rates rise with income. More tax can often be saved by spreading RRSP deductions over more than one year. While contributions made in one year can be deducted in a future year, it does not always make sense to borrow to make an RRSP contribution if it will take several years to fully utilize the deduction. Again a series of smaller loans may produce the better financial result.

 When you use your tax refund to pay off the loan as quickly as possible.

Or maybe not …

 If you expect to be taxed at, or near, the lowest marginal rate over time. In that case, you won’t get the full tax-reduction benefit of making your maximum RRSP contribution, so the cost of taking out an RRSP loan doesn’t make sense. Instead, you might want to consider contributing to a Tax-free Savings Account (TFSA). The contribution isn’t tax deductible but money and interest inside a TFSA is tax-free and, unlike your RRSP, so are withdrawals, which can be made at any time for any purpose.

 If your increased RRSP refund is already earmarked, in whole or in part, to pay taxes you owe on other income.

 If you are unsure your income level will allow you to meet your RRSP loan obligations, which you will be required to do regardless of your income level and the performance of

your RRSP in the shorter term.

Borrowing to increase your RRSP contribution can be a useful strategy but it also comes with specific risks. Perhaps you can avoid the need to borrow next year through a Pre-Authorized

Contribution (PAC) plan that automatically deducts and saves any amount you want from your regular paycheques.

And, of course, your professional advisor can help you map out the RRSP contribution strategy that fits the overall shape of your financial life.

John Scholl , CLU (Chartered Life Underwriter),CGA, B. Mathematics,

Financial Consultant - Investors Group Financial Services Inc.

& Investors Group Insurances Services Inc.

200 - 24 Queen Street East,

Brampton, Ontario L6V 1A3

Wealth Management & Financial Planning

Phone: (905) 450-2891 X529 Toll Free: 1 (866) 799-2223 x529 Cell (416) 731-3660 Fax: (905) 450-9747

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.

2011 Resolutions you can keep

Here’s a resolution you can take to the bank

There’s a resolution revolution is here!

Canadians everywhere have made New Year’s promises to themselves. Big promises (I resolve to quit smoking.) and not-so-big-promises (I resolve to call my aunt more often.). But here’s one promise you should make and never break: “I resolve to be financially secure.” And here are ten simple ways to make that happen:

1. Budget better

Look carefully at your income and expenses -- then set a realistic budget that includes savings.

2. Defeat debt

Keep that high-interest credit card in your pocket – or better yet, cut it into little pieces. Credit card debt is very expensive. Stay on top of your debt by paying off high interest and non-deductible debt first. Do you have mortgage insurance …. Wrong…Get quotes on a personal insurance policy instead.. it’s cheaper and your survivor is the beneficiary, not the bank.

3. Set goals

Make sure your lifestyle expectations match – and don’t exceed – your income. Be sure to set aside enough regularly to reach your goals.

4. Register yourself

Investments held within a Tax-Free Savings Account (TFSA) allows for tax-free income and an RRSP is a terrific tax-deferred savings builder. Start early, make your maximum yearly contributions and you’ll save on tax and enjoy years of tax-free growth in a TFSA and tax-sheltered compound growth in a RRSP.

5. Trim taxes

There are lots of tax deductions and tax credits – be sure you take full advantage of every one that applies to you.

6. Invest efficiently

Interest income is taxed significantly higher than dividends or capital gains – so it’s usually better to hold investments earning interest income in a TFSA or a tax-deferred RRSP and those that earn dividends or attract capital gains in your nonregistered portfolio.

7. Invest in your child’s future

A post-secondary education is expensive but necessary. Help your kids pay for it by starting a tax-deferred, compound growth Registered Education Savings Plan (RESP) eligible investments now!

8. Insure change

Your life is always changing in one way or another – that means your need for income protection and estate planning are changing, too. Be sure your insurance coverage keeps pace.

9. Assist your assets

Good asset allocation is vital to good long-term investment growth. Get steadier returns over time with the right balance of assets from the three asset categories – cash, fixed-income investments and equities.

10. Wrap it all in a plan

The tenth step to financial security is to wrap the other nine steps in a comprehensive financial plan that will get you where you want to go. Achieving financial security – now, that is a resolution you can take to the bank. Your professional advisor can help you get there.

***


John Scholl , CLU (Chartered Life Underwriter),CGA, B. Mathematics,

Financial Consultant - Investors Group Financial Services Inc.

& Investors Group Insurances Services Inc.

200 - 24 Queen Street East,

Brampton, Ontario L6V 1A3

Wealth Management & Financial Planning

Phone: (905) 450-2891 X529 Toll Free: 1 (866) 799-2223 x529 Cell (416) 731-3660 Fax: (905) 450-9747

I strive to continually improve my wealth management practice to be worthy of the referrals received. I build my business one introduction at a time, and would consider it a great compliment to be introduced to one of your business associates, friends or family.