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HomeMy WebLinkAboutThe Citizen, 1996-01-31, Page 13HOW BALANCED IS YOUR RRSP? AGF GROWTH+INCOME FUND gives you all the advantages of stocks, bonds and cash in one mutual fund. Diversifying among stocks, bonds and cash is a proven technique for decreasing investment volatility. It recognizes that each type of asset performs differently during the different stages of the business cycle. Often, the right balance between assets can be more important than any specific investment. It can help generate higher returns without significantly increasing risk. Find out how AGF GROWTH + INCOME FUND can improve the performance of your RRSP. MUTUAL FUNDS Preserving Wealth. Pursuing Opportunities. For more information contact: Helen M. Hetherington Financial Planning Consultant R.R. #3 Brussels, Ontario NOG 1H0 Bus: (519) 887-9964 Res: (519) 887-6817 Fax: (519) 887-9967 Toll Free: 1-800-869-8922 Associated Financial Planners Limited Head Office: 20 Erb St. W., Suite 800, Waterloo, Ont. N2L 112 Ft Competitive ates RRSP Loans AvaitioNe Al Woe Hessenaur & Shantz Ltd. Karen Kleist Insurance Broker 224 Josephine St., Wingham, Ontario (519) 357-2669 Li Est 1912 AU 0 • HOME • RRSPs LIFE • COMMERCIAL • GROUP RRSP DEADLINE FEBRUARY 29, 1996 THE CITIZEN, WEDNESDAY, JANUARY 31, 1996 PAGE 13. • • 'WHIRR -RRWAN -n MIK 7 N 11111INININIVNINIIIIIIIMMIN=1/11112.0IIIIErrk I11111=11111 I1111k SAVE SMARTER About the Canada Pension Plan Do you know where your money is? As the average age of Canadians continues to increase, people are seeking more information on bene- fits available through the Canada Pension Plan (CPP), a government program which most Canadians contribute to over their working years. Though families today often have two incomes, resulting in two CPP cheques at the age of 65 (or earli- er), there is benefit available to the surviving spouse or minor children in the event of the CPP recipient's death. Survivor benefits, which come in Three forms, are paid to the deceased's estate, the surviving spouse and dependent children. Death benefits The death benefit is a one-time lump-sum payment which goes to the estate, the person who has incurred funeral expenses, the sur- viving spouse or the next of kin, in that order. The amount of the payment is dependent upon the length of time the deceased contributed to the plan and how much was paid in. The death benefit is equal to six months' worth of pension which was received (or would have been at the age of 65), up to a set maxi- mum, for the year of death. In 1994, the average death bene- fit totalled $2,473.30 with the max- imum set at $3,440. This payment is made within six to 12 weeks of the application. Surviving spouse benefits There are many factors to take into consideration when determin- ing the surviving spouse benefits, which can be particularly important with one-income families. To qualify as a surviving spouse, the person must be the legal or common-law spouse at the time of death. Even if the survivor is legal- ly separated from the deceased and there is no co-habitating spouse, the person may be eligible. The amount of the benefit varies greatly depending upon contribu- tion level, the age of the living spouse at the time of death, if the survivor is receiving disability or retirement benefits and if there are dependent children. With prompt application for sur- vivor benefits, the pension will begin in the month following the By Linda Henhoeffer Financial Advisor Once in a while, I end up at a fast food restaurant for lunch. I always feel overwhelmed by all the choices. As I am frantically trying to make sense of all this amid the hustle, usually the three year old behind me is asking his dad, "What's taking that lady so long?" The teenage staff are rolling their eyes and tapping their fingers on the counter. In desperation, I order the first item on the list. My reasoning is it must be good if it's at the top! What the heck is 'a double over with a flip' anyway? Someday I will order one just to find out. I wonder if this is how most of us feel about our investments. Overwhelmed by all the choices. Bewildered by the language. Served by the staff who are too busy to explain the advantages and disadvantages of each type of investment. Too busy to determine if this investment is appropriate for us and fits our 'diet'. Most Canadians know we should be saving for our retirement. The government certainly won't be able to afford to keep us in our old age. Most of us know we get an income tax refund if we put our savings inside a Registered Retirement Savings Plan. Most of us look forward to an income tax refund in the spring to buy ourselves a treat: a summer vacation, a new lawn mower, that hammock we always wanted! Where most of us fall down is HOW we invest our savings. Most of us approach our savings in the same way I cope with fast food restaurants. Get me in and out