Jennifer Jacobs – The Steady Increase in Cost for Long-Term Care Insurance

In this video, I speak to Jennifer Jacobs, President of LTCI Consulting Inc. to chat about the expectation of changes of living benefits / life insurance, in terms of what we see in the market place and what we can do to take advantage on what is available today.

IRONSHIELD Financial Planning’s “Fly On The Wall” update call.
These calls are recorded by Scott Plaskett and allow you to get a behind-the-scenes look at one of his professional update calls. Watch and listen as a “fly on the wall” and get some of the most valuable information you will find on the Internet.

Why did Charles Wilton sell KB Home and buy Eaton?

In today’s episode, I chat with Charles Wilton, Portfolio Manager with the Private Investment Management Group at Raymond James. We talk about the recent deposition and acquisition in his portfolio.

Having Little Financial Knowledge is a Dangerous Thing

Photo by: OpenDemocracy licensed under Creative Commons Attribution 2.0 Generic

When it comes to financial planning, knowing too little is a dangerous thing. As a financial planner, the main part of my job is to educate my clients on things that they may not know—or things that they may not know they don’t know. In today’s blog post, I’m going to tell you why it is important to work with a professional—someone who has a lot of financial knowledge.

The first thing that you should know about financial planning is that it is comprised of many moving parts. It is often based on variables, which means that personal hopes, goals and opinions, as well as factors such as inflation, rate of return, tax rate and contribution levels must be taken into account. If any of these variables change, chances are that the financial plan you have is going to end up being wrong and your long-term outcome would be inaccurate. This is the reason why being flexible and being able to make small adjustments now, can make a big difference in the future.

Many people feel that having a financial plan in place is all it takes for them to feel secure with their finances. The truth is, while having a financial plan is excellent, it doesn’t mean that you’re all set. It may give you more confidence, but it also only gives you an idea of the direction in which you are heading. To get a more up-to-date version of your financial plan, progress reports every six months are crucial and help you remain focused on where you want to go in terms of your financial goals.

Being confident about your finances and having some idea of what you need to do is great, but it’s not enough for you to tackle your financial plan on your own. For example, most people don’t realize that they are actually unaware of how their planner’s financial planning software handles taxes. Canada is a marginal tax rate environment, which means that all of our income sources are taxed differently and at different rates. What happens then is that a lot of software out there calculates using an average tax rate. As a result, this provides skewed results and causes you to think that you need to save a lot more money in the early years in order to have enough for retirement. The biggest challenge here is putting too much aside for the future while sacrificing the present, so make sure that you are being taxed properly.

Another obstacle that may come up if you don’t have enough financial knowledge is that certain thresholds offer different investment solutions, and you must know which one you qualify for. When handling your own financial plan, the number one rule of financial planning is that if you have accumulated a certain level of wealth, but are investing in the same investment solutions as someone who makes much less than you, then you’re in the wrong place. The four thresholds are:

Tier 1: up to $100,000

Tier 2: $100,000-$500,000

Tier 3: $500,000-$1,000,000

Tier 4: $1,000,000 plus

People want to increase their return without increasing the risk. Being in the right investment solution is the best way to get higher returns with lower fees, without increasing risk in your portfolio.

Many people want to handle their own investments because they resent paying fees for financial advisors, especially if they don’t see positive or any returns at all; they don’t want to pay simply to have someone else lose their money. However, deciding where, when and what to invest in is a daunting task and it is essential that you work with an expert. People who choose to manage their portfolio by themselves could face a huge problem, and there are two reasons why this might happen.

First of all, there is nobody managing the investment, which means that you alone are responsible for the instability and the consequences of your investments. This is a passive approach and while this may yield a decent return over time, it will also make you susceptible to making the wrong decisions when emotions get in the way. This is where the second issue comes in. When things get tough, do-it-yourself investors start to make small adjustments to their portfolios, but studies from the past 15 years have shown that the more you fiddle with your investments without professional help, the worse you do.

