In the second video of our series, Scotiabank Retirement Expert Bev Moir answered a question from Chris Gillis on how one can determine the right mix of savings – between TFSA, RRSP, an employer pension – also factoring in OAS and CPP. Watch Bev’s response and post your retirement planning questions here on our Wall. Bev will be responding to your questions all week.

Determining the right mix of savings between TFSA, RRSP, and employer pension

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)

Important News About the Moir Team

We have some good news to report! Ingrid Sojka, my Administrative Associate, is expecting her first baby! It’s a very exciting time for her and her husband Jan. The baby is due October 25th; the not so good part of the message is that Ingrid’s last day in the office is Friday October 3rd.

Her plan is to return following a one-year maternity leave. We’ll miss her; she’s been part of the Moir Team for two years now and I rely on her greatly. She says I can call her if I’m stuck (!!!) and she’ll do some work for us from home once she and the baby get settled. We wish them all good health and much joy!

Here are the plans I’ve put in place to keep things running smoothly: Beverley Thompson (another Bev!) will join us from another ScotiaMcLeod team on Monday, September 22nd to overlap with Ingrid. Bev T. has been part of ScotiaMcLeod for many years; in fact when I joined the firm 14 years ago she was working in the office and was one of the individuals who gave me encouragement. I greatly appreciated her support then and look forward to working with her again!

Bev is an Administrative Assistant. This means she’ll be unable to take orders to buy or sell stocks and bonds. I’ll be staying close to the office and we’ll have other back-up arrangements in place for the times I’m booked and unavailable to come to the phone. The office number remains the same (416-945-4454) and Bev’s email address is beverley_thompson@scotiamcleod.com.

Matt Zavaglia, a third year University of Toronto student, has been hired to work with us on a weekly basis throughout his school year. Matt worked with us this summer (largely behind the scenes) and was a great help. We’re pleased he’ll continue with us.

Please take a moment to introduce yourself when you call in the coming weeks!

Market Update
Jittery markets can upset even the most confident investors. This year’s extreme volatility has been a case in point. We know that a long-term, focused strategy is the best protection against a difficult market cycle. The enclosed colour graph produced by Russell Investments illustrates the importance of maintaining a long-term perspective during this time of market volatility.

Dating back to 1924, the graph shows that positive “bull” market returns outnumber the negative “bear” markets we’ve experienced and, you can see that history shows “bear markets” are generally of shorter duration. We’re currently experiencing a bear market and while we don’t know how long it will last, I can say with confidence that it will be followed by an up-market that will be stronger and will likely last longer!

What to Do Right Now

• The 2008 Federal Budget introduced the Tax Free Savings Account (TFSA). The TFSA is designed to become a part of Canadians’ overall financial plan by helping them save after-tax dollars in a tax effective way. Scotiabank is the first major bank to launch the new TFSA now in order to beat the rush on January 1, 2009. Please call us!
• Please consider the opportunity to go paperless and in the process support the environment.

Upcoming Seminars and Media Events

• Retirement Planning and Transitioning seminars – October and November 2008. Please call to be added to the invitation list.
• CP24 – Tuesday September 23rd @ 2:50 pm “Raising Financially Literate Children.”
• Article in the November Issue of Glow Magazine.

Retirement Tip
Jeremy Siegel is a 62-year-old economist who is affiliated with the prestigious Wharton School of Business, University of Pennsylvania. He wrote Stocks for the Long Run in 1994 and now, 14 years and four editions of his book later, he continues to caution investors from bailing out of stocks during times of market upheaval. As reported by the Globe and Mail’s Brian Milner this summer, here are some pointers based on Dr. Siegel’s research:

• Stocks are safer than bank deposits, over the long term, when inflation is taken into account.
• The biggest winners over the long haul are always stocks with the highest dividend yields.
• No strategy exists that will out-perform the market all of the time.
• No indicator tells you when stocks hit bottom.
• A little knowledge is worse than no knowledge for the novice investor.

I believe the markets are presenting opportunities, especially for the long-term investor.

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

• CP24 Tuesday May 20th at 2:45 p.m. on “Spring Cleaning” your financial affairs
• June 3rd “Elder Care: What You Should Know” with Audrey Miller, MSW, RSW, CCRL – details & invitation (pdf)

Savvy financial advice for using a tax refund:

• pay down non-deductible debt
• contribute to your RRSP or your child’s RESP
• hold the money for investment in new TFSA (2009)
• invest in yourself by improving your fitness or your mind!