RSP catch up loans
Contribute today, save for tomorrow…
The best time to start contributing is now. Your RRSP is most effective when you maximize your contributions each year, starting today.
Save on income taxes - Contributions into your RRSP are tax-deductible up to your deduction limit, and growth within the plan is tax-free until withdrawn. Compounding growth on your investment – Both your contribution and any growth can generate earnings. The longer you invest, the faster your money can grow. An RRSP loan lets you take advantage of both benefits now by topping up your unused RRSP contribution room.
Borrowing to invest in an RRSP may not be appropriate for everyone. Your clients will need the financial means to meet their loan obligations. In addition, investments held in an RRSP may fluctuate in value. Your clients should be aware that, regardless of their RRSP’s performance or value of any investments held in their RRSP, they will be required to meet their loan obligations in full. Please ensure clients read the terms of their loan agreement and the investment details for important information. Manulife Bank of Canada solely acts in the capacity of lender and loan administrator and does not provide investment advice of any nature to individuals or advisors. The dealer and advisor are responsible for determining the appropriateness of investments for their clients and informing them of the risks associated with borrowing to invest.
Non Registered Investment loans
100% loans are ideal for investors new to a leveraged investing strategy and for those wishing to borrow 100% of their investment. Multiplier loans are designed for sophisticated investors who wish to buy larger amounts.
With traditional investing, you set aside a portion of your income each month or each year to purchase investments. Gradually, those investments grow over a long period of time. With leveraged investing, you take out a loan and make a single large investment purchase on day one. Then, you set aside a portion of your income each month to make interest payments on the loan. The amount you pay for loan interest may be the same as the amount you would normally contribute to a traditional investment plan. But, while your “out of pocket” costs may be the same under both strategies, leveraged investing has the potential to generate far greater returns. Here’s why:
- Compound returns. Compound returns refers to the fact that investment growth accelerates over time as the growth from one year is added to your initial investment to create a larger investment that can grow the next year and so on. The key to successful compounding is having the largest possible amount growing for the longest possible time. While traditional investing benefits from compound returns, it fails to take full advantage of them. Assume you have 15 years to invest and plan to make regular contributions each year. Only the contribution you make today will grow for the full 15 years. The contribution you make one year from now will only have 14 years to grow and so on. With leveraged investing, you contribute a much larger amount on day one and the whole amount can grow for the full amount of time, say 15 years. The effect of compound returns is much stronger with leverage, which can result in better investment results over the long term.
- Tax deductibility.* Since the interest you pay on a loan reduces your investment return, it’s important that you pay as little interest as possible. However, the interest you pay on an investment loan is generally tax deductible. This reduces the overall cost of this strategy
* Tax-deductibility depends on a number of factors, with the Income Tax Act providing the framework for determining tax-deductibility. Readers should consult their own tax and legal advisors with respect to their particular circumstancee.
Using borrowed money to finance the purchase of securities involves greater risk than a purchase using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines
Guaranteed Income in retirement
There are several options when it comes to making sure you don’t outlive your income. They can be designed to cover your essential on-going retirement expenses or the peace of mind knowing the amount invested will be there for your lifetime.
Life Annuities provide guaranteed income for your entire retirement, no matter how long you live. Only life insurance companies can offer annuities that guarantee income for life.
A Single Life Annuity provides a pre-determined income for an individual as long as he or she is living. When the individual (annuitant) dies, the contract ceases unless there are remaining guaranteed payments. Any remaining guaranteed payments would then be made to the named beneficiaries.
A Joint and Survivor Life Annuity is designed to cover the lives of two individuals – a primary annuitant and a secondary annuitant (usually spouses). Income is generally paid to the primary annuitant and, upon his or her death, the secondary annuitant continues to receive that income for his or her lifetime.
Life Annuities can be ideal for clients who:
- Wish to cover essential expenses in retirement
- Are concerned about outliving their savings
- Want to reduce ongoing investment decisions
Tax Free Travel Account in Retirement
What is a TFSA?
A Tax-Free Savings Account (TFSA) is a special type of account that allows Canadians to contribute a certain amount of money each year and earn tax-free investment income. But unlike a Registered Retirement Savings Plan (RRSP), earnings in a TFSA are generally not taxed, even once withdrawn!
For Canadians saving for retirement, the TFSA is an exciting opportunity to accumulate a nest egg that will generally not be subject to tax. The opportunity is especially compelling for young Canadians who have many years to benefit from compounded tax-free investment returns.
No consequences on income‑tested benefits and credits makes this ideal for those close to or in retirement. Withdrawals and income earned in the TFSA will not reduce the amount of the government benefits, such as Old Age Security (OAS), Guaranteed Income Supplement (GIS), and Employment Insurance (EI) benefits, and will not affect the eligibility for federal credits, such as the GST/HST sales tax credit, or Canada Child Benefit (CCB).
So, enjoy your retirement by implementing a TFSA into your goals for retirement. Most likely you are planning to travel so, why not designate your TFSA for travel and use your RRSP for your other expenses in retirement.
We can also quote your travel insurance for you.