Mehul Gandhi, CFP®, CLU®, TEP

This is a great work around for income splitting! As you know, there are numerous income splitting strategies, including pension income splitting...but the CPP payments don't qualify. The purpose of income splitting in general is to try to even out income (and therefore tax rates) throughout retirement, which can be many decades. That length of time comes with significant consequences if you don't plan correctly for it. The article lays out that you're still able to split your CPP income, but not via the same mechanism as other pension and RRIF/LIF income. Rather, you need apply for it through Service Canada. Every little bit helps, right?

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What you need to know about the Bank of Canada’s latest rate cut. Josh Nye, Canadian Fixed Income Strategist, shares three key takeaways.

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What you need to know about the Bank of Canada’s latest rate cut. Josh Nye, Canadian Fixed Income Strategist, shares three key takeaways. #ratecut #BOC

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Saving for retirement should start early. Take advantage of employer-sponsored plans and consider individual retirement accounts. Regular contributions can lead to a comfortable future. Plan today for a secure tomorrow! #RetirementSavings #FuturePlanning

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Let's talk about one of the most tax-efficient estate planning strategies available in Canada - Insurance within a Corporation The last two weeks we have covered estate planning topics for Holding Companies (Holdco's): 1) 3 layers of taxes on your Holdco when passing the assets onto your heirs 2) Estate Freeze to get future growth in the hands of your heirs The reason life insurance in a Holdco is so efficient is that the entire amount of insurance proceeds (death benefit less cost base) creates Capital Dividend Account (CDA) room. This CDA room is what your heirs can use to pay out as a tax-free dividend. The trick here is to size the expected net insurance benefit to offset the tax bill to preserve the value of their inheritance, rather than giving part of it to Ottawa. Just like a personal WL policy, we usually see the policy premiums funded with money that you're never going to spend personally – it would all be going to your heirs anyways. Due to the very unfavorable triple taxation of leaving corporate assets to your heirs, the fact that WL proceeds can be ripped out tax-free makes their after-tax returns extremely compelling.

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Fidelity has released their retirement report for 2024 and their findings are not surprising. Retirees and and Pre-retirees are generally less optimistic about the financial outlook for retirement and the main reason for this is the increases to the cost of living. Much less surprisingly is that retirees who do not have a financial plan are less optimistic than retirees who do have a written financial plan. Having a well designed investment portfolio that has been constructed to suit your time horizon and risk tolerance is important, however your portfolio is directionless if it is not paired with a customized financial plan. This would be equivalent of planning a road trip to a destination but not having a gps or map to guide you to that destination. If you are working with a full service investment advisory team, it should be paramount they offer a customized financial plan and the plan should be revisited and updated on annual basis. This keeps the client and the advisor accountable to ensure the stated goals in the plan are attainable and are on track.

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For our last (of 4) strategy pieces on advanced RRSP planning, we look at the “meltdown strategy”. This strategy aims to replace excess RRSP assets with non-registered assets, but is the riskier that the others we have discussed because it uses an investment loan (leverage). The meltdown strategy follows the same principal as the preceding posts – it can be more tax efficient over the long-term to spread out RRSP/RRIF withdrawals over more years. This, of course, depends on both your and your spouse’s retirement date. We talked 2-weeks ago about how a spousal RRSP being key if you think your spouse will retire before you…but I digress. For the meltdown strategy, you would obtain an investment loan to be invested in a non-registered account. You would then pay the interest component of the loan by withdrawing (deregistering) the exact same amount of funds from your RRSP. From a tax perspective, you are accomplishing an offsetting income inclusion (RRSP withdrawal) with an interest expense deduction from the loan – because the cash from the loan is invested in a non-registered taxable account, you can write off the interest. Said another way, you’ve created an offsetting income-expense balance, at least in theory (there are withholding taxes on RRSP withdrawals so sizing is key), which is why you should consult your tax professional before implementing anything like this. It is quite simple to create a tax-efficient non-registered account strategy targeting capital gains. Even heavily discounted bonds will accomplish this quite nicely. This is a complex strategy so you’ll need someone reliable to model this out for you, but it has the potential to help you restructure your savings if you find yourself very RRSP heavy.

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🌟 Deciding When to Take Your CPP Benefits? Let's Discuss! 🌟 Many of our clients have been pondering a crucial question regarding their retirement planning: "Should I start taking my CPP benefits early?" It's a question with significant implications for your financial well-being in retirement, and the answer isn't one-size-fits-all. Taking CPP benefits before the age of 65 might be tempting for many, especially if retirement comes earlier than expected or if there are immediate financial needs. However, it's essential to remember that starting your benefits early means they will be reduced by a certain percentage for each month before you turn 65. On the flip side, delaying your CPP benefits beyond the age of 65 can result in an increase in your pension amount. It's a decision that requires a careful assessment of your current financial situation, your health, your retirement goals, and your expected longevity. Here are a few considerations to keep in mind: Your Financial Needs: Evaluate your current and future financial needs. Do you have other sources of retirement income? Your Health and Longevity: Consider your health and family history. Longer life expectancies may favor delaying your CPP benefits. Impact on Your Retirement Lifestyle: How will taking CPP early or delaying it affect your desired retirement lifestyle? Tax Implications: Understand the potential tax implications of starting your CPP benefits at different ages. It's a decision that deserves a thoughtful conversation and personalized advice. For a deeper dive into this topic, reach out to us for a consultation. Your retirement journey is unique, and so should be your CPP benefits strategy. Let's make sure your plan aligns with your life goals and financial objectives. 💼📈🏡 #TWG #thewealthbuildinggroup #yourmoney #RRSP #RetirementPlanning #CPPBenefits #FinancialWellness

