Four Things You Need to Know about Inexpensive Term Insurance – April 2013

The most basic form of insurance and the simplest to understand is Renewable and Convertible Term Insurance. Coverage is provided for a specified term, the policy renews automatically at the end each term period until the policy expires, most commonly at age 85. This plan has the lowest initial cost at entry, but don’t be mesmerized by the low cost because on renewal you will pay a substantial increase. If, however, you become uninsurable before the end of the term period you will have no other option but to renew or convert it to a permanent plan if you want to keep the coverage.

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Do You Fly South for the Winters?

What Snowbirds Need to Know About Residency Rules

After another harsh winter, many Canadians dream of joining the large number of Snowbirds who make their way to the dry warmth of California, Arizona and Florida each winter season.  If you are contemplating, or already are, becoming a Snowbird and whiling away the winter months in warmer climes south of the border it is important to understand how the new U.S. Tax laws apply under these circumstances. The last thing you would want is to find that the Internal Revenue Service considers you a US resident making you liable for U.S. income tax or subject to U.S. penalties or both.

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TFSA or RRSP? – February 2013

Lately, one question clients are asking me is whether they should contribute to a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP)?  Personally, I really like the TFSA. however it doesn’t have to be an either or choice.  Why not do both?  If both, in what proportion should you divide your contributions?  In order to make an informed decision, let’s quickly review the main features of each program as discussed in last month’s article.  I will use bullets to illustrate the features as nothing gets people’s attention more than bullets.

TAX FREE SAVINGS ACCOUNT 

• Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
• Maximum contribution is $5,000 for each year from 2009 to 2012 and must be made by December 31^st of the year of contribution.  For 2013, due to indexing the maximum contribution is $5,500.
• There is carry forward room for each year in which the maximum contribution was not made.
• The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
• Withdrawals may be made at any time on an income tax free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

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A New Year’s Resolution You Shouldn’t Break – Saving For Retirement! – January 2013

Many of us set New Year’s resolutions for ourselves and often those resolutions have to do with finances. January is the month we say, “Ok, this year I am going to save more and spend less”. This article won’t tell you how to spend less, but it will outline two government sponsored programs available to help you save for retirement or even just a rainy day! Of course these are not the only vehicles you can accumulate money with – those include anything from putting dollars under the mattress to the most sophisticated tax shelter schemes – but these two are the most popular.

Tax Free Savings Accounts (TFSA)

This is the new kid on the block established by the government as of January 1, 2009. Canadian residents age 18 or older could contribute up to $5,000 into a TFSA. The funds would grow tax free and although there is no tax deduction for the contribution, withdrawals can be made at any time without paying tax. Also, there is no earned income requirement for an individual to contribute. For those years where no contribution is made, it can be made in later years. Any withdrawals can be paid back in addition to current contributions. Be careful not to do this in the same year as the money was withdrawn so as to avoid a tax penalty for over payment.

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Got an RSP and Turning 71? – December 2012

Do you know someone with a Registered Savings Plan (RSP) and turning 71 – maybe your parents, brother or perhaps yourself? If you do, you should be aware of some decisions that have to be made to the Registered Savings Plan. The Income Tax Act says that you have to terminate your RSP’s by December 31st in the year you turn age 71. In doing so, you have three options:

1. You can withdraw all the funds in your RSP in one lump sum; however, this would be a fully taxable withdrawal for 2012. Unless you have a negligible amount in your registered plan, this is not a good option. This strategy defeats the whole plan in having an RSP in the first place.

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