Author: kiara

With inflation at a nearly 40-year high, you might be worried about what it means for you retirement. In this article, we go over some things you can expect, whether you’re in the process of planning for retirement or are already retired.

You may have noticed a spike in certain expenses recently, such as your groceries, rent and gas bills and you may be wondering why this is happening. The reason is inflation. Inflation occurs when there is a broad increase in the prices of goods and services. But inflation doesn’t only impact your spending habits. It also affects your ability to save for big life goals like retirement and enjoy your golden years as you should.

I’m saving for retirement. How does inflation impact me?

As your expenses go up with inflation, your financial priorities will most likely shift, and saving for retirement may move down the list. You may even find it difficult to put aside funds on a regular basis since you first must pay for things like food and gas. In extreme situations, you might even have to dip into your savings to compensate for overspending. When your income remains the same, but the cost of living keeps going up this is certainly a possibility.

Your first instinct may be to reduce or cut back entirely on otherwise regular contributions to your retirement accounts until things subside and prices return to something-like-normal. However, you should avoid giving in to this urge. Even if you’re only considering reducing or ceasing your contributions for a short period of time, this can have drastic effects on your nest egg.

Compound interest earned on the funds you save and invest for your retirement on a consistent basis will help your savings increase more quickly over time. Imagine the size of a snowball increasing as it tumbles down a slope and gains momentum. Compound interest works in a similar way.

By continuing to make regular contributions to your retirement accounts, you ensure that you enjoy the full power of compound interest. On the other hand, when you reduce or stop your contributions to your retirement savings, this could result in thousands of dollars less in retirement savings over the long term.

Consider the following example. Let’s say Bob starts with $2,000 in his RRSP and invests an additional $2,000 per year towards his retirement for the next 30 years. We’ll assume a 7 percent return every year to keep things simple. Bob’s RRSP would be worth $202,146. Now if Bob decides to stop contributing to his RRSP in year six and seven due to inflation, he will end up with $181,146 in total savings, which creates a $21,000 difference by the end of year 30.

While we do not recommend reducing your spending on necessities such as food, if you fear you may have to lower the amount or frequency of your contributions, you can free up some funds by eliminating non-essential expenses, such as dining out or subscription services.

Budget cutbacks can only go so far in any event, so you should definitely have a conversation about this matter with your wealth management advisor. Your advisor will be able to guide you through the process of adjusting your retirement planning strategy and investment portfolio in a way that has the least amount of impact on the quality of your life at the current moment and the best possible outcome for your retirement.

I’m already retired. What does inflation mean for me?

With so much time and effort involved in planning and saving for your retirement, as a retiree, you are certainly wondering if you’ve saved enough, how long your money will last and if you will need to adjust some of your highly anticipated plans as inflation rises. The answer depends on a few factors. Among them, your cash flow, your expenses and how willing you are to compromise on things if need be.

Since you are no longer working as a retiree, your income tends to be more predictable, and your expenses tend to become more stable as well. Your personal savings and your investment portfolio are most likely your main source of cash flow during this period in your life. You may also rely on government pensions, such as CPP, Old Age Security (OAS), and GIS for retirement income.

While your personal savings and ongoing investments will likely be the most affected by rising inflation, as your purchasing power decreases and the markets respond, the federal retirement benefits you’re receiving will see less of a negative impact.

Government-funded programs like CPP, OAS and GIS are indexed for inflation, which means that they are adjusted to keep pace with inflation, although using different formulas. So, you will likely receive an increase in the payout amounts as the government tries to account for the rapidly rising cost of living.

However, it remains important to note that if the rate of inflation outpaces the adjustment rate, it will not entirely offset inflation. So, you may find, after you spend on your basic expenses, like rent, utilities and groceries, that you have less left over for the really exciting activities on your bucket list. It then becomes a balancing act between carrying on as planned with your retirement and making concessions, especially when your expenses exceed your income. This can be the case if you have goals or hobbies you’re determined to hang on to.

If you’re healthy, travelling is probably one of the top items on your retirement bucket list. You’ve most likely saved up for this lofty goal as it can be costly. Unfortunately, when inflation is up, it can be more expensive to travel than you anticipated.

But there are also some silver linings to inflation, such as interest rates rising. You’ll find that rates for annuities like GICs, as an example, should go up during periods of inflation.

Another advantage is in real estate. For those who still own their home and are looking for the best time to sell it, during periods of inflation, real estate prices tend to go up. What this means is that it might actually be the best time to sell your home when inflation rising.

Of course, like any situation, there are both positives and negatives and these must be weighed against each other. If you are to draw any conclusions, the bottom line is this: If your expenses exceed your income, which is entirely possible, as the cost of living rises with inflation, you may be forced to choose between delaying your retirement or moving forward as planned but making some concessions.

If you are just transitioning into retirement, you may decide to work longer to generate more income to do the things you initially planned and cope with rising expenses. If you are in retirement and do not plan on returning to the workforce, you may opt for lower-cost alternatives to everyday products to offset inflation costs.

