Financial Planning TURNER SYNDROME SOCIETY OF CANADA S COTT B OASSALY, J.R. S AINT AND A SSOCIATES

Today’s Agenda What is Financial Planning? What is Financial Planning? The need for Financial Planning today The need for Financial Planning today The elements of a Financial Plan The elements of a Financial Plan Financial planning strategies Financial planning strategies Case study: Nancy and Yasmine Case study: Nancy and Yasmine Special considerations Special considerations Choosing a financial advisor Choosing a financial advisor

What is Financial Planning? Systematic process Systematic process Financial advice based on goals Financial advice based on goals Comprehensive approach: Comprehensive approach: Retirement Planning Retirement Planning Education Planning Education Planning Major Purchases Major Purchases Risk Management Risk Management Debt and Cash Flow Management Debt and Cash Flow Management Tax Planning Tax Planning Estate Planning Estate Planning

The Need for Financial Planning Today Low rates of savings Low rates of savings High rates of borrowing High rates of borrowing Questionable confidence in retirement capacity Questionable confidence in retirement capacity Unreliable sources of retirement income Unreliable sources of retirement income Increasing life expectancy Increasing life expectancy

The Need for Financial Planning Today Average annual increase in after-tax income ( ): 1.2% Average annual increase in after-tax income ( ): 1.2% Average increase in household spending ( ): 2.1% Average increase in household spending ( ): 2.1% Two thirds of Canadian households had debt > $114,000 (2009) Two thirds of Canadian households had debt > $114,000 (2009) In 2016, highest debt to income load of G7: 171% of disposable income In 2016, highest debt to income load of G7: 171% of disposable income Up from 110% in 2000 Up from 110% in 2000 As many as 84% of Canadians unsure they will save enough for retirement ** As many as 84% of Canadians unsure they will save enough for retirement ** 89% will need CPP and OAS in retirement ** 89% will need CPP and OAS in retirement **

One In 14 Million Chance of Retiring Percentage of population counting on lottery to fund retirement: Percentage of population counting on lottery to fund retirement: ** Bank of Montreal Survey, 2014 Province/RegionPercentage ** British Columbia41% Québec36% Ontario33% Atlantic32% Alberta32% Prairies29%

Planning Your Financial Goals 1.Financial Snapshot  Balance sheet and financial inventory  Income sources 2.Timing  Maximize income  Minimize taxes  Enjoy life 3.Investment Profile

Balance Sheet and Financial Inventory Existing assets and liabilities Existing assets and liabilities Current activities Current activities Existing incomes sources Existing incomes sources Existing expenses Existing expenses Insurance Insurance Estate plan Estate plan

Existing Assets and Liabilities ASSETS Home Home Personal use property (e.g. cottage) Personal use property (e.g. cottage) Income property Income property Investments Investments Savings Savings Insurance cash values Insurance cash values

Existing Assets and Liabilities LIABILITIES Mortgage Mortgage Line of credit Line of credit Credit cards Credit cards Personal loans Personal loans Car loans Car loans Store credit Store credit

Existing Assets and Liabilities CURRENT ACTIVITIES Home renovations Home renovations Regular saving and investment contributions Regular saving and investment contributions Insurance premium payments Insurance premium payments Mortgage pre-payments Mortgage pre-payments Loan payments Loan payments Additional borrowing Additional borrowing

Existing Income Sources Salary, wages and commissions Salary, wages and commissions Bonuses and taxable benefits Bonuses and taxable benefits Employer contributions to retirement plans Employer contributions to retirement plans Income property rent Income property rent Investment income Investment income Government benefits Government benefits Spousal or child support Spousal or child support

Existing Expenses Housing Housing Transportation Transportation Living (e.g. food, grooming, clothing) Living (e.g. food, grooming, clothing) Lifestyle (e.g. dining out, entertainment, travel) Lifestyle (e.g. dining out, entertainment, travel) Debt payments Debt payments Insurance premiums Insurance premiums Investment contributions Investment contributions

Insurance Group life insurance Group life insurance Individual life insurance Individual life insurance Disability insurance Disability insurance Critical illness insurance Critical illness insurance Long-term care insurance Long-term care insurance Health and dental benefits Health and dental benefits

Estate Plan Will Will Executor Executor Powers of attorney Powers of attorney Legal guardian Legal guardian Trust Trust

Your Retirement – On Your Terms When do YOU want to retire? When do YOU want to retire? When can you afford to retire? When can you afford to retire?

