TFSA Canada - Power up Your Tax Free Savings Account

A November 2010 survey by BMO Financial Group showed that while more than a third of Canadians have opened a Tax-Free Savings Account (TFSA Canada), they know little about the wide range of investments that they can hold within those plans. As a result, investors may not be taking full advantage of the tax benefits and investment return potential of TFSAs. 

The survey showed that 37% had no idea what investment opportunities are eligible for their TFSA Canada. Only 20% knew that segregated funds were eligible and 26% knew that Guaranteed Investment Certificates (GICs) could be included in their plans. The reality is that a TFSA Canada can hold many types of good investments strategies. Here’s a look: 

A TFSA is not a simple ‘account. The range of eligible investment opportunities in Ontario is similar to what qualifies for inclusion in a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). That means a wide selection of individual securities, such as eligible stocks and bonds, segregated funds, real estate investment trusts (REITs), annuity contracts, foreign currency, and more. 

Diversifying beyond cash or savings-type investments in your TFSA Canada can improve long-term growth potential and returns. Because your investment return is completely tax-sheltered in the TFSA Canada and tax-free upon withdrawal, the more you earn in your Tax Free Saving Accounts, the more you benefit from the tax advantages. Compounding of tax sheltered returns can greatly increase your investment income and leave you with a much larger pool of wealth than you would have if you invest in a taxable account. 

Good investment strategies are key. The investments you hold in your TFSA Canada will depend on your financial goals, your risk tolerance, and other factors. We need to consider your Tax Free Saving Accounts as part of your overall good investment strategies, carefully balancing what you hold in your TFSA, RRSP, and non-registered investments. We also need to ensure that your good investment strategies aren’t driven solely by tax considerations, but that taxes are just one part of deciding how and when to invest. 

Financial security is like your health, getting the best professional and personalized advice is extremely important. There`s no better time than now to get together so we can give you the tips and tactics that will help you get ahead and to make the most of your Tax Free Savings Account  by exploring its full investment and tax-saving potential within your overall investment strategies.  For more information contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca  

Family Health Insurance – How to Manage the Stress of an Emergency

As the Canadian population ages, more of us in our 40s, 50s and beyond are supporting or helping with our senior parent’s health care. We want to make sure that they have spoken to a health insurance company and already have family health insurance in place.  There’s a good chance that at some point we’ll be called upon to deal with emergencies involving our aging relatives. Sometimes those emergencies require us to supply information needed for our parent’s health, care or well-being. 

When that time comes, you’ll want to access that information as quickly as possible. You or your loved ones don’t want to be scrambling to figure out necessary details when time is critical and stress is high. Your parent’s health depends on it.  

The best way to make sure you can act quickly and confidently is to prepare in advance. Speak with your parents about their information, their family health insurance, the health insurance company, the name of their Life Insurance Agent.  Compile all their info and any documents you might need, and make sure they’re easily accessible. The more knowledgeable you are, the better you’ll be able to look after not just your parent’s health, but yourself as well. 

Medical information and the exchange of family health insurance information is very important. If a parent is in sudden need of medical care, supplying the right information in a hurry can be a lifesaver. Keep a list of your parents’ blood types, medications, details of allergies, a history of past illnesses and surgeries, and contact information for doctors and other caregivers. You’ll also want to have the details of any family health insurance plans, as well as supplemental coverage such as critical illness insurance or long-term care insurance. Speak to the Life Insurance Agent from the health insurance company and they will be able to supply you with all the necessary details needed in regards to their family health insurance coverage. 

Obtaining your parents financial information is also very important. You may be called on to manage or help manage your parents’ finances in an emergency. This will require access to bank account information, credit card information, details of loans and loan payments, investment information, and any other pertinent financial details and documents. 

Having all legal documents as it relates to your parents estate is vital. Quick access to important legal documents is essential for medical and financial matters. If you or another family member has power of attorney to manage your parents’ healthcare or finances, copies and originals must be easily accessible. Other information you may need in an emergency includes your parents’ wills, their written instructions about the level of medical treatment they want if they can’t express their wishes (sometimes known as a “living will”), and family health insurance policies. Other estate planning information should also be readily available. The documents and information you need will depend on your parents’ situation. Your parents Life Insurance Agent from the health insurance company will be able to help you plan a strategy for gathering the necessary documentation, speaking with your parents, and deciding where their information should be kept for immediate access.  It’s also wise to annually contact their Life Insurance Agent on an annual basis to ensure that their family health insurance plans are consistent with their life changing needs. 

For more information please contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca

Investment advice in Ontario - How You Can Turn Fund Losses into Tax Benefits

With the end of the year approaching, it’s an ideal time to review the performance of your investments — in particular, segregated fund holdings that have declined in value. This is a great way to ensure that you are using insurance to maximize your income tax benefits. 

