Strategic Planning 101

Term life Permanent life Universal lifeWhole lifeCritical IllnessDisability

Term life insurance

What is it? Term life insurance generally provides a level tax-free death benefit and a level premium set for a fixed number of years ie the term. Term Lengths usually come in 10, 20 or 30 years, however, can be found in all lengths (up to 100). When the term length is up, there is often an option to renew at a guaranteed price, convert (to a permanent insurance policy) or lapse (cancel coverage and reapply). If you pass away at any point during the term, your beneficiaries receive a death benefit. Why you should have it. Term life insurance is the most simple and cost-effective choice for most people. You simply determine how much coverage you need and for how long you need it. When it expires, you can take out another policy if you still need the insurance.

Permanent life insurance

What is it? Whole life or Universal life policies are “permanent,” meaning they never expire. They also add the possibility of building up an investment within your policy that you may be able to cash or borrow against in the future. What’s the catch? The downside is they are much more expensive and complicated than term life. One exception is individuals who can benefit from the ability to borrow against the policy to extract money from a holding company in a tax-efficient manner. If this sounds like you, we can show you exactly how this works.

Universal Life

Universal life insurance is a form of permanent life insurance. Universal Life can be purchased as Level, Increasing or decreasing benefit. Payment can also be level minimum, limited to a payment schedule (like 10 years) or YRT/ART (yearly/annually increasing in cost). Universal life policies can be overfunded meaning paying more than the minimum to accumulate a cash value.

Whole Life

Whole life insurance is also a form of permanent life insurance.

In addition to providing a death benefit regardless of age, a whole life insurance policy also accumulates cash value. There are many forms of Whole life most fall into Participating and nonparticipating whole life.


These plans offer features similar to non-participating policies -- lifetime protection, guaranteed cash values and, in most instances, guaranteed premium schedule. Plus, they also generate a dividend. The dividend allows the insured to share in the profitability of the insurance company. Dividend rates can change each year & there are different kinds of dividends (the most popular being PUA paid-up additions) There is no guarantee that the insurance company will pay a dividend. (most life insurance companies in Canada have a solid history of paying dividends even in negative earning years.)

As mentioned the dividend can be structured in many ways but the most popular way is to buy additional life insurance PUA (that has a cash value that can be leveraged in a number of ways) other forms are to reduce future premiums, allow the dividend to be used to purchase a one-year term insurance policy (generally called enhanced insurance) or receive the dividend in cash.

Non Participating

These plans offer more simplicity and a lower premium, but they do not generate an annual dividend. Non-participating whole life policies provide lifetime protection, fixed premiums guaranteed cash values and certain plans can be paid-up in a limited number of years.

In either case, the premiums are generally the level each year, you can choose to pay premiums every year for as long as the policy is in effect or for a set number of years. Spreading your total premiums out over just 8 -20 years. (be sure to check if this is guaranteed in the contract as well)

Critical illness insurance

What is it? Critical Illness insurance pays a single tax-free lump sum benefit when the insured person is diagnosed with a serious illness, such as cancer, heart disease or stroke. Most policies cover about 20 more common illnesses. Generally, we recommend enough Critical Illness insurance to pay both your usual expenses plus any extra medical expenses for a whole year while you recover. Why you should have it. Critical Illness insurance is sometimes called insurance for your savings account. Why? Because if you come down with something serious like cancer or heart disease, you may very well make a full recovery, but you’ll probably have dipped into your savings account to cover missed work as well as healthcare expenses.

Disability insurance

What is it? Disability insurance usually pays a tax-free, monthly benefit equal to 65% of your salary until you’re able to work again or until age 65, whichever comes first. This amount is designed to give you comparable take-home pay to when you were working. Why you should have it. It is estimated that about one person in three will be at least temporarily disabled due to an illness, accident or injury at some point in their lives. This could be from something that happens on the job or something in your private life, such as a car accident, a back injury, or a medical disease.


Tax-Free Savings Account (TFSA) Registered Retirement Savings Plan (RRSP) Registered Education Savings Plan (RESP) Non-Registered AccountLocked-In Retirement Account (LIRA) Registered Retirement Income Fund (RRIF) and Locked-In Retirement Income Fund (LRIF) Spousal RRIFSpousal RRSPGroup Retirement Savings Plan (GRSP)

Tax-Free Savings Account (TFSA)

Pay now, party later TFSA is short for Tax-Free Saving Account. The name is slightly misleading because a TFSA is really an investment account that can hold all the same types of investments as an RRSP. Why you should have one With a TFSA, you’ll have to invest after-tax dollars when putting money into the account since there is no tax deduction, unlike an RRSP. On the flip side, the advantage is you can earn investment gains in your account and never pay tax on them. For example, if you invested $5,000 and it grew to $10,000, you could walk away with the whole $10,000. No taxes, no catches. What you need to know Similar to an RRSP, there is a limited amount of contribution room. For 2018, the amount is $5,500 (with the contribution limit moving up to $6,000 in 2019). Also similar to an RRSP is the fact that you can carry unused room forward. If you’ve never contributed to a TFSA before, you should have more than $60,000 of contribution room available based on the annual limits set since they were introduced in 2009. A neat feature of TFSAs is that you get your contribution back when you make a withdrawal. Take $5,000 out this year, and you’ll have an extra $5,000 of contribution room available for next year.