It’s understandable to be concerned about how inflation will affect your freedom and flexibility during retirement. The strategies to mitigate the effects of inflation on your retirement savings and plans will differ from person-to-person depending on your unique situation. It’s always best to touch base with your wealth management advisor if you feel even slightly concerned about how inflation will impact your retirement.

While this article been carefully checked, we cannot and do not guarantee that the information provided is correct, accurate or current. Please speak to your Rothenberg Wealth Management advisor for advice based on your unique circumstances. 

Using home equity as retirement income can be an interesting option for retiring Canadian baby boomers who have benefited from strong real estate markets over the past two decades.

The options for funding one’s retirement are varied and wide-ranging. The most typical sources of income in retirement include pensions and financial savings, which typically take the form of Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs) and non-registered savings accounts.

Another option that retirees can consider is their home equity. One method for accessing home equity is through a reverse mortgage. A reverse mortgage is a loan that allows you to get money from your home equity without having to give up your home. Depending on several factors, including you and your spouse’s age (both must be at least 55 years old) and the appraised value of your residence, you can borrow up to 55% of the current value of your home. However, reverse mortgages are usually issued for much less than this.

A reverse mortgage can be set up to make periodic payments to a homeowner, or it can be taken as a lump sum. In either case, there are no payments required until the homeowner moves out of the home, passes away or sells it.

There are several advantages and disadvantages to using a reverse mortgage. 

The advantages include:

1. Your net worth may be tied up in the value of your home, especially if its value has grown over the years. A reverse mortgage allows you to access your home equity without having to sell your home. Furthermore, you continue to own your home, and you will never be asked to move or sell your home. Even if the value of the home declines below the balance owing on the reverse mortgage, you can continue to live in the residence for the rest of your life.
2. You can access your home equity without the month-to-month payments you would find on a typical loan, like a Home Equity Line of Credit (HELOC) or a refinance. In fact, no payments are required at all, at least not until you move or sell your home, which is entirely your decision. Payments are thus voluntary, and, as a result, it is impossible to default on the loan.
3. You can choose how to receive your money, whether as a lump sum or at regular intervals. There are no conditions or requirements as to how you spend the money you receive. You can use a reverse mortgage for anything from paying off an existing mortgage to renovating your home or helping your family.
4. Since this source of income is technically a loan and not income, it is available on a tax-free basis. Furthermore, any payments received from a reverse mortgage are not considered when determining eligibility for Old Age Security (OAS), Guaranteed Income Supplement benefits (GIS), or Canadian Pension Plan (CPP) nor do they affect any benefits you may be receiving.
5. Unlike some other types of loans, income and credit scores are not considered for eligibility for a reverse mortgage. However, because of mortgage rules and regulations in Canada, you may be required to submit them.
6. You can never owe more than what your home is worth. If your home falls in value, the reverse mortgage lender takes the loss.

The other side of the coin… The disadvantages include:

1. One of the most significant disadvantages of reverse mortgages is the noticeably higher interest rates. In effect, the interest rates charged on reverse mortgages tend to be materially higher than the rates charged on similar types of lending products such as a traditional mortgage or a HELOC. For example, Canada’s largest reverse mortgage provider currently charges 5.49% on reverse mortgages with a 5-year term. Meanwhile, major Canadian banks are offering regular mortgages for 2.65% (as of April 2020). The percentage points difference will significantly reduce a homeowner’s equity, particularly given the effects of compounding when no payments are made before selling (like almost all mortgages in Canada, it compounds semi-annually). For this reason, it’s important to compare solutions.
2. The equity you hold on your home may go down as you accumulate interest on your loan. As a rule of thumb: The higher the interest, the more interest you’ll end up paying back to your reverse mortgage provider, and the less equity you’ll have at the end once you reimburse the amount. In a rising interest rate environment, it’s not uncommon that the interest can accumulate and take up more home equity to a point where you may have no money left.
3. If you have an existing mortgage or HELOC, the funds you receive from a reverse mortgage must first be used to pay off existing loans secured by your home. Consequently, you can’t just go and spend the money you receive however you want.
4. Staying in your home may become unfeasible at some point in retirement if things like climbing the stairs, house maintenance, snow removal and lawn care become too much of a burden. In this case, you may decide to move and sell your house. The issue here is that when you do so, you must repay the reverse mortgage in full. However, you may not have sufficient funds to do so. In this case, planning is everything.
5. If a reverse mortgage has significantly reduced the equity of your home, there may be little funding left to cover long-term care later in life.
6. A reverse mortgage reduces the size of your estate. In turn, the inheritance that you would leave for your family is smaller. It’s important to consider how a reverse mortgage can impact your legacy.

