EXPERT ADVICE - FINANCIAL
WITH THE RIGHT PRODUCTS, YOU CAN GROW AND PROTECT A HEALTHY NEST EGG.
3. LIFE INSURANCE
plan accumulates tax-free until it’s withdrawn and then it’s taxed in the hands of the child (meaning usually no tax is payable). Not opening an RESP to save for your child’s education means you’re also turning down free money. That’s right. The Government of Canada will match 20 per cent of your annual contributions up to a maximum of $500 per year to a lifetime maximum of $7,200 per child. That’s a big boost in savings!
While TFSAs and RRSPs help build wealth, you also need to think about protecting your financial future. That’s where life insurance comes in. If you’re married, have kids or own a business, you should have a life insurance policy in place in case anything happens to you. How much you need depends on your personal situation but it should be enough to cover any debts you may have (including your mortgage) and help cover your family financially for as long as possible.
Here are five key financial products that should be part of your plan:
1. REGISTERED RETIREMENT SAVINGS PLAN (RRSP)
As soon as you begin your working life, you should have a Registered Retirement Savings Plan (RRSP). It’s one of the most tax-effective ways to save for retirement. You’re allowed to contribute up to 18% of your earned income from the previous year to a maximum that changes slightly every year (see the RRSP dollar limit column on the CRA website). If you’re a member of a group pension plan, your contribution room is reduced by your “pension adjustment,” an amount you’ll find listed on your T4. Contributions are tax deductible, meaning you can net a tidy tax refund while building your savings. Plus, you can turbo-charge your RRSP savings by putting that tax refund back into your RRSP as soon as you receive your cheque.
4. CRITICAL ILLNESS AND DISABILITY INSURANCE
It’s important to not only have life insurance but also to ensure you’ll be financially protected should you ever become unable to work due to illness or injury. Would your workplace benefits provide you with adequate coverage? If not, what would happen to you and your family? Critical illness insurance helps pay the costs associated with a life-altering illness such as cancer or a stroke. You receive a lump-sum payment if you become critically ill and you decide how you wish to spend the money. Disability insurance protects you from a potential loss of income due to injury or illness. You receive a recurring monthly payment to cover ongoing financial costs. Even if you have workplace group disability benefits, it’s often wise to have your own personal policy to provide you with additional coverage.
2. TAX-FREE SAVINGS ACCOUNT (TFSA)
▲ Evan Patkai, B.B.A. Financial Advisor Member of Advocis (Photo: Evan Ceretti Photography) Contact me to build a plan that will fit your life.
A Tax-Free Savings Account is an ideal savings tool for both long-term and short-term goals such as a vacation or home renovation. Also, for younger Canadians who haven’t yet reached their peak earning years, a TFSA is a great way to start saving for the future. TFSAs came into effect in 2009. From 2009 to 2012, the annual maximum contribution was $5,000. It increased to $5,500 in 2013, and to $10,000 in 2015. From 2016 to 2018 the limit was $5,500 and in 2019 and 2020 the limit increased to $6,000. And while contributions aren’t tax deductible, there’s no tax payable on investment growth and withdrawals are tax-free.
5. REGISTERED EDUCATION SAVINGS PLAN (RESP)
184 Buchanan Drive, Charlottetown 902.894.8513 ext. 222 Cell: 902.940.6414 evan.patkai@sunlife.com www.sunlife.ca/evan.patkai Patkai & Son Financial Services Inc.
If you have kids, a Registered Education Savings Plan (RESP) is a must. It’s a special savings account that lets you save for your kids’ education after high school. Income earned inside the
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