Some Compelling Statistics:
* 9 out of 10 women will be responsible for their own finances – they will never marry, will marry & divorce, or their spouse will predecease them. (Deborah Owens – A Purse of Your Own)
* 70% of new businesses are started by women & 85% of all brand purchases are made by women. (MsCareerGirl.com )
* The average age a woman is widowed is 56. (Census Canada )
* Widows account for 45% of all women aged 65+. (Statistics Canada )
* More than 75% of long-term care home beds are occupied by women. (Canadian Women’s Health Network )

In my role working with women, one of my goals is to empower my clients to achieve their financial goals in part by making informed decisions/choices.
• Women face several realities that have financial repercussions: divorce, widowhood, longer lives, lower earnings, more conservative investors.
• Know what’s going on with your finances – make the effort to learn.
• Establish a relationship with a trusted advisor and work with that person to advance your financial knowledge and to move forward on your financial goals.
• Get a Financial Plan to assess if your goals for saving, debt reduction, and risk mitigation are on track.
• Few think they will ever face critical illness, disability or chronic illness, premature death, or long-term care. Protect against these risks.

From ‘Discovering She’ Magazine, September 2011

Sadly the relaxed days of summer are coming to an end and the glorious warm weather will soon begin to fade. However we can look forward to crisp, cool fall days, the rich fall colours and hopefully a bright sunny Indian Summer!

If you’re like me, you begin September with a sense of excitement and anticipation – lots of activities to look forward to and getting oneself and the family back into a more structured routine. Just as we discipline ourselves for school and work demands, our financial security and sense of financial empowerment requires planning, goal setting, and discipline to achieve the desired results.

As school and work routines become established in the coming months, this is also a good time to set up a financial framework to get yourself on track and keep you there. Here are my top three tips for you and a bonus tip for you to help your children.

Get a Financial Plan that establishes your financial goals and shows you how to reach them.
Work with your financial advisor to prepare a written plan that documents your short, medium and long term financial goals. The Plan should include actions to take that will help you achieve them, such as:

1) showing you how much needs to be paid on your mortgage on a bi-weekly or weekly basis to decrease your mortgage by eight years
2) how much needs to be saved for your four year old child in order to have sufficient education savings available for post-secondary education in 15 years time
3) how much annual retirement income you can expect to have in 20 years based on expected growth and contributions

If shortfalls exist in any of your goals your new financial plan will show you how much more needs to be saved and you can plan around this as best as you can.

Save for your future – for your children’s education, for a rainy day, and for your retirement.
In this age of low cost credit, it’s very easy to take on debt and borrow for homes, renovations, and other purchases. The potential exists, however, to take on too much debt. Despite how much better Canada is than the States in controlling our debt loads, Mark Carney, our Bank of Canada Governor, has been warning Canadians’ about their accumulating debt load. Unexpected job loss, rising interest rates that increase the cost of carrying debt burdensome, or disability or unexpected illness are risks that threaten to throw households off track. Saving for a rainy day by setting aside three to six months income in a liquid savings account has been replaced by living paycheque to paycheque and relying on ones’ line of credit.

Examples of saavy financial habits to promote better savings and stronger financial health include:
1) setting up an automatic monthly transfer of cash to a rainy day savings account
2) opening a Registered Education Savings Plan (RESP) for children while they are young and committing to making the minimum annual contribution of $2,500 per child to attract the maximum government grant of $500
3) arranging a monthly payroll contribution or automatic bank transfer to your RRSP. The aim should be to make your maximum allowable RRSP contribution each year.

These examples are not meant to discourage but rather to encourage you and show you a path! If you can’t achieve all of them right now, at a minimum get started on each one with whatever you can afford. This will put you further ahead than if you procrastinate or wait for a day when you have the available funds.

Control your personal and household debt.
Some of you reading the savings strategies noted above may feel overwhelmed because most of your income is going towards paying off debt such as mortgage, student loans, RRSP loans, and credit cards. This is a situation facing many Canadians because studies show that more than half the Canadian population lives paycheque to paycheque.

