Financial Quiz – No Perfect Scores!

Canadians have some studying to do when it comes to their financial literacy, as shown by the results of an Investor Knowledge Quiz by Bridgehouse Asset Managers.

The survey tested investor’s understanding of common terms and strategies; including the difference between equities and bonds, active and passive investing, and the concept of dollar cost averaging.

The company reported out of 1004 participants, not one person got a perfect score; the average was 39%, or 6 out of 15 questions.

Survey Results:

-While most of the Canadians surveyed knew the definitions of both equities (70%) and bonds (71%), not many knew that different types of investment income are taxed at different rates: 43% knew that interest income is taxed at the highest rate, while only 24% knew that capital gains were taxed at the lowest rate.

-Most investors surveyed didn’t know Canada’s relative size in the global equity market: 27% underestimated its size, 27% overestimated its size and 23% have no idea what size it is.

-Only 37% got the definition of dollar cost averaging right.

-More than 62% didn’t know the difference between active and passive investing.

-And, more than 82% believe there are still foreign content limits imposed on their RRSPs.

However, although scoring poorly, most of the participants (72%) did note they would like to learn more about investing and how to manage their finances more effectively.  Furthermore, 93% would like the education system to include courses on basic investing and financial principles.

Test yourself; a version of the survey is available as a multiple-choice quiz HERE.

If you don’t score as well as you would like; not to worry, that is why you have me!

Have a great weekend,

Tracey

 

 

 

 

 

 

 

 

 

Source:  Original article posted on Advisor.ca 11-27-13 by staff.

 

 

Insuring Your Stay-at-Home Spouse

Just because your stay-at-home spouse doesn’t bring home a paycheque every week; doesn’t mean the job they do is not worth insuring.  In fact, if tragedy strikes and they get sick or die, you would be the one left scrambling to pay for the funeral and other expenses during a time of grieving.

A stay-at-home spouse typically accomplishes a lot more than you would think during the average work week.  A 2011 Salary.com survey determined the average stay-at-home mom works approximately 100 hours per week and typically “earns” $115,000 a year.  The stay-at-home spouse works several unpaid jobs including chef, housekeeper, driver and daycare teacher.

Considering they do so much, a realistic life insurance policy figure would be around $1 million.  Lower amounts like $100,000, invested at today’s low rates won’t last long, especially if it has to fund all the jobs your spouse does.

Based on your family’s specific needs; the type and duration of life insurance will vary, it can range from a 20 year term policy to cover your spouse while your children are still at home, to a whole life policy that will have more predictable premiums.

While life insurance is a great financial tool to help protect your family’s wealth in case of death, if your stay-at-home spouse develops a critical illness that prevents them from taking care of the household, you could still be in trouble.  While most insurance companies won’t cover non-working spouses for disability insurance, they can still purchase critical illness (CI) insurance for protection.

In the event of a critical illness; cancer for example, the tax-free lump-sum payment from a CI policy would help pay for someone to take your spouse to and from treatments, perform regular household duties and watch the children during his/her recovery.

Insuring your stay-at-home spouse is just as important as insuring the breadwinner of the family.  With the right combination of life and CI insurance your family will be prepared for the worst.  Furthermore, you will feel much better knowing that such a personal tragedy will not be compounded by financial devastation.

If you would like to review or update your existing coverage, don’t hesitate to give me a call.

Have a great weekend,

Tracey

 

 

 

 

 

 

 

 

 

 

 

 

Source:  Original article by Golda Brown, posted on Advisor.ca 09-04-13

 

When Should You Apply for CCP?

This can be a very difficult question to answer.

Canada Pension Plan (CPP) benefits are based on your average annual earnings during your working years; and what age you are when you start receiving benefits.

Under the new rules, after 2016, if you choose to take CPP early, your pension benefit will be reduced by 0.6% for each month you are under the age of 65.  If you decide to wait, your monthly benefit will be increased by 0.7% for each month you postpone receiving your benefits over age 65. 

Obviously, the government’s recent changes to CPP are designed to encourage people to wait until they are over age 65 before they start receiving their benefits.  From a purely financial standpoint; people who live beyond the age of 80; are better off to wait until age 70 before they apply.  So, what is the best option for you?