An interesting tidbit to point out is that oftentimes, the best days in the market start just after a market crash, a market correction or a really bad day in the market. However, people do not tend to invest during these unstable days and end up missing out on opportunities. Their emotions make it extremely difficult for them to act logically and continue to stay invested. This is why working with a professional can often produce significantly better results.

So you see, having little financial knowledge can be a dangerous thing. The most valuable solution I can suggest is to put someone between you and your investments. Hire a financial planner—an independent, third party—who can guide you through your choices and help you avoid making bad decisions. To help you get started, you can download your free copy of my special report—“Twelve Key Questions that You Must Ask a Financial Planner Before You Hire One”—to help you with the interviewing process. Keep in mind that there is a lot that a certified financial planner knows, so it really helps to talk to them about your financial future.

Mike Flux – Market Update and Investment Alternatives Q3-2015

In this video, I speak with Mike Flux, Senior VP of Connor Clark & Lunn Private Capital to chat about their investment outlook from Q3 of 2015. We also discuss how to interpret the current events, and how to properly position portfolios to take advantage of these market events.

In this second video, Mike gives an update on the alternative strategies that they are using in their portfolios to help reduce the effects of the current volatility without sacrificing returns.

9 Strategies to Protect Your Personal Credit Score

There are a variety of unknown factors that can affect your personal credit score. For example, most people don’t realize the importance of and the difference between two key dates for paying off their credit card debt: the due date and the statement date. The latter is the date on the credit card statement, and refers to the date your balance is reported to the credit card bureau. As a result, even if you pay your balance on time each month, it may not be reflected in your credit score.

Here are 9 more tips and tricks to protect your personal credit score.

1. Know your score

In Canada, the credit score range is between 300 and 900 – the higher your score is, the better. This number reflects a person’s credit history over the past six years. Only 5% of Canadians are known to have a score of 850 or better, so make sure that you keep up to date with repaying your debts from all sources, including banks, governments and credit card companies. Checking your score regularly will alert you to mistakes and credit fraud as well. To check your credit history, you can consult the major credit-reporting agencies in Canada, such as Equifax Canada or TransUnion Canada, and receive a copy of your credit file for free.

2. Pay your bills on time

Being even one day late with your payments will hurt your credit score. In order to prevent this from happening, always allow extra time for online transactions to be processed. For example, make your payments at least three days before the due date to avoid any possible delays. Consider setting up an automatic payment each month to ensure that you never forget to pay the minimum.

3. Never exceed your credit limit

If you’re close to being maxed out, take precautions and pay more than the minimum. Otherwise, the interest due could push you over your limit. Going over your limit, even by as little as $5, can mean costly charges from your credit card company and will hurt your credit score.

4. Don’t apply for store credit cards

Many stores offer one-time discounts for signing up for their store credit cards, but don’t be tempted by the offers. Most store credit cards have interest rates as high as 29%, which are viewed in a negative light by the credit bureau and can lower your score.

5. Spread out your spending

The percentage of available credit you have is important because this will affect your score. Distribute your spending more equally so that you don’t have one charge card that’s nearly maxed out while another card has no balance at all. Spread it out so that both cards are at 50% capacity.

6. Prioritize your payments

You must decide which payments take priority and pay those first. For example, mortgage payments are important, but they are not usually shown on Canadian credit reports. Instead, you should pay more attention to your credit card, loan and lease payments, and make those on time.

7. Beware of closing accounts

If you’re preparing to close an account, ensure you make all your payments on time, even if you’re not completely satisfied with the lender. Missing a payment will show up on your credit report, can hurt your score, and is very difficult to fix. When closing an account, ask for written confirmation that the account was closed with a zero balance.

8. Don’t close unused credit cards

If you have low interest credit cards that you don’t use, keep them open and use them every so often. It is actually an advantage to have a zero-balance credit card, since this helps to improve a low credit score.

9. Don’t apply for too much credit at once

Be careful of taking on too much credit at once because the credit bureau views this as a sign of financial trouble. For example, don’t lease a car, sign up for a new cell phone and apply for a loan all at the same time; this will raise questions about your ability to fulfill your financial commitments. Also, beware of being preapproved by multiple lenders before you’re ready to buy. Even though you can check your own credit rating, preapprovals will affect your score negatively.