Some retirees may want to remain in their home for personal or sentimental reasons. If no other financial options allow for this preference, a reverse mortgage may be the only option. However, as with any financial product, there are many things to consider; there is no one-size-fits-all solution. Reverse mortgages certainly fulfill a need in the market, but they are not well-suited for all retirees. It’s essential to get a professional opinion on your personal situation.

Please note we do not offer reverse mortgages. However, we suggest you give us a call at (514) 934-0586 (Montreal) or (403) 228-0949 to discuss comparable options. A Rothenberg Wealth Management advisor will evaluate your unique situation and see if other options are available that might be better suited to your needs.

When people move out of their home, it is usually after they have tried remaining at home – at times with assisted living care – and have reached a point where this solution no longer works.

In some cases, home care lasts only for a limited time due to changes in the senior’s health condition and increasing additional needs. In other cases, the reason for the change may not be physical but rather due to social isolation, apathy, or loneliness.

Where do I start? Who can help?

When looking for the most suitable Residence for one’s next life chapter, there are many aspects to consider. Facility, comfort, activities, proximity to family, level of care, budget, demographics and so much more. Often, first-timers feel overwhelmed and uncertain as to which facility to visit, what to look out for, what questions to ask, or have nothing to compare with.

Often the local municipality will offer resources for seniors and housing options, though usually they mostly cover long term care facilities (regulated by the government). If you are looking for this information, please consult:

Ottawa: Community Information Centre Ottawa – Tel  613-761-9076

Kelona: Aging at Home, Moving to another care level. Another resource in Kelowna is the not-for-profit organization Seniors Outreach – Tel 250-861-6180

Montreal: Community Information Centre Montreal

Calgary: Community and Social Services Help Line

The search may become a little more complex when you are looking for a retirement home also for independent or semi-independent seniors. It may be helpful to consider the services of specialized agencies which are available in many parts of Canada. Placement agencies are compensated by all private Residences, so their service comes at no cost to you and they operate in a similar manner across the country.

Services such as Seniors Choice Montreal headed by Steve Besner, or Accès Résidences under Fabienne Coullerez’s guidance, provide an efficient way to search for the best Residence. Their services are free as they get compensated by the Residences.

Similar services are available in Ottawa and Kelowna as well. For example: Comfort Life – Servicing large sections of Canada

Comfort Life Ottawa

Comfort Life Kelowna

Or Tea & Toast, who work with 90 % of residences in the Ottawa area but offer services across Ontario.

How can such an agency control the quality of service at a Residence?

Some agencies have a dedicated evaluator who visits each Residence and assesses the quality of services, care, and facilities offered to seniors. The teams at both agencies mentioned above visit the facilities they recommend on a regular basis and follow up with each client.

Are placement agencies objective when advising seniors on the best Residence? Placement agencies are compensated by all private Residences, so they do not have an interest in suggesting one over another. Maintaining trust in the relationship with clients and their families is crucial to placement agencies’ reputation and referral business.

Types of Residences available to today’s seniors

While Assisted Living Residences and Nursing Homes have long been a solution for seniors who require care, in the past few years Autonomous Residences have increasingly been built and renovated to accommodate independent senior customers.

Autonomous Residences

Autonomous Residences service seniors who are able to function autonomously and manage all activities of daily living (ADL). Often times these seniors have their own car and may still have the ability to travel.

So why would these autonomous seniors consider a move to a Residence?

• Residences offer peace of mind for the senior and their family – Though they are in relatively good health, there is always the fear of an accident, a fall, blood pressure issues, etc. When in a Residence, a nurse or care worker arrives within a couple of minutes of a push of a button or pull of a cord on the emergency call system.
• An array of fun and interesting activities – These activities are designed to stimulate mind, body and spirit and are invaluable in maintaining a zest for life. Drama, art, music, field trips, athletics, lectures, movies, and bingo are some examples.
• The responsibility of maintaining a home is lifted – Shoveling snow, arranging home repairs, mowing the lawn, painting and renovating… these burdens are left behind in favour of living in a building with on-call maintenance experts.
• A Residence becomes a cure for loneliness and solitude – Residences offer all the privacy and personal space a senior may want while at the same time providing the option of joining a multitude of common areas and activities with other seniors or chatting with neighbours and friends at will.
• Cooking and cleaning dishes is optional – Residences offer the option of eating in the dining room for 1, 2 or 3 meals per day. Those who desire to continue preparing meals are welcome to do so.
• Residences provide a great venue for family visits and get–togethers – Whether it’s a one-on-one visit in the Residence library or a family birthday party in a private dining room, Residences provide an environment for seniors and their families to enjoy quality time together.

Assisted Living Residences

Assisted Living Residences provide various levels of care for seniors who need help with ADLs.

If a senior requires help with only one or two daily activities, they can often live in an Autonomous Residence or on an autonomous floor in a Residence and can purchase extra help from the Residence or via external private companies (home care).

When a senior needs help with many ADLs, it is time to move to the Assisted Living floor or, if not available in the current Residence, to move to an Assisted Living Residence where their needs can be met. They will still benefit from all the advantages of Residence living along with the extra help to make their days stress-free and comfortable.

