Estimating your CCP Retirement Pension

Do you ever wonder how much you will receive from the Canada Pension Plan (CCP)? Knowing your public pension allows you to more effectively set your private savings goals and retirement spending expectations.  Of course both CCP and OAS will always be subject to modification and therefore best to revisit the analysis periodically.

Assessing your My Service Canada Account

For starters, sign up.
While the service is free, one must first obtain password access by registering on the Service Canada website.  For security, an initial password is sent by Canada Post to your address on record with the government.  You will have a chance to confirm the address, so if it’s incorrect, you can call and speak to someone, but otherwise it can be done online.

CCP Earnings and Contributions

On the site, a table shows all the calendar years in which you make contributions (i.e. paid CPP premiums) and the amount of pensionable earnings upon which those were based.  There are notations in respective years where you were below the basis exemption (B), contributing at the maximum (M), self-employed (S) and where a credit split (CS) with a spouse may have applied.  There is even a new notation for post-retirement benefits (P), which is the credit that applies beginning in 2012 for premium contributions made when receiving a retirement pension while continuing to work.

 If you want to obtain a printed official statement, you can order it online.  On the other hand, if you disagree with the record, there are instructions as to the necessary documentation you will need and the procedure you can take to correct any errors.

Estimating monthly CCP benefits

Now here’s the fun part.
With a couple of clicks, you can get a quick estimate of your CPP retirement pension in current dollars if you were 65 and began your pension today.  Though this may be a simplistic way to express it, in fairness, it is easier to understand than to show an indexed amount years or decades into the future.  Alternatives are also offered for retirement commencing early at age 60 or late at age 70, based on the respective 0.6% and 0.7% monthly adjustments, which will be fully implemented by 2016.

Of further practical reference are the figures for the CPP disability pension and related amounts for dependent children.  Finally, there is a summary of the type and amounts available on death for lump-sum payment, survivor spouse and dependent children.

 This is a great tool that I think everyone should check out; knowledge is power, and knowing in advance what your benefits will be helps us plan better for your retirement dreams.

Have a great weekend; the Service Canada website is simply www.servicecanada.ca .

Tracey

Source:  Invesco, original article written by Doug Carroll, Tax & Estate InfoService

A Golden Opportunity for the Brave?

After a good start to 2012, global stock markets once again are being affected by economic uncertainty out of Europe; it is largely the same story as in 2010 and 2011.  The eventual outcome depends on a myriad of decisions made by politicians and central bankers globally.  We do know; with a degree of confidence that capital markets will survive and some believe that down the road this point in time will be seen as a golden opportunity for the brave.

 Negatives: Europe

There is no sugarcoating Europe right now. It has structural issues it is working through, and its fits and starts are translating to volatility on global stock markets. Greece is a very small economy on the world scale but its economic woes are undermining confidence in the European banking sector. Europe’s banks are exposed to the sovereign debt of nations such as Greece, Portugal and Spain; threats of losses on the banks’ portfolios create fear and uncertainty not only on the part of investors, but also on the part of depositors. In the end, Europe needs a structure in place to recapitalize the banks, similar to what the US did for its banking system in 2008/09. Until that is resolved, the pattern of minor crises followed by European Central Bank short-term fixes will continue to stir the headlines pot.

 Undecided: China

Economic growth slowed in April and May, the result of earlier interventions by the Chinese government to reduce speculation in the property sector. In early June, in response to this lower growth, China cut its interest rate for the first time since the 2008/2009 financial crisis. One way in which China’s economy differs from those of the US or Canada is the speed with which it can implement economic policy. This allows it to apply economic stimulus measures and see results more quickly. The 10% or greater annual growth that China has achieved over the past decade is unlikely to be duplicated over the next ten years. However, even if China’s growth moderates to 5-6% over the second half of this decade, that is on a much bigger base than China had in the early 2000’s. Therefore, a moderate growth scenario will grow global resources demand – a positive for Canada’s energy and mining sectors.

 Possible bright spot: United States

Lower commodity prices and low interest rates act as a stimulus to the US economy. Its corporate balance sheets are in good shape, corporate cash generation is still strong, and the housing market is making a gradual turn for the better. With market declines, equity valuations are broadly attractive. It has been said that corporations themselves are the biggest value investors, so companies with cash on their balance sheets can use times of market weakness to make acquisitions. This benefits high-quality, well-run companies as they can set the table for future growth.

I am always here to answer your questions and provide guidance, if you would like to discuss the impact of recent market events on your portfolio, give me a call.

 Have a great weekend,

Tracey

Source:  Mackenzie Financial

Be Mortgage-Free Sooner

Most Canadians on average who currently have a mortgage plan to have it paid off by age 55.  However, according to a CIBC poll conducted by Harris-Decima; many Canadians are mortgage free by age 48.