Related Links
Understanding the Basics of Credit Scores
https://www.ironshield.ca/media/understanding-the-basics-of-credit-scores/

Rebuilding Canadian Credit after Living Abroad
https://www.ironshield.ca/media/rebuild-canadian-credit-after-living-abroad/

Equifax Canada—Get a Free Credit Report
http://www.consumer.equifax.ca/home/en_ca

TransUnion Canada
https://www.transunion.ca/ca

How Life Insurance Can Save Your Family – Stories from the Heart

At IRONSHIELD, it is important for us to help you make the best decisions possible when it comes to your everyday finances. Life insurance is a tool that can greatly improve your life and provide your family with financial stability. In today’s blog post, I want to show you some examples of how a proper insurance policy can be an excellent security tool in the event of a terminal illness diagnosis or the death of the insured. For five individuals, life insurance significantly changed their lives forever. Be inspired by their stories below and discover how life insurance can make an impact on you and your loved ones.

Victoria’s Story

Nancy was a widow whose husband had died at a young age. His small insurance policy was not enough to support his wife and their two daughters, so Nancy decided that she wanted to purchase additional comprehensive insurance in case anything were to happen to her. Sometime later, Nancy was diagnosed with cancer and was able to use the terminal illness portion of her insurance, which allowed her to receive 75% of the policy’s face value. Nancy used this money to finance a home for her daughters, purchase a car for her parents, pre-pay her funeral arrangements, and pay for expenses such as clothing. In addition, she saved some of it for her daughters’ college tuitions. Described by her insurance agent and friend, Victoria, as “an advocate for life insurance,” Nancy loved her family enough to take action while she was still alive to protect them. Her greatest wish was to help her daughters live comfortably and have the lifestyle she would have given them, and with the money from the life insurance policy, her wish was granted.

Irene’s Story

Irene’s client, Susan, had stayed at home with her children and did not have life insurance since her husband, Mark, was the family’s main source of income. Irene initially set up an insurance policy only for Mark because the couple didn’t feel that Susan needed any protection if she was a stay-at-home mom. However, Irene convinced them to buy insurance for Susan, citing the argument that Mark could not just give up his job to stay at home and care for his family if something were to happen to his wife. Susan passed away in a speeding accident some time after they purchased life insurance; Mark also suffered injuries, lost his income due to a disability, and needed to stay home with the kids. Irene said, “the life insurance continued to provide the opportunity to keep a roof over their kids’ heads.” With that money, their daughter was able to attend college and accomplish her goals. While he still misses his wife dearly, Mark said, “to buy an insurance policy is the best thing I did in my life.”

Mike’s Story

Mike’s client, Anne, and her husband wanted a big family and adopted five children within a few years. As their family continued to grow, Mike suggested that they needed more “life insurance for protection,” since Anne wanted her family “to be taken care of.” The family then purchased term for both Anne and her husband; more for him, since he was the one bringing home the money, but also enough for her because she was a stay-at-home mom who took care of the children and the household. When Anne passed away suddenly, her husband and their kids were able to adjust and live comfortably with the extra money, which can actually help you find the strength to get through the grieving process. Mike offers this advice to his clients: “Do not forget about the stay-at-home mom.” It is vital to consider how valuable her contributions are to the family.

Larry’s Story

Larry’s client, Dan, was the president and manager of a small company. Larry discussed insurance programs with him that would help fund a buy-sell agreement between Dan and his business partners, as a means of protecting their company’s name and employees. They decided to buy “key person insurance,” which is essentially life insurance for the key persons in the company – usually the owner, founders or employees that are crucial to the business. In the event of a death or departure of a key person, the money comes straight into the company and is used to find a replacement for the empty position. When Dan passed away in a plane accident, the infusion of capital from the life insurance policy enabled the company to find a replacement for him and maintain the efficiency of their business. Dan’s former business partner and the current president and CFO of the company advises that all business owners should be responsible for their employees, and to “make sure there is some succession planning,” as well as insurance for key persons, in order to protect their company’s legacy.