Nursing and Memory Care Residences

These Residences provide full care until end of life. Nurses and care workers are available 24/7 and all ADLs are managed by the Residence. In a memory care situation such as Alzheimer’s or any form of dementia, these Residences (or special floors within Residences) have secure entrances and exits so the senior cannot wander off the floor or out of the building.

At this stage, many of the otherwise available activities are no longer appropriate. However, other adapted activities are offered instead, designed with the high-care or memory-challenged senior in mind.

Continuum of Care vs Specialized Residences

Some Residences cater to one specific type of senior (e.g. only equipped for an autonomous lifestyle or specialized in memory care). Other Residences offer a continuum of care whereby the senior can enter as a fully autonomous resident and move to different areas within the Residence as their needs change.

Many seniors/families prefer such continuum of care Residences since they allow them to remain in the same building and avoid a complete change of environment when care needs increase.

Helpful checklist while visiting a Residence

To choose between multiple Residences offering a similar level of care in the same geographic area, one should visit each Residence and make note of certain factors and criteria:

• Analyse the environment and the interactions between the staff and the residents.
• Do you like the location and outside appearance? As you tour the Residence, does it feel inviting and homelike?
• Ask the residents about how they like the community and staff.
• Do the residents seem to be appropriate housemates for you or your loved one?
• Unit accommodation – is heating/air conditioning individually controlled?
• What type of activities and amenities are offered?
• What level of healthcare services are offered (nurse, doctor visits, dietary services, physiotherapy, grooming, pharmacy, etc.)?
• Are visits welcomed at any time? Are grandchildren allowed to spend the night? Is there a charge?
• Does the Residence train staff on elder abuse and neglect? Is there a policy for reporting suspected abuse? Is there a camera surveillance system in place?
• Does the Residence have a designated area for residents with cognitive impairments such as Alzheimer’s disease? If so, is it secured?
• Does the Residence allow hospice care to come in and care for residents?
• What are the most common reasons a resident may be asked to move out of the community?

The role of a senior living consultant

Experienced senior living consultants work with various sizes of Residences, from autonomous to high care. Consultants can provide families with behind-the-scenes knowledge that is otherwise not accessible.

Seniors Choice Montreal can often negotiate a better price for their clients due to their long-standing relationship with Residences. The agency uses its valued connections with Residences, hospitals, social workers and nurses to provide personalized service and help with the necessary paperwork and government assistance applications.

Their team continues to support the family even after the senior has moved in. Sometimes occasional check-ins are enough; other times, such as when the senior’s family lives out of town, they depend on Seniors Choice Montreal to visit their loved one and provide regular updates.

Accès Résidences’ team of consultants visits the facilities it recommends and ensures they remain consistent over time. Their consultants are familiar with the ins and outs of each Residence and can help clients determine which Residence offers the best personalized response to their needs. All their consultants are members of the Quebec Association of Consultant for Services to Seniors (ACSAQ) and abide by their code of ethics. They service a large spectrum of communities in multiple languages and are attuned to their cultural sensibilities.

Residence costs

The average monthly rent for a standard unit in a Residence for seniors in Quebec was valued at $1,788 in 2019. In the Montreal area, private Residences’ monthly costs range from approximately $2,000 up to $8,000. This wide discrepancy in cost results from various factors including location, facilities, care level, size of room or apartment, number of meals included, and optional parking.

Generally speaking, the amount of care needed is the largest single factor influencing the monthly cost.

Conclusion

Placement agencies conduct a free initial consultation and assessment of the senior’s needs and later accompany the senior and their family on multiple visits to appropriate Residences as they search for the perfect fit. The agencies’ extensive knowledge of the industry and long-standing relationship with Residences is often invaluable and enables deeper insights, access to non-published details, and better long-term follow-ups. All of the above is made available without additional cost to the family – a win-win option to consider.

Many seniors and others in need do not feel ready to leave their home for an institutional setting but do need support to remain at home. Trying to follow their wishes and choose the least restrictive approach first is advisable. However, family members must be realistic about their loved ones’ abilities and should assess their senior’s ability to age in place.

To determine if an elderly person can continue living at home requires examining all aspects of their present housing situation and how each one affects their safety and quality of life is key.

1. Medication management should be assessed: Do they remember to take their medications at prescribed doses and times?
2. Meal preparation: Is it possible for them to cook for themselves? Are they preparing and eating balanced meals? Are they able to safely operate kitchen appliances?
3. Safety and mobility: Do they have difficulty getting around the home or taking stairs? Have they fallen in the home? Do they have a plan in place to call help in case of an emergency? If mobility is an issue, can the home be equipped with safety devices like grab bars or an emergency response system and would the senior person be open to using them?
4. Personal hygiene. Can they autonomously take care of their personal hygiene routine (bathing often enough, grooming adequately, laundering their clothes and linens)?
5. Transportation: Are they still driving? Are they safe behind the wheel?
6. Socialization: Are they participating in activities, seeing friends and exercising or are they isolated from others most of the time? Are they showing signs of depression?
7. Home management: Is the house clean or in general disarray?
8. Financial management: Are their bills paid on time?

