A tax-free compounding account… In your portfolio that may have been over looked – $52,000 for each spouse to be exact, start planning now!

The tax-free savings account (TFSA) is starting to grow up.

Introduced in the 2008 federal budget and coming into effect on Jan. 1, 2009, the TFSA has become an integral part of financial planning in Canada, with the lifetime contribution limit now set to reach $52,000 in 2017.

Start taking advantage of this savings today.

Remember when you thought $5,000 did not amount to much as an investment. If you had taken advantage of this program you could have another $60,000 to $70,000 for each husband and wife invested in savings today. That’s $120,00 -$140,000 of Tax free Value based on the average market return since 2009.

Used correctly the TFSA can supplement income lowering your tax base during retirement. The gain made in a TFSA is tax-free, and therefore so are withdrawals — Did you know? That the money coming out of the account does not count as income in terms of the clawback for Old Age Security, which starts at $74,780 in 2017.

The TFSA has also become a great vehicle for dealing with a sudden influx of wealth. For people who downsize and sell their house or receive an inheritance, this money is already tax-free. Do not make it taxable in the hands of the government again.

Contact me for more information regarding this and other investments that have been overlooked. It never hurts to get a second opinion regarding your future.

 

Things you may or may not know about Registered Education Savings Plans

Things you may or may not know about  Registered Education Savings Plans

 

When learning about the lingo of RESP’s you will find some useful information within this article that will catch your attention, as most people who invest in their children do so, because they understand the need to help in the future. Although, they most likely will not understand the ins and outs of the program that they have been investing into for the future. We at Henley Financial & Wealth Management are always here to help you understand the process.  Please contact us with any questions you may have.

Let’s begin…

The CESG contribution limit is different than the RESP limit. The maximum annual amount of Basic CESG (Canada Education Savings Grant) that can be paid in any year was increased to $500 from $400 (and to $1,000 from $800 if there is unused grant room from previous years). The lifetime CESG for each child is still $7,200.

You can create a family plan or an individual plan. If you have one child, and intend to have more children, a family plan can be an attractive option. You can name one or more children as beneficiaries (the child using the funds in the future), and add or change beneficiaries at any time. If one of your children decides not to attend a post-secondary institution, your other children can make use of the funds.

With a family plan, all beneficiaries must be related to you. They can include children, adopted children, grandchildren, and brothers and sisters. You cannot include an unrelated person in a family plan.

A portion of contributions to the plan must be allocated to each beneficiary, although not necessarily equally. For example you can allocate a greater percentage to an older child who becomes a beneficiary a few years before university to quickly build education savings for that child. Meanwhile, younger children could be allocated less because there is plenty of time until they attend college or university. Contributions for each beneficiary can be made until the beneficiary turns 31.

The CESG is paid into the family RESP in the name of each beneficiary until that beneficiary turns 18. Most RESP’s, family or individual must be collapsed on or before the last day of their 35th year of existence. This should provide enough time to meet education savings needs of most families, including those with children of substantially different ages.

An important thing to know regarding RESP and CESG…

In the RESP world, $7,200 is an important number.  It’s the total amount of RESP grant money that can be paid to any one child.  This means that once a child has received $7,200 of grants – any future contributions will not receive any grant money. Meaning if there is a $50,000 maximum contribution to a RESP, only $36,000 of that RESP contribution will be credited with the 20% ($7,200) CESG.

This rule also applies to the RESP withdrawal phase. When you are making payments to a student – that child cannot receive more than $7,200 worth of grants.  Any excess amount of grants paid to a child will have to be returned to the government.

All withdrawals of contributions from an RESP account can be sent to either you (subscriber) or the student (beneficiary).  If you request a withdrawal of accumulated income in the form of an EAP (educational assistance payment), the money has to be sent to the student.

Specify if the withdrawal is to be from contributions, non-contributions or both

There are two parts to an RESP account:

  1. Contribution amount.  This is the total amount of all your contributions to the account.
  2. Accumulated Income.  This is all the money in the RESP, which are not contributions.  RESP grants, capital gains, interest payments, dividends are all included in the Accumulated Income portion.