The ideal situation is to live within your means and not to get into debt in the first place. However, this is not always feasible or practical when one thinks of taking a student loan to advance ones’ career or buying a house or condo. The trick is to watch how much debt is absorbed and to control it and whittle it down over time. A guideline for paying off ones’ mortgage is twenty years. Student debt needs to be reduced and eliminated as soon as possible in ones’ career in order to then be able to accumulate savings to build wealth for the future.

Just like dieting where you have to eat less than the energy you expend, your household budget has to include more income than expenses. If there’s a mismatch, look for opportunities to increase your income and reduce expenses. It is difficult to reduce fixed expenses but you can look into reducing your cable or satelitte bill by selecting an alternate package and being conscious of the electricity you use by teach your family to unplug those unused items within your home. You can reduce your credit card bill by seeking out credit card companies that give you a reduced interest rate. You can also look for ways to reduce your discretionary spending such as eating out less frequently and finding ways to spend quality time with your children that does not involve spending a large amount of money. Check your local listings guide to see what free events are happening in your city or town.

Bonus: Teach your kids and the young people in your life about money.
The financial literacy of Canadians or lack there of is gaining attention among educators. Efforts are being taken across Canada to ensure that school age children get exposed to financial concepts and good practices at earlier ages. As parents and grandparents, one of the best things you can do is be a role model to your children about “good” spending and savings habits. Talk to kids early and often about money and what you’ve learned. Teach them the value of saving by helping them save for things they want and help them learn that they need to earn their savings as well. If you teach your children responsibility for their own financial future you will be inspiring and empowering the next generation!

Bev has been recently invited to join the Advisory Board for the Roger’s publication, Advisors Edge. Bev Moir, MHSA, FCSI, Scotia McLeod – Investment Advisor and Financial Planner – Serving Toronto and the Greater Toronto Area (GTA) since 1993. For a complimentary, no obligation, consultation, please call my direct line: 416-355-6364 or Toll Free 1-877-355-6340. Ask Bev what women need to know.

This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc.(SCI), a member of CIPF. This publication is intended as a general source of information and should not be considered as personal investment, tax or pension advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. This publication and all the information, opinions and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI. Scotiabank Group refers to The Bank of Nova Scotia and its domestic subsidiaries. ™ Trademarks of The Bank of Nova Scotia.

From ‘Discovering She’ Magazine, August 2011

Talking with Women About Money – August

It’s a HOT summer and I hope you’re enjoying it at your favorite “home away from home,” your family cottage. For many of us, our cottage represents the second largest financial investment we will make. There is, however, an important difference between this property and your primary residence! On the last death of you and your spouse, there will likely be a significant tax liability. This is because a couple can designate only one property between them as a principal residence, which is sold with a capital gains exemption. All of this has the effect of forcing us to develop ways to pass the cottage on in a tax efficient manner.

Who should the family cottage go to?
While concern about the future tax liability associated with the disposition of the cottage is important and requires forethought, for others, who to leave the property to is paramount. The best solution may not be to leave it equally to all children. The children may not have the same interest in its future use and, a cash bequest, from other estate assets, may be more appropriate to those who don’t want the property.

I recommend having an open discussion with your children or grandchildren to determine who has an interest in using the property and who will pay the costs of future maintenance and taxes.

Ways to transfer ownership of the cottage
There are several ways of transferring ownership including the use of life insurance and trusts.

Life insurance can be a very cost-effective method of providing liquid cash to pay any capital gains. Insurance can be purchased on the single owner of the cottage or, as is most often the case, on the joint owners (mom and dad.) The policy would be a “joint last to die” and, because two people are insured, the cost will be less than either could buy individually. The proceeds of the insurance are tax free to the beneficiaries. In some cases, the beneficiaries of the cottage and of the insurance may be able to pay the premiums. The only potential downfall to this solution is that the owner(s) of the cottage must be in good enough health to qualify for the insurance. Because this may not be the case, let’s look at other solutions.

Consideration can be given to transferring a cottage to an ‘inter-vivos’ (living) trust if there is currently a small capital gain (the transfer of the cottage asset into the trust triggers capital gains). However, this would effectively transfer any future capital gains to the beneficiaries.