Who qualifies to assist seniors at home?
Professional agencies like Premier Home Care help seniors continue to stay and function at home with the support of qualified caregivers who go through initial and ongoing training. Caregivers at Premier Home care may have different certifications such as Alzheimer care, cancer care, diabetes, heart care and others. They are interviewed in person and if then selected, they undergo references and a criminal background check performed by an independent company.

What is the process?
Mark Wathen, co-owner of Premier Home Care, explains that once the company completes its free client assessment and home safety inspection for fall prevention and bathroom safety, they meet again with all decision makers involved to present their personalized recommendations. A customized care plan is designed outlining all the agreed upon services and the weekly schedule (3-hour minimum shift).

Services provided
The caregivers provide non-medical homecare: companionship (including reading together, games and puzzles, help with, cooking together and watching TV), meal preparation, light housekeeping, grooming & dressing, transportation to appointments or errands, medication reminder and other activities of daily living.

Quality control
Mark mentioned that in order to keep track of the quality of care they come to the home for unannounced visits, check the Care Plan book and the log, and communicate with the client and the family directly. Time keeping is automated with software specifically designed for the home care industry, so they always know when a caregiver’s shift starts and ends and are immediately alerted if there are any discrepancies. There is an application for smartphones, so the client always has access to the caregiver and schedule.

Who can benefit from such services and where?
The clients are primarily seniors who want to remain safe and independent in their homes for as long as possible. Whether home is the family house, a condo, a senior’s residence or an assisted living facility, we can provide our services wherever they are required. Once they start getting help with activities of daily living, seniors can remain in their current residence for years, surrounded by their memories, family and friends, more affordably than moving to an increased care facility.

The cost factor
Generally, rates vary between $23-$28 per hour for “standard” care for an individual. Usually there are additional costs for couples and/or special Alzheimer care. Many companies will require a minimum of 3 or 4 hours per shift – this is in consideration of the caregivers having to travel to and from the client’s residence.

For people aged 70 and over, choosing to remain at home has never been so easy. In Québec, you can potentially receive up to 35% of your eligible expenses as a tax credit related to home care services. Most services and products are eligible.

Sometimes home care can last only for a limited time due to changes in the senior’s health condition or additional needs. On other occasions the answers to questions 1-8 (at the beginning) may indicate social isolation, apathy, or loneliness which may lead to prefer life at an active residence. Once the choice has been made to move to a seniors’ residence the search for the appropriate residence begins. More often than not the senior and the family can feel overwhelmed by this process, by the need to ask the right questions and know what to look for and compare before meeting a final decision. In part 2 of this blog we will try to offer some insight into the differences between residences, cost, and levels of care so you will feel better informed and know what to expect and plan for.

Useful links:

• Programs and Services for Seniors in QC
• Tax credit for home-support services for seniors
• Home care | Alberta Health Services
• Alberta – Continuing Care 
• Alberta – Seniors Support

Having a balanced portfolio can help make portfolios more risk resistant and allow them to succeed in numerous market cycles. Bonds are one of the most valuable tools investors have to diversify and balance their portfolio. In this month’s blog, we explain what bonds are, how they are traded, why they fluctuate, and most importantly how they can help your portfolio.

What are bonds?

Governments and corporations often need to raise money for their operations. These operations can include anything from building infrastructure to launching new products. One of the ways a company or government can raise that money is by issuing bonds. Bonds are effectively IOUs whose face value, the principal, must be repaid on a maturity date. Bonds also include a coupon, which is the interest investors will earn from the bond and which is calculated annually as a percentage of the principal.

The four types of bonds are corporate, government, municipal, and mortgage. Though they are often considered safe investments, their prices can fluctuate for several reasons.

Bonds on the Secondary Market

Similar to the way stocks are traded, after a bond is issued on the primary market, it can be traded between investors on the secondary market, especially corporate bonds. Because of the variety of issuers and maturity dates, secondary market bonds are sold over the counter (OTC) instead of on an exchange.

The value of having access to a secondary market is that it gives bonds liquidity, which can be a very valuable addition to their secure reputation.

Why the fluctuations?

There are three primary reasons bonds may fluctuate: interest rates, the inflation rate, and economic outlook.

Interest rates and bond prices have an inverse relationship, meaning that when interest rates fall, bond prices rise, and vice-versa. This occurs because, if interest rates rise above a bond’s coupon, purchasing that bond will no longer be an attractive investment. Because potential investors could receive a better rate from banks, there will be less demand for bonds on the secondary market.