Example of contribution amount and accumulated income amount 

Let’s say you contributed $2,400 per year for 15 years to an RESP account. 20% grants were paid on all the contributions and the investments have gone up in value.

  • Account is now worth $50,000.
  • Total contributions are $36,000 (15 x $2,400).
  • Accumulated income amount is $14,000 ($50,000 – $36,000)

You can make two types of withdrawals from an RESP account if your child is attending post secondary school:

  1. PSE (Post-Secondary Education Payment) is a withdrawal from the contribution amount.
  2. EAP (Educational Assistance Payment) is a withdrawal from the Accumulated income.

Some interesting facts about PSE and EAP:

  • PSE payments are not taxable income and there are no limits on withdrawals.
  • EAPs are taxable in the student’s hands.
  • There is no withholding tax on EAPs.
  • The financial institution at the end of the year will issue a T4A slip for any EAP made during the year.
  • There is a $5,000 limit for EAPs in the first 13 weeks of schooling.
  • When doing a withdrawal, you will have to specify how much of the money will be coming from contributions and how much from accumulated income.

So you now have some of the ins and outs of making contributions and withdrawals to and from an RESP. The rules can be confusing and complicated so when in doubt, seek the help of a financial advisor to guide you through your options.

One of the Biggest Assets in your life requires proper coverage.

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  1.  You have two life insurance options after securing your mortgage: insuring through the creditor or insuring through a life insurance company.
  2. Mortgage insurance is convenient, but the benefit is limited to the amount owing on the mortgage and is paid directly to the creditor and not your family.
  3. Life insurance is paid to your beneficiary and your coverage won’t decrease as your mortgage is paid down.
  4.  If you buy a bigger home, increasing your insurance coverage may be a smart choice.

Henley Financial and Wealth Management can provide expert guidance on both of these options.
When you buy a home, you need a way to help protect yourself and your family’s financial security, no matter what happens.

Your bank/lending institution will talk to you about mortgage insurance (also called creditor insurance) when you finance your house. You wil be told about the importance of this product for your mortgage. What it means…if you die, your mortgage with the lender is paid out, which is how the lender protects the institution if something should happen to you.

But what happens to your family if they don’t payout the mortgage because the death did not pass the underwriter approval after the fact. What you receive from the lender for your premium is a credit certificate not an actual insurance policy. After death, the credit certificate is sent to the insurer for underwriting at which time the underwriter will decide if the insured qualified for insurance. One of two scenarios will happen: the lender will payout the mortgage or refund the premiums. If its the latter it is because the insured did not qualify for insurance due to circumstance before death.

Is having mortgage insurance/credit insurance from your lender the best option for you?

If you want to protect more than just your home, individual insurance will better suit your needs. Individual insurance generally provides more control, options and benefits to help you financially protect what matters most. Underwriting is done at the time of application and an insurance policy is issued if you qualify. When the insured dies the benefactor can choose to payout the mortgage, use the money for the families individual needs or do both.

By comparing Mortgage Insurance and Individual Life Insurance, you ensure you’re giving yourself and your family the type of insurance protection that meets your personal needs and just protecting the lender.

Build a financial security plan that will help protect your mortgage and what matters most in your life.

 

How should I invest my tax refund?

How should I invest my tax refund?

You may soon find yourself with a tax refund.

  • How should you spend it?
  • What is the right answer for you?
  • Would you be interested in a value added idea?

Presented by Henley Financial & Wealth Management – please continue to read you may find this of some value.

The average individual tax refund is between $1,500 and $3,000. Not everyone will get a tax return essentially a return means that you paid the government too much in tax during the year and now they want you to have it back… For the chosen few people that do lend the government their own money to invest during the year on a tax free basis, that’s the biggest chunk of discretionary income they’ll see in a year. There’s a lot of temptation to spend this cash as is not readily accounted for so it’s essentially free money.

What would you do with that cash if was suddenly given to you?