A “discretionary” trust can be useful because, as mentioned earlier, it may not be clear as to which of your children may even have an interest in the property. The transfer can take place into this trust and the owners will have unlimited use of the property as well as complete control. This would allow time to decide who the beneficiaries will be. At some later date, the property can be rolled out of the trust to the beneficiaries, at the value it was rolled into the trust originally. This will have the effect of deferring tax until the property is sold. If, as the owner, you are over 65, an ‘alter ego’ or ‘joint partner’ trust could be used. With these types of newer trusts there is no deemed disposition of property when the cottage is transferred into the trust.

A Word of Caution
There have been suggestions that the cottage can be transferred into joint names with the eventual beneficiaries. While this may have the effect of passing the property by “rights of survival” at death, it has major drawbacks. If this is done, there will be a capital gain at the time of transfer, the property would be in “joint control” with all owners, and it would be subject to claim if there were a marriage breakdown or by creditors of any of the owners. This is clearly not a good solution.

Hopefully your family cottage is a source of great enjoyment and many fond family memories. It’s important to plan for its’ appropriate transfer and to provide sufficient liquid cash to pay any taxes. A great deal of expense and frustration can be avoided in the future by taking a small amount of time today to plan for this event.

This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc.(SCI), a member of CIPF. This publication is intended as a general source of information and should not be considered as personal investment, tax or pension advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. This publication and all the information, opinions and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI. Scotiabank Group refers to The Bank of Nova Scotia and its domestic subsidiaries. ™ Trademarks of The Bank of Nova Scotia.

Here is a Personal Tax Organizer to help you prepare to file your income tax. (pdf)

Bev wrote this article for the May issue of Ontario Dentist

It’s no surprise recent dental school graduates are eager to kiss their student budgets goodbye and reward themselves after years of intense study. With a much-improved cash flow, thanks to steady employment, they’re ready to spend their hard-earned money. But, graduates, beware. Some sound advice may be just what’s needed before reaping those well-deserved rewards.

Mary’s Story
Mary Brown recently graduated from the University of Toronto’s Faculty of Dentistry and has begun working in an established dental practice near her downtown Toronto condo, which she rents from her parents. After years of hard work and studying, she has a guaranteed salary — and many wants. To start with, she wants to buy a $30,000 Toyota Prius, and she also wants to take a trip to Mexico.

The balance that Mary needs to find is to enjoy the fruits of her chosen career now, while saving for future goals.

However, Mary owes her parents $25,000 in education-related expenses. Fortunately, for her, her parents are only charging her one percent interest on the student loans, and they expect “interest only” to be paid monthly, similar to bank practice. However, if Mary were to have borrowed the $25,000 from a bank, typically she would be charged prime (currently at 2.25 percent) plus the secured rate of one percent, or prime plus the unsecured rate of 4.99 percent. Should she wish to eliminate this student debt, Mary would need to make payments to her parents of principal and interest.

Mary also plans to buy the condo she rents from her parents. According to her realtor, the condo has a resale value of $225,000, which means she needs a minimum down payment of 20 percent of the resale value to qualify for a conventional mortgage. It’s to Mary’s advantage to save the 20 percent down payment ($45,000) to qualify for a conventional mortgage, as this type of mortgage does not need to be insured by a federal regulator. In contrast, a high ratio mortgage, where less than a 20 percent down payment is made, must be insured, adding an additional one percent to the total carrying cost of the mortgage. High ratio mortgages are more expensive to carry, and the total cost of the mortgage over its entire duration is increased because of this additional insurance.

A quick tally of the initial financial expenditures that Mary is contemplating is about $100,000. How will she handle this? What is her plan of attack?

Our First Piece of Advice: Mary Needs a Financial Plan
Dentists are in the enviable position of being able to earn significant incomes from the beginning of their careers and they have the potential to build substantial wealth over their lifetime. In a recent Workopolis survey, the typical base salary for a dentist in Ontario ranges from $80,000 to $124,000. Contrast that with the typical salary range for a high-school teacher — from $40,000 to $60,000, or a new electrician — $38,000 to $53,000. One of the best pieces of advice we can give to recent graduates, such as Mary, is to work with a personal financial planner. By going through the financial planning process, she will gain a better understanding of her current situation, including the amount and details of her debt, and she’ll clarify and prioritize her financial and other life goals over time via this roadmap.