The inflation rate also has an inverse relationship with bond prices. Because a rise in the inflation rate means a decrease in a given dollar’s purchasing power, it means that if inflation rates rise more than expected, the return from a bond will be worth less in current dollars. However, the inverse is also true and can lead to a greater-than-anticipated purchasing power from the dollars returned by a bond.

Economic reports and outlook that can affect bonds include the employment rate and GDP growth, among other forecasts. And these forecasts can be the greatest force for fluctuating the bond market, as hope or fear influence investors’ decisions about future investments. If the numbers being reported are much better or much worse than what was expected, a big move in the bond market, as in most markets, can be expected.

Because bonds are seen as a safe investment, during volatile times or when there is negative economic news, investment-grade bond prices will rise. High-yield bonds often have more risk and therefore do not behave in the same way. Investors respect the safety of investment-grade bonds and may therefore choose them over investments with greater risk. On the other hand, when the economy is booming and there is good employment data, bond prices may suffer as investors seek to cash in on the greater market’s success.

How this affects you

At Rothenberg, we take a conservative approach to investing. Our Balanced Portfolio philosophy means that we aim to make our clients’ portfolios successful by matching it to their risk tolerance level and hopefully creating stable growth. Investment-grade bonds are a valuable tool in a balanced portfolio.

To learn how bonds can be useful to your specific portfolio, make an appointment with one of our Wealth Advisors. Please call 514-934-0586 (Quebec) or 1-800-456-0949 (Alberta).

We are here to provide you with a checklist to ensure you get the most out of tax credits, deductions, and benefits. But first, we want to get more in depth about tax loss selling.

What is Tax-Loss Selling?

Tax-loss selling means selling an investment with accrued losses at year-end, allowing you to offset capital gains realized with other investments. Net capital losses can be carried back three years or carried forward indefinitely. Tax-loss selling therefore enables investors to mitigate the impact of capital gains taxes.

Superficial Loss Rules

When you sell an investment at a loss, if you, your spouse, your company, or a trust in which you have a major interest, purchase and still own an identical investment within 30 days of the sale, then the capital loss is added to the cost base of the purchase. This includes re-purchasing the same company or a fund tracking the same index. Professional advice may be needed to determine whether certain products are considered identical.

Foreign Currency Tax Loss Selling

Foreign currency fluctuations are another important consideration when tax-loss selling. The gain or loss will be different once the foreign exchange is taken into account. It is even possible that when calculating between two currencies, what appeared to be a loss may end up being a capital gain, and vice versa. Before selling to take losses, it is extremely important to calculate foreign currency exchange rates.

The Rest of the Year-End Checklist

While tax-loss selling can be an important tool, it is far from the only thing to consider before year-end. Here is a handy checklist with some other steps to take:

Pension income splitting — Those who receive a pension may be eligible to split up to 50% of eligible pension income with a spouse

Guaranteed income supplement — If you received the guaranteed income supplement or allowance benefits under the old age security program, you can renew the benefit by filing by the deadline.

Registered retirement savings plan (RRSP) — You have until December 31 of the year in which you turn 71 to contribute to your RRSPs.

Goods and services tax/harmonized sales tax (GST/HST) credit — You may be eligible for the GST/HST credit, a tax-free quarterly payment that helps offset all or part of the GST or HST you pay. To receive this credit, you must file an income tax and benefit return every year.

Medical expenses — You may be able to claim eligible medical expenses that you paid, provided the expenses were made over the 12-month period ending in 2018 and were not previously claimed. This can include amounts claimed for attendant care or care in an establishment.

Age amount — If you are 65 years of age or older on December 31, 2018, and if your net income was less than $83,000, you may be able to claim up to $7,125.

Public transit amount — You may be able to claim the cost of monthly or annual public transit passes for travel within Canada on public transit in 2018.

Pension income amount — You can claim up to $2,000 if you report eligible pension, or annuity payments on your tax return.

Registered disability savings plan (RDSP) — This savings plan can help families save for the financial security of a person who is eligible for the disability tax credit. RDSP contributions are not tax deductible and can be made until the end of the year in which the beneficiary turns 59.

Disability amount — If you, your spouse or a dependent have severe and prolonged impairments in physical or mental functions and meet certain conditions, you may be eligible for the disability tax credit (DTC).

Family caregiver amount — Those caring for a dependent with impairment in physical or mental functions may be able to claim up to $2,000 when calculating certain non-refundable tax credits.

Have you noticed that in the investment industry there are so many acronyms and terms you have never heard of? We would like to de-mystify our business! So we have included a glossary of some of these terms in this eNewsletter. Let’s start with these ten!

Exchange Traded Funds (ETFs)

Exchange traded funds (ETF) are securities that track other assets or indexes, meaning that they own underlying assets such as stocks or bonds, and divide ownership into units. ETF unit holders are entitled to profits such as interest or dividends, and their value can appreciate over time. Though they are pooled funds, they trade like a common stock on a stock exchange.  That means the can be bought and sold throughout the day, thereby offering liquidity and diversity. They generally have lower fees than mutual funds.