YOUR OPTIONS

If you have planned ahead and have several sources of retirement income, you will have the luxury of choosing when you want to start receiving your CPP benefits.  This can also present some tax-planning opportunities.

If you were 65 in 2012, the maximum CPP retirement benefit was $11,840 per year.  This may not seem like a lot; but considering Canada’s graduated tax system, every dollar of income counts come tax time.  (The more you make the higher the tax percentage you pay.)  By delaying your CPP benefits to later in life, you present the opportunity to reduce the risk of having your OAS clawed back, this is because most people enjoy a higher income in their early retirement years, and take less income later on as their lifestyle slows down.  By waiting to age 70, your monthly benefit would be increased by 42%, waiting beyond age 70 there are no additional benefits.

Percentage of CPP Benefits you will receive depending on age taken:

 

Age at                                 Old CPP                    New CPP

Application                      Rules                      Rules

60                                         70%                       64%

61                                         76%                       71.2%
62                                          82%                      78.4%
63                                          88%                      85.6%
64                                          94%                      92.8%
65                                         100%                   100%
66                                         106%                   108.4%
67                                         112%                   116.8%
68                                         118%                   125.2%
69                                         124%                   133.6%
70                                         130%                   142%

It’s a big decision whether or not to start taking your benefits once you reach the age of 60, if you are not sure and need some help figuring it out, give me a call.

 

Have a great weekend,

 

Tracey

 

 

 

 

 

 

 

 

 

 

 

Source:  Original article by Maureen Glenn, published on Advisor.ca 06-11-13

How to Handle a Financial Windfall

Whether your new money comes from an inheritance, lottery winnings, long term financial planning or selling your company; it doesn’t really matter, what is important now is how you are going to handle this new and greater financial responsibility.  Here are some tips to help you tackle it like a pro. 

Build a Team.  You will first need to revise your Financial and Legacy Plans with your Financial Planner, Accountant and lawyer.
Determine Your Involvement.  When it comes to your wealth, what type of investor are you-strategic or tactical?  Do you want to be involved in the day to day portfolio decisions; or do you want to manage from the big picture level? Neither is right or wrong but if you are leaning towards the first one be realistic about your capabilities, remember the skills of a successful person are not always those of a successful money manager.
Pay off debt; then invest.  Investing and making your money work for you is a great strategy; but don’t do it at the expense of the often smarter although more mundane choice of paying off your debts.  Pay off your mortgage, cottage and other loans before building your investment portfolio.
Spread the wealth.  After a windfall, your focus should be on keeping what you have, not doubling your money.  That means diversification and conservative growth.
Assess and control spending.  With a lump sum windfall, no matter how large, it should not be treated the same as a continuing high income.  Rather than allocating more money to riskier investments, it is better to take control of your spending – although it may be higher than before, you want to be careful you don’t burn through your newly acquired next egg.
Explore income-splitting opportunities.  Will this windfall be your primary source of income?  If so, and you haven’t already, take advantage of income splitting.  It is often possible to use a shell corporation to split investment income with your spouse and adult children in certain situations.
Learn to say no.  Such a windfall could mean a lot of unsolicited calls from friends, family and charities for seed money, loans, and gifts.  Learning to say no will help prevent a lot of stress and hassles.
Revisit and reassess.  A large windfall is usually a one-time event.  Wealth and estate management isn’t.  Make sure you revisit your financial plan on a regular basis, while there is no perfect schedule, most professionals would suggest every 24 months.

Part of my job is to take the emotion out of the financial decision making process.   So, whether you find yourself with a large windfall or just need help with day-to-day cash flow management, I am here to help you make the best decisions for your personal situation.

Have a great weekend,

Tracey,

 

 

 

 

 

 

Source:  Advisor.ca, original article by James Dolan, posted 09-05-13

 

 

 

 

Your Estate Matters - The Will

 
We all know it's important to have a valid will, this short video helps explain what happens when someone dies without one.

Video - Get your will right

Hope you enjoy it, have a great weekend,

Tracey















Source:   Advisor.ca, Jamie Golombek