There are several ways Mary can find an appropriate personal financial planner. One of the best ways is through a referral. She can ask her parents who they work with, or she can speak to her bank manager for a referral. Another option is to ask work colleagues for a recommendation. If Mary gets several names, she should book introductory meetings with each to assess his or her credentials, his or her experience in working with someone such as herself, her comfort level with the planner, whether he or she offers a financial plan as part of the service and how the planner gets paid.

The financial planning process identified several financial goals for Mary, including student debt-reduction, saving the down payment to buy the condo, buying the new car and being in a position to buy a dental practice in five years. A financial plan developed various funding strategies and alternatives for her goals and, more importantly, showed Mary where those goals may have to be compromised. For instance, Mary cannot afford to buy an expensive new car. The plan showed her that by delaying a car purchase and using urban transit (and occasional car rentals, if necessary), she could pay off her student debt in two and a half years and save the down payment for her condo purchase in four and a half years — as opposed to seven years, if she bought her Toyota this year.

This is an exciting time in Mary’s life as she begins her career and looks forward to its rewards. However, the financial plan, to be comprehensive, must also factor in the potential for unplanned and unexpected events, such as critical illness, disability and premature death. It needs to encompass strategies to protect Mary’s savings and enable her to maintain her lifestyle. Critical illness insurance provides a lump sum tax-free benefit if one is diagnosed with a critical illness. For Mary, who, at age 30, is a healthy non-smoker, the cost for a $100,000 benefit could be as low as $50 a month.

Term life insurance is also relatively cheap at this point in her life. She has no dependents, and needs to only cover the cost of debts and a funeral, should she die early. A death benefit of $300,000 would cost about $160 annually, as an example. Disability insurance is necessary—but expensive. Mary should explore what’s available as an employee of the practice. Additionally, she should investigate the cost and features of buying private disability insurance with the help of her financial planner or insurance specialist. While the cost of disability insurance may be similar, putting in place her own private disability insurance will offer better features, including tax-free monthly income, should she become disabled and “own-occupation” coverage in the event she can be rehabilitated. Mary needs to know most group plans pay taxable benefits until the disabled individual can be rehabilitated sufficiently to assume any job.

A financial plan is not a static document. Mary needs to review it regularly and update it as her needs and priorities change and the complexity and sophistication of her situation evolves. If Mary is working with a financial planner, many offer this planning service as part of their overall service, and there is no additional charge to have the plan revisited and revised. There are some advisors who only offer financial plans for a fee. In this case, she needs to be aware of this upfront to decide on the value for the cost. Most banks have staff who will provide a simple plan for no fee.

Our Second Piece of Advice: Stay Out of “Bad” Debt
The second best tip we can give to Mary is, stay out of “bad” debt. There is “good” debt, where she is borrowing to get ahead, such as when one borrows to buy a dental practice. “Bad” debt is the high-cost consumer debt that funds lifestyle activities, such as dining at restaurants, buying clothing and jewelery, or using a credit card to pay for trips. If she is disciplined enough to pay off the monthly charges on time each month, then she’s fine. Problems arise when the monthly balances aren’t paid off and interest charges accumulate on items that have already been consumed and enjoyed. Typically, credit cards charge an annual interest rate of 18 percent to 19.50 percent on unpaid monthly balances. The monthly minimum payment is mostly interest payments and, if one only makes the minimum payment each month, it can take years to pay off that debt.

Here’s an example. Let’s say Mary buys $990 worth of clothes. If Mary’s interest rate is 18 percent and she makes only the minimum payment each month on the $990 charge, it will take her 152 payments — or nearly 13 years — to pay off the balance due. That’s a lot of interest!

Managing one’s cash flow is a fairly simple proposition. If Mary spends more than she earns, she’ll never stay out of debt and, more importantly, she’ll compromise her opportunity as a high-income professional to achieve her financial goals. The balance that Mary needs to find is to enjoy the fruits of her chosen career now, while having for future goals. For instance, in addition to her goal of home ownership, Mary likely wants to build savings to support her lifestyle during retirement.

