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.


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.


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.


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.


Do you have a plan?

Do you have a plan?

Most people are concerned about having enough money to meet their obligations at or in retirement. Using traditional planning methods such as buy term and invest the difference, and live off the earnings and retain capital are the most common methods used today.

This type of planning only works if you follow a regimented plan and you don’t spend the difference.  If you fail to invest the rest… it lessens the quality of life that one should be able to enjoy in the active years of retirement! It is upside down and backwards!

With our low-interest rate environment, it’s difficult to find sustainability in your portfolio. One way to extend the life of your capital is to consider equities in the form of dividend earning stock.

This tends to be a source of hedging against tax, inflation, fees and other wealth transfers, however, using equities means taking more risk.

Who wants to take more risk leading into retirement?

If you would like advice on reducing the risk, or with what type of investment vehicle may be best for your situation please contact us at info@Henleyfinancial.ca

Visit us at at Henley Financial and Wealth Management

If indeed you are investing in equities please understand the risk involved within your investable assets. Investing in equities will depend on your risk tolerance and the reality of the situation. During retirement, you should lower the amount of Equities within your portfolio to protect you against the volatility of the markets. Leading up to retirement Equities can help build your portfolio but you must be able to accept the risk of volatility which the markets will provide.

Guaranteed Lifetime Withdrawal Benefit products offer a guaranteed income bonus and can provide a stable environment for investments moving forward with the option of a guaranteed lifetime income. This takes the guess work out the planning and provides you with a pension like asset.

Another strategy is to have adequate permanent life/asset insurance that frees up other assets such as non-registered savings, investment property equity or retained earnings in a business.

Having enough life insurance allows one to spend down taxable savings RRSP’s or RRIF’s during early/active retirement years (age 60-75) whereby you’re actually reducing the tax burden overall.

By deferring the use of RRSP’s and RRIF’s the tax on these assets is actually growing as invested capital. By using the funds sooner, rather than later, (yes you are paying more tax now) but you are paying a known tax, you have control over what the tax amounts are. If you wait long enough the government dictates the amount of tax owed yearly. Meaning if you defer too long, one conceivably can pay a much greater tax than ever saved by using the registered plan strategy!

Access equity sitting dormant in your paid off or very low debt home could also be a strategy that you could use during retirement. The reverse mortgage has been a component of retirement planning  over the last few years based on the low-interest rates on borrowed money. Again this strategy requires some professional advice.

Life insurance lowers the pressure of the capital to perform and lessens market volatility risk. It also lessens government control risk. Meaning, by using a registered plan strategy you absolutely are in a partnership with the government. RRSP and RRIF products are very much a controlled revenue source for the C.R.A. your strategy will dictate the how much income they will receive on your behalf.

If you are interested in creating more spendable income during the early retirement years without fear of running out of money we can show you how. For the most part, we can increase your spendable income into and during retirement without any additional out of pocket expense!

If we can recover 1%-5% of gross income from dollars that are unnecessarily being transferred away from you through tax, fees and other opportunity costs which can be redistributed to your retirement plan and increase lifestyle along the way. Would you be interested?

Let us provide you with an overall review of your entire investment and financial plan. We will do this with no obligation from you to move forward with any recommendations we may have, or we may find that you are well on your way and continue on that path. Either way, a second opinion never hurt anyone.

Ask yourself these 10 questions? They will help you decide if you are ready…

1. When do you want to retire?

2. What percentage of your current income do you expect to need in retirement?

3. How do you plan to spend your money in retirement?

4. Have you considered your lifestyle needs in retirement?

5. What guaranteed sources of income can you count on in retirement?

6. Do you plan to work part-time or full-time in retirement?

7. How do health and wellness factor into your retirement plan?

8. Are you ready for the unexpected events in life?

9. How will you keep your money working in retirement?

10. Do you plan to leave a legacy?

Like everyone around you saving has become second nature. You have saved wisely and built a sizeable retirement fund to provide for your retirement.  The next question is one that will confuse many… Are you ready?

imagesThink about how you will keep your money growing. Talk to a financial security advisor about investment solutions for retirees.

Let us help you at Henley Financial & Wealth Management.