Because in Ontario fund performance sometimes results in a loss, depending on the markets in a given year, we need to ensure that we are receiving good investment advice and pay as much attention to our “sell” strategy as we did to the steps that originally led us to make those promising investments. 

The end of the year is a good time to consider selling underperforming segregated funds. We may not be able to revive them, but the right strategy can help minimize taxes and give the holdings one last crack at doing some good for your portfolio returns.  

One piece of good investment advice in Ontario is to consider if the proceeds from those funds can be used in more promising investments, this could be the time to sell at a loss to improve your year-end tax position for more income tax benefits. 

More good investment advice in Ontario is to recognize the opportunity to ‘sell low’. By redeeming fund units (outside your registered plans such as Registered Retirement Savings Plans) for less than their original cost, you will create a capital loss that can be used to offset capital gains on your income tax return. By reducing your capital gains, you reduce your income tax bill.  

You may even be able to use that loss towards income tax benefits by reducing income taxes in future or past years. If you own money-losing segregated funds that are likely to make a year-end distribution, you take advantage of the capital loss for income tax purposes and avoid a taxable distribution by redeeming before the distribution date (generally mid-December). 

We need to carefully consider which of your segregated funds holdings are candidates for tax-loss selling. These should be investments that we believe have little opportunity for recovery. We also need to weigh the financial benefits of tax-loss selling in each case. 

When we create a capital loss, it must first be used to offset any capital gains earned in the same income tax year. Any remaining losses can be carried forward indefinitely to future years or applied to gains from the previous three years. 

Here’s an example of how tax-loss selling can work to your benefit. 

Let’s assume you invested $80,000 in a segregated fund a few years ago (outside a registered plan) and sold that investment this year $100,000, for a profit of $20,000. You also sold a money-losing fund investment this year for a loss of $10,000.  You would deduct the $10,000 loss from the $20,000 gain, leaving you with a capital gain of $10,000 for the year. Half that amount must be reported as a taxable capital gain on your income tax return, so you will pay tax on $5,000. You can use a capital loss on any eligible investment to offset a capital gain on any other eligible investment. For example, your segregated fund loss could be used to offset gains from segregated funds, stocks, bonds, exchange-traded funds, or even promising investments in real estate. However, capital losses can normally be used only to reduce or eliminate capital gains, not to offset other income. 

There is one important caveat: When you sell a security to claim a capital loss, do not buy that security again for at least 30 days. Otherwise it will be deemed a superficial loss by the Canadian Revenue Agency and you won’t be allowed to use it to reduce taxable gains. 

Timing is important. Transactions need to be completed before year-end to qualify for your 2011 income tax return. Please refer to your tax professional or accountant for advice. For more investment advice in Ontario, please contact Gary Mandel by calling (416) 849-1653 or by www.wecoveryou.ca  

Life Insurance Brokers Should Review All Your Life Insurance Options with You

With 2011 drawing to a close, it’s an ideal time to review your insurance strategy with your Life Insurance Broker. The goal should be to ensure that your coverage is keeping pace with changes in your life and that you are aware of all your life insurance options.

People get jobs and lose jobs, the stock market goes up and down, unexpected events, and these are just the basics of life. Look at what has happened in your life recently. Some developments that may warrant a visit to your Life Insurance Broker and changes in what you’re paying for insurance can include: marriage or divorce, the birth of children, children growing into adulthood, a death in the family, a new job, a higher salary, an inheritance, or a change in your wealth or debt levels.

Taking the time to review your life insurance options and what you’re paying for life insurance with your Life Insurance Broker also gives you the opportunity to review where your finances have taken you this year. To see whether your portfolio is still in alignment with your goals and consistent with where your life has taken you. It’s not only a chance to review your investments but also review all aspects of your financial life.

Make sure you have enough life insurance because inadequate insurance can lead to financial difficulties or less support for your family in an emergency. Sufficient life insurance coverage will allow you and your family to weather events that could otherwise lead to financial problems.  Having life insurance is good but having sufficient life insurance coverage is key.

Do you need less life insurance coverage? There are lots of life insurance options and there’s no point in paying for life insurance that you no longer require. Instead, your Life Insurance Broker can suggest you consider diverting the money you’ll save on premiums into savings and investments.

Have you considered more than just life insurance coverage? An annual review of your life insurance coverage with your Life Insurance Broker of what you’re paying for life insurance and what you’re life insurance options are is the best way to assess whether your coverage is adequate. It’s also a great way to ensure that you’re making the best use of all the insurance products you need to guard your financial security and that of your family. While life insurance is central to coverage, your Life Insurance Broker should explore possibly unanticipated needs such as long-term care coverage, critical illness insurance, and disability insurance. Together, you can review your life insurance coverage and other life insurance options to ensure you have the peace of mind that comes from knowing you’re well covered for 2012.

For more information about Life Insurance coverage and the life insurance options that are available you can contact Gary Mandel by calling (416) 849-1653 or by visiting www.wecoveryou.ca