Helen’s Story

Helen’s client, Alice, worked at a country club that offered its employees a comprehensive medical plan and a small insurance policy. The club believed that all employees should have the option of purchasing additional life insurance. Alice made the decision to buy life insurance not only for herself, but more because her husband was going through an organ transplant. Helen suggests that, often, people don’t realize the need for insurance until they are going through a real-life situation. In this case, Alice also wanted to make sure that their young son would be taken care of in the future. When Alice passed away unexpectedly, their family lost her income and had outstanding medical bills from the transplant. The money from the life insurance policy that Alice had initially bought greatly assisted her husband and son in their time of need. Alice’s husband calls the insurance money “a gift that [Alice] left me.”

* Some names and identifying details have been changed to protect the privacy of individuals.

Related Links
The IRONSHIELD Insurance Plan
https://www.ironshield.ca/services/insurance-plan/

Long-Term Care Insurance 101—Part 1
https://www.ironshield.ca/articles/long-term-care-insurance-101-part-1-the-basics/

Long-Term Care Insurance 101—Part 2
https://www.ironshield.ca/articles/long-term-care-insurance-101-part-2-the-dos-and-donts/

An Investing Principles Checklist With Charles Wilton

A new interview with Charles Wilton, Portfolio Manager with the Private Investment Management Group at Raymond James. In today’s episode, we talk about the discipline process that Charles follows in order to make the proper decisions in making good quality investments.

Lower RRIF Withdrawal Minimums—More Flexibility for Seniors

The annual federal budget revealed in April 2015 brought along changes that have a profound impact on the financial industry. Along with the decision to raise the contribution limits of TFSAs, it was also announced that the government has proposed new rules for Registered Retirement Income Funds (RRIF) and lowered the mandatory withdrawal minimum for seniors significantly. In today’s blog post, we will take a quick look at how the new RRIF rules will affect seniors and their retirement savings.

Currently, seniors that have reached 71 years of age are required to withdraw the minimum amount from their RRIF each year. Up until the federal budget of 2015, this amount was 7.38% of an individual’s RRIF. The new changes will decrease the mandatory withdrawal significantly to 5.28%, but will continue to increase at a slightly faster rate per year. However, instead of capping off at 20% by the age of 94, the cap will now be reached at age 95.

Photo by: American Advisors Group licensed under Creative Commons Attribution 2.0 Generic

Reasons for the Change
Living in Canada has changed dramatically since 1993, the year when the former 7.38% withdrawal rate came into effect. Since then, the average life expectancy in Canada has improved from about 77 years to 81 years by 2012; it is certainly even higher today. The proposed RRIF rules are meant to reflect the change in the Canadian way of life and “reduce the risk of people outliving their savings.”

Investment industry groups, including CALU, and seniors’ organizations, such as CARP, have been active over issues regarding an individual’s retirement savings for years. They have often voiced their concerns about eliminating or pushing back the age at which the mandatory withdrawals began. Now, seniors can accumulate their savings longer and have more flexibility when it comes to managing their money in a tax-efficient way.

Useful Tips and Advantages
The new withdrawal minimum in RRIFs allows almost 50% more capital to be preserved by the age of 90. It is estimated by the federal government that the RRIF changes will save seniors $670 million in taxes over the next five years until 2020.

For wealthier Canadians, it is best to remember not to leave too much money inside your RRIF because this will lead to a higher tax liability upon death. While withdrawing a certain amount of money will trigger some taxes, it will correspond with your marginal tax bracket at the time. Therefore, the longer you accumulate your money, the more likely it is for taxes to be triggered in an estate and pushed to a higher tax bracket.

Four Mistakes to Avoid When Creating a Retirement Plan
https://www.ironshield.ca/articles/four-mistakes-to-avoid-when-creating-a-retirement-income-plan/

Tag Archives: Financial Planning