as quickly and painlessly as possible. Is there a better way? Yes. Take some time to learn about the various kinds of investments. This way you will be an informed consumer and able to take control of your savings. Everyone is talking about 'mutual funds' but what are they and would they be a good investment for you? MUTUAL FUNDS A mutual fund is a government regulated investment where many people pool their money to buy a portfolio of stocks, bonds or treasury bills. The decision of what investment to buy and when to sell is made by the 'manager' of the mutual fund. The manager usually has a business degree, training and experience. As profits are being made, these profits are shared with the 'shareholders' in proportion with the amount we have put into the mutual fund. EQUITY (STOCK) MUTUAL FUNDS An 'equity' mutual fund is a portfolio of stocks of companies. The manager will usually buy stocks of companies from the various segments of the economy. So, our portfolio will usually have some stocks of banks, manufacturers, computer and drug companies, etc. It would be difficult for most of us to be able to afford this wide variety of stocks on our own. This diversification is an important reason to invest in a mutual fund. Another advantage of investing in mutual funds is our choice of investing in Canadian companies or international companies. This opens the world to us! Would you like to invest in Asia, Europe, or the USA? All of this is possible with mutual funds. GOVERNMENT BOND MUTUAL FUNDS When governments run out of money and they need to borrow money to pay their bills, they take out mortgages. Governments don't use the term 'mortgage' to describe these debts. Governments use the term 'bond'. Bonds are issued by the governments in different maturities. Some are very short term - 60 days, 90 days, and one year. These are called 'treasury bills' or 'T bills'. The treasury bills are sold at an auction every Tuesday. The average rate of return of the 90 day 'T bills' plus one quarter per cent is the rate that sets the Bank of Canada interest rate! Longer term bonds are also issued for five years, 10 years and even 20 years. Of course, the longer term bonds usually pay a higher rate of return. Governments issue bonds of various amounts and maturity all the time. These bonds are also bought and sold daily on the 'bond market'. Changes in the daily interest rates determine the profit or loss on these bonds. A 'bond' mutual fund will usually hold bonds of various issue dates and length of maturities. A 'money market' mutual fund will have treasury bills only. BALANCED MUTUAL FUNDS A 'balanced' mutual fund will have a combination of companies' stocks, government bonds and treasury bills. This more conservative portfolio will be appealing to investors who like the idea of having some of each of these asset classes. Learning about our investment choices can be fun as well as educational. Our savings are important to our financial health. They deserve more thought than we give to our order at a fast food restaurant. e-1•mi 1L)IBC R.R.S.P. SEMINAR February 12, 1996 Blyth Memorial Hall - Art Gallery 7:15 p.m. - 8:30 p.m. Admission Free presented by Blyth CIBC Topics include: Demystifying Mutual Funds R.S.V.P. - as seating is limited Please call 523-4247 death though it may be six to 12 Pension payments will not be lost weeks before the first monies upon remarrying. arrive. (This is a change since 1987. If The cheque should arrive in the previous survivor benefits were last three banking days of the lost, contact the local Income Secu- month. rity Programs office) Cessation of survivor benefits A final consideration for the liv- As well as considering when the ing spouse is that they are permit- beneficiary will receive monies, ted to receive two CPP payments one must also be aware when bene- upon the death of a spouse. fits cease. If the survivor is already receiv- For those spouses over the age of ing their own retirement or disabili- 35 at the time of the contributor's ty pension, the survivor benefits death, pension benefits end one will be combined into one pay- month after their own death. ment, to a set maximum. The new However, for those under 35, for payment will not necessarily be the whom eligibility for benefits is sum of the two pensions. more strict, benefits end when the A recipient, however may not survivor: is no longer disabled receive survivor benefits from two (according to CPP guidelines), no deceased spouses. The larger pen- longer raising the deceased contrib- sion will be paid. utor's dependent child or one month Orphan benefits after their own death. Continued on page 14 Important information about AGF Mutual Funds is contained in the simplified prospectus Obtain a copy from an investment dealer, mutual fund specialist or AGF Management Limited and read it carefully before investing. Unit value, yield and investment return will fluctuate.