Registered Retirement Savings Plan (RRSP)

Party now, pay later RRSP is short for Registered Retirement Savings Plan. The idea with this type of investment account is to avoid paying tax on some of your income today and instead pay it after you retire. There are two advantages to this One, it is likely that you will be in a lower tax bracket when you retire. And two, being able to invest more of your money now will lead to a bigger nest egg when it comes time to spend it. Here’s a simplified example: If you made $10,000 and paid income tax at the highest marginal rate of about 50%, you’d have $5,000 left to invest. If you earned 6% annually over the next 20 years, you’d end up with about $16,000. Next, you’d have to pay tax on the gains you made. If you were in a retirement tax bracket of, say, 30%, the taxes on your $11,000 profit would be roughly $3,300, leaving you with $12,700 after all is said and done. Now, if you put that $10,000 in your RRSP instead, you’d pay no income tax on it. You could invest the whole $10,000 at 6% annually for 20 years, and end up with $32,000. This time, you’d have to pay tax on the full amount, not just the profit. But at a retirement tax rate of 30%, you’d still be left with $22,400, or nearly twice as much money. And also some limitations One of the limitations of an RRSP is that you are only given contribution room of 18% of your income each year with a cap of roughly $25,000 per year (this figure usually increases a bit each year). The good news is you can carry forward unused contribution room from previous years. Check the Notice of Assessment from your most recent tax return to see how much total contribution room you have available. You can take money out of your RRSP at any time, but there will be withholding tax just like a paycheque. The exception is when you take money out of your RRSP to buy your first home or to return to school as a mature student. There are programs that allow you to “borrow” from your RRSP for these purposes without paying tax, as long as you pay it back into your RRSP within 15 years for home purchases or 10 years for school.

Registered Education Savings Plan (RESP)

Set your child up for the future. RESP is short for Registered Education Savings Plan. This type of investment account is used to help a child pay for college or university. The first benefit is the ability to invest in the plan without paying tax on investment gains until withdrawals are made for school. At that time, only the profits are taxable, and only in the name of the child, who will almost certainly be in a very low tax bracket. Free money from the government The second benefit is really remarkable: the Canadian Education Savings Grant (CESG) matches 20% of your RESP contributions. That’s like a guaranteed 20% return on investment. The maximum grant is $500 per year up to a lifetime maximum of $7,200 per child. An RESP can remain open for 36 years. If your child still hasn’t made it to university by then, all is not lost; you can generally transfer the account to another child, or to your RRSP (minus the government grants). Just a heads up Be wary of companies that offer Group RESPs. This is an outdated financial product that thousands of Canadians still purchase every year, probably unaware that there are unnecessarily high fees, low investment returns, and strict rules that can cause you to lose all of your investment gains and government grants.

Non-Registered Account

No special tax features A regular, run-of-the-mill investment account with no special tax features is often referred to as a non-registered account. This is the type of account you’ll generally invest in after you’ve used up your RRSP and TFSA contribution limits. You don’t get to deduct your contributions from your taxes or earn tax-free investment returns with this type of account, but that doesn’t stop you from doing some tax planning. The best types of investments for this account This mostly comes down to which types of investments you choose to hold in the account. Interest income is taxed at your full marginal rate, just like your salary. This makes bonds, GICs, and other interest-bearing investments the least desirable choice for your taxable account. Dividends from Canadian corporations are taxed at a lower rate than interest income. This makes Canadian dividend-paying shares or ETFs a little more attractive for this type of account. Capital gains are only 50% taxable. For example, if you invest $5,000 and it grows to $10,000, you’ll only pay tax on $2,500, or half your gain. This makes common shares or growth-oriented ETFs the most attractive investment for this type of account, at least from a tax point of view.

Locked-In Retirement Account (LIRA)

Similar to an RRSP, with some exceptions LIRA is short for Locked-In Retirement Account. This is a close cousin of the RRSP, except with some additional restrictions. A LIRA is created when you leave a job and transfer money out of a company pension plan. Once it’s in your LIRA, you can manage the money yourself and invest it as you wish, just like an RRSP. The catch The catch is that you can’t put more money in, and it’s difficult to take any money out of a LIRA before retirement. With an RRSP, you can access your money at any time as long as you pay tax on the withdrawal. You can also make tax-free withdrawals with some conditions to pay for school or a first home. Not so with a Lira. About the only way to access the money before retirement is by proving financial hardship based on standards that vary by province.