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Global corporates hold potential for capital appreciation and higher yield, to complement core bonds. Learn more about Mackenzie Global Corporate Fixed Income Fund: https://ow.ly/eKEH30sEcZS

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I get this question a LOT from clients, and in a 'perfect' world, with all the variables known, it would be an easy answer - whereas in real life the answer always comes back to ... "It depends." In most cases the best decision is based on a number of factors and works best when you have a long term planning framework to benchmark your decision against.

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One of the most impactful things in a client meeting is stress testing a current or future withdrawal strategy. Before I bore you to death allow me to explain in plain language. This means running various scenarios of withdrawal amounts per year and on market returns. For example, a couple who is 65, retired and spending $80,000 a year needs to know relative to their portfolio if this withdrawal amount is sustainable. Assume they have a portfolio of $1,000,000 divided between RRSP's, TFSA's and taxable accounts. Lets also assume the portfolio they own is a mix of 60% stocks and 40% Bonds, is invested in low cost index funds, and is well diversified. In addition, they are getting their respective government pensions (QPP & OAS). Now they would want to know the following: -What if they spend $90,000/year instead? -What if for the next 5 years their regular spending will be $60,000/year but they want to add an extra $20,000/year of travelling? -They would like to help their children buy a home, can they afford to do so? -With the current mix of stocks and bonds, is their spending sustainable until old age (90-95YO). -Does the sequence of their withdrawals make sense (RRSP, TFS, Non-registered)? -What if their portfolio has many good/bad years, how does this affect the sustainability of the withdrawals? -What if they need extra care after they are 85YO? -What if they sell their primary residence and downsize/rent? etc. Remember a portfolio is just a means to an end. It is a tool meant to be used and effectively allow people to have the life they want. I often meet newly onboarded clients who have overly focused on the portfolio without actually thinking how this will be used. And this is exactly why running these scenarios is impactful. It makes people think and define what they have worked for or working towards. Money must have a purpose. #financialplanning #Money #Investing #withdrawalstrategies

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You can start taking your Canada Pension Plan as early as 60. But once you start taking CPP, can you pause payments if you decide you'd prefer to let the value grow a few more years? If you're quick it may be possible, says Nicole Ewing, Director, Tax and Estate Planning, TD Wealth. She joins Kim Parlee to discuss how you can feel confident you're making the best decision.

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While there are many North American companies that also need to transform/restructure, headlines like these add to our confirmation bias of just buy American (outside of Canada). This is a quick and good read.

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Thinking of retiring early? Taking CPP before age 65 results in a permanent reduction of your monthly benefits. For every month you take CPP before age 65, your benefits are reduced by 0.6%, which amounts to a 7.2% reduction per year. If you can comfortably support yourself without early CPP benefits, delaying might be beneficial. We can help you assess your current and projected financial needs; there is no one-size-fits-all answer.

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Let's talk about the two most common use cases for life insurance – for yourself, personally, and if you have a holding company (Holdco). At the bottom, there are two links for prior posts that give more context about the rationale, incl. examples. For you, personally, are you trying to plug a gap – i.e. if you had died yesterday what would happen to your family financially – or solve a (tax) problem later in life? If you're relatively young with a big mortgage (FYI – I find mortgage insurance pricing to generally be a rip off vs. other forms of life insurance) and the main income earner in the household, leaving that debt plus income hole will probably destroy your family's finances. Taking that a step further, we usually see the surviving spouse wanting to work less and spend more time with their kids. Sometimes that means a desire to cease work altogether, even if they are also a high-income earner. That kind of risk can be passed on to an insurance company at a relatively minor cost, depending on factors like your health. The other use case is to solve a problem – for this, we'll focus on those will Holdco's where permanent insurance is often a slam dunk. There are three layers of tax when you pass on your Holdco to the next generation: 1) Capital Gains on your shares of the Holdco 2) Capital Gains on the investments within the Holdco if sold by your beneficiaries to access the value 3) Tax on withdrawing the funds – from the Holdco into their personal hands Now, you do get some of the #3 back in the form of RDTOH, but the math usually works out to paying twice the amount of tax as passing personal assets on. You can (and should) read more in the attached to get a better understanding of the mechanics, but the Cole's Notes is that life insurance proceeds within a Holdco are tax-free (same as personal) but also generates Capital Dividend Account (CDA) room, which can be withdrawn from the Holdco tax-free! To sum it up, you continue to build Holdco wealth pre-personal tax and then your heirs can access your hard work and savvy investments without getting crushed and giving up ~50% to the CRA. The growth plus tax-efficiency (key to the equation) makes your after-tax return from insurance a really attractive number. Always rely on a licensed professional to run your numbers and advise on the sizing and best use/type. Posts for additional context: Personal: https://lnkd.in/gGYdVbsB Corporate: see attached link & image for an example of the actual math, particularly column 3 - IRR of Death Benefit. https://lnkd.in/gaDvuPFg ​

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