Mary needs to understand her cash flow to know what’s coming in as income and what’s going out in the form of fixed expenses (such as rent or mortgage, heat, taxes, telephone) and variable expenses (such as food, entertainment, clothing, trips). Anything left over is available to help her get ahead and achieve her financial goals.

Our Third Piece of Advice: Establish Relationships with Trusted Professional Advisors
The third piece of advice we offer Mary is the importance of establishing relationships early in her career with professional advisors. Here, we’re thinking of the value brought to Mary through a banking relationship, an accountant, a lawyer and a financial planner. All of these professionals will be in a position to help educate Mary about important financial, legal and tax matters and will help to guide her as she grows in her career and as her financial and other needs evolve. Finding competent advisors is critical.

Mary’s Opportunity
With careful planning, some money management discipline and a strong salary that grows with her experience and client base, Mary will not only eliminate her student debt, but she will also be on the road to home ownership, a new car and be in a stronger financial position to buy a dental practice in several years.

This article appeared in the Fall 2009 Registered Nurses’ Foundation of Ontario Newsletter
Charitable giving is a growing priority for many Canadians. We see this in recent statistics showing a substantial increase in donations. This kind of support for charity is unprecedented in our history. While generosity and belief in community are primary motivators, the greatest enabler is a series of new tax incentives that began in 1996.

Introduction of Federal Tax Incentives
In introducing these charitable giving incentives, the Federal government has given taxpayers a choice. It’s a choice about how individuals wish to support society and the amount of tax they wish to pay. With these new tax incentives, it’s now possible to eliminate tax on 75% of income, except in the year of death and the year prior to death, when this figure jumps to 100%. Everyone must contribute to society via the tax system, but the decision about where the contribution goes can now be directed by the individual taxpayer.

What makes the tax incentives distinct is that they focus on gifts of assets (stocks, bonds, mutual funds, real estate, RRSPs/RRIFs) and business interests. These aren’t the gifts we typically make. Most are familiar with annual gifts by cheque to our favourite charities. The Federal tax incentives enable exceptional gifts that stand out for their size and level of commitment. These are gifts that are planned ahead of time and often realized through estate plans.

Meaningful Charitable Planning
A good financial and estate plan that includes charitable giving can be difficult to implement on its own and professional advice is recommended. Personal and family needs are at the centre of the planning process, and then charitable giving is considered. The goal is to integrate charitable giving into your financial and estate plan in a way that reflects both your values and your desire to minimize taxes.

At lower amounts, the individual’s will typically designates one or more charities to receive specific amounts or a percentage of the final estate value. At higher levels of gifting, an intermediary charitable entity – either a donor-advised fund, which is a charitable giving vehicle administered by a third party such as a mutual fund company and created to manage charitable donations on behalf of an organization, family, or individual, or a private family foundation – is set up to receive assets over a number of years. The intermediary “container” can be filled at your own pace, in increments or in one large instalment, often when a business is sold or at the time of death. This “container” represents a piece of your legacy, an ongoing entity in your family’s name.

Typically, these larger gifted assets are endowed, which means the capital is invested and only the income is gifted annually. Both advised funds and private foundations give ongoing control to the donors and their families to choose the charitable recipient annually. It’s a vehicle that allows donors and their families to be involved over time in enacting your legacy.

Example 1
Mary, a 70 year old retired nurse, is an example of someone who wants to donate to the RNFOO. She arranges to contribute $50,000 over five years to a donor-advised fund available from a mutual fund company. Working with her advisor, she invests the money conservatively to ensure that the principal remains intact and the annual income of about 3% to 5% is donated to the RNFOO each year into perpetuity.

Example 2
In another example, Joanna, a Registered Nurse, and her spouse John want to make significant contributions to several charities. On their passing, their son will inherit sufficient assets to enable his career and lifestyle while simultaneously keeping him motivated to continue working. Joanna and John want to impart their charitable values to their son, his children and grandchildren. To do so, they set up a private family foundation with an initial investment of $250,000. On their passing, they have designated their private foundation as the beneficiary of a $500,000 joint, last-to-die life insurance policy. With the investment strategy designed to preserve the capital, the annual income can be distributed to their charities of choice.