Registered Retirement Income Fund (RRIF) and Locked-In Retirement Income Fund (LRIF)

Made to enjoy the fruits of your labour RRIF is short for Registered Retirement Income Fund. LRIF stands for Locked-in Retirement Income Fund. They are both variations on the same theme: these are the accounts that an RRSP or LIRA must be turned into by the time you turn 71. You use them for taking money out rather than putting money in. Managing your withdrawals The government requires you to withdraw a certain minimum amount every year. If you take only the minimum amount, the money should last for the rest of your life (at least based on their actuarial tables). You are free to withdraw as much as you like, but be aware that every dollar is taxable. Therefore, it takes some tax planning to make sure that your sources of retirement income add up to enough money to meet your expenses without going over and putting you in a higher tax bracket.

Spousal RRIF

Made for you and your partner to enjoy retirement So you and your partner have your Spousal RRSP and are about to retire. It’s time to switch this account over to a Spousal Registered Retirement Income Fund (Spousal RRIF). Just like an individual RRSP, this account is what your Spousal RRSP must be turned into by the time you hit 71. You and your partner use this to take money out as an income rather than adding to it. The three year attribution rule There is a rule that is unique to this account compared to an individual RRIF. The three year attribution rule applies to couples that take their retirement savings out too early in order to cheat the tax system. As an example, one spouse earns more than the other and they put $5000 in their spouse’s RRSP to take the tax deduction. The spouse earning less now takes that cash out the following year and the other dodges the taxes from the year before. Since it’s been less than three years that they’ve put the $5000 into the account, the one earning more will have the $5000 added to their income and will have to pay the tax.

Spousal RRSP

If one of you make a lot more than the other, this is a great account for you. A Spousal RRSP is a lot like a regular RRSP, except one spouse is allowed to make some or all of their annual RRSP contribution to an account in the name of the other spouse. This comes in handy when there is a large income disparity between the two. Now, the higher-earner gets the full, immediate tax relief when a contribution is made, but the lower-earning spouse gets the tax liability down the road when the money is withdrawn. The goal is to achieve a lower tax rate and a smaller overall tax bill for the couple when they retire. Two things to keep in mind Whether you just have your own RRSP or your own RRSP plus a Spousal RRSP, your annual new contribution room is still limited to 18% of your income up to a fixed cap, and any unused room from one year can be carried forward indefinitely. Also, in order to discourage cheating, the government will attribute the taxes back to the contributor on any amounts that stay in a Spousal RRSP for less than three years.

Group Retirement Savings Plan (GRSP)

Similar to an RRSP First off, a GRSP (or Group Retirement Savings Plan), acts just like an individual RRSP. Invest your money tax-free and only pay tax once you withdraw from this account. 18% of your income can be put into this account every year to a max of $26,230 (2018). So, what’s the difference? A GRSP is administered by your employer. If you leave your job there’s no problem, since you can take it with you without penalty or take money out of it, as long as you pay the tax. Free Contributions from your employer The biggest advantage of a GRSP is that employers often chip in. That means free money for you. They can match your contributions up to 3 and 5% of your salary. Now that’s something to get excited about. Something to think about There are some drawbacks to this type of account compared to a regular RRSP. For one, the company decides who manages the account. This makes for a limited choice and not great for someone who wants complete control over how their investments are managed. Secondly, Some plans restrict employers from taking money out of the account after they leave the company. Keep an eye out for this before making a final decision.

Financial Advisor Financial plan Goal-based planning Legal wills and Emergency planning

Financial Advisor

Financial advisors have played a central role in the financial planning industry for decades, helping people to manage their money over time.

Financial advisors are typically paid a commission based on their Assets Under Management, or AUM.


Financial plan

A financial plan is exactly what it sounds like – a plan for your finances. Building a true financial plan typically involves evaluating your current financial situation (things like how much you make and how much you’re spending) and then developing a strategy for your future based on your personal goals and stage in life.

Many people, especially those just beginning to focus on personal finance, find the idea of building a financial plan overwhelming. You might be thinking, “Where do I even begin? Do I even need a financial plan?”

The short answer is – yes.

Building a financial plan makes it far easier to reach your short and long-term financial goals because you have clear and measurable targets to reach. For example, if you’re looking to purchase a new house within the next two years, you can research how much you need to save each month for a down payment. Without understanding how much your dream home will cost and setting a time-bound goal, it would be next to impossible to build an appropriate savings strategy.

What else should I know?

If you decide to move forward with creating a financial plan (you should!) you may be surprised by how emotional the planning process can be at first. After all, building a plan requires confronting every aspect of your financial life – even past decisions you may now regret.

Don’t let these negative emotions deter you!

By working with Planswell, we blend technology with financial experts that get to know you and your specific goals. We work them into a coherent and flexible document that adapts to your life over time.


Goal-based planning

Often when we think of financial planning, the first thing that comes to mind is planning for retirement. But what about all of the other critical financial decisions we make and goals we set for ourselves long before we reach retirement age?

