Group RRSP Contributions
The Key to Group RRSP Contributions
Immediate Tax Reduction
- Canada Revenue Agency allows payroll deduction contributions to be made before taxes are deducted from pay.
$1000.00 Gross Pay
- 100.00 Group RRSP Deduction
$ 900.00 Gross Pay – Taxable Income
What is the biggest Difference between a Group RRSP and a Personal RRSP?
- The Group RRSP Contributions are deducted at source and you are NOT taxed on theses contributions. In other words, you get an immediate tax deduction!
Dollar Cost Averaging
A Strategy for Volatile Markets
The only certainty in securities markets is that they fluctuate. A rising market may create a euphoric mood; a falling market can lead to gloomy headlines that discourage investors. With dollar-cost averaging, you can take advantage of the very moves that freeze others with indecision. It’s an investment strategy that’s made for uncertain markets.
One Simple Concept, One Disciplined Strategy
Dollar-cost averaging works as well for beginners as it does for experienced investors. It is simple concept that’s summed up in a few words: Invest the same amount of money at regular intervals, regardless of market moves.
- It tends to lower the average cost of your investments
- It’s a disciplined strategy. Dollar-cost averaging imposes discipline because you keep investing the same dollar amount every month, no matter what happens in the market. It removes the temptation to stay out of the market when conditions are uncertain or volatile. In fact, dollar-cost averaging works best in volatile markets
- It eliminates the temptation to try market timing
It's important to remember
That no strategy is perfect. Dollar-cost averaging will not guarantee you a profit or protect you against a loss if you must sell your investment when prices are down.
* This investment strategy is subject to the appropriate investment objectives & risk tolerance and may not be suitable for all Clients. The Client should contact their Advisor to discuss their investment decisions *
Segregated & Mutual Funds
What's the Difference between a Segregated Fund and a Mutual Fund?
Do you like the feeling of knowing that your money is well invested and well protected? Segregated funds combine the growth potential of a mutual fund with the security of a principal guarantee
Guarantees
Principal guarantee: Segregated funds operate under a fixed contract term, with a principal guarantee that protects your investments at maturity or death.
Maturity guarantee: When a deposit matures and is redeemed (generally a minimum of 10 years from the date of deposit), you will receive a top-up payment, less any withdrawals and fees, if the market value is less than the guaranteed amount.
Death Benefit guarantee: When a segregated fund annuitant dies, and the market value of the investment has declined, the named beneficiary will receive the guaranteed amount, less any withdrawals and fees.
Ownership Structure
Segregated Funds are a deferred annuity contract between an insurance company and a policy owner. The policy owner makes deposits through the contract and the insurance company invests the money in Segregated Funds. Segregated Funds are an asset of the insurance company and are similar, in essence, to money held in trust for the investor. The segregated nature protects the investor against the insolvency of the insurance company.
Mutual Funds are owned by the investor and are managed by the investment management company. The securities in the funds (owned by the investor's pooled resources) are maintained in safekeeping by the custodian of the fund.
Regulation
- Segregated Funds are regulated by the Life Insurance Act
- Mutual Funds are regulated by Securities Legislation
Succession Planning & Probate - Hugh Differences!
Segregated Funds:
Segregated Funds are insurance contracts and a beneficiary can be named to receive any proceeds upon the death of the life insured which leads to the following benefits:
- Can bypass the estate (and probate) through a named beneficiary designation.
- Privacy preserved
- The fund will not form part of the value of the estate (no probate fees or other fees like accountants, executors and lawyer fees)
- Money liquidated and received by beneficiary typically much quicker
- Not subject to the settlement of the estate
- Not typically subject to the estate creditors' claims if the named beneficiary is a member of the family like spouse, parent, child or grandchild.
Mutual Funds:
Will be a part of the deceased's estate and distributed according to the will after the will is probated (fees).
Creditor Protection
Because it is an insurance product, it offers creditor protection from policyholder's creditors while policyholder is alive but if it can be shown to have been purchased to avoid potential known creditor actions, it could be challenged.
Taxation
A segregated fund is considered a trust for tax purposes. This is important for two reasons:
- The segregated fund will allocate all taxable income and realized capital gains to investors. This avoids having income taxed inside the fund at the top marginal rate.
- The fund acts as a conduit, that is income and capital gains retain their characteristics as they flow through to the investor and appear on the T3 in the same way they were realized in the fund. In other words, dividends will be reported as dividends, interest as interest and so on.
There are two taxable events arising from investing in funds – Mutual Funds or Segregated Funds
- Income allocation (controlled by company)
- Disposition (controlled by investor)
Capital Loss
Another segregated Fund advantage since Mutual Funds cannot distribute negative capital gains distributions. Capital losses are carried forward to be used against future gains within the fund.
Segregated Funds have the ability to flow through capital losses (138.1(3) of the Income Tax Act) to the individual investor (which can in turn be used to offset other capital gains realized in the same year)
In a year, for example, where there are both capital gains and losses to report, gains will be reported in the capital gains box (Box 21-- same as a mutual fund) and losses will be reported in the "Insurance Segregated Fund Capital Losses" (Box 37 -- only available to Segregated Funds).
With Segregated Funds, the investor gets to choose when to claim the capital losses as capital losses not used in the current year can be carried back three years or carried forward to future years. This is not the case with Mutual Fund investments.