The approach to planning described above separates the process of planning the gift from the support of individual charities. You can plan to give a large amount to charity over a number of years as part of an integrated plan. The contributions happen on your timetable and not when fundraisers come calling. Gifts to individual charities occur as part of a controlled, thoughtful process that preserves maximum flexibility and allows ones’ philanthropic values to be implemented over time. If you would like to learn more about this planning opportunity, please contact the RNFOO office.

Bev is a Senior Investment Executive and Financial Planner with ScotiaMcLeod and highly respected in her industry. She is a Certified Investment Management Analyst and a Fellow of the Canadian Securities Institute. Bev has served as Gala Fundraising Chair, and from October 1998 to October 2004 she served on the Executive Team of RNFOO. At the Gala in May 2006, Beverley Moir was presented with an Honourary Life Membership in recognition of her leadership and commitment to the Registered Nurses Foundation of Ontario.

® Registered trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF. This article is for information purposes only. All performance data represents past performance and is not indicative of future performance. It is recommended that individuals consult with their Wealth Advisor before acting on any information contained in this article. ScotiaMcLeod does not offer tax advice, but working with our team of experts we are able to provide a suite of financial services for clients. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF. All insurance products are sold through ScotiaMcLeod Financial Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing life insurance products, ScotiaMcLeod advisors are acting as Life Underwriters (Financial Security Advisors in Quebec) representing ScotiaMcLeod Financial Services Inc.

Finally spring is approaching and we can say good riddance to winter garb, all that snow, and dark winter days!! It also means we’re getting closer to the end rather than the beginning of this terrible stock market downturn and economic malaise. It’s a matter of time before markets and the economy recover, and I have no doubt they will – I just don’t know when, nor does anyone.

It has been very difficult for all of us to see the depressed state of our financial assets and real estate holdings. Over the past several months, I’ve had numerous conversations with clients and heard many emotions expressed. Some of these include sadness, cynicism, anger, stress, anxiety, and uncertainty. It’s been difficult for me too to have these conversations. As you know, my investment approach is balanced, diversified, and conservative. To see quality investments drop the way they have has been disheartening. I’m sorry we’ve all had to experience this situation. However, markets will always go up and down and there are some lessons to take away from this current bout of market volatility:

* Have a Financial Plan that includes both short-term and long-term financial goals and stick to it. Just because market conditions change doesn’t mean that one’s long-term strategy needs to change.
* Consider what would happen if tomorrow you couldn’t work, walk, or speak or a loved one became seriously ill. Plan ahead and develop a “comprehensive” Financial Plan.
* For short-term goals (e.g., withdrawing income from a Registered account or for an upcoming purchase), protect yourself from market downturns by holding guaranteed assets (e.g., GIC, Money market) that have a maturity date that matches the date the cash is needed.
* Have emergency savings equivalent to at least three months’ gross income, more if you have job insecurity or uncertainty.
* Long-term investors need to learn to take advantage of inevitable market downturns by overcoming their fear and investing more money or arranging a regular monthly contribution to take advantage of dips. Learn to view these downturns as opportunities to buy assets “on sale”.
* The key to wealth accumulation: spend less than you earn and control debt, not just today but everyday.

Finally, all too often volatile capital markets cause us to forget about ourselves. The stress and uncertainty of the markets can take their toll on us. I encourage you to take time to maintain your personal health and well-being.

From the Insurance Journal by Red Bolton

Financial planners across Canada are eagerly awaiting the Jan. 1, 2009 launch of the new tax-free savings accounts (TFSA).

“We’re anticipating quite a rush, quite a demand to open in January,” says Bev Moir, a senior wealth advisor with Scotia McLeod. Ms. Moir has already made the necessary arrangements with a number of her clients so they can step into TFSAs come the first day of the New Year.

The positive interest Ms. Moir has received from clients about the new TFSAs is partly a result of her promotion of the new scheme. She wrote an article on the topic which she sent out to her clients and posted on her website. She has also been speaking exhaustively with her client base, explaining the opportunities available.