The purpose of goal-based planning is to focus not only on retirement but on reaching all of these other goals – from buying a house, to owning a boat to going on a year-long adventure around the world!

Goal-based planning tends to be more personal and customized. Everyone will eventually need to care for themselves in old age, but not everyone has dreams of buying a vacation home in the Italian Riviera!

What else should I know?

When working with us, we are able to put together plans that include both long- and short-term goals, so you’re able to maintain your lifestyle in the future and also save for any monumental purchases you might have in mind.


Legal Wills and Emergency Planning

One critical part of financial planning that tends to be put on the “someday” list is estate planning. Let’s be honest, no one likes thinking about what will happen after they’re gone, but end-of-life and emergency planning helps protect the assets you’ve worked hard to accumulate and grow.

Your Last Will and Testament and Power of Attorney documents allow you to appoint people you trust to act on your behalf when you are no longer able to or temporarily incapacitated. These legal documents empower them to distribute and manage your accounts, properties and any other assets according to your written wishes.

When and why do I need a Will?

Creating a legal will is an important responsibility and can be created once you reach the age of majority in your province or territory. Life is unpredictable and can throw us curve balls at any point, but having a will and a power of attorney (sometimes known as a living will)  can help us prepare for the unexpected and protect our loved ones from future chaos and complications.

While all adults should have one, here are some key factors that drive people to create their Will:

  • You recently got married or remarried
  • You are currently in a common-law marriage
  • You recently went through a common-law separation or divorce
  • You have assets such as a home or multiple properties
  • You have a child(ren) and/or other dependants
  • You own valuable heirlooms such as art or jewelry
  • You have assets that as a result of your death may cause tension among surviving family
  • You own a business or investments
  • You have a cause that really matters to you that you wish to donate to after you pass away

In the event you pass without a will, the law says that you have died “intestate,” meaning that you haven’t left any instructions as to how you would like your property to be divided and distributed.

In these circumstances, your property will be divided according to the laws of the province or territory you live in. Usually, this is a set formula that the courts will decide on.

There are many options when you’re ready to check this important task off your list such as visiting a lawyer if you need legal advice, or using an online will service if you have a simple and straightforward estate.

Regardless of how you decide to create these legal documents, you’ll need to have some important conversations with those you’re assigning responsibility to such as your executor, power of attorney, and if you have minor children, their guardians. Make sure they are comfortable with these crucial and potentially life-altering roles. They should know about your important accounts, investments, properties and the documents they might need access to in order to represent you and your wishes.

Exchange Traded Funds (ETF) Mutual funds Segregated Funds BondsEquities/Stocks Margin AccountAnnuity

Exchange Traded Funds (ETF)

Exchange Traded Funds (ETF)

An ETF is an exchange-traded fund. Depending on which ETF you invest in, the fund could be made up of any number of assets, from bonds to commodities to stocks. When you buy shares of an ETF you are buying a portion of the included assets. If the value of the assets goes up, your share value goes up but if the value of the assets goes down, your share value goes down – just like if you were purchasing shares of a stock on the stock exchange.

ETFs have become extremely popular for individual investors lately, and for good reason. ETFs give investors who don’t have a lot of money access to a highly diversified and low-cost investment option. You can also buy and sell ETFs whenever. This last point is what truly differentiates an ETF from a mutual fund. While similar, a mutual fund does not trade like stocks on a stock exchange.

If you’re new to investing, ETFs can be a great option, especially if you only have a modest investment to get started. As always, check in with a financial advisor to learn more.

Mutual funds

Mutual funds allow you to pool money with thousands of other investors and together invest it in various types of securities, like stocks and bonds. Mutual funds are managed by a team of professionals who are responsible for figuring out the best way to invest the pool of money.

There are many benefits to investing in mutual funds for individual investors. First and foremost, mutual funds allow you to diversify your investments easily, without having to purchase many different individual securities. That’s because the team of investment professionals will select a wide variety of stocks and bonds to invest in on your behalf. You also get the benefit of a professionally managed account for a relatively low cost.

If you would describe yourself as an inexperienced investor or as someone who prefers a more passive approach to investing, a mutual fund may be the right fit for you.

However, before investing in a mutual fund, it’s important to review how the fund has performed recently as well as examine its fee structure. Even low percentage fees that don’t sound like a lot, can add up to thousands of dollars lost over the years.

Segregated Funds

Segregated (or seg) funds are an investment product sold by life insurance companies. They are individual insurance contracts that invest in one or more underlying assets, similar to a mutual fund.

Unlike mutual funds, segregated funds provide a guarantee to protect part of the money you invest (75% to 100%). Even if the underlying fund loses money, you are guaranteed to get back some or all of your principal investment. But you must hold your investment for a certain length to benefit from the guarantee.


