Advisors Report

Long-term care insurance addresses the health, personal and financial needs of those who can no longer take care of themselves.

We’re living longer in today’s society then ever before, and all data tells us this trend will only continue to increase.  But as we age, many of us will confront illnesses such as Alzheimer’s, diabetes, stroke, heart disease and cancer. And what happens when we can no longer care for ourselves or our parents or other loved ones?  This is when long-term care insurance comes in.

Do you know someone already in private or public care?  Almost half of Canadian workers have eldercare responsibilities that impact time and financial resources, even with government aid. So it’s no surprise that the financial implications of long term care need to be addressed. 

Long-term care insurance helps cover the costs of in-home care or a long-term care facility should you no longer be able to care for yourself. It can help you and your family members maintain your desired lifestyle, independence and financial security.

While there is a degree of public care available for long-term care, government programs are not all-inclusive and certainly not “top of the line” when compared to private facilities. Long-term care insurance helps to fill these gaps in care that government plans leave open.

Some experts recommend purchasing coverage between the ages of 50 and 55. Generally, the minimum coverage provides benefits to pay for health and personal care services for those living in a long-term care facility. Additional coverage can also be obtained to cover in-home care. This would include help with everyday tasks such as cooking, cleaning and shopping.

With long term care you have the option of selecting benefits that cover you for one year, two years, five years or for your entire life.

Not only can long-term care insurance help you in dealing with the financial responsibility of providing ongoing long-term care, it can also help to ease the financial burden that may fall upon your loved ones – while preserving your savings and investments you worked so hard to accumulate.

Living in a long-term care facility (depending on the type of room, care services, facilities etc. and the government funding available in your province) can cost anywhere from $800 – $5,000 a month.  Homemaking and personal care can cost about $15 – $25 an hour.  Nursing home care can cost anywhere from $25-$65 an hour.  These costs are just general estimates and can range much higher if you choose upper levels of standards of care.

As far as costs are concerned, you can get basic plans for as little as $1 dollar a day, or more complex plans for about $5 dollars a day.  These numbers vary based on age and health.

We like to think of long term care as a tool to help preserve your life savings and RRSP’s at the time you need them most.  At $5000 dollars a month, savings can’t last long, and with many boomers looking to pass on inheritances to their children or grandchildren, this may be the perfect tool to ensure those wishes are granted.  So prepare today for a healthy, sustainable future with long term care insurance.  I would be happy to help explain this matter in full detail.  Feel free to contact me at:

Adam Myers

Financial Advisor

Professionals for Independent Planning

Email: adam@pfip.ca

Phone: 613-224-5511   X108

www.pfip.ca

As the markets continue to climb in recent months, the process of portfolio rebalancing is becoming a hot topic among investors and advisors.  Rebalancing is primarily about risk control, or making sure your portfolio isn’t dependent on the success or failure of one investment, asset class or style.  Rebalancing is the process of restoring your portfolio to its original asset mix or objective. 

You don’t have to do anything to your portfolio for it to change. That’s because some of your investments will go up as other investments go down.  This is the market as we know it. Those investments that have done well will begin to take up more of your portfolio than those that haven’t done so well. And you don’t have to do a thing for that to happen.

But every so often, you need to readjust your portfolio to restore its original balance or mix.  If your investment goals haven’t changed, your portfolio’s mix shouldn’t either. But thanks to market forces it almost certainly will. Hence the need for rebalancing.

And this doesn’t have to feel like pulling teeth.  Follow these steps to an easy rebalance:

Step 1: Figure out your target portfolio mix

This was the blend of asset classes and investment styles that were going to allow you to reach your investment goal.

Step 2: Compare your target mix to your current mix

Compare you cash and bond holdings to your equities.  Evaluate if you’re still on course, comparing risk and returns, as well as types of income for tax purposes. 

Step 3: Determine where your investments are out of line with your original target

Begin by seeing how your cash and bond positions have shifted compared to your equities. Very often, your positions in these areas will shrink relative to equities because, in general, equities as a group outperform cash and bonds.

Then, consider your sector exposure. Although you may not have built your portfolio with a specific sector in mind, you want to be sure that you aren’t overexposed to one industry.

Finally, look at your investments, one by one. Which ones have performed the best? These investments may now be taking up more of your portfolio than you originally intended.   

 Step 4: Readjust

Remembering your target mix, line up your risk and return blend to match your goals and objectives.  Sitting down with your financial advisor can help ensure the proper allocation of assets.

Effective rebalancing doesn’t mean keeping daily tabs on your portfolio. Instead, follow these guidelines:

Guideline 1: Rebalance every year or so. We’re not saying you should only look at your portfolio once a year. But resist the urge to tinker when you do. You’ll save yourself unnecessary labour and possible administrative costs.