Hmm, A Trip, Newest Phone, Clothes, Shoes, Dinner and Drinks (well more drinks than dinner), Raptors Tickets, Concert Tickets and a host of many other ideas come to mind.

Once you see the cheque or the deposit in you bank account a spending rush will come over you. Earning 1% in a high yield savings account does not seem very appealing. Investing in your portfolio for future returns that cannot be seen for years to come does not give you that warm and fuzzy feeling.

You could take a trip of a lifetime. How could that be a bad investment? The experience alone is worth a lifetime of memories. This will subside next month when you realize that you spent the return and then some and have to pay for those memories. Hopefully you took some beautiful pictures to share with your face book and instragram friends. Those will more than make up for the sticker shock price of the trip.

The other items or ideas mentioned are all short term memories but definitely worth the time spent if that’s what you want. Just remember there is a difference between needs and wants.

So what should you do with your tax return? Here is an idea that will work but isn’t sexy at all. Double up on a mortgage payment. Or Pay down a credit card bill as it is the highest interest debt that you are carrying. Either is a good choice…

If you think about it paying down your mortgage with your return you are one month closer to paying off the principle on your house. This is one of the biggest assets you own in your portfolio especially with today’s housing market. Since mortgage rates are historically quite low, you could potentially make more money by investing that return in the market but as we know the market can be very volatile.

In any case it’s just a thought and the value to you in the long run is a great basic investment in yourself and your family.

 

The greatest compliment we receive is being introduced to family, friends and co-workers. Let us know if you would like to introduce someone to Henley Financial and Wealth Management. Contact us Henley Financial & Wealth Management.

 

Heaven can wait… along as you plan for the road ahead.

Heaven can wait… along as you plan for the road ahead.

A person sacrifices his/her health to make money.  Then they sacrifice money to recuperate their health.  They become so anxious about the future that they do not enjoy the present; the result being that they do not live in the present or the future; they live as they are never going to die, only to die never really lived.  Dalai Lama

So when I’m asked what I do?

The answer is simple!  I help you take care of the future so you don’t have worry, thus allowing you to live for today and tomorrow. I help you succeed!

whatdoyoudo

According to the Dalai Lama, “a person sacrifices their health to make money”.  So what if I told you I can help you protect your money so you don’t have to sacrifice your health.

When creating our wealth we are often confronted with the risk of not accumulating enough for our future.  During the accumulation phase of life (accumulation phase –  is when we earn money) it is critical that we save for the future, so we can continue to enjoy a comfortable lifestyle into retirement. Our lifestyle ambitions requires us to earn our dreams.  In some cases we tend live beyond our earning potential.  Saving for retirement is often complicated, difficult and a time-consuming task for many.  We often see people delay saving for the future because they want more now.  This is where I can help you succeed.  I work with you to help give you that future so you can live today, within your earning potential, and not worry about tomorrow.  I help make your life simple through planning.

How?

 If I could…

Take the volatility out of the market would you be interested?

Help you protect your assets would you be interested?

Help you protect your earning power would you be interested?

Help you protect your earning potential would you be interested?

If you answered yes, to any of these questions above, it’s time for us to start planning together.  Plan for your future so you can live in the present…let me do what I do best.

I can help you find money that you did not know you were losing willingly or unknowingly by taking the volatility out of the markets.  In doing so I will help you Protect Your Assets through Wills, Health Benefits, Estate planning, and Long Term Care.  I will help you Protect Your Earning Power through Living Benefits.  Finally, I will help you Protect Your Earning Potential with the use of Life Insurance.

This is what I do! I help you plan for the future so you can live in the present. I help you succeed!

So is the Dalai Lama right?  Do we have to sacrifice health for life style?

As long as we do what we love and love what we do!   We know that life is good.  We must enjoy the present as we never know what lies ahead.  So live for today and plan for tomorrow.  If done correctly we will not have to sacrifice our health for lifestyle.

Do you have to sacrifice your money to recoup your health?

In life we are sometimes thrown a curve ball, and our ability to deal with any health issue that comes our way is vital to our recovery.  If planned correctly you will never have to sacrifice the future for the present.  Depending on the health issues you will have a plan in place so that the road to recovery is all that you will have to concern yourself with.

