To retire comfortably, you need to save and invest regularly using an effective savings and investment strategy. Maximizing RRSPs or other retirement accounts will likely be essential to realizing your retirement goals. Once you retire, you'll need to "switch gears" somewhat and begin considering wealth transfer strategies.
An effective wealth transfer strategy can help you accomplish a variety of goals, such as distributing your assets the way you choose, avoiding probate fees and reducing estate taxes. You can explore a variety of wealth transfer tools, including the following:
Gifting - Gifting your assets to your adult children can help minimize the size of your estate, reducing the tax burden at death. This could also potentially lower probate, executor and legal fees. Be careful when gifting property (including cash and securities) to a spouse or minor child, as income attribution rules may apply, causing income earned on the gifted property to be taxed in your hands.
If you donate securities with a capital gain to a registered Canadian charity then there is no tax payable on the capital gain, and you get full credit for the donation, up to the standard charitable deduction limit.
Will - A will is simply a plan for distributing your assets to family members and other beneficiaries. If you were to die intestate (without a will), provincial laws would determine how your assets should be distributed - and there's no guarantee that the end result would be what you would have chosen.
Beneficiary designations - Many of your financial assets - including life insurance policies, RRSPs and TFSAs - allow you to name a beneficiary. Upon your death, your beneficiary will automatically receive these assets, avoiding the sometimes time-consuming, expensive (and public) process of probate. It is essential that you periodically review these designations to make sure they reflect your current wishes and that they do not conflict with the terms of your will.
Trusts - Different trusts can help you accomplish a variety of wealth transfer and estate planning goals. For example, an inter vivos trust can help you leave assets to your heirs without going through probate. You can also structure the trust to stagger payments over a number of years, rather than all at once, or include other restrictions or incentives. A testamentary trust, created in your will, can allow your heirs to effectively income split with the trust, potentially decreasing overall taxation.
As you can see, trusts are versatile instruments - but they are also complex. Consequently, you'll need to consult with your tax and legal advisors regarding your particular situation.
Permanent Life Insurance - When building an estate for your heirs, you have typically considered both registered and unregistered investment accounts as your principal sources of accumulating wealth. Permanent life insurance can be used to effectively accumulate wealth and pass it along to children or grandchildren, typically in a very tax-efficient manner.
All the wealth transfer techniques we've looked at will require some careful thought and preparation on your part - so don't wait too long before getting started. Time has a way of sneaking up on all of us - but it's especially sneaky when we're unprepared.
This article was written by Edward Jones on behalf of your Edward Jones financial advisor Edward Jones, its employees and financial advisors do not provide tax or legal advice. You should consult with a qualified tax or legal specialist for professional advice on your specific situation.
Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec) Inc.
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(NC) - With RRSP season underway, many Canadians are re-evaluating their investments and wondering what options work best for them.
While more than half of Canadians have a Registered Retirement Savings Plan (RRSP), many are unsure of what investments to hold in it or what is appropriate for their particular life stage. For example, people in their 20s can afford to have a more aggressive investment approach, while those closing in on retirement may want to be more conservative to protect their nest egg.
"Finding the money for your RRSP is the first step to long-term savings, but knowing what to invest in, when to invest, and how to invest are just as critical," explains Robert Armstrong, vice president of managed solutions and registered plans strategy with BMO Investments Inc. "Personal investing success largely depends on how well your portfolio fits with your short- and long-term goals; that's why it's important to ensure that your risk tolerance aligns closely with your age and life stage."
BMO SelectClass Portfolios specifically address investors' risk tolerance, whether conservative, bold or somewhere in between. With one investment decision, investors can access a range of mutual funds that cross asset class, sector and region. When an investment solution is properly diversified, it offers smoother returns over the life of the investment. This type of portfolio design can give investors confidence that they are on track to achieving their goals, such as being financially prepared for retirement.
Investors can visit a BMO Bank of Montreal branch and speak to a financial professional about mapping out their financial goals, gauging their risk tolerance and focusing on the mutual funds that are most suitable for their individual circumstances.
(NC) - You've set financial goals and objectives, you're confident managing your money, and you'd like to build your portfolio for the long run so you're financially prepared for retirement. Have you considered the benefits of investing online?
"Saving for retirement is one of the most important financial goals. It's never too early, or too late, to start planning and saving," says Rowena Chan, a vice president at TD Direct Investing. "Online investing offers a wide range of investment choices and the flexibility to invest on your time, from anywhere."
Chan suggests the following tips to help increase your confidence when investing online:
Stay up-to-date. Understanding what's happening in the markets will allow you to make informed investment choices. Knowing the risks and benefits associated with various investment options will help you make confident decisions.
Have a personal investment plan. Think about the number of years you have until retirement along with your risk tolerance and tailor your investment strategy accordingly.
Take advantage of tools and resources. You are investing for yourself, but you don't have to do it by yourself. There are calculators (such as the TD Retirement Savings Calculator), tutorials and seminars available online that can help you invest with greater confidence.
Get familiar with the features. There are a variety of platforms that offer secure and convenient access to trading tools from your computer or mobile device (such as a smart phone or tablet).
"My last tip is to work with a company that you know and trust," adds Chan. "You want to feel confident that your investments are secure and you are receiving the support you need. Read online reviews and ask friends and family about companies they have used and would recommend."
