Client Solutions

Mid-Career Families

 

Life just got a whole lot more complicated. How do I cope? (40’s)

For many Canadians in their 30s and 40s, the line is never as straight as it looks. Business opportunities, aging parents, divorces, blended families, market meltdowns, health challenges –– just to name a few –– may enter the mix and leave you confused about your next move.

There are always solutions that make sense, no matter what life may have in store for you. Whether you’re worried about your health or the health of a loved one, family continuity, retirement possibilities or planning for sabbaticals, sorting out the tax and estate implications is part of a winning financial plan. Helping you find the answers to the situations life throws at you is what we do best.

A winning financial game plan is not glamorous, it’s just common sense. For more information or to set up an appointment to discuss your dreams, please feel free to contact our office. Let’s get the conversation started!

Case Studies

Mickey and Minnie – the Power of Dollar-Cost Averaging and Behavioural Investment Counseling

Mickey and Minnie were a decade apart in age, so he had accumulated significantly more in assets than she had. When we met, it was exceedingly evident that his portfolio (which was ultra-conservative) didn’t at all fit his desire to get maximum growth out of his investments.

Also, with his higher earnings, taking advantage of a spousal RRSP made a great deal of sense.

Upon multiple detailed discussions about the risk we decided to target a much riskier growth-oriented portfolio, but to take our time getting there. We set up an automatic transfer to occur each Monday: a small amount of his investments (about 2%) would switch from low risk to higher risk so that in a year he would be positioned as he should be. In addition, he would add significantly to the spousal RRSP each month.

Then COVID hit. We had talked about the risks of events such as these, so they were prepared for my call. While the market was cheap, we significantly accelerated the program so that they were able to buy a large portion of their investments while the market was “on-sale”. It’s only been a short while, but they are very happy campers.

Archie and Edith – Protecting your Loved One’s

Life insurance often feels like a waste of money… until it isn’t. We started working with Archie and Edith when they were in their 20’s. One of the many discussions we had centered around the question, “What will happen to your family if you die prematurely?” We secured life insurance for them both.

A decade later, when Archie contracted cancer, we all grieved. The money won’t bring him back. Edith would much rather have Archie back, but that’s just not an option. Today, with no kids at home, Edith works, but not because she needs the money. Financially, she is looked after, so the pressure is off. The choice she and Archie made to pay for life insurance provided at least a bit of relief at a terrible time.

Lois Lane – Protecting Yourself

They say that you buy life insurance for your loved ones, but you buy disability insurance for yourself. That was very evident in Lois’s life. After years in a high stress, high paying job she (like Archie above) contracted cancer. Unlike Archie, she survived, but she was never the same. Unable to go back to work, she had to rely on her disability insurance payments.

Fortunately, she had purchased the slightly more expensive kind that covered her for her “own occupation” meaning that since she could no longer work in her own occupation (as opposed to “any occupation”) she was covered and would continue to be paid until the age of 65.

We continued to manage her investments knowing that at the age of 65 the disability payments would stop, and future income would only be from CPP, OAS, and her investments. Today we manage her investments for income creation rather than growth.

Emeril – Charitable Giving Strategies

Emeril had participating life insurance with a carrier that de-mutualized, which meant he received $5,000 in shares in a life insurance company. He asked me about selling them. Knowing that Emeril regularly donated an amount similar to that we suggested a different strategy.

The cost basis of the shares was $0, so the entire amount would be considered a capital gain if he sold them, with half of that gain being taxable. All in all, about $1,000 in taxes would be owing due to the sale. Since he expected to donate a similar amount, we suggested that rather than his regular cash donation, instead, he donate the shares, in kind. The charity could then sell the shares, so they would still get their $5,000.

The result for the charity was the same as if he had given cash, but the result to him was $1,000 better, because when shares are donated not only does the donor get the normal tax credit of a donation, but they also receive the benefit of not having to pay tax on the capital gain.

Donald and Ivanka – Registered Education Savings Programs (RESPs)

At the age of 40, Donald had decided to switch careers. He was going back to school to study law, but that meant years of little income. Ivanka was a stay-at-home mom and with 6 children at home, going to work outside the home wasn’t much of an option.

It was helpful that they were able to use some of the RRSPs that we’d helped them save over the years to make ends meet in the short term. But when we walked them through how education savings plans worked, they decided to move heaven and earth to continue to fund them until at least the first child headed to college.

Once the first one was in, rather than needing to come up with additional cash each year, we were able to shift money around to maximize the grants ($2,000 for each child) for the other children. As the government added additional incentives, we ensure that each child received as much free money into their RESP as was possible.

Despite having no or low income while Donald was back at school and for the first few years back at work, with our help, they were able to significantly help their children get a leg up.

NOTE: The case studies above are based on true events. Names have been changed to protect privacy.