Maximizing Retirement Income Employer-sponsored plans Employer-sponsored plans Government programs and assistance Government programs and assistance Income properties Income properties Personal savings and investments Personal savings and investments

Employer-sponsored Plans Group RRSP’s Group RRSP’s Registered Pension Plans Registered Pension Plans Defined benefit pension plan Defined benefit pension plan Defined contribution pension plan Defined contribution pension plan Individual pension plans Individual pension plans Individual Pension Plan Individual Pension Plan

Government Programs and Assistance Canada Pension Plan Canada Pension Plan Old Age Security Old Age Security Guaranteed Income Supplement Guaranteed Income Supplement The Allowance The Allowance Provincial programs Provincial programs

Canada Pension Plan/Québec Pension Plan Provides monthly benefit to eligible applicants Provides monthly benefit to eligible applicants Applicants may apply as early as 60 and as late as 70 years old Applicants may apply as early as 60 and as late as 70 years old Full CPP available at age 65 Full CPP available at age 65 Indexed to inflation every January Indexed to inflation every January Other benefits Other benefits Post-retirement benefit Post-retirement benefit Disability benefit Disability benefit Survivor benefit Survivor benefit

Canada Pension Plan/Québec Pension Plan Factors affecting your benefit amount Factors affecting your benefit amount Your age Your age Your contributions Your contributions Your other employment income Your other employment income

Old Age Security Paid as monthly payment Paid as monthly payment Available to most Canadians 65 years of age and older Available to most Canadians 65 years of age and older Available to those who meet legal status and residence requirement Available to those who meet legal status and residence requirement Increased by 0.6% each month claim is delayed past 65, up to maximum of 36% at age 70 Increased by 0.6% each month claim is delayed past 65, up to maximum of 36% at age 70 Delayed OAS precludes receipt of Allowances Delayed OAS precludes receipt of Allowances Subject to recovery tax if income above threshold Subject to recovery tax if income above threshold

Personal Savings and Investments Types of investment accounts Types of investment accounts Types of investments (asset class) Types of investments (asset class) Types of return on investment Types of return on investment Taxation of investment returns Taxation of investment returns Diversification Diversification By asset By asset By geography By geography By sector By sector Other Other

Types of Retirement Investment Accounts Non-Registered Account (Open or Cash Account) Non-Registered Account (Open or Cash Account) Registered Retirement Savings Plan (RRSP) Registered Retirement Savings Plan (RRSP) Registered Retirement Income Fund (RRIF) Registered Retirement Income Fund (RRIF) Tax-Free Savings Account (TFSA) Tax-Free Savings Account (TFSA)

Investments Cash Cash Government bonds Government bonds Corporate bonds Corporate bonds GIC’s GIC’s Mortgages Mortgages Real property Real property Stocks Stocks Mutual funds Mutual funds Segregated funds Segregated funds Exchange-traded funds (ETF) Exchange-traded funds (ETF)

Types of Investments (Asset Class) Cash Cash Fixed Income Fixed Income Equities Equities Asset ClassExamples CashCash; Money Market Fixed IncomeBonds; GIC’s; Mortgages EquityStocks

Annuities Offered usually by insurance companies Offered usually by insurance companies Guaranteed regular income, for life or a certain term Guaranteed regular income, for life or a certain term Available for registered and non-registered accounts Available for registered and non-registered accounts May offer tax advantages May offer tax advantages

Types of Return on Investment Interest Interest Dividends Dividends Capital Gains Capital Gains Asset ClassExamplesReturn CashCash; Money MarketNone; Interest Fixed IncomeBonds; GIC’s; MortgagesInterest; Dividends; Gains EquityStocksDividends; Gains

Taxation of Investment Return ReturnTaxation Interest100% at MTR Dividends Grossed up then subject to dividend tax credit Capital Gains Inclusion rate of 50% then taxed at MTR

Taxation of Investment Return AccountTaxation OpenReturn flows through RRSP/RRIF100% at MTR TFSANo tax