Although the Dali Lama says that people don’t enjoy today because they worry about the past and the future.  I believe that if you plan your personal and families financial security with a vision and purpose you can indeed live worry free to enjoy today.

Unfortunately, we all will die at some point, as it is the cycle life we know.  Live life, enjoy your present and future.

The purpose of our life is to be happy.  Dali Lama

Start planning today and be happy tomorrow.

If you liked this article please like my Henley Financial & Wealth Management Facebook Page: https://www.facebook.com/HenleyFinancialandWealthMangement

If interested contact me  @ http://www.henleyfinancial.ca

Are you Missing out?

Are you Missing out?

A tax-free compounding account… In your portfolio that has been overlooked.

Check us out… Henley Financial and Wealth Management

The tax-free savings account is starting to grow up.

Introduced in the 2008 federal budget and coming into effect on Jan. 1, 2009, the TFSA has become an integral part of financial planning in Canada, with the lifetime contribution limit set to reach $52,000 in 2017, provided you were 18 at the time it came into existence.

Remember when you thought $5,000 did not amount to much as an investment. You would have another $60,000 to $70,000 for each husband and wife if you have been maximizing their contribution and based on the market’s return since 2009.

Used correctly the TFSA can supplement income lower your tax base during retirement. As the gains made in the TFSA are tax-free, and so are withdrawals —Did you know that the money coming out of the account does not count as income in terms of the clawback for Old Age Security, which starts at $74,780 in 2017.

The TFSA has also become a great vehicle for dealing with a sudden influx of wealth. For people sell their house or receive an inheritance. That money is already tax-free you don’t want to make it taxable in the hands of the government again.

With that in mind, and the new year limit increase upon us, here are eight things Canadians need to know about TFSAs.

How did we get to $52,000?

The first four years of the program, the annual contribution limit was $5,000 but that increased to $5,500 in 2013 and 2014 under a formula that indexes contributions to inflation. The Tories increased the annual contribution limit to $10,000 in 2015 but the Liberals quickly repealed that when they came into power and reduced annual contributions to $5,500 for 2016, still indexed to inflation. The annual number increases in increments of $500 but inflation was not riding high enough to boost the annual figure to $6,000 for 2017 so we are stuck at $5,500. That brings us to the current $52,000. The good news is even if you’ve never contributed before, that contribution room kept growing based on the year in which you turned 18.

Eligible investments

For the most part, whatever is permitted in an RRSP, can go into a TFSA. That includes cash, mutual funds, securities listed on a designated stock exchange, guaranteed investment certificates, bonds and certain shares of small business corporations. You can contribute foreign funds but they will be converted to Canadian dollars, which cannot exceed your TFSA contribution room.

Unused room

As the TFSA limit has grown, so has the unused room in Canadians’ accounts. A poll from Tangerine Bank in 2014 found that even after the Tories increased the annual limit, a move that ended up as a one-time annual bump, 56 per cent of people were still unaware of the larger contribution limit. In 2015, only about one in five Canadians with a TFSA had maximized the contribution room in their account, according to documents from the Canada Revenue Agency.

Withdrawal and redeposit rules

For the most part, you can withdraw any amount from the TFSA at any time and it will not reduce the total amount of contributions you have already made for the year. The tricky part is the repayment rules. If you decide to replace or re-contribute all or a portion of your withdrawals into your TFSA in the same year, you can only do so if you have available TFSA contribution room. Otherwise, you must wait until Jan. 1 of the next year. The penalty for over-contributing is 1 per cent of the highest excess TFSA amount in the month, for each month that the excess amount remains in your account.

Is the Canada Revenue Agency still auditing TFSAs?

The Canada Revenue Agency continues to investigate some Canadians — less than one per cent — who have very high balances in their accounts. Active traders in speculative products seem to be the main trigger. Expects an appeal of the current rules regarding TFSA investments to be heard in February.

