Adam Myers, Financial Advisor

Hello Every body!!!  Although its very cold here in Ottawa, I just wanted to take this opportunity to wish everyone a happy and successful 2010!  And with the New Year still ringing in our ears, maybe it’s a good time to make a new resolution.  A “Financial Resolution”.  Please don’t confuse this with dieting or starting back up at the gym. Think of this as a simplified financial plan for 2010 that can help you reach your goals for the coming years.

Did you achieve your financial goals this past year?  How about this past decade?  Whether you did or did not, this may be an excellent time to make up a new plan, updated to include any changes from the past years.  Did you buy a new house? Get married? Have children? All these things can have a large impact on your financial situations, so make sure to adjust your plan accordingly.

The main goal of a financial plan is financial freedom.  I think most people would agree with me on that.  So what does financial freedom look like to you?   Take a minute and picture where you want to be in 10 years, then 20 years and so on till you have a clear picture of where you would like to be.  Then sit down and try to imagine how to get to that first step.  Proper money management is crucial to the maintence of your plan, so don’t be scared to ask for help.  Your financial advisor is a prefect place to start.  Here are a few ideas to get you started…

Cash flow

It’s a good idea to keep track of the money coming in and out of your accounts.  Look at where the majority of your out flow is heading and see where you can save money in your spending.  Budgeting is a huge aspect of financial freedom.  Also review your portfolio to see if your investments are inline with your goals.  Some plans were set up years ago and should be reviewed regularly to ensure they are still on course. 

Insurance and Emergency Funds

Protecting yourself and your family’s lifestyle are another important aspect of your plan.  Have an “Insurance Needs Review” done to make sure you’re properly covered; especially if there have been any major changes in your life.  You can find these on many insurance web sites if you don’t have an insurance broker you can talk to.   Also, start an emergency fund if you don’t have one, as unexpected events can be managed when you’re prepared.  A good place for this may be the “tax free savings account”, and with the New Year comes more contribution room, so be sure to look into this option.

Tax planning is not just a year end topic.  Tax planning and preparing can be done through out the year and are important factors to a financial plan.  The type of investments you hold and the tax bracket your in will influence your return, so examine these components carefully and make sure that taxes are working effectively for you, and not against you.   It’s also a good idea to keep careful documents of all your transactions and purchases so when tax time does come around, you have all your necessary information handy.

Financial Education

How about some plans for increasing your financial knowledge? Even the most experienced investor needs to keep up on changes to tax laws and new government incentives like the “tax free savings account”.  You can find a wealth of information at your local library, on line threw blogs and financial websites, and in many magazines and newspapers. 

And many others…..

There are many factors to consider when drawing up a financial plan that I haven’t mentioned, such as risk tolerance, mortgage payments, estate planning, etc…  So it may be in your best interest to ask for some help from a qualified financial advisor.  I am simply hoping to get you thinking about your finances and to get you started on your way to a healthy financial future.  Remember financial freedom is the goal, so stay on track and update your plan regularly.

Adam Myers

Financial Advisor

Professionals for Independent Planning

Email: adam@pfip.ca

By: Adam Myers

Charities and non-profit groups work on behalf of Canadians to provide the services and support that contribute to quality of life in our communities. We need to increase Canada’s donor base to ensure organizations working across the country and around the world can meet the growing demands of the individuals, families and communities they serve.

A recent Ottawa newspaper article has raised a troubling issue: Canadians, among some of the most privileged in the world, give a relatively small mount of income; on average 1.2%, to charities when compared to our American neighbours who donate a full 2% of income.   However, we have to factor in the difference in tax rates to see a clear picture. Americans pay considerably less taxes then we do, and after paying federal, provincial, municipal, sales and property taxes, people just do not have the money left over to donate to charity.   Or do they……?

With federal and provincial tax credits, charitable giving can actually be a tax reducing financial strategy.  The current federal charitable tax credit works like this: 15% on the first $200 donated and 29% on the remainder. The Ontario provincial credit for 2009 is 9.44% on the first $200 and 17.41% on amounts above.  So if you’re in a lower tax bracket, this can actually reduce your taxes owed at year end.  And with the ability to combine total donations with your spouse or common law partner, it’s even easier to get over that $200 mark. Just remember you can only claim up to 75% of your income from the year.