Contact us at information@henleyfinancial.ca for more information regarding investment solutions.

Above are 10 questions… Questions that need answers so that you can retire into the lifestyle that you have become familiar with living. Studies show us that you spend more money on the weekends (or days off) because these are generally the days you have time to spend your hard earned money. So consider this in retirement every day is a weekend or a day off.

When do you want to retire? This is a personal question with many variables being attached for each individual. How much money do you have saved? Do you like your job? Are you healthy? When we change over from a saving to spending cycle the timing of your retirement is crucial to building a fund and assessing how long you will need it to last. If you like your job you may want to work longer as a consultant, this will help fund your retirement income. Although health will be the biggest factor to your retirement date, many workers are forced into retirement, not because of age but health issues. I guess it comes down to want to retire or need to retire hopefully the decision is yours to make.

What percentage of your income today will you need in the future to retire? This is a number that needs to be calculated into the retirement plan. Most financial advisors will show you a figure of 75% of today’s income going forward. To be honest that is a generous figure. Most of your big-ticket items will have been paid for by this time. You must remember however that you will are likely to make the most income in your lifetime during the last 5 years of employment before you retire. So your final valuation is something that must be continually updated while planning for the future.

What are your current spending habits? Are you a saver or a spender? Because these habits will not likely change in retirement, and as always you must plan for the unexpected events which will be out of your control. It goes without saying savers are more likely to save more and have more than the spenders, so spenders must work to save more now to have more in retirement. This is a common sense approach but you would be surprized by the lack of respect for compounding interest and how it works in your favor over time.

imagesHow many days a year will you travel or play golf? If you retire at age 65 and live till the age of 90… meaning you will have less than 10,000 days or 9,125 days to be exact. That would be a fair amount of travel and golf for anyone; some planning will have to be involved regarding the answer to those questions. I believe these answers to be the top answers to the question of… what do you want to do when you retire? So to live that lifestyle you will have to plan for future expenses that you may not already have. If you buy a condo in Florida you will have to account for the condo fees and associated upkeep costs of two homes to allow for the travel and golf adventure you have planned. If you plan to travel the world you will have to account for the currency exchange rates and the costs associated with travel to the exotic locations you want to visit.

Calculate how much income you’ll receive during retirement – from sources such as Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) payments. Then, determine how much additional income you’ll need and where this will come from. While investment income is a nice bonus, you shouldn’t rely on it to pay for necessities.

When you consider retirement planning, make sure to account for unpredictable events – both financial and personal. As we said before plan for the unexpected. Make sure your retirement savings are strong enough to support you through a future economic downturn, and a rise in the cost of living and a long life.

If you plan for the future you will be able to enjoy life to the fullest, if you fail to plan for the future it will get away from you and your plans will have to be alterred. The choice is yours choose wisely.



Three Kinds of Money…Debt, Credit, and Cash

Three Kinds of Money…Debt, Credit, and Cash

We live in a time when we can capture information about anything we want… Google has become our go to encyclopedia! Do you remember when we had to write an essay without a computer?  Yes! I am dating myself but encyclopedia Britannica and the library were my research tools. The information found in those pages could be trusted as it was researched and documented with footnotes.  Information today can be found with one click on a computer, the world wide web of research made easy by  Google, Bing, and Yahoo. The problem that we face is some of this information can be contradicted by a single opinion or biases without any documentation. Although it seems research has been made easier it somehow has become more difficult to find the answer.

So how do we get valuable information out to the masses to help them understand the value of what we are saying?

Well, I don’t have that answer, but hopefully, you will find value in the rest of this article as it relates to your Financial Security for the future.

I value experience and knowledge when it comes to a conversation. A good friend of mine who has been in the financial industry for over 30 years sat me down one day and said, “Have you heard about the three kinds of money”?  Umm, Debt, Credit, and Cash?  I replied with a big grin; “Not quite the answer I was looking for, let me explain this concept to you”.  He proceeded to draw a diagram on a napkin because like many others I am a visual learner.

The learning curve…

Below you will find a circle which we will refer to as your circle of wealth, within that circle you have three kinds of money. Lifestyle, Transferred, and Accumulation.