Be careful on foreign investments

If a stock pays foreign dividends, you could find yourself subject to a withholding tax. While in a non-registered account you get a foreign tax credit for the amount of foreign taxes withheld, if the dividends are paid to your TFSA, no foreign tax credit is available. For U.S. stocks, while, there is an exemption from withholding tax under the Canada-U.S. tax treaty for U.S. dividends paid to an RRSP or RRIF, this exemption does not apply to U.S. dividends paid to a TFSA.

What are people investing their TFSA in?

People are still heavily into cash and close to cash holdings. A study from two years ago, found 44 per cent of holdings in TFSAs were in a high-interest savings accounts. Another 21 per cent were in guaranteed investment certificates. If you want to see your money grow you also have to respect your risk tolerance. You may want to look at your investment horizon.

TFSA vs RRSP

It’s hard to generalize which is better for a typical Canadian. RRSPs are generally geared towards reducing your taxable income when your marginal rate is high and then withdrawing the money in retirement when your income will theoretically be much lower. The answer is easy if you make $10,000 a year and you’re a young person — the TFSA is better — but the deduction you get from RRSP contributions are only part of the equation. It also depends on the flexibility that you are looking for. Once you get to the higher marginal rate that deduction is attractive but nothing stops you from taking that deduction and putting it in a TFSA and getting the benefit of both.

 

Getting out of your way to find success!

Getting out of your way to find success!

I learned that courage was not the absence of fear, but the triumph over it. The brave person is not the person who does not feel afraid, but the person who conquers that fear.  Nelson Mandela

During the Christmas break we find ourselves looking towards next year. Planning our business model or just looking forward to a change. I always try to pick up a book during the holidays usually a biography as I find them to be most interesting. I like reading about other people’s stories.

Generally what you find in every success is the same pattern, if you have a goal in life and want to succeed you will need to know the following…

  1. Be clear about your goal.
  2. Face your fears.
  3. Trust yourself.
  4. Embrace the unknown.
  5. Think big.
  6. Be brave.

To be successful at anything we do we must conquer some if not all of the above. Life is funny as we are held back by our cautious nature we are afraid of the unknown, our own failure. Because of this most of us never reach our true potential. We read about the successful people who fail more than once and keep pushing forward until finally they reach that unattainable goal for most. Success!

Being clear about your goal – we focus more on what we will lose than what we will gain. Therefore if you are going to lose something you must be clear about what it is you want to gain. There will be no guarantee that success will be accomplished but the answer is ‘NO’ if you don’t ask the question and will always be ‘No’! We must know the answer before we start. So ask the question!

Fear – often gets in the way but we are wired from a young age to be cautious to any potential threat to our own safety. That is not only a physical threat but also a mental threat we will undermine our own ability to asses smart risk from safe risks. Sometimes you have to say “what the heck?” and push forward. If don’t challenge your fear it will become you.

Trust – you must believe in the path that you have set out for yourself. If you don’t have trust in yourself to create the future you aspire to have you will only find regret. There will be days you will be overwhelmed. As long as you believe in the path you have set out for yourself and trust the process. Success will come.

The unknown – We always choose the path of least resistance because it’s the one we know. What if we walk through a door that’s open and we don’t know anyone on the other side. You have two choices turn around and walk back through the open door, or meet new people on the other side. Within a short period of time you will have made a new contact, a new friend, or had a new conversation. At any rate you will have embraced the unknown. Choose a path unknown every now and then you may be surprised at the result.

Think big – we all have dreams, which get us excited. These dreams are awe-inspiring; they are the end result of an idea. We know for a fact that we can’t go from nothing to something without staring with an idea. If it’s a big idea then that’s the end result, and we you need to take small step along that path to achieve the dream. Don’t stop dreaming big dive in with both feet grounded find the solution to create the idea that fulfils the results.

Be brave – Let’s be clear: Living courageously is not the absence of knots in your stomach, a lump in your throat, sleepless nights or sweaty palms. It’s not about being fearless. It’s about fearing less. Everyone processes greatness within himself or herself.

Do not judge me by my successes, judge me by how many times I fell down and got back up again. Nelson Mandela

Get out of your own way and you will find success!