Ways to Give

There are several ways to donate, let’s take a quick look at a few of the more common choices:

Cash gifts - Probably the easiest way to support a charity. Most charities issue receipts for amounts $10 and over. The Income Tax Act allows you to carry forward donations in excess of the annual limit to any of the five following years.

Donations of securities - Gifts of qualifying securities (stocks, mutual funds, etc…) are not subject to capital gains tax.  You can donate securities that have built up capital gains, pay no tax, yet receive a tax receipt for the full value of the donation.  (This is a great tax strategy, but fairly complicated. If your interested send me an email and I would be glad to explain this in full.)

Through a will - Charitable donations made through a will are made in the year of death and the estate claims the tax credit on the final return.  A life insurance policy is a great way to carry this out. (Just be careful, a downside to estate made donations is the probate fees)

Tax Strategies

Here are some tax strategies to maximize your tax credit return.  For those of you that may be donating less than $200/year, try combing your totals with your spouse or common law partner.  Another option is to carry forward your donations for up to five years (remember the key is to get those donations over the $200 mark for the year of claim to maximize those credits)

For those of you who are donating higher amounts, you may want to donate stocks or mutual funds instead of cash.  Donating stocks to charity will result in 0% capital gains and a tax credit for the market value. If you have a large capital gain in your portfolio and you want to sell, you can donate a portion of your gain to charity to reduce your capital gains tax to zero.   (There is a formula to calculate the exact amounts required, which is a little over the scope of this material, but again, if anyone is interested, send me an email and I would be more then happy to explain it in full detail)

In conclusion, the need for donations is always present, but especially in the winter months.  So why not make a difference in your community, feel great about helping out and save your self some tax money in the process.  Find a charity that you feel deserves your donation, and help them help others this holiday season.

Adam Myers

Financial Advisor, Ottawa ON

Professionals for Independent Planning

 Adam Myers

Financial Advisor

As millions of Canadians hit the roads and book flights to criss-cross the globe for the holidays, an alarming percentage don’t fully understand key aspects of their insurance coverage or their need for out of province travel insurance. An accident can happen to anyone, even during a short business or recreational trip. Some health services are not insured by the province and you may have to pay the full costs for those services.  Many health services outside Canada cost much more than coverage by OHIP, and you are responsible for any difference in cost.  Let’s take a closer look….

OHIP will pay very limited amounts for physician services and hospital facility services if certain conditions are met. OHIP will only pay for insured, emergency out-of-country health services that are rendered to an insured person.  To qualify as an ‘emergency’ there are a number of criteria that must be satisfied.  The treatment must be medically necessary, and the treatment must be performed at a licensed hospital or licensed health facility, and the treatment must be rendered in relation to an illness, disease, condition or injury that is acute and unexpected, and arose outside of Canada, and requires immediate treatment.  A lot of “ands” I know, let’s take a look at what they won’t cover.

OHIP does not cover treatment that is not medically necessary, health services that are completed at a facility that is not a licensed hospital, treatment that is generally accepted as being experimental, treatment rendered for an illness or injury that arose inside Canada or ambulance services/transportation costs.  That last one can be a real burden.

Back in Canada, your provincial health insurance plan looks after your hospital and medical expenses and you rarely see a bill. But, once you travel outside of Canada or even outside of your own province, coverage under your provincial plan is limited, and only some of these expenses may be covered. The good news is that the difference can be made up by travel health insurance.

Travel health insurance is designed to pay for certain unexpected costs that may arise when

you are traveling. These can include emergency hospital/medical costs, trip cancellation, lost baggage and accidental death insurance. But, not all plans cover all of these components.

For instance, the trip cancellation insurance you buy when you book your holiday may not include health insurance. Be sure you understand what protection you are buying, and whether it meets your specific needs.

