For flexibility, go convertible and renewable

chronic illness or deteriorating health years down the road otherwise make it dif-ficult to get the protection you need.

A renewable and convertible policy also provides an option to switch to permanent insurance with a level premium as your needs change. For example, in the years ahead, your financial priorities might shift to covering tax liabilities, taking care of dependants with disabilities, leaving bequests, funding a business succession, or passing along a property, making per-manent coverage a more attractive choice.

Planning for your evolving needsThink of “renewable and convertible” as insurance for your life insurance. You may never need to exercise the option but know-ing it is there offers peace of mind.

We can help you determine the coverage you need today, while leaving your options open for whatever the future may bring. n

For many people, getting married or having children is a key life event that

prompts them to obtain their first life insurance policy.

Term life insurance is often an early first choice for financial protection because it is initially less expensive than permanent insur-ance. It is an affordable way to get the amount of coverage you need now to protect dependants in the event of premature death.

It also provides you with a valuable opportunity to build in flexibility to meet your changing protection needs in the future. Here’s how.

Flexibility to renew or convertWhen you choose term insurance that is also renewable and convertible, you are guaranteed the ability to purchase addi-tional coverage from the same insurer in the future, regardless of your health status. This can be extremely useful should a

FOCUS ON INSURANCE

Independent Financial

Concepts Group Ltd. Langstaff Road - Concord Office:

1700 Langstaff Road, Suite 1001 Concord, ON L4K 3S3 Telephone: (905) 202-8430 Fax: (905) 695-0507 Holly Street - Toronto Office:

20 Holly Street, Suite 207 Toronto, ON M4S 3B1 Telephone: (416) 486-3989 Fax: (416) 486-4061

Website: www.ifcg.com While the hot weather typically tells us it’s time to kick back and relax, the economy is happily taking the opposite path. Employment is rising and companies are posting healthy profits.

The stronger economic climate presents new opportunities and challenges. This would be a good time to revisit your finances and plan ahead for potentially higher interest rates.

We also invite you to get in touch to take a second look at your investment portfolio. Higher interest rates will affect your investments in different ways. GICs will yield more and so will money market funds. Some stocks will be more attractive too.

We can help you make the best of the stronger economic climate.

W hen it comes to real estate, most people think of their home. This

makes sense, as the single biggest invest-ment many Canadians will ever make is the purchase of their principal residence. But real estate is a distinct asset class, and one that can offer a number of benefits as part of a diversified portfolio.

For individual investors, gaining a stake in a wide range of commercial real estate hold-ings in Canada or around the world is easy, thanks to professionally managed mutual funds. Real estate mutual funds may invest directly in stocks of real estate companies and associated sectors, such as the construction industry. They may also invest in Real Estate Investment Trusts (REITs), which typically hold portfolios of commercial properties, including apartment buildings, hotels and seniors’ homes, industrial buildings, offices, and shopping malls.

Why real estate?Given the events of the past couple of years, you may wonder why anyone would want to invest in real estate. In the U.S., in particular, property values fell and over- extended borrowers simply walked away from their losses. New construction waned, and vacancies rose in offices and malls.

With more stringent lending criteria and a more conservative mindset, Canada escaped the brunt of the global real estate meltdown, as well as the worst ravages of the recession. And with signs of economic resurgence, now may be an ideal time to revisit the potential benefits of real estate mutual funds. These include:

• Income. Whether they own real prop-erty directly or hold REITs, most real estate

mutual funds focus on generating a regular stream of rental income from the proper-ties they hold.

• Tax benefits. Where that income comes from REITs, a large portion of it may be tax-deferred. That’s because some or all of a REIT’s distributions are considered return of capital (ROC), reflecting the depreciation that the REIT can claim for tax purposes on the properties it holds. ROC is not taxable in the year of receipt. Instead, it decreases the investment’s adjusted cost base, resulting in a higher capital gain when the investment is eventually sold or transferred.

• Inflation protection. Historically, real estate has provided an effective “hedge” against inflation. After all, people will always need a place to live.

• Diversification. From a historical per-spective, real estate as an asset class has not always moved in lockstep with other equities.