Diversification By asset type (asset allocation) By asset type (asset allocation) By geography By geography By sector or industry By sector or industry Other (e.g. style, interest rate sensitivity, size of company) Other (e.g. style, interest rate sensitivity, size of company)

Diversification By asset type (asset allocation) By asset type (asset allocation)

Diversification By geography By geography

Diversification By sector By sector

Non-Registered Account Not registered with Canada Revenue Agency Not registered with Canada Revenue Agency Holds all types of investments Holds all types of investments No limits on contributions No limits on contributions Not tied to income Not tied to income

Non-Registered Account Cash Bonds GIC’s Real Property Stocks Mutual Funds Segregated Funds ETF’s $$$$$$ Tax (Interest and dividends) Tax (Capital gains)

Registered Retirement Savings Plan (RRSP) Registered with Canada Revenue Agency Registered with Canada Revenue Agency Holds all types of investments Holds all types of investments Contribution limit based on taxable income up to annual maximum Contribution limit based on taxable income up to annual maximum Contribution limit carries forward to subsequent years Contribution limit carries forward to subsequent years Contributions may be deducted from taxable income to reduce income tax Contributions may be deducted from taxable income to reduce income tax Withdrawals taxed as income at marginal tax rate (MTR) Withdrawals taxed as income at marginal tax rate (MTR)

Registered Retirement Savings Plan Cash Bonds GIC’s Real Property Stocks Mutual Funds Segregated Funds ETF’s $$$$$$ Tax Refund

Registered Retirement Income Fund (RRIF) Registered with Canada Revenue Agency Registered with Canada Revenue Agency Holds all types of investments Holds all types of investments Converted from RRSP Converted from RRSP Mandatory by December 31 of year annuitant turns 71 Mandatory by December 31 of year annuitant turns 71 Withdrawals taxed as income at marginal tax rate (MTR) Withdrawals taxed as income at marginal tax rate (MTR) Mandatory minimums each year beginning year annuitant turns 72 Mandatory minimums each year beginning year annuitant turns 72

Tax-Free Savings Account (TFSA) Registered with Canada Revenue Agency Registered with Canada Revenue Agency Holds all types of investments Holds all types of investments Contribution limit established annually by Federal Government Contribution limit established annually by Federal Government Contribution limit carries forward to subsequent years Contribution limit carries forward to subsequent years Withdrawal amounts recaptured in following calendar year as additional contribution room Withdrawal amounts recaptured in following calendar year as additional contribution room No deduction of contributions against taxable income No deduction of contributions against taxable income No taxation of growth or income No taxation of growth or income

Tax-Free Savings Account Cash Bonds GIC’s Real Property Stocks Mutual Funds Segregated Funds ETF’s $$$$$$

Education Funding for post-secondary education through: Funding for post-secondary education through: Self-directed RESP’s Self-directed RESP’s Group RESP’s Group RESP’s Whole life insurance Whole life insurance

Registered Education Savings Plan (RESP) Intended to help pay costs of post-secondary education (trade school, college or university) Intended to help pay costs of post-secondary education (trade school, college or university) Registered with Canada Revenue Agency Registered with Canada Revenue Agency Holds all types of investments Holds all types of investments No deduction of contributions against taxable income No deduction of contributions against taxable income Growth sheltered until withdrawn Growth sheltered until withdrawn Canada Education Savings Grant (CESG) Canada Education Savings Grant (CESG) Self-directed and Group plans Self-directed and Group plans

Registered Education Savings Plan Cash Bonds GIC’s Real Property Stocks Mutual Funds Segregated Funds ETF’s $$$ $$$ Tax $$$ $$$ CESG Income

Insurance Life insurance Life insurance Disability insurance Disability insurance Critical illness insurance Critical illness insurance Long-term care insurance Long-term care insurance

Life Insurance In the event of death In the event of death Lump sum tax-free to beneficiary Lump sum tax-free to beneficiary Term or permanent Term or permanent Helpful in retirement for: Helpful in retirement for: Debt repayment Debt repayment Retirement income for survivor Retirement income for survivor Tax payment Tax payment Estate planning Estate planning Gift Gift

Disability Insurance In the event of disability preventing insured from working In the event of disability preventing insured from working Monthly benefit, often tax-free Monthly benefit, often tax-free To age 65 only To age 65 only Helpful in early retirement for: Helpful in early retirement for: Transition to pension Transition to pension Retirement income Retirement income

