Successful Tax Sheltered Investing

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  • 1. Successful Tax Sheltered Investing By: Aleem Visram, HBA, MBA, IFIC, LLQP Co-Owner & Financial Advisor [email protected] www.mirfp.com (647) 986-9163 MULTI INSURANCE Retirement & Financial Planning
  • 2. AGENDA Introduction & Background Why worry about Retirement Planning? Compounded Interest effect Tax Deferred Savings RRSPs vs. non-Registered Savings RRSPs vs. TFSA Investment options Mutual Funds vs. Segregated Funds Investment Strategies Risks to your retirement plan Final tips
  • 3. Multi Insurance Retirement & Financial PlanningHolistic approach to include a customized plan with a broad range offinancial planning strategies to cover all your financial needs, including: Wealth Building This involves monitoring accounts on an ongoing basis to take advantage of opportunities as they arise, and changing market conditions. Retirement Planning A solid plan can make the difference between a comfortable retirement and one that is inadequately financed Tax Planning Looking for investment opportunities to help reduce tax liabilities Estate Planning Ensuring that you have greater control of your assets during your lifetime and preserve assets from unnecessary legal and tax costs Insurance- Ensuring that you and your family have adequate life, critical illness and disability coverage to provide you with sufficient funds in the event of an illness or death
  • 4. Multi Insurance Retirement and Financial Planning Proven track record of success with over 40 years in the business and over 1,000 clients Aleem Visram has an HBA & MBA from the Richard Ivey School of Business and is a certified Financial Advisor by the Investment Funds Institute of Canada (IFIC) and Life Licence Qualification Program (LLQP) Bahadur Visram is among the top performing financial advisors with Chartered Life Underwriter (CLU), Certified Financial Planner (CFP) and Chartered Financial Consultant (CHFC) designations Independent Advisors that work with ALL Mutual Funds, Banks and Life Insurance companies in Canada
  • 5. Multi Insurance Retirement & Financial Planning As Independent Advisors we work with all these companies: We will provide you with the best rates available in Canada
  • 6. Why do you need to worry aboutretirement planning now? The average Canadian over age 65 spends $51,000 per year Old Age Security and CPP only provide an average of $13,272 per year You need a gross pre-tax earnings of approximately $90,000 per year to receive a net after tax income of $51,000 per year The CURRENT average life expectancy of a male is 83 years and a female is 85 years If you live to the average Canadian age and spend the average $51,000 per year, you will need $1.5 million to $2 million in retirement income
  • 7. How do you save enough for retirement? Imagine you have a twin and both of you are investors You Your Twin invest $2,000 a year invests $2,000 a year at 10 per cent compounding at 10 per cent compounding annually for 10 years annually for 30 years starting at age 25 starting at age 35 Who ends up with more?
  • 8. Essential: start early, think long term Based on annual contributions of $2,000 $611,817 and assuming a 10 per cent average annual compounding rate of return $361,887 You You Start investing Stop investing 25 30 35 40 45 50 55 60 65 Retirement Your twin Your twin Starts investing Stops investing
  • 9. Avoid the Tax Man!In Canada you pay taxes on your HIGHEST income first,so the more money you make, the higher taxes you pay Income Income Taxes Over $128,800 46% $83,088- 43% $128,800 $78,361- $83,088 39% $75,550- $78,361 35% $66,514- $75,550 33% $41,544- $66,514 31% $37,744- $41,544 24% Up to $37,744 20%Avoid paying high taxes through tax deferred savings
  • 10. Registered Retirement Savings Plan (RRSP) An RRSP is the best tax deferred investment A RRSP is a personal savings plan registered with the federal government You can contribute 18% of your income each year (to a maximum of $22,450) and receive up to $10,000 in tax refunds each year Deduction room is based on previous years earned income (2010 deduction based on 2009 income) plus unused contribution room from previous year less pension Wide selection of investment options, such as mutual funds, stocks, bonds and GICs Flexible retirement options Money grows on a tax-deferred basis with compounding interest until withdrawn If you die your RRSPs will be rolled over to your spouse tax free Deadline to purchase RRSPs is the end of February
  • 11. Why should I invest in RRSPs? An RRSP can help maintain your standard of living Helps to ensure you have a comfortable retirement without having to worry about money Tax Benefits: Income tax is deferred until the money (and earnings) are withdrawn at retirement. At retirement, your annual income (including money withdrawn from your RRSP) will likely be lower than your income today. Therefore, you will be earning in a lower tax bracket, which means that a smaller percentage of your income will go to taxes.
  • 12. Special RRSP FeaturesAdditional Benefits: Home Buyers Plan (First Time Homebuyer) Up to $25,000 can be borrowed from your RRSP to buy a home, without counting the withdrawal as income If you and your spouse each have RRSP, you can borrow up to $50,000 between two of you if taking joint ownership Must be repay loan (no interest) within 15 years. Lifelong Education Plan Allows you to withdraw a maximum of $20,000 for education/tuition, or $10,000 max per year. Must be repaid in equal installments within 10 years. 11
  • 13. Invest in a tax-deferred plan Savings program based on a monthly contribution of $200 $455,865 for 30 years at an annual rate Growth outside of 10 per cent into a Registered an RRSP Retirement Savings Plan Growth within (RRSP) an RRSP $281,192 $153,139 $113,952 $36,173 $41,310 10 years 20 years 30 years
  • 14. Types of RRSPs Regular Managed with an investment advisor or at a Bank. You manage your RRSP and can hold a variety ofSelf-Directed investments that you decide. Splitting contributions between your RRSP and your Spousal spouse which can help save taxes in the future. 13
  • 15. The Power of RRSPs and Compounded Interest Example: Sarah is 30 years old and makes $100,000 per year. She wants to retire at age 65 and is wondering if she should invest in RRSPs for tax savings.Tax Shelter vs. No Tax Shelter InvestmentsItem No RRSPs RRSPSGross Income