Principal Protected Notes (PPNs)

Principal protected notes (PPN) are structured notes that guarantee the investor’s initial investment, and offer growth or income based on the performance of the underlying assets. PPNs are ideal for investors wishing to help protect their investments while participating in market movement.  Investors must hold PPNs until maturity in order to receive the full payout.  This means that investors’ money will be tied up for longer periods of time, and early withdrawals may be subject to withdrawal charges.

Principal At-risk Notes (PARs)

Principal At Risk Notes (PARs) are a type of structured note that can provide more growth or income than a PPN, but with risk to the initial investment, hence their name. PAR notes often have additional features, such as limited capital protection or accelerated returns, and like PPNs must be held until maturity in order to receive the full benefit of the note. Other restrictions may apply, such as an upside cap.

Mutual Funds

A Mutual fund is a pooled investment composed of stocks, bonds, and similar assets. They are operated by managers who invest the fund’s capital to try to produce capital gains and income for the fund’s investors. Mutual funds provide a way for investors to access the stock market and the potential and diversity of a wide range of financial products with a relatively smaller amount to invest.  There are many different kinds of mutual funds, with different investment styles, asset mixes and geographic allocations.

Preferred Shares

Preferred shares are fixed income securities issued by companies that pay dividends to shareholders.  Preferred shareholders get paid before common stock dividends are issued.  They are also entitled to be paid ahead of common stock holders in the event the company goes bankrupt. Preferred stock shareholders do not hold any voting rights.

Common Stock

Common stockholders own a portion of a company, and are usually given voting rights.  Stockholders partake in the profits of a company both via dividends and capital appreciation, if the value of the shares increase. There is more risk in holding the common stock of a company, but there is also potential for greater returns than holding preferred shares.

Real Estate Investment Trusts (REITs)

Real estate investment trusts (REITs) are trusts that own, operate, or finance real estate. REITs often trade on major exchanges like other securities and offer an opportunity to take part in real-estate investing. The REIT income comes from a variety of income-producing real estate, from residential housing to shopping malls to office buildings, and often specialize in a specific sector, such as healthcare.

Bonds

Bonds are debt securities where the issuer – the company or government that is borrowing – owes the bond holder. They pay interest until the maturity date at which point the capital amount would be repaid. Interest is usually payable in semi-annual intervals. Bonds are typically liquid and can be traded on the secondary market.

The primary difference between stocks and bonds is that stockholders are owners and bondholders are considered as lenders. Bondholders have priority and will be repaid in advance of stockholders in the case of bankruptcy. Furthermore, bonds have a maturity date, whereas stocks remain outstanding indefinitely.

Guaranteed Investment Certificates (GICs)

Guaranteed Investment Certificates (GICs) are Canadian investments, offered by trust companies or banks, that provide a guaranteed interest rate of return over a fixed period of time. Because the invested amount and the interest on GICs are fully guaranteed, they are considered a safe investment.  The Canada Deposit Insurance Corporation (CDIC) guarantees the repayment of interest and capital in the unlikely event of bankruptcy of the financial institution up to the amount of $100,000 per person per institution (check CDIC.ca for more details).

Guaranteed Life Annuities

Life Annuities are financial products that pay out a fixed amount of income.  Regardless of what happens to the stock markets, and/or interest rates, the Life Annuity will continue to pay out a fixed amount, making the Annuity a reliable means of securing a steady cash flow.  Life Annuities are offered through Life Insurance companies, and they can not be changed once started.  The payments will continue for the entire life of the annuitant and his/her spouse if applicable.  Guaranteeing a minimum number of payments as a way to protect the estate is always recommended.

While it is important that you are aware of some of this terminology it is even more important that you speak with your Wealth Advisor.  He or she can help you through this jungle!

There are a lot of things to take into consideration when you’re leaving the country for an extended period of time. These tips will help make you with preparation, travel, and driving basics. Once everything taken care of, all that’s left is getting to your destination safely. From there you can enjoy the sun and warm weather stress and worry-free.

Leaving your house vacant for more than 30 days

Each homeowner insurance provider is different but all of them have rules in place regarding steps that you must take if your house, condo or apartment is going to be vacant for a specified length of time – usually 30 days. A trusted neighbor, friend or family member who routinely checks in on your house could help mitigate any potential problems—such as water damage resulting from a burst pipe. It is wise to call your insurance provide to review your policy so you can leave with peace of mind.

