November/December - 2006
Thank you! Your continuing trust and support, together with your referrals, made 2006 another record breaking year for Mathisen Financial, Inc. It is important for me to let you know that your business is very much appreciated.
Because this communication is to thank you and to wish you a MERRY CHRISTMAS AND A HAPPY NEW YEAR, I'm enclosing the current issues of LIFE LETTER and LIFE LETTER MATURE without my regular commentary. However, I am including a link to a new investment/retirement vehicle that has become available.
LOWER RISK TO RETIREMENT
INCOME - Manulife
Financial has develped this new investment program for the baby boomer
generation. The INVESTMENT
EXECUTIVE (Canada's Newspaper for Financial Advisors) says about
this new product:
"Investors can receive a 5% guarantee bonus in each of the first
10 years after they purchase the product, to a maximum of 50% increase,
if no withdrrawals are made". Please call me for more details.
LIFE LETTER MATURE - Designed for people over 55, please pass LIFE LETTER MATURE on to someone you know. The subjects covered November and December deal with death taxes in Canada and How to protect yourself fom fraud.
THE STOCK MARKETS - As of November 30, 2006, the TSX Composite Index is up 13.13% year-to-date. This return is very competitive with other major world stock indexes. A full report on the 2006 year-end performance of the indexes will be published in the January/February edition of my Newsletter.
If you're not on the internet, please call me and I'll personally get the Annual Review Check List to you.
Please, allow me to say it once more: MERRY
CHRISTMAS AND A HAPPY
NEW YEAR TO YOU AND YOUR LOVED ONES.
RRSP questions and answers
Dave asks, "I'm only 21. Why should I start an RRSP now?"
Dave has time before retirement on his side. By starting young, Dave can avoid the panic that sets in for far too many that wait until their 50's. He can also weather the ups and downs of the markets better as he'll have more time to recover from losses.
Let's say that Dave sets a goal of accumulating $1,000,000 for his retirement at age 65. By starting today, and assuming he earns 7.50% average annual compound return on his RRSP deposits, Dave needs to save about $3,250 per year. If he waits until he's 31, he will have to deposit $7,015 annually to reach the same goal. His annual deposits will need to be about $16,050 if he waits until age 41.
The temptation can be great for someone who waits too long to start an RRSP to take on too much risk in hopes of reaching their goals in a short period of time. Sam has yet to recover from the losses he suffered by placing most of his RRSP savings in high tech investment funds in the late 1990's.
Marilyn asks, "I'm just going to get nailed with income taxes on my RRSP savings, so why bother?"
Deposits made to an RRSP, within limits, can be deducted from income, thus lowering Marilyn's income tax bill now. Earnings within her RRSP do not attract taxes until she actually receives them. As long as Marilyn converts her RRSP to an income in retirement rather than taking it all as a lump sum, she will only pay taxes on the income as she receives it. Income tax brackets have increased and tax rates have decreased over the last several years, so Marilyn will likely pay less taxes on her retirement income than she does today on her earned income.
Rob asks, "Why should I contribute to a spousal RRSP?"
A spousal RRSP is a great way to split income in retirement. Rob can contribute to an RRSP in his wife Sarah's name and he gets the tax deduction. This works well because he is in a higher tax bracket now than she is. By building approximately equal retirement funds, the income tax payable on their retirement income will be much less.
Let's say Rob and Sarah are already retired with a $60,000 annual retirement income. Based on tax rates in 2005, if Rob had received all the income, his tax bill would be between $8,593 and $14,843, depending on province or territory of residence. If they each received $30,000 annually and depending on which province or territory they lived in, their tax bill would only be between $4,740 and $10,235.
Registered Retirement Savings Plans were introduced through federal legislation in 1957 as an incentive for Canadians to save for their retirement. You owe it to yourself to take advantage of these tax-advantaged savings plans.
For informational purposes only. This article is not intended to provide specific tax advice.
Copyright © 2006 Bowen Financial Inc. All rights reserved
Want help with your RRSP and retirement
A safety deposit box is usually sealed when its owner dies. Since it may remain locked up for weeks or even months, some documents may be inaccessible just when they're needed most.
Dick thought it would be a good idea to put his Will in his safety deposit box. Though some jurisdictions allow it to be opened after your death to remove the Will, the procedure usually delays things. As your Will may contain burial or other special instructions and should be probated as soon as possible, access to it should not be hampered.
When Dick had his Will prepared by his lawyer, he learned that most law firms have a "Will vault" where Wills can be stored until they are needed. He decided to leave his original Will with his lawyer for safekeeping and kept a copy for himself.
Tom and Kate kept their marriage certificate, cemetery plot deed, savings account passbook and some cash in their safety deposit box. They removed all these items after what happened to a neighbor.
When Tom or Kate dies, the survivor may need the marriage certificate to access certain assets or benefits. The cemetery plot deed, of course, will be needed as part of the funeral process. Access to the cash and bank account will be necessary until proceeds from the life insurance are received.
Life insurance policies should be readily accessible because your beneficiaries may need them to collect the proceeds.
In general, anything your heirs or executors may need in the first few months after your death should not be kept in your safety deposit box. If in doubt, leave it out.
David and Victoria collected all the things that their heirs or executors will need and put them in one place, an accordion style folder labeled "For Our Executors." They also let their executor know where in their home they keep the folder.
Besides containing a copy of their will and the other documents noted above, it included a list of all their assets and a completed Estate Checklist. The checklist tells David and Victoria's executors where other documents and records may be found and the names and contact information of their advisors (Life Insurance Agent, Lawyer, Accountant, etc.) that they may need to contact.
What do you keep in
a safety deposit box? Quite simply, things that
are irreplaceable but not necessary to settle your estate.
• The coins left to you by your grandmother.
Copyright © 2003 Bowen Financial Inc. All rights reserved
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