When purchasing travel insurance there are a few key questions you should ask, such as:

• Will your policy cover you for the entire length of your trip from Canada or your home province? If you decide to extend the length of your stay, can your policy be extended? How would this be done?
• What types of restrictions and limitations does this policy have?
• Does your policy deny any benefits if your medical emergency arises because of a pre-existing condition?
• Are there exclusions about specific activities/events i.e., sports, war, suicide, substance abuse?
• What maximums, deductibles and/or co-insurance would apply in the event of a claim?
• Does your policy pay for emergency return home?
• If you are traveling with family or friends, does each individual need a separate policy, or can one policy cover everyone?
• Are there certain countries that are not covered under the policy?
• Does your policy provide for trip cancellation, baggage loss and other damages?
• If you have out-of-country coverage through your group plan at work, are there any restrictions? Does it cover you for business travel only?

So where can you find travel insurance? Well there are a number of places you can go, such as you credit card company or through you group health insurance.  But it is generally recommended that you talk to your insurance advisor or broker to guarantee you get proper coverage customized to cover all of your travel insurance needs.  So whether it is a day out of the province or a year out of country, make sure you’re protected with travel insurance.

Adam Myers

Financial Advisor

Professionals for Independent Planning

Email: adam@pfip.ca

Phone: 613-224-5511   X108

www.pfip.ca

News from The Globe and Mail

Five reasons you should be nice to your insurance agent

By TIM CESTNICK

00:00 EDT Thursday, July 23, 2009 Page B10

Special to The Globe and Mail

A good friend of mine, Greg, works in a high-stress job on Bay Street. In the summers, he and his wife like to get out of the city to go camping in their motorhome. He finds it very relaxing, but this summer they have found their peace and quiet disturbed by well-meaning, but unwelcome, visits from other campers. Greg has devised a plan that pretty much guarantees they will have privacy. Now, whenever they set up camp, Greg places a sign on the door of their RV that reads: “Insurance agent. Ask about our new term life package.”

That does it - every time.

I know that insurance advisers get a bad rap sometimes. But let me say out of the gate that there are some characteristics of life insurance that make it useful as a tax and estate planning tool, namely: Benefits are paid out completely tax free when the insured individual dies.

Further, it’s possible to accumulate investments inside an insurance policy on a tax-sheltered basis - not quite like your registered retirement savings plan, but similar.

Next, if a corporation is the beneficiary of a policy on a life, a portion (often 100 per cent) of the benefits paid out upon the death of the insured individual will be credited to the company’s “capital dividend account” (CDA). Amounts in the CDA can be paid out as tax-free dividends to shareholders of the company. It’s primarily this combination of characteristics that creates many uses for insurance.

The key to buying insurance prudently is understanding three things very clearly: First, what is the purpose of the life insurance you are buying? Second, how much is the right amount of coverage? Finally, what is the right type of life insurance to buy? If you can wrap your mind around the answers to these three questions, you should have confidence in the investment you’ve made in insurance.

Let’s address the first question. There are many reasons why you might consider buying life insurance. These will generally fall into one of five categories:

Provide for Others

If you have dependants who will otherwise face hardship financially if you pass away, it will be important to buy insurance on your life to provide the capital necessary to generate an income for those dependants. In addition, you might want to leave money to others who have needs, such as your favourite charities.

Cover Final Disbursements

When you pass away, there will be costs and debts to pay. Who is going to pay for these? Think about the following types of disbursements: Funeral costs, legal and accounting fees, income taxes, executor fees and probate fees, as well as outstanding mortgages, credit card balances, lines of credit and other loans. You could leave your spouse or others in a bind if you saddle them with the requirement to pay for these things out of their own pockets.

Provide Equitable

or Larger Bequests

If it’s your desire to treat your kids equally, life insurance can make that possible. For example, suppose you leave your cottage to your daughter who uses it, and your investments of equal value to your son. Suppose also that the cottage gives rise to a tax bill on your death. Where will the cash come from to pay the taxes? Potentially from your son’s share of the estate. This could leave him shortchanged. Life insurance can provide the cash to equalize the estate.