Tips before you leave 

1. Pack your passport, but first renew it if it’s due to expire during your time away.
2. Make 2 photocopies of all your cards and documents. Pack one set and leave a copy with a trusted neighbour, friend or family member.
3. Let your bank and credit card companies know that you’ll be leaving the country.
4. Consider purchasing an international phone plan to save on costly roaming fees.
5. Cancel any regular deliveries and forward your mail.
6. Unplug all unnecessary electronics and appliances in your home. Shut off the water.
7. Make it seems as if someone is home. Arrange someone you trust to collect mail or flyers that land at your front door. Install timers on indoor and outdoor lights and hire someone to clear snow from your driveway, sidewalk and path after each snowfall.
8. Call your telephone, cable, Internet and/or satellite provider to temporarily suspend your service. However, make sure this doesn’t interfere with your home monitoring system, if you have one.
9. Store valuables that you’re not taking with you in a safety deposit box.
10. Do not post your travel plans on social media sites. You don’t want to publicize that you’re away from the house.
11. File all your prescriptions ahead of time: Be sure you have all of your medications with you and carry them in their original, labeled, drug store containers. It is also recommended:
    • To have a document with your medical history handy
    • To carry your updated immunization pass
    • To have a health care power of attorney specifying who can make decisions on your care in case you are unable to articulate your wishes.
    • If you have pre-existing medical conditions it is important to wear an alert device that would connect to a virtual database with pertaining medical information
12. Get travel health insurance: Getting sick abroad can be very costly or unsafe. Some credit card issuers offer health and travel insurance. You should check which coverage they provide (e.g. hospital stay? Doctor visits? Emergency medical evacuation to Canada if needed – possibly escorted by nurse/doctor?). In any case make sure you have a health insurance while travelling to avoid high bills upon return.
13. Keep track of how many days you stay in the US – verify the latest regulations and limit of days/year allowed (different rules for immigrations and for tax purposes).

Before hitting the road, reach out to your auto insurance provider. It’s important you notify them of your plans and review your coverage options to ensure you’re properly protected.

1. Take your car to a mechanic for a tune-up. It’s important your vehicle is prepared for the lengthy drive.
2. Renew your auto insurance, or driver’s licence before leaving if they’re going to expire while you’re away.
3. Consider joining a roadside assistance program such as CAA that can help you both in Canada and outside of the country.
4. Equip your car with a winter driving survival kit which will come handy in case of an emergency.
5. Make sure you know where you’re going! Even if you have a GPS to help you with directions, having maps as a backup couldn’t hurt either. If you belong to a roadside assistance program they can provide you with maps and other details of your route.
6. Don’t overdo it. Take frequent breaks from driving and take your time. A well-rested and alert driver is a safe driver.

Being debt-free can seem like a pipe dream.  However, it is possible.  A lot of progress can be gained step by little step. It is important to just start by taking the first step.

Know Your Interest Rates:  An important step to becoming and remaining debt-free is knowing how much you are paying for your debt. Canadian credit cards charge anywhere from 20 to 24 percent interest. That is a huge percentage and will rapidly increase the amount of debt you have.

Consolidate debt:  If you’ve accumulated credit card debt, the best way to manage it is to consolidate that debt onto a low rate line of credit, and perhaps even close all credit card accounts, switching instead to a debit card. Lines of credits tend to hover around 5% interest, which would substantially decrease the amount of interest you will be charged each month.

If you need to negotiate payments with the financial institution(s) that too is an option. It is possible that by contacting your creditors, you can negotiate a reduced settlement or a more manageable payment schedule.

It is important that you know in clear numbers how much you owe and what the interest rate is so that when you can make payments on your debt, you are paying off the debt that is costing you the most. Keep in mind that you should still always try to make the minimum monthly payments on all debt.

Track your spending:  Once you know how much you owe and at what rate(s), tracking your spending is the most tangible and easiest way to get started on the road to a debt-free life. Either note all purchases or save receipts and take note of them. This way, you can know where your money is going. A good app to help track spending and provide for basic budgeting needs is Wally. Unlike many other budgeting services, Wally is free! By tracking your spending, you will slowly get into the habit of being more aware of your purchases, and cutting back on what is excessive.

Budget:  A budget doesn’t necessarily mean scarcity, it just means that you know where your money is coming from and where it’s going. That way, you can better plan and monitor your spending. True to its name, the app You Need A Budget helps you live within your income and see what can be done to balance your budget. This app works on mobile phones and desktops, and enables you to build your budget while taking into account living expenses, debt, and investments. Other websites/apps to track budgeting and spending include Mint and Budget Tracker.

Don’t rush it! Your motivation will disappear if you try too much too fast and don’t adjust to budgeting at a pace that works for you.

Budgeting will not only enable you to contribute as much money as possible to debt repayment, but also help your spending and saving habits once the debt is gone. This way, you can enjoy a debt-free life as much as possible and even being able to spend money guilt-free.

Stop spending:  Until your debt is paid off, it is best to rein in as much spending as possible. Using savings to pay off debts is a good idea, but make sure to replenish those savings as soon as possible.  And having an emergency fund is still necessary.

Be consistent:  Try to be consistent in your payments: pay off as much debt as you can afford to regularly.

When you reach milestones, celebrate! You deserve that feeling of freedom and positivity! The greatest reward is that you will be on your journey toward being debt-free forever.