AAEAAQAAAAAAAAavAAAAJDIzOGFiYzk0LWY1ZDYtNDhhZC04MjRkLTQ5YTE0OGYzYzQ0YgLifestyle: In its simplistic form are the things that we can afford to do and have while we enjoy the merits of living for today and days to come.

Accumulation: Is the process of collecting assets, through purchase or by obtaining them, an activity of collecting for a particular purpose in the future.

Transferred: This is money that is being directed away from your Lifestyle and Accumulation of funds that will not help you lead life the way you want in the future.

So now that you understand the three kinds of money above:

Which would you least want to change moving forward?

If you said Lifestyle you would be correct. No one wants to change the way they live  on a daily basis. So we cannot take away from your Life Style.

Which would you want change the most?

If you said Accumulation you would be correct. We want this to be the biggest piece of the circle moving forward because our accumulation will help us keep the Lifestyle to which we have become accustomed to in the future.

So by default that leaves us with Transferred, we want this to be the smallest piece of the circle in our future because this is money that we are losing unknowingly or unwillingly.

Does all this make sense?

Well, then I have three Questions for you?

1. If we could change the accumulation value in your circle would you be interested?

2. If we could change the amount of money being lost unknowingly or unwillingly would you be interested?

3. If we could do all that with a very minimal change to your lifestyle would you be interested?

The answer to the three questions above, YES! of course you would be interested!

Let me show you how we can make one simple change that will increase your Accumulated Money and decrease your Transferred money.

Example:  Romeo and Juliet buy a house worth $560,000, they put 10% down as a down payment. When they sign the papers at the bank they are told they must buy Mortgage Insurance and Critical Illness Insurance as security on their mortgage.


House $560,000

Mortgage $2.9% @ Bank X

Down payment $56,000

Monthly Mortgage Payment: $2,359

Insurance needs: $504,000 each for Life Insurance, and $250,000 each for Critical Illness coverage.

Life insurance  $504,000  = $112.00/month

Critical Illness $250,000  = $295.00/month

Total Monthly payment increased to $2,766/month.

If Romeo and Juliet had bought the same Life Insurance and Critical Illness coverage from an independent Financial Advisor, which will be underwritten at the time of sale and would also be fully portable.

Their monthly premium would be as follows…

Life Insurance $504,000  = $52/month

Critical Illness $250,000 = $201/month

Therefore, they would have saved $154/month or $1,848/year of unwillingly spent money which they could put towards their own Accumulated money.

Coincidently if they put that Transferred money back into their Accumulated money  and it earns them 5% per annum compounded over the next 25 years. Which is the length of their amortization on the mortgage they would have an extra $100,000 saved in their accumulated fund.

This is only one of the many ways to stop spending money unknowingly or unwillingly.

Contact me @ Henley Financial and Wealth Management  to learn more about how to increase your Accumulated money and your Lifestyle money, while decreasing your Transferred Money which you are doing so unknowingly or unwillingly.

You may also contact us at the following  Info@henleyfinancial.ca




Helping you understand…Part 2

Helping you understand…Part 2

You needed to save and invest for retirement, so you open an RRSP and contributed as much as you can each year.

Sure, the saving part is tough. And, of course, investing always had its challenges. But at least, we all know that an RRSP is the easiest way to invest for our future. We do this because government advises us that we should.

Then in 2009, along came the TFSA – tax-free savings account. This was started by the government to give those who had maxed out their RRSP contributions another place to invest. But did they really need a place to put another $5,000? No! But it was a government handout during an election campaign to serve the 4% of the population that wanted more room in their investment portfolio.

Most of the population are probably going to have to prioritize how they invest for their future. They will have to figure out which vehicle is right for them to focus their investment dollars. When you make an RRSP contribution, you get to deduct that amount from your taxable income. The investments inside your RRSP grows on a tax-deferred basis as long as they stay in the plan. Meaning when money is withdrawn directly from the RRSP, or from the registered retirement income fund (RRIF), or an Annuity to which the RRSP has been converted will be taxable.

Let’s say you have invested your money and your RRSP has grown to $1,000,000, that’s a nice size portfolio. You have worked hard to establish that piece of your financial security for retirement. But did you know that you also have a partner – the government – who is waiting patiently for their share!  As we stated above when you start to withdraw on your investment you will be taxed at the rate of your tax bracket.