Alternatively, perhaps you just want to leave your kids more than you could otherwise without insurance.

Shelter Income From Tax

As I mentioned, life insurance policies can provide tax-sheltered growth. You won’t be taxed annually on income earned inside the policy. Now, there are relatively low provincial income taxes paid by the insurance company on investment income inside the policy, but you won’t see that tax - or feel it much.

You can expect slightly lower returns inside an insurance policy because of this tax, fees and administrative costs, but historically the returns in some of the whole life insurance policies have been quite stable - and tax sheltered. Speak to an insurance adviser about the performance of participating whole life policies.

Maintain Business Health

As a business owner, consider insurance to provide cash for a surviving partner to buy out the estate of a deceased partner, maintain stability in the business if a key person dies, pay off debts of the business if a key person dies, or repay the business for any significant costs incurred (such as pension contributions).

© The Globe and Mail

As of 2009, you have a new tax-sheltered option for saving money, thanks to the new Tax-Free Savings Account (TFSA). The TFSA allows you to save or invest your money without paying tax on income, dividends or capital gains earned inside the account. You can also withdraw funds tax-free at any time. That’s a great incentive to save money!!!

It is important to know: The TFSA is not an investment! It is not like a Canada Savings Bond, sold by the government. Rather, it is more like an RRSP (Registered Retirement Savings Plan), or a savings account. Think of it as a vehicle to hold investments. The difference being that you DON’T pay taxes on any income earned with in it!

The TFSA is suitable for everyone, whether you are just starting your savings plan or you are an experienced investor. And it couldn’t be easier to set one up.

Any Canadian resident who is 18 years of age or older and has filed a tax return can establish a TFSA. You can open one at your favourite financial institution, threw your financial advisor, or even on line. Initially, your annual contribution room is $5,000 per calendar year. You do not have to contribute the maximum every year, as the unused contribution room can be carried forward to future years. This number will grow by $5,000 annually, and will be indexed to keep pace with inflation in $500 increments.

You can withdraw funds from your TFSA at any time, for any reason, with no penalties. It could be for a new car, to renovate your kitchen or to take that dream vacation you always wanted. You could even use it as security for a loan. Withdrawals are not subject to any taxes, so any growth experienced over the year is yours TAX FREE.

The amount withdrawn during the year will be added to your contribution room the following year, so you don’t lose contribution room by withdrawing - you get it back in the following calendar year. Most investments that can be held in an RRSP will also be eligible for your TFSA, including GICs, mutual funds, segregated funds, stocks and bonds. This is a huge opportunity to earn investment income and not pay taxes.

Unlike an RRSP, you won’t be able to deduct your TFSA contributions on your income tax return. But don’t think of this as an RRSP which is a tax deferred savings account that still taxes you when you withdraw. Think of this as an opportunity to grow your savings tax free, and with draw them TAX FREE.

Money withdrawn out of your TFSA doesn’t affect federal income-tested benefits and credits like Old Age Security, the Goods and Services Tax Credit and the Canada Child Tax Benefit. You can also transfer your TFSA assets to your spouse or common-law partner upon death without any impact on the survivor’s existing contribution room. It also offers income-splitting opportunities.

There’s a lot to like about the Tax-Free Savings Account. Maybe too much to cover in one article, but I can tell you this: The introduction of the TFSA has taken the importance of financial planning up another notch. For some, it may be wiser to use the TFSA in your investment plan. For others, the RRSP may make more sense. And for some, a combination of the two. Now is the time to review your situation to see how to best plan ahead.

So whether it’s a short term goal like a new car or a dream vacation, or a long term goal like a new home, the tax free savings account may be the perfect strategy to get you there faster. If you have any questions or comments, please feel free to contact me and I would be happy to discuss the benefits of the TFSA and how it can fit into your financial plan.

Adam Myers

Independent Planning Group

202-223 Colonnade Road South

Ottawa Ontario, K2E 7K3

Phone: (613) 224-5511 x 108

Email: adam@pfip.ca