What’s their secret?   The poll uncovered a few extra steps and decisions made by respondents to pay down their mortgages’ faster.  The majority of the mortgage-free people asked; used one or more of the following strategies to help accelerate their payments:

    ·        52% made lump sum payments annually
    ·        42% increased the amount of their payments
    ·        40% increased the frequency of their payments

To help implement these strategies; the majority of the mortgage free Canadians (78%) said they made a number of sacrifices along the way, including;

    

·        Creating a budget to keep track of spending

     ·        Skipped large and/or ‘unnecessary’ purchases
     ·        REliminate extra spending; like restaurant and entertainment
     ·        Skipped vacations

CIBC suggested a few strategies to help minimize the feeling of sacrifice while people worked towards becoming mortgage free.  Tax refunds, for example could be used as a lump sum payment toward your mortgage; or you can increase your payment slightly at the beginning of each New Year.  Also, increasing your payments when you get a raise at work can help your acceleration without a significant impact on your cash flow.

“Being mortgage-free” is a top financial priority for many Canadians”  says Colette Delancy of CIBC, “Consider what you normally pay to your mortgage every month, and then imagine that dollar amount going towards your retirement savings instead.  That really puts into perspective the difference paying off your mortgage even one or two years earlier can make” she adds.

“Your mortgage is one of the biggest financial commitments you will ever make, and investing time to get advice about how your mortgage fits with your overall financial goals can yield significant financial benefits down the road,” says Delaney.  “Follow easy strategies and capitalizing on today’s low rates will help people accelerate mortgage repayment.”

To learn more; or to find out how you can pay down your mortgages faster, give me a call.

Have a great weekend,

Tracey

Source:  Advisor.ca

Ten Things to Do with Your Tax Refund

In the mail this week I received my refund cheque from CCRA, like many of you; I have a choice to make. Understanding the urge to spend it on travel, shopping or dining, here are a few suggestions that will help keep everyone’s financial affairs firmly on the ground.

1.       Your RRSP  This will help generate another refund, but in the meanwhile is arguably and interest-free loan to the government until you file next year’s return.  You could offset this by filing with CCRA to reduce tax deductions at source over the coming year.

2.       Spousal RRSP  Rest assured that the spousal RRSP remains a useful income-splitting tool even with the advent of the pension-splitting rules, particularly if access is desired prior to age 65.

3.       RRSP loan paydown  If you took out a loan for your RRSP contribution, a prudent use of the refund is to now eliminate or significantly reduce the loan balance.  

4.       Mortgage reduction  The sooner a mortgage is retired, the sooner there will be amore in the monthly budget to devote to retirement savings.  Whether you choose mortgage or savings both contribute to your comfort level, financially and psychologically.

5.       Paying down non-deductible debt  Regardless of why we have debt, this kind of debt often compounds against us faster than we can accumulate savings.  Eliminating such costly commitments makes finances more manageable.

6.       TFSA  Not since the entry of the RRSP in 1957 has tax-sheltered investing been made so broadly and easily available.  Consider also that a cash gift to a spouse that makes its way into a TFSA will not be subject to spousal income attribution rules.

7.       RESP  Especially for deposits that attract government grants, an RESP is great for education saving and income splitting.  As well, investing a little each year will reduce sticker shock down the road when you see the amount due on your child’s acceptance letter.

8.       RDSP  Significant government support and tax benefits are available through these plans for families with disability issues. 

9.       Non-registered investments  Whether investing directly or using leverage, tax effect is a key issue when managing non-registered investments.  Make sure to have a plan and dovetail it with other savings.

10.   Live it up… a bit   After all, saving is just spending-in-waiting – but try and maintain balance.

Have  a great weekend,

Tracey

Source:  Invesco Tax & Estate matters

What happens if My Life Insurance Company goes bankrupt?

People tend to ask me this question once we finish filling out the life insurance application, well; the answer is Assuris protects your Life Insurance.

Principles of Assuris’ Protection

Assuris protects policyholders by minimizing the loss of benefits and ensuring a quick transfer of their policies to another solvent insurance company.  The policyholders protected benefits will continue to be honored by the new company.  The transfer is done directly and therefore Policyholders do not need to file a claim with Assuris.

Assuris Members

Every life insurance company that sells insurance policies in Canada is required, by the federal, provincial and territorial regulators, to become a member of Assuris.  You can find a complete list of their members on their website.  Assuris’ protection only applies to the benefits of the products issued by a member’s company.

Assuris Protection

If a life insurance company fails, Assuris transfers the policies to a solvent company.  Assuris guarantees that policyholders will retain at least 85% of their insurance benefits.  Insurance benefits include Death Benefits, Health Expenses, Monthly Income and Cash Values.

Deposit type products like annuities, universal life overflow accounts and dividend deposit accounts are also transferred to a solvent company.  These products are guaranteed for 100% of their Accumulated Value up to $100,000. 

Protection Limits:

Benefits                                               Assuris Protection

Death Benefits                                  $200,000                                              or 85% of promised

Health Expense                                                $60,000                                 benefits, whichever

Monthly Income                              $2000/month                                     is higher

Cash Value                                          $60,000

Benefits Protected:

Life Insurance, Critical Illness, Health Expense, Disability Income, Long Term Care, Annuities, GMWBs, and deposit type products such as Accumulation Annuities and TFSA.  Assuris also protects guaranteed amounts under individual segregated fund policies.

If you have more than one policy with the failed company, all similar benefits are added together before Assuris’ protection is applied.  Assuris provide separate protection for individual, group, registered and non-registered benefits, individual TFSA and group TFSAs.

If you have any questions or would like more information visit www.assuris.ca or give me a call.

Have a great weekend,

Tracey

Source:  Assuris.ca