Critical Illness Insurance In the event of serious illness, disease, or loss of independence In the event of serious illness, disease, or loss of independence Lump sum tax-free Lump sum tax-free To age 65, 75 or 100 To age 65, 75 or 100 Helpful in retirement for: Helpful in retirement for: Expenses during recovery (e.g. drugs, health care, parking) Expenses during recovery (e.g. drugs, health care, parking) Expenses after recovery (e.g. drugs, health care, renovations) Expenses after recovery (e.g. drugs, health care, renovations) Salary replacement during recovery (for insured or spouse) Salary replacement during recovery (for insured or spouse) Final wishes Final wishes

Long-term Care Insurance In the event of loss of independence In the event of loss of independence Weekly benefit tax-free Weekly benefit tax-free Possible coverage for life Possible coverage for life Helpful in retirement for: Helpful in retirement for: Expenses during recovery (e.g. drugs, health care, parking) Expenses during recovery (e.g. drugs, health care, parking) Cost of nursing home or long-term care facility Cost of nursing home or long-term care facility Retirement income supplement Retirement income supplement

Estate Planning Will for yourself and spouse Will for yourself and spouse Executor Executor Powers of attorney Powers of attorney Person Person Property Property Family trust Family trust

Financial Planning Strategies Case Study: Nancy and Yasmine

Financial Planning Strategies 1.Start early Yasmine starts investing $300 a month at age 25 Yasmine starts investing $300 a month at age 25 Nancy waits to age 40 and invests $300 a month Nancy waits to age 40 and invests $300 a month Both retire at age 60 Both retire at age 60 Nancy would have to contribute almost $1000 a month to have the same amount saved as Yasmine Nancy would have to contribute almost $1000 a month to have the same amount saved as Yasmine NancyYasmine $138,615$427,421

Financial Planning Strategies 2.Complement your RRSP with your TFSA Every year, Yasmine invests her tax refund into her TFSA Every year, Yasmine invests her tax refund into her TFSA Nancy spends her tax refund Nancy spends her tax refund NancyYasmine RRSP$138,615$427,421 TFSA$0$149,602 Total$138,615$577,023

Financial Planning Strategies 3.Live within your means Yasmine dislikes debt and borrowed conservatively for her mortgage ($300,000) Yasmine dislikes debt and borrowed conservatively for her mortgage ($300,000) Nancy doesn’t mind debt, used Home Buyer’s Plan ($21,000), and maxed out her mortgage ($400,000) Nancy doesn’t mind debt, used Home Buyer’s Plan ($21,000), and maxed out her mortgage ($400,000) ** Assumes money borrowed at age 45 ** Assumes money borrowed at age 45 NancyYasmine Payment at 2.99%$1891$1418 Payment at 4.50%$2214$1660 RRSP after 10 years **$87,248$427,421

Financial Planning Strategies 4.Maximise CESG in RESP’s Yasmine contributes $208 a month into RESP for daughter Yasmine contributes $208 a month into RESP for daughter Nancy contributes $100 a month into RESP for daughter Nancy contributes $100 a month into RESP for daughter NancyYasmine $47,025$95,943

Financial Planning Strategies 5.Manage Risk Yasmine completes a capital needs assessment for life insurance and takes out critical illness insurance Yasmine completes a capital needs assessment for life insurance and takes out critical illness insurance Nancy relies on her life insurance through work and does not take out critical illness insurance Nancy relies on her life insurance through work and does not take out critical illness insurance NancyYasmine Total capital needed$800,000$550,000 Cash deficit for survivors$640,000$0 Need for borrowing if sick$60,000$0

Special Considerations Disability Tax Credit Disability Tax Credit Medical Expenses Medical Expenses Tax Credits Tax Credits Registered Disability Savings Plans Registered Disability Savings Plans Trusts (Henson, “available for use”) Trusts (Henson, “available for use”) Provincial programs (e.g. Ontario Disability Support Program) Provincial programs (e.g. Ontario Disability Support Program)

Choosing a Financial Advisor Type of advisor Type of advisor Type of firm Type of firm Size of firm Size of firm Experience Experience Credentials Credentials Specializations Specializations Compensation Compensation

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