Rhonda's Financial Blog

Back to Basics: A Reminder of RRSP Musts

Tuesday, January 31st, 2012

To play any game, it is important to know the rules and how they may affect the outcome or result of the game. Not to suggest that planning for retirement is a game, but knowing how RRSP rules can affect your retirement planning is very important. Below are a few of the “must knows” for your RRSP planning.

1. Maximize your contribution

The more you put away the more you will have. It is important to know the maximum allowable limit for your financial situation. Currently for 2011, you can contribute 18% of your prior year’s earned income up to a maximum of $22,450 less your pension adjustment (PA) and your past service pension adjustment (PSPA). Remember also that carry forwards of unused contributions from 1991 onward can also be contributed.

2. Contribute Today

The sooner you contribute, the sooner your savings start growing for your retirement. The compounding of interest returns can make a big difference on your RRSP balance over time.

3. Spousal RRSPs

Contributions can be made to a spousal RRSP that will allow income splitting at retirement which in turn will reduce the amount of tax that you will pay. Contributions are limited to your personal limit.

4. No More Foreign Content Limit

• 30% foreign content limit in RRSPs and registered pension plans is now a thing of the past.
• Canadian investors now have the option to invest up to 100% of their retirement plans into foreign securities, without penalty.
• Opportunities for money managers to seek out the best investment opportunities wherever they exist is wonderful news for Canadians – provides the opportunity for greater diversity and more attractive risk-adjusted returns.

5. Consolidation

Consolidating your assets leads to more efficient asset management as well as reduced costs. You should discuss with your advisor why consolidation would be right for you

How to Have Financial Conversations with Your Aging Parents

Tuesday, August 16th, 2011

Having a will and a final plan in place is recommended as soon as we enter into adulthood. Or at the very least, when a major life event has occurred such as a marriage, birth of a child or maybe even an inheritance.

As depressing as tackling issues related to our own mortality is, it’s a given and it’s better to deal with these issues sooner rather than later. But long before your family members will be dealing with your mortality, you’ll be dealing with your parents’ final arrangements. The reality is, your aging parents will need assistance with their personal and financial planning affairs.

Talking with your parents about mortality and money is never easy but it’s important to do. If you find it difficult to discuss these issues, you can start by discussing your own will and final wishes. Getting their input on your decisions can help you understand the choices that they have made. Hopefully this will open the door to discuss theirs.

Things that you need to discuss:

What they owe, where and with whom – Understanding their level and type of debt is essential. This can include investment properties and investment accounts, as well as lines of credit, credit cards, auto loans and home loans. Although you may not discuss this during your first conversation about their financial planning status, it’s important that you understand exactly what is owed and where those accounts were held.

Their will – Although it may seem grim, you need to know what to expect when your parent passes. Be sure to discuss the pertinent details of the will and know who the executor of the will is. This discussion should also include their living will.

Power of attorneys or representation agreements – These are essential in a health crisis and it’s important for you and your parents to have these established well ahead of time. It’s far better to have these documents in place long before they are needed.

Care scenarios – Do you and your parents have plans for what will happen if they become ill or invalid? This may be the most difficult of all conversations, so you may want to handle this separately from the other financial issues. Be sure to cover whether they’ll downsize and move in with you or go into care facilities.

Final arrangements – Burial arrangements and other final arrangements are important to cover with your parents as well. If you understand what your parents’ final wishes are, it will make it easier for you to follow through with them.

You need to talk early and often with your parents about finances. As they grow older, they’ll become more in need of your assistance with their day to day lives. Whether this comes in the form of financial assistance, shared living space or medical care, it’s important to understand exactly what you’ll be facing when that time comes. Don’t try to talk about all of these issues at once. Make it a point to talk with them regularly so you can keep the lines of communication open.