Loading...
The Huron Expositor, 1999-01-20, Page 6bonds, stocks, etc. The choice of what is the right investment should revolve around you, your age. your tolerance for risk and where you are in the life cycle. If you are young in age you will want to focus on invest- ment's that will produce'a great deal of growth over time. For most people this will mean choosing a growth mutual fund. If you arc approaching thc middle age point in your life you should look at a balance of your sav- ings bonds or GiC's, and a portion in e,quitics, usually an equity mutual fund. As you begin to reach retirement age 15 -THE HURON EXPOSITOR, January 20, 19119 119 FINANCIAL PLANNING??? THE IMPORTANCE OF A FINANCIAL PLAN "There are three kinds of people: those who make things happen, those who watch what happens, and those who say, "What hap- pened?" - Oliver Wendel Hobnes Investments, tax and estate laws, even daily living are growing more complicated. You can face your financial future with either anticipation or apprehension. A complete, written financial plan will help bring anticipation to your future. Your financial plan becomes your promise of the future. Committed to that promise, you will be more likely to give up small amounts of instant satisfac- tion for the larger rewards that come from delayed grati- fication. Your financial plan should cover these topics: 1. Life insurance (What will happen to your family if you die'tothorrow, next year, 10 years from now?) 2. Retirement income that yot1 and/or your spouse can't outlive (Consider that one or both of you may live 30 years in retirement) 3. Estate planning (Minimize taxation of your estate in order to leave more to the people you love) 4. Educating your children 5. Medical costs during the last five years of your life (Half of one's .total lifetime medical expenses may come in the last five years of life). 6. Charitable giving (Highly efficient ways to make meaningful contrihu- tions to the institutions that have provided assistance to your family's life) Regular reviews of your financial plan will ensure that it always reflects your plans for the future. ' Nearly 70 percent of Canadians have no financial plans for retirement. These individuals will face their financial futures with appre- hension. it doesn't have to be that way for you. Meet with your financial advisor and together. make things happen for your financial future. By Doug Elliott, Financial Advisor THOUGHTS TOWARDS INCOME TAX PLANNING At this time of year, most people turn their thoughts towards income tax planning for the eventual filing of their income tax return. Tax planning should not be completed due to Revenue Canada's annual income tax filing deadline. but should be an ongoing process. Some fail to understand the'tax rules and their application, while during the year some fail to 'take advantage of opportuni- ties that will help to reach their gpal of paying the fnini- mum amount of income tax that is required by law, and also'meet goals of investment for the future. • Your accountant is available to advise you and work with you and your business during the year to ensure that deci- sions made during the, year which have income tax impli- cations can be recognized at that time. There may be cer- tain planning opportunities to case the tax burden that can- not be implemented after the year has past. Part of the tax planning process is to understand the following concepts: Time Value of Money - A dol- lar received today is worth more than a dollar received in the future. This applies to tax planning in that it is better to pay a dollar of tax that is owed in the future rather than today if there is a chance to do s0. Marginal Tax Brackets. - In Canada we have progressive tax rates, which means that as your income rises, your rate Of tax also rises. This concept will determine how much tax would be saved by incurring costs that arc tax deductible. In Ontario the marginal ,tax rates range from 25% to 50% and include both Federal and Provincial income taxes. Tax Deferrals - Any planning undertaken to defer income tax to a future period is a deferral and not an elimina- tion of tax obligations. Tax Credits and Tax Deductions - A tax deduction will decrease taxable income and will reduce the overall tax bill by the marginal tax rate. A tax credit is a reduction of taxes owing and a $100 tax• credit will save taxes of $I00 regardless of the person's marginal tax rate. Tax planning is an essential process and should be under- taken year round with the assistance of your accountant or financial advisor before the annual tax return is due. Brian E Wightrnan - CGA 8a5Haefling Bas Haefllng, C.A., P. Ag. Associate: Barry Boyd Providing a full range of accounting, computer. tax, and financial consulting services to meet the needs of Business and Farmers Ph: 348-8412 - 11 Victoria St.. Mitchell - Fax: 3484300 Achieve Your Financial Goals with our complete financial planning services. Our team of advisors work with you to establish your comprehensive financial plan involving •insurance, •investment, •tax and. •estate planning Cali us for your no -cost consultation, Doig Erop B. link lnuestmentGentre Seaforth 96 Main St. Serving Seaforth Since 1986 527-0420 RRSPs ARE BEST FOR GROWTH As the RRSP contribution deadline; March I, approaches many of us will he giving some consideration to making our yearly contribution to our Registered Retirement Savings Plans. However, a great many Canadians are not thinking about their retire- ment plans at this point. or do not think that RRSP's are very important. These people gen- erally do not understand the benefits of having a RRSP, which is a shame since RRSP's are one of the best ways to achieve growth of • ones wealth, while keeping the "Tax Man" at bay. RRSP's are very simply accounts which are sheltered from