A TFSA is the mirror image of an RRSP. Although you contribute after-tax dollars. So you don’t get a deduction for your contribution. But once the money is in the plan, it not only grows free of tax but also comes out free of tax. No tax is ever paid on this investment!

So why are we all not investing in a TFSA? There is definitely a circumstance that allows for either investment, you have to know which one will suit you best from a financial standpoint.

To help you understand the federal government introduced TFSAs, and created Chart 1:

Pre-tax Income $1,000 $1,000
Tax $ 400 N/A
Net contribution $ 600 $1,000
Value 20 years later @ 6% growth $1,924 $3,207
Tax upon withdrawal (40%*) N/A $1,283
Net withdrawal $1,924 $1,924
* The marginal tax rate — the rate of tax charged on the last dollar of income

This chart shows how a TFSA contribution is made with after-tax dollars while withdrawals are tax-free. And an RRSP contribution is made with pre-tax dollars  while withdrawals are taxable.

The chart also demonstrates that if you are in the same tax bracket when  you contribute and nothing changes and you remain in the same tax bracket at the time of withdrawal, then TFSAs and RRSPs work out to be the same. This is really simplified math and generally not the case for many investors. But it does show how these investments work in  its easiest form.

What you should know is if your tax bracket is lower at the time of withdrawal than at the time of contribution, the RRSP will win. But, if your tax bracket is higher at the time of withdrawal than at the time of contribution, the TFSA will win. The fluctuation in tax brackets is the tricky part; the perfect scenario is to be in a lower tax bracket during your retirement years.

Most of us contribute to RRSPs with after-tax savings and then spend the refund. We talked about this before in another article and it is your money to spend. Although if you invest that refund in yourself what would happen?


See the Chart 2 below:

Contributed after-tax savings $1,000 $1,000
Value 20 years later @ 6% growth $3,207 $3,207
Tax upon withdrawal (40%) N/A $1,283
Net withdrawal $3,207 $1,924

Now that’s a savings but remember this was after tax money that came from a refund and   was deposited into savings… yes, it was free money from your tax return and the initial investment into an RRSP. This shows how to use tax-free money (your refund) to your advantage keeping it tax-free moving forward.

So which investment is right for you?

TFSAs are very flexible. You can take money out of a TFSA at any time and then put it back in future years. We see this vehicle as investment portfolio for someone who is investing $5,000 or less into his or her plan a year. In other words, if you are in a low tax bracket then you may be better off with TFSA because you are not benefiting from the tax deduction.  A TFSA will be more fitting for your situation and you will not have to worry about being hit by the taxmen at retirement.

The RRSP investment is for the person who wants to lower their taxable income and is trying to invest 10% or more of their earned income into a retirement plan. As stated above the money will grow tax deferred within the RRSP until the funds are withdrawn. If you receive a tax refund that money can be used to build an alternative investment portfolio. As we have seen from chart 2 above, take your return and invest it into a TFSA you will be further ahead in the future. That alternative investment will grow tax-free and will not be taxed on withdrawal.

There is no wrong or right answer on which way to go when investing for retirement. The key is to have a plan moving forward and to stick with that strategy so that you can create a solid financial plan.

Many Canadians who are using TFSAs as retirement-savings vehicles are going to have trouble avoiding the temptation to withdraw from their plans. Many will rationalize the need to withdraw from their future retirement savings for the pleasure of spending it on something they want now. With an RRSP, the threat of paying tax on your withdrawal is a deterrent as no one wants to pay tax to the government so they can buy that must have item. Retirement planning will require some restraint and understanding when using a TFSA and savings vehicle.

Finally, some advice that will serve you well:

  • If you choose to invest in RRSPs, don’t spend your refund; Invest in yourself!
  • If you choose to invest in TFSAs, don’t spend your TFSA;
  • Whatever investment you choose, save more than you are today by trying to increase your investment dollar on a yearly basis!

Above are ideas, which may help you decide which plan is right for you, as always we at Henley Financial & Wealth Management are here to help.

You may also contact us at the following Info@henleyfinancial.ca  with any questions or thoughts you may have regarding investing in your future.