Bonds are issued by corporations or governments when they need to raise cash. Sounds similar to stocks, right? Well, the big difference between bonds and stocks is that bonds represent debt. Rather than owning a portion of a company like you would by owning shares of stock, when you purchase a bond you are providing a loan in exchange for regular interest payments. Once your bond reaches its maturity date, the original amount you invested (the principal) is returned to you. The only scenario in which you wouldn’t receive the principal is if the bond defaults.

Bond defaults are rare, so bonds tend to be a less risky investment choice. It’s a good idea to include a mix of stocks and bonds in your portfolio in order to diversify. It’s also a good idea to review your ratio of stocks to bonds at various points throughout your lifetime as your goals and income streams change. As you get older, for example, you may want a more conservative investment strategy that leans more towards using bonds.


Stocks are issued by companies when they’re looking to raise cash. Once stock is issued, investors can choose to purchase shares of the stock at a particular price, which is determined by the stock market. In exchange for helping to fund the company, investors like you get to benefit from the profits (hopefully) and sometimes losses (bummer).

If you choose to invest in stocks, you hope that the company performs well so the value of each share goes up. If the share goes up and you sell it at a higher price than your purchase price, you make a profit. Shareholders can also benefit from receiving dividends, which are a percentage of earnings that a company pays to its shareholders at regular intervals.

Stocks can be a very lucrative investment vehicle, but with the possibility of higher returns comes higher risk. It’s impossible to truly predict future company performance, so it’s very possible that the stock you choose to purchase ends up losing value.

Because of the higher risk of investing in individual stocks, it’s a good idea to include a mix of investment vehicles in your portfolio like bonds or mutual funds, in addition to stocks. Some people even opt out of investing in individual stocks entirely, choosing more diversified investment options instead.

Margin Account

In the same way that a bank can lend you money if you have equity in your home, a stock brokerage can lend you money against the value of certain investments in your portfolio. Generally speaking, you can borrow up to 50% of the purchase price of eligible investments. In other words, you may only be required to put up $5,000 of your own money in order to purchase $10,000 worth of stocks or bonds.

By doubling your purchasing power, you also double your potential returns. If your $10,000 investment grew to $15,000, you could sell the shares, pay back your $5,000 margin loan, and be left with a $5,000 profit, effectively doubling your money. Amplifying the power of your money in this fashion is known as using “leverage.” However, the power of leverage works both ways. If your $10,000 investment were to decline by 50%, the broker could force you to sell your shares and you’d lose your entire original $5,000 investment, so there’s still no such thing as a free lunch.


An annuity is a type of investment vehicle that you can purchase from a bank, typically to supplement your income in retirement. The premise is relatively simple – you set aside a certain amount of money in your annuity and the money grows over a set period of time called the accumulation phase. Typically, you are unable to withdraw any money during this phase without incurring significant fees. At the end of this set period, you receive regular payments from the annuity, which is called the annuitization phase. Hopefully, your investment has done well and the money you originally set aside has grown to a larger sum.

While the general concept of an annuity is simple, there are many different variables to consider if you are thinking of purchasing an annuity, like how long the accumulation phase should be, how long you want to receive payments and whether you prefer a fixed or variable annuity. A fixed annuity means you’ll receive equal payments during your annuitization phase, whereas a variable annuity means your payments will be dependent on how much your investment grew. If your investment does well, you could receive higher annuity payments. If your investment does poorly, your payments will be lower.

Annuities can be a great option if you’re looking to secure another stream of income in retirement. However, the different features we discussed above are just a small fraction of the many details to consider when reviewing your options for an annuity. Check in with your financial advisor and don’t be shy about asking lots of questions before making your decision.

Registered Retirement Savings Plan (RRSP)

An RRSP (registered retirement savings plan) is an investment account that is registered with the Canadian government and is used as a vehicle to save for retirement. An RRSP is different than a typical investment account because it provides specific tax benefits meant to encourage you to keep up with your retirement savings. What does it mean to have tax benefits?

In the case of an RRSP, your contributions are tax deductible, which means you can deduct your contribution amount from your income each year and only pay taxes on the remaining amount. For example, let’s say Susie makes $50,000 and contributes $4,000 to her RRSP. She would only have to pay income taxes on $46,000 ($50,000 – $4,000).

You also don’t have to pay taxes on any of your earnings as long they stay in your account. Instead, you only pay taxes on the money that you withdraw in retirement which is referred to as a tax deferral benefit.

In plain English, this means that you not only get to contribute to your retirement savings tax free each year, but your savings also grow tax free – a great benefit that should not be overlooked.

Because of these generous benefits, RRSPs have a few restrictions like annual contribution limits and specific eligibility requirements. As a client of Planswell, you’ll know exactly how much to contribute every month and year, so you’re always maximizing your contributions with an eye on retirement.


Retirement spending

Imagine this. You’ve just retired and have spent the last 45 years diligently saving for this moment. Suddenly, your goal is no longer wealth accumulation, but rather spending the savings that you’ve built up over the years. You have to figure out how much is reasonable to spend each month while still saving enough to live comfortably, hopefully for the next few decades. This process is called retirement spending. If you’re a client of Planswell, you’ve already done this ????

What else do I need to know?

Retirement spending is very similar to the process of decumulation. Decumulation involves strategizing about the best way to spend the savings you’ve worked hard to accumulate during your working years based on critical factors like your current income streams, investment strategy, personal goals, needs and plans for an inheritance.



Most of us spend our entire adult lives at least vaguely aware that saving for retirement is a critical aspect of our financial health. However, saving for retirement is only half of the puzzle.

Once we actually reach retirement age, we’re presented with a new challenge – how to spend the savings we’ve worked hard to accumulate during your working years. This process is called deaccumulation and it requires a completely different skill set than what is needed to accumulate wealth.

To spend effectively in retirement, there are critical factors to consider like:

Income – what are your income streams?
What is a reasonable amount to spend each month that allows you to enjoy life while still saving enough for the future?
What are your needs and wants? Do you have any personal goals you’d like to reach while in retirement, like traveling the world or spending time with family?
Do you want to leave an inheritance?

Answering these questions will help form the basis for your deaccumulation strategy. Given the specialized skill required to successfully manage retirement funds, it may be helpful to consult a financial advisor for guidance.

What else should I know?

Some financial advisors may be well versed in wealth accumulation but may not truly understand the intricacies of deaccumulation. Review your deaccumulation strategy with your Plan Pro, they’ll be able to help you answer these questions and more.


Estate Planning

If you plan on leaving your loved ones an inheritance or you’re planning to distribute your assets you will need a Last Will and Testament.

Other things you can consider in addition to creating your will include setting aside money to cover your own funeral arrangements, outlining how you’d like your life to be celebrated, and specifying who you’d like to care for your beloved pets and any charities you’d like to donate to.

If you pass without a will, you’re considered to have died intestate. This means that while the government doesn’t automatically get your estate, it does get to use provincial laws to decide how to distribute your estate and appoint your executor. Your estate includes all of your assets (anything you possess of financial or other value) and any debts you owe. What happens with your estate varies from province to province and it may be very different from what you would have wanted since the government doesn’t always take into account the specific needs of individual families.

More and more services are being created to help make estate planning an affordable and painless process. Whether you visit a lawyer or use an online service, make sure to review your legal documents regularly to keep them up to date and ensure they truly reflect your wishes and life circumstances. Store your documents safely and make sure your executor (the person you appoint in your will to act on your behalf) knows where to find it.


Digital Legacy

With most of our lives existing online, paper trails are slowly becoming a thing of the past.

Retirement is a great time to collect, review and create an inventory of your digital properties and assets. Not only for your own peace of mind but to help executors, power of attorney and trusted friends and family who may need access to this information after you pass away.

So what are digital properties or assets? Just like physical assets, digital assets can hold monetary or sentimental value (and sometimes both!). For example, a monetized YouTube Channel or cryptocurrency could have considerable monetary value, while platforms like Facebook or Instagram may hold sentimental value.

Each platform will have different policies about account transfers and access so it’s important to look into these to see what your options are. Also consider the items stored on your phone and computer like photos, unpublished journals, manuscripts, artwork etc. and what you’d like to happen to them after you’re gone.

In the past these items could be found in a safety deposit box at a bank, an accordion file folder in an office, or at the very least, scattered amongst belongings at home. With the digitization of key documents, recordings, accounts and contact information, it’s now more important than ever to keep everything organized in one place and stored securely with your legal will and power of attorney documents. Whether you choose paper, a USB, an external hard drive or the cloud, the most important thing is the people you need to have access to it know where it is.



Amortization simply involves paying off debt with equal payments at equal intervals over time. An example of this is a fixed rate mortgage – your monthly payment remains the same throughout the entire life of your loan.

Even though your monthly payments might look the same at face value ($500 a month let’s say), it’s important to understand how to break down each payment into two components – interest and principal. Each time you make a monthly mortgage payment, part goes towards paying off the interest on your loan, while the rest goes towards the principal (or the remaining amount you owe on your loan).

At first, a significant portion of each of your mortgage payments goes towards paying interest, while a small percentage covers the principal. Over time, the amount you pay in interest each month slowly decreases, while the amount that goes towards the principal slowly increases. By the time you reach your last payment, it will be made up of entirely principal – and you’ll have paid off you loan!

Now, you’re probably thinking – “That’s nice, but why does this matter?”

When making decisions about amortized loans (home and car loans are common), many people make the mistake of looking at only the cost of each monthly payment. While this is an important factor, looking at only the total monthly payment means you aren’t able to see how much you’re paying in interest vs. paying down your principal. To uncover this information, it’s smart to create an amortization table that outlines how much you’re spending and where. That way, you can see easily and transparently, the actual cost of your loan. You may, for example, be getting a lower monthly payment, but be paying for your loan over a longer period of time, meaning you are paying more in interest than if you went with a higher monthly payment from day one.



Mortgage rate


A mortgage rate indicates the amount of interest a lender charges you when you take out a mortgage. It’s always in your best interest to get the lowest rate possible, because a lower rate means lower monthly mortgage payments. You can either choose a fixed-rate mortgage (interest rate stays the same) or a variable-rate mortgage (interest rate fluctuates), which are both described below.

So, why are different mortgage rates offered?

Lenders prefer working with people who are likely to make their loan payments in full and on time. To determine how likely this is, banks look at your credit score. If you have an excellent credit score, you’re more likely to quality for a lower interest rate. If you have a lower credit score, you will likely get a higher rate or, if you have really poor credit, you may not qualify for a loan at all.

When selecting a mortgage, do your homework! Finding the best deal will likely involve shopping around to several different lenders. At Planswell Mortgages, we act as a mortgage broker shopping around for the right mortgage to fit your situation. We’re not in it on a commissioned basis so that means we’ll make sure the interest rate, terms, and everything else included in your mortgage are optimal to help you reach financial success.



Variable rate mortgage


A variable-rate mortgage is exactly what it sounds like – a mortgage in which the interest rate fluctuates. An increase in the interest rate means that your monthly mortgage payment will go up, while a decrease in the interest rate will make your monthly payment go down.

Typically, variable rate mortgages offer a low introductory interest rate – lower than the rates for a fixed rate mortgage. This can be a better deal initially, but once the introductory offer is over, it’s difficult to predict what your monthly payments will be. This makes financial planning more difficult. If interests rates went up significantly, you could be responsible for a monthly payment you can’t afford!

Even though variable rate mortgages are riskier than fixed rate mortgages due to their unpredictability, there are some scenarios in which it might make sense to choose one. You might, for example, plan to pay off your mortgage before the introductory period is over (so you avoid dealing with fluctuating rates entirely) or you might be confident that interest rates will go down, bringing your monthly payment down with it.

Either way, before selecting a variable or fixed rate mortgage, talk to a financial professional and carefully weigh the pros and cons of each option to determine what’s right for you.



Fixed rate mortgage


A fixed rate mortgage offers the same interest rate for the entire length of your loan. The benefit of a fixed rate mortgage is that you can predict exactly what your monthly mortgage payments will be – a great advantage for financial planning purposes.

Fixed rate mortgages are often compared to variable rate mortgages, which feature fluctuating interest rates. Variable rate mortgages typically offer a low introductory interest rate – lower than the rates for a fixed rate mortgage. This can seem like a really good deal upfront, but it’s possible for the interest rate to rise over the life of your loan, meaning you could end up paying much larger monthly mortgage payments.

Before selecting either a fixed or variable rate mortgage, it’s important to weigh the pros and cons of each option to determine what’s right for you and your financial situation.



Interest rate


When you borrow money from a bank, the bank charges interest as payment for letting you use their money. The amount of interest charged is expressed as a percentage of the principal – or the total amount of the loan.

The same works in the opposite way. When you put money in your savings account, you receive interest payments in exchange for letting the bank use your money while it’s sitting in your account.

You’ve probably seen interest rates advertised using the acronym APR. APR stands for annual percentage rate and it takes into account both the interest rate itself as well as lender fees.

When borrowing and lending money, understanding the interest rate and its impact is critical to ensuring you make an informed decision. When selecting a mortgage, for example, interest rates can have a significant impact on how much you pay in your mortgage payments each month.





Let’s say you took out a variable rate mortgage and interest rates are climbing. You’re starting to get worried that you won’t be able to keep up with your mortgage payments because higher interest rates mean higher monthly payments. What can you do? Are you stuck with your original loan terms forever?

No, not necessarily thanks to the concept of refinancing. Refinancing simply means replacing an existing loan with a new loan, presumably with better terms. Basically, you take out a second loan, use the new loan to pay off the first, and then pay back the new loan in monthly installments just like before, only with a better deal.

Refinancing can mean lower monthly payments, a lower interest rate or a change in the length of the loan, depending on what you negotiate with your lender. Refinancing is also a time consuming and sometimes expensive process, so it’s important to think through your options carefully before refinancing.



Reverse Mortgage


Use your home equity to borrow money, tax-free

A reverse mortgage allows you to take money from your home equity – tax-free-, without having to pay monthly mortgage payments. Unlike a regular mortgage that dwindles away as you pay it off, this type of loan rises over time as interest and loan fees accrue. This can come in handy if you’re reaching a retirement age and are sitting on a pile of home equity but haven’t hit your retirement goals. In order to tap into your home equity without selling and downsizing, a reverse mortgage can come into play. The older you are and more equity you own on your home, the bigger the loan you can secure.

How to qualify

First off, you must be at least 55 years old – as well as your spouse – and a homeowner to be eligible for a reverse mortgage. These loans can come in the form of a lump-sum payment, planned advances, or a combination of the two. Keep in mind, there are restrictions in Canada that limit the maximum amount you can receive. When it comes to paying back the loan, reverse mortgage balances are only due when the homeowner dies, sells the home or moves away permanently.

Deciding if this is a good idea

Before getting a reverse mortgage, make sure to weigh your options. These loans can be costly and eat away at your equity with interest and loan fees. There are also risks of not being able to pass your home down to your family after you die. That’s why it’s always a good idea to get outside advice about how a reverse mortgage could affect your financial plan.



Home Buyers’ Plan


The Home Buyers’ Plan allows first time home-buyers to take an tax-free loan from their Registered Retirement Savings Plan (RRSP) for a down payment on a qualifying home. As of March 19, 2019, the Canadian Federal government increased the amount from $25,000 to $35,000.  If you’re purchasing with someone who is also a first time home-buyer, you can both withdraw $35,000 from your RRSP for a combined total of $70,000, tax-free.

It’s important to keep in mind that the money is considered a loan from your RRSP, so it has to be repaid within 15 years. If you don’t refill your RRSP, the amount will be considered a formal withdrawal and added to your taxable income. It’s also important to note that when repaying the amount back into your RRSP you do not receive the tax credit that you got the first time around.

If you’re interested in taking advantage of this incentive, be sure to check out the eligibility requirements.



Mortgages and Estate Planning


Buying a home can be one of the most rewarding purchases in your lifetime. That’s why it’s always important to plan for what happens to your property and loans after you pass. Most people fear that their outstanding debts will be passed on to their family, but the good news is that in Canada, the mortgage stays with the home, not the person.

This does not mean it goes away if you pass away. If you are the sole owner of the property and mortgage, it must be paid from your estate. In most cases, if you bought property with your spouse, they will take over the mortgage and the financial institution may reassess the terms depending on the situation.

If you have a property you would like to gift to a specific heir, it is important you make these wishes known in your legal will. Further, you will want to specify if you want the estate to pay off any debts on the property so the person inheriting it is free and clear if that is your intention.

Review your financial and estate plans regularly. You’ll want to understand what types of debts will need to be paid and what your insurance policies will cover before you are able to divvy up your assets as you would like. 

In the event of a medical emergency

Beyond your Last Will and Testament you should prepare your Power of Attorney documents. While the name of these documents may vary from province to province, the purpose is similar: if you are incapacitated, who do you choose to speak and act on your behalf?


For example, in Ontario, there are two types of powers of attorney – one for property and one for personal care. Your Power of Attorney for Property can make important financial decisions on your behalf including paying your bills, managing your investments and collecting money that’s owed to you. Having this in place can help you avoid your mortgage falling into arrears or managing investment properties if you’re unable to make payments yourself.

Rule of 72

No. of yrs required to double your money at a given rate, U just divide 72 by interest rate Eg, if you want to know how long it will take to double your money at 8% interest, divide 72 by 8 and get 9 yrs

At 6% rate, it will take 12 yrs

At 9% rate, it will take 8 yrs

Rule of 70

Divide 70 by the current inflation rate to know how fast the value of your investment will get reduced to half its present value.

Inflation rate of 7% will reduce the value of your money to half in 10 years.

4% Rule for Financial Freedom

Corpus Required = 25 times of your estimated Annual Expenses.

Eg- if your annual expense after 50 years of age is 500,000 and you wish to take VRS then corpus with you required is 1.25 cr.

Put 50% of this into fixed income & 50% into equity.

Withdraw 4% every yr, i.e.5 lac.

This rule works for 96% of time in 30 yr period

100 minus your age rule

This rule is used for asset allocation. Subtract your age from 100 to find out, how much of your portfolio should be allocated to equities

Suppose your Age is 30 so (100 - 30 = 70)

Equity : 70%

Debt : 30%

But if your Age is 60 so (100 - 60 = 40)

Equity : 40%

Debt : 60%

50-30-20 Rule - the allocation of income to expense

Divide your income into

50% - Needs (Groceries, rent, emi, etc) 30% - Wants (Entertainment, vacations, etc) 20% - Savings (Equity, savings, assets, etc) & Risk Management (life insurance, critical illness insurance, disability insurance)

Using 20% of your income to plan for your future (retirement and insurance) will go a long way to ensuring a secure retirement.

3X Emergency Rule

Always put atleast 3 times your monthly income in Emergency funds for emergencies such as Loss of employment, medical emergency, etc.

3 X Monthly Income

In fact, one can have around 6 X Monthly Income in liquid or near liquid assets to be on a safer side

40% EMI Rule

Never go beyond 40℅ of your income into EMIs.

Say you earn, $5,000 per month. So you should not have EMIs more than $2,000.

This Rule is generally used by finance companies to provide loans. You can use it to manage your finances.

Life