How to investReal estate funds may be international (offering global diversification) or focus on Canada. The former tend to be dominated by real estate stocks, while the latter typically focus on REITs. In addition, many broadly diversified equity and income funds include real estate holdings in their portfolios.

Professional advice can help you determine whether a real estate mutual fund would enhance your portfolio and help you choose an appropriate fund or funds. n

Looking for income and diversification? Real estate funds may be the answer

Mutual Funds

Real estate funds bounce back Like all equities, real estate mutual funds felt the effects of the global downturn in 2008. But they recovered strongly in 2009, with an average return of more than 20% for the year.

2002

-40-35-30-25-20-15-10

-505

1015202530

-40

-30

-20

-10

0

10

20

30

2009

2008

2007

200620052004200320012000

%

Source: Globefund. Mutual funds in the Real Estate Equity category must invest at least 90% of their equity holdings in the Real Estate industry group according to S&P Global Industry Classification Standards.

Real estate mutual funds average returns Jan. 1, 2000 – Dec. 31, 2009

The MONEY fileT I P S A N D T A C T I C S T O H E L P Y O U G E T A H E A D

3 strategies to be mortgage-free soonerWith mortgage interest rates already climbing, many homeowners are anticipating higher payments in the future. These strategies can help you pay down your principal faster, possibly saving you thousands of dollars in interest and shaving years off your amortization.

Just how much can you save? the following examples are based on a $200,000 mortgage at 5.5% amortized over 25 years and monthly payments of $1,221.*

EYEOPEnERgraphic evidence of how investing works

HOUSEHOLD FINANCES

Ditch the car, save a bundleMany Canadians consider their car part of their everyday cost of living. But they might think again, if they knew just how much they could save by leaving the car at home.

Consider this: During the Vancouver Olympics, the city was able to cut downtown traffic by 30% — and accident claims by 20% — by closing off roads and urging people to take public transit.

And the dollar figures are even more compelling: The Canadian Automobile Association says it costs $8,441, on average, to own and operate a 2009 four-cylinder Chevrolet Cobalt sedan, driving 18,000 km per year. Make that $11,216 for a 2009 six-cylinder Dodge Grand Caravan. This includes ownership and oper-ating costs, such as fuel, maintenance, insurance, and car loan pay-ments. Add in the cost of parking, and you’re looking at additional sav-ings of about $2,000 per year. Another benefit: monthly transit passes qualify for a tax credit.

In other words, if you’re willing to give up your vehicle (or maybe a second family car), you could save as much as $1,000 a month — money that you could use to eliminate debt or top up your investments. n

EDUCATION SAVINGS

Invest in yourself with the Lifelong Learning PlanIt’s never too late to go back to school. And whether your goal is to increase your earning power or pursue a more satisfying job, your Registered Retirement Savings Plan (RRSP) can help.

The federal government’s Lifelong Learning Plan allows tax-free RRSP withdrawals of up to $10,000 each year over a four-year period, to a maximum of $20,000, for you or your spouse. These can be used to pay for full-time career training

or post-secondary education. The funds must be repaid over 10 years.

The plan can be especially beneficial for younger people who have plenty of time to make up for the loss of any

tax-deferred growth resulting from early RRSP withdrawals. But, at any age, going to school to upgrade skills or retrain can raise your potential to earn more — so you’ll be able to make higher RRSP

contributions in the future to repay the loan and build

your savings. n

1 Increase your payment

frequency

Go from $1,221 monthly to half that amount every two weeks. You’ll make the equivalent of an extra month’s payment every year.

$28,830

3 years and 10 months

Interest saved:

Time saved:

2 Make lump-sum

prepayments

Come up with $2,000 annually from a tax refund, bonus, or other windfall.

Interest saved:

Time saved:

$39,517

5 years and 3 months

*Assumes an interest rate of 5.5% over the mortgage’s amortization period. All pre-payments commence at the start of a 25-year amortization. For illustration only. Actual rates will vary.

3 Increase your regular

payments

Bump up your monthly payment to $1,500.