Read the full article (pdf-290kb)

A Savings Plan for All Canadians for Their Future
The Government proposes to reduce the taxation of savings through the introduction of a Tax-Free Savings Account (TFSA)
How the Tax-Free Savings Account Will Work

• Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
• Contributions will not be deductible.
• Capital gains and other investment income earned in a TFSA will not be taxed.
• Withdrawals will be tax-free.
• Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits.
• Withdrawals will create contribution room for future savings.
• Contributions to a spouse’s or common-law partner’s TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
• Qualified investments include all arm’s-length Registered Retirement Savings Plan (RRSP) qualified investments.
• The $5,000 annual contribution limit will be indexed to inflation in $500 increments.

Why should you open a TFSA?

• The TFSA will provide a flexible savings vehicle for Canadians.
• Since not everyone is able to save each year, individuals who are unable to contribute $5,000 in a year will be able to carry forward unused contribution room to future years.
• The TFSA complements existing savings plans such as registered pension plans, RRSPs, Registered Education Savings Plans (RESPs) and Registered Disability Savings Plan.

Full Flexibility to Withdraw and Re-Contribute

• In addition, in recognition of the fact that most people are likely to have multiple savings objectives at the various stages of their lives—e.g. to purchase a car, home or cottage—the full amount of withdrawals may be re-contributed to a TFSA in the future, to ensure that there is no loss in a person’s total savings room.
• In recognition of the fact that couples often make their savings decisions and plan for their financial security on a joint basis, individuals may contribute to the TFSA of their spouse or common-law partner, subject to the spouse or partner’s available contribution room.

Saving in a TFSA to Meet Unforeseen Needs

• Canadians will also benefit by being able to use the TFSA to start saving early for a range of needs they may have in the future.
• Many Canadians may prefer to use a TFSA to save for pre-retirement needs given the absence of tax consequences on withdrawals and the ability to avoid the use of RRSP room for non-retirement savings needs.

A Savings Account for Post-Retirement Needs

• The TFSA will also provide seniors with a savings vehicle to meet any ongoing savings needs, something to which they have only limited access once they are over the age of 71 and are required to begin drawing down their retirement savings. Based on current savings patterns, seniors are expected to receive one-half of the total benefits provided by the TFSA.

No Impact on Income-Tested Benefits

• Tax Free Savings Accounts will not affect your eligibility for federal income-tested benefits, such as the Canada Child Tax Benefit and the Guaranteed Income Supplement.
• Money you take out of your Tax-Free Savings Account will not affect federal income-tested benefits and credits, so you’re not penalized for saving.

The Tax Relief Provided by a TFSA Will Grow in the Future

• This amount will increase in the future to take inflation into account.

More details on the TFSA and its design features are provided in the link below:http://www.cra-arc.gc.ca/gncy/bdgt/2008/txfr-eng.html

REPORT ON RRSPs: FAMILY NEEDS AND RETIREMENT PLANNING
Squeezed in a generational sandwich
MARJO JOHNE
Special to The Globe and Mail
January 30, 2008

Each month, after covering her share of the household bills and mortgage payment, Lucy Ye takes the bulk of the money left in her bank account and uses it to cover two additional obligations: a registered education savings plan for her eight-year-old-son and a $1,000-a-month commitment to help pay her parents’ mortgage and other living expenses.

“I know I should also be putting some money away into an RRSP,” says Ms. Ye, a 37-year-old dental supply sales representative who lives in Toronto with her husband and son. “But after paying the RESP and giving money to my parents, there’s really nothing left for my own retirement savings.”

Ms. Ye is part of the growing group of Canadians known as the “sandwich generation” – those who are caught between raising children and caring for aging parents.

Not surprisingly, a significant portion of baby boomers belong in the sandwich generation. A 2004 study by Statistics Canada found that close to 30 per cent of Canadians aged 45 to 64 were helping aging relatives while still supporting their own children.

The Statscan study also found that 40 per cent of sandwiched Canadians incurred extra expenses such as renting medical equipment, 15 per cent had to reduce their working hours, and 10 per cent lost income.