taxation. For example, if your lucky enough to be able to find a bond or a GIC that will pay you 5% a year, and you have $1,000 invested, you will receive in annual income $50.00 from your investment. Sounds okay right? Wrong. The $50 is considered interest , income and is fully taxable at your marginal tax rate.. So if you are in a 40%' tax bracket, $20.00 of your $50.00 goes to the "Tax Man." Now you only have $30.00 in annual income in your pocket from 'an investment of $1,000, or a 3% return. But if you had contributed $1,000 into an RRSP GIC that _. gave. you 5%. in annual income, the "Tax Man" would give you a tax refund of $400.00 for making your con- tribution ($1,000 x 40% tax bracket) and the annual income Of 5% or $50.0( would not be taxed as long as the income remains inside of thc RRSP making that invest- ment grow at a much faster rate. if you do have an RRSP or are going to open one, ybu will now want to consider choosing the right kind of investments for your Registered Savings Plan. Mutual funds, GiC's, CSB's, GIVE SOMEONE A SECOND CHANCE. Discuss organ donation with your family and sign a donor card today. We'd CIBC like to contribute to your RRSP • Protected Mutual Funds • GICs • Prime Rate RRSP Loans • Professionally Managed Accounts OPEN EXTENDED HOURS FOR RRSP SALES Feb. 25, 26, 27 Better advice. MorerOptions. On your terms. 527-0100 Please feel free to drop in to discuss: The Rules The Tax Advantage the investments Date: Every Wednesday Night In January & February' 'Wednesday, Feb. 3/99 Is reserved as Ladles Only Night Time: 7:00.9:00 p.m Place: Edward Jones Office 79 Ontario Rd., Mitchell Registered Retirement Savings Plan Information Nights Joe Waite 79 Ontario Road, Mitchell, Ontario NOK 1NO (519)348.9873 Edward Jones Serving individual investors Mfg://www.edwardiones.com your tolerance for risk gener- • ally goes down. Therefore bonds. and GIC's (also known as fixed income products) should comprise a larger por- tion of your portfolio, and equities a smaller portion of your savings, CIBC Brian E. Wightman Certified General Accountant 64 Main St., Seaforth (519)527-1331 Brian Wightman • Accounting & Bookkeeping • Personal & Corporate Tax • Farm, Business & Indvidual • Tax Planning Call for a free consultation at my office, vour home or 1'usaness. 527-1331 THE GRANDPARENTS WHO WANT JUNIOR TO BE A MILLIONAIRE IT'S YOUR MONEY By Paul J. Rockel Chairman, Regal Capital Planners Ltd. (NC) - The financial joke amongst salesman at the office tells about the grandparents who were all excited, and called from their home 200 miles away, asking the mutual fund salesman to visit them, as they wished 10 invest enough money to make their newly- bom grandchild a millionaire at age 65. And ... the salesperson went, driving the 200 miles, without first doing some simple mathematics. He didn't figure out how much would have to be invested at birth, to make a newly -born child worth $1 million 65 years Tater. You see, Grandpa had been a mutual fund client for many, many years, and he knew that good mutual funds have averaged some 15% per year, given 15 -year or more timespans. Past performance has proven it, and the statistics on all mutual funds in Canada are published monthly in the Globe and Mail and Financial Post. The saletman lost a lot of money because he didn't do a simple calculation. To achieve S1 million at age 65; assuming a 15% average rate o return, all 3randpa would have to ,investor that infant grandchild, would be $133.41. The salesperson drove 200 miles to get an investment of $113.41, and probably eamed a commission of less than $3.50. Would you? (At 12% retum, the single investment amount required woukf be $632.16). But, • did- Grandpa really want the child to have $1 million; os did he want the child to have the purchasing power of $1 million today, REGAL CAPITAL LPfLANNERS Maitland Valley Financial Consultants Ltd. 453 Tumbeny St, Brussels, ON NOG I HO 65 years from now? And, that's a different story. Many of the top experts are telling us that inflation will' again reach double digit figures (over 10%) in the not too distant future. Some are forecasting inflation "averages" over the next many decades that will be somewhere between 5% . and 6% averages per year. (Past 34 years inflation averaged 5%). Taking the idea that Grandpa wanted Junior to have the spending power of $1 million when he reached age 65, assuming an inflation rate of 5% means that Junior will need over $23 million at that time, just to match the equivalent of $1 million today. If inflation wee to average 8%, Junior would need $148 million at age 65, to have the same purchasing power as $1 million today. Shocking, isn't it! To achieve $148 million 65 years from now, at 15% rate of return, Grandpa would have to invest $16,784. For that the salesperson might want to drive 200 miles. • • Have -you taken inflation into your future plans? If your total pension benefits are $20,000 yearly now, at 5% inflation you will need $48,000 yearly 18 years from now, just to match the purchasing power of $20,000 today. Think about it! 'Rate of retum is used only for the purpose of illustrating the effects of the compound growth rate, and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund.' Bus. (519) 887-2662 Res.(519) 347-2569 Susan Cater, C.I.M. Financial Consultant SOME OF OUR PRODUCTS AND SERVICES Top Paying GICs, Tax Sating SbaNglaa, Weal Fw►d,, We f OWN* Insurance, RRSP., RRIFa and RESP, (The above 1st represents only a few o18re nw' y Rnanciat services avaliable through your Reg l Financial Centre.) - This Is No. 1222 ki e aeries of sada lltsl have been appearing in newspapers and magazines across Canada for more then I5 wane. For Paul J. Rocarers book 'WHY INVEST IN MUTUAL FUNDS' contact your brad book store or Regal Cap a/ Planners LA?., febpbone 887-2662.