Interest saved:

Time saved:

$58,703

7 years and 10 months

This newsletter has been written (unless otherwise indicated) and produced by Ariad Custom Communications. Vol. 24, No. 4 2010 Ariad Custom Communications. This newsletter is copyright; its reproduction in whole or in part by any means without the written consent of the copyright owner is forbidden. The information and opinions contained in this newsletter are obtained from various sources and believed to be reliable, but their accuracy cannot be guaranteed. Readers are urged to obtain professional advice before acting on the basis of material contained in this newsletter. Readers who no longer wish to receive this newsletter should contact their financial advisor. ISSN 1205-5840

CHARITABLE GIVING

Two ways to give to charity with your insurance

WHILE MANY OF US would love to make a large donation to our favourite charity, day-to-day financial obligations often get in the way. Life insurance can help you leave a legacy to your cause. Here’s how:

1. Designate the charity as the ben-eficiary. As the beneficiary, the registered charity receives the proceeds of the life insurance on the death of the insured. The donor’s estate receives a tax receipt to apply to the donor’s final tax return.

For example, a couple, both aged 65 and in good health, could purchase a $100,000 life insurance policy for a monthly premium that will never increase. Upon the death of the second spouse, $100,000 goes directly to the charity, bypassing probate. The estate gets a tax receipt for $100,000, which can offset taxes due on a Registered Retirement Income Fund (RRIF) balance or other assets.

This strategy allows the donor to change the beneficiary, if desired.

2. Designate the charity as the policy owner. An alternative strategy is to purchase new insurance and name a registered charity as the owner and bene-ficiary. The donor pays the premiums each year and earns a charitable receipt each year to offset annual taxes.

Once a policy is donated, ownership and control cannot be reversed.

Professional advice can help you determine an appropriate way to use insurance to support your estate planning wishes. n

RETIREMENT PLANNING

An often-heard concern among those about to retire is how to increase after-

tax income from investments, yet still have enough money to leave behind for the kids.

There is one planning solution that can help you do both. Consider this: Use your capital to purchase a prescribed insurance annuity. You’ll earn a higher after-tax income than if the same capital were invested in Guaranteed Investment Certificates (GICs). At the same time, you can put some of this income toward life insurance to provide an inheritance.

How to generate higher after-tax incomeA prescribed annuity guarantees you regular payments for life that are a blend of non- taxable capital and taxable interest. This generates a higher after-tax income than if the same capital were invested in GICs, which generate fully taxable interest income. Here’s how these two scenarios compare.

Income from GICs. For example, if you were to invest $150,000 in GICs and earned 3.0% interest annually, you would have $4,500 in taxable income. In a 45% tax bracket, you would be left with $2,475 of your GIC income after taxes.

However, you would still retain your original capital, which you could spend or leave to your loved ones.

Income from annuity. Alternatively, you could use your original capital to buy a prescribed annuity that might pay some-thing like $12,000 a year. The “prescribed” component is tax-efficient because it ensures that the taxable portion is the same each year.

Since only part of the annuity is taxable, you would end up with more after-tax cash — perhaps $10,000, or four times as much as the GIC route. However, all of your capital will have gone into the annuity, leaving nothing for your estate.

How to leave something behindTo help you leave a legacy, you could use a portion of your annuity income to purchase permanent life insurance. This can be returned tax-free to your heirs.

If annual premiums for the insurance policy were to cost about $5,000, or half of your after-tax cash, you would still be left with twice as much income as if you had invested in GICs.

This strategy, combining a prescribed annuity and permanent life insurance, works best if you are in reasonably good health, the insurance premiums are not prohibitive, and the cost doesn’t cancel out the tax savings.

Generally speaking, the older you are, the more annual income the annuity will provide. However, life insurance premiums also increase with age.

Unlike the GIC option, you don’t have to worry about reinvesting at a lower rate. The regular annuity payments you receive are guaranteed for life at maturity. The down-side, of course, is that you won’t benefit if rates go up. Once the annuity route is taken, it cannot be reversed. In a rising interest-rate environment, GICs could become more attractive for producing income.

We can help you determine the approach that makes the most sense for your situation. n

Earn more after-tax income and preserve capital for heirs