“It’s a tough position to be in,” says Bev Moir, a Toronto-based senior investment executive with Scotia McLeod, the investment arm of the Bank of Nova Scotia and a division of Scotia Capital Inc.

“And it’s something that often happens unexpectedly, so many people are just not prepared mentally, emotionally and financially.”

While the added responsibility of looking after a parent may suddenly restrict the household budget, it doesn’t necessarily mean RRSP contributions have to be put on hold, say the financial planning experts.

In many cases, they say, sandwiched Canadians can find the money to put toward an RRSP by reducing expenses or somehow increasing the money coming in, even by just a modest amount.

As a starting point, Ms. Moir suggests getting in touch with local community agencies to find out about any support programs for older people.

“For example, if your parent needs care during the day while you’re at work, there may be a community program that can help you with that,” she says.

Ms. Moir also recommends checking your employer’s benefits plan to see if it includes an employee assistance program – a service, provided by a third party, to help employees through personal difficulties such as divorce, drug or alcohol addictions, or a death in the family.

“Your [employee assistance program] provider may be able to direct you to resources that can help you care for your parents more cost-effectively,” says Ms. Moir. “Even if you only save $50 a month, there’s your RRSP contribution right there.”

Once you’ve begun to make regular RRSP contributions, Ms. Moir suggests that you can then ask Canada Revenue Agency to decrease the tax taken off your paycheque (CRA will calculate the reduction based on your income bracket and how much you’ve committed to pay toward your RRSP each month). This would add more dollars to your paycheque, which you could add to your retirement savings.

Ken MacCoy, a financial planner and life insurance consultant in Chilliwack, B.C., points out that sandwiched Canadians whose parents or elderly relatives live with them also may be able to claim a caregiver credit on their income tax return.

For the 2007 tax year, the maximum caregiver credit is $4,019 for each parent or dependant relative. To qualify as a dependent, the parent or relative must meet a set of criteria based on their age (they must be 65 years or older), relationship to the person filing the tax return, and income.

Another way to find money to invest into RRSP is to lower monthly mortgage payments, says Mr. MacCoy. “You can look at either a longer mortgage period to generate additional cash flow, or you can get yourself a line-of-credit mortgage.”

The latter is a better choice, he says, because it’s based on simple interest instead of compounding interest – saving you thousands in the long run – and also because it allows mortgage-holders to pay only the interest on the loan.

“So you can use the extra money to save in an RRSP while you’re also paying for your parents’ care,” he says. However, this means you’re not reducing the principal amount of your mortgage, so he says it’s a good idea sit down with your parents and talk to them about getting a life insurance policy and designating you as a beneficiary. Then, when they die, you can use the insurance benefits to pay down your mortgage.

Dependent children may also be able to lend a hand, says Mr. MacCoy. Many university-age children prefer to live with their parents because it’s cheaper than renting their own place. But if they have a part-time job, it may not be a bad idea to ask them to pay rent while at home, says Mr. MacCoy; the parent could then put that money toward an RRSP.

So what about people like Ms. Ye, who choose to leave their nest egg bare while they save money for their children’s education? Wouldn’t it make more sense for them to put their retirement savings before junior’s college fund?

Ms. Moir doesn’t think so. “Why not do both: maximize your RRSP and get a tax refund, and then put your refund into the RESP?”

Ted Rechtshaffen, president and chief executive officer of TriDelta Financial Partners Inc., in Toronto, says part of a good RRSP strategy is knowing when not to put money into an RRSP. Some sandwiched Canadians end up taking a pay cut while looking after their parents. Because tax refunds on RRSP contributions increase as income goes up, it may make more sense to defer contributing to a plan until your paycheque is bigger.

Ms. Ye, meanwhile, hopes she won’t have to wait too long to start an RRSP.

“I’m getting a little worried,” she says. “Even though I’m still young, I know that if I don’t look after my RRSP now, I may be in trouble in the future.”

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Sandwich ingredients

30%
Number of Canadians age 45 to 64 who are helping aging relatives while supporting their own children

$4,019
Maximum caregiver tax credit for each parent or dependant relative for the 2007 tax year