Guideline 2: If you rebalance just one thing, make it the equity/cash split. Your cash and bond stakes are vital to keeping your portfolio in check. So if you don’t want to rebalance your entire portfolio on a regular basis, at least restore your cash and bond positions to their original levels yearly.

Guideline 3: Be a tax tactician. Keeping your portfolio in line isn’t satisfying if it means you also wind up with poor after-tax returns.  Try rebalancing less frequently, to avoid gains taxes.  Use new money to top up the holdings that are down, rather then selling the ones that are up.  And if you have the choice, switch securities in the same fund family, rather then selling to avoid capital gains taxes and administrative fees.

Rebalancing can become difficult and ineffective without proper knowledge of the markets, so make sure you understand what you’re doing before making any rash decisions.  A financial planner can help you make the right choices that will help you reach your goals quicker and more efficiently.

Adam Myers
Financial Advisor, Ottawa
PFIP-IPG
Email: adam@pfip.ca
Phone: 613-224-5511   X108
 
www.pfip.ca
www.joinipg.com

Registered Education Savings Plans

A Registered Education Savings Plan (RESP) is a tax efficient savings vehicle to help you save for your child’s continuing education costs. The current estimate for one year of post secondary education is $4000 per year, not including rent and daily living (http://www.statcan.gc.ca/daily-quotidien/060426/dq060426c-eng.htm), and most programs are 3 – 4 years long.  As costs increase and inflation rises these estimates can only climb in years to come.  That’s why it may be a good time to consider opening an RESP for your children.

Starting an RESP today allows you to start saving for a child’s future post-secondary education immediately.  If you’re wondering how much to save and when to start, the answer is: save as much as you can afford and start today. By starting early, tax-sheltered earnings on your savings have the potential to grow surprisingly quick.

In addition, the Government of Canada will help you with saving incentives that are only available if you have an RESP, including the Canada Education Savings Grant and the Canada Learning Bond.  That means free money towards your child’s education savings.

All your child needs is a valid social insurance number and some one to contribute money.  That’s it!  You can open an RESP through your financial advisor or through your local bank.  Anyone can open an RESP and anyone can contribute to it. This includes parents, grandparents, aunts, uncles, and friends.  This can be a great idea for gifts that actually help a child’s future.

The total RESP lifetime contribution limit for each RESP beneficiary is $50,000.  The maximum annual RESP contribution that will qualify for the 20% grant is $2,500.  These numbers are maximums and people should remember that with tax sheltered growth, even a little contribution goes a long way.  So even a $100.00 deposit gets a $20.00 grant from the government.  And these funds are invested in stocks, mutual funds or cash products of your choice, which could mean quick, tax efficient growth.

Contributions can be made up to the year your child turns 17 to receive the grant, with some restrictions, and the plan must be collapsed after its 35^th year.  Although you can still contribute and grow tax free until the 35^th year, you can only receive grants till the 17^th birthday.

Withdrawals are taxed in the hands of the child with drawing the money for education purposes, which means they are still in school and probably in the lowest possible tax bracket.  The money doesn’t necessarily have to be used for tuition, as it can be used for rent, bills, textbooks or any other issue that may arise.    But what if your child decides against post-secondary education?

You have all kinds of options available should your original beneficiary decide not to pursue a post-secondary education. You can:

1. Decide to select another beneficiary if it’s permitted by your plan.
2. Make a tax-free capital withdrawal of all the money you contributed to the plan. However you will be required to pay back the government grants.
3. Withdraw the earnings as cash (subject to income tax in the year it is withdrawn, along with a 20% penalty).
4. Transfer up to $50,000 of the earnings in the RESP to your personal or spousal RRSP, provided you have unused contribution room. With this option you will avoid paying income tax on the income withdrawn.
5. Donate the earnings from the plan to a qualifying educational institution.

There are two types of plans available: the family plan and the individual plan.  Anyone can open an Individual RESP and anyone can contribute to it. This includes parents, grandparents, aunts, uncles, and friends, but the individual plan can have only one beneficiary.  For Family RESP’s, the contributor must be related by blood or adoption to the beneficiaries, but can have multiple beneficiaries. 

There is so much to cover with RESP’s and there can be some complicated issues that arise as well, so careful planning by a professional advisor should be involved.  If you have any questions or require more information feel free to contact me any time at:

Adam Myers

Independent Planning Group

202-223 Colonnade Road South

Ottawa Ontario, K2E 7K3

Phone: (613) 224-5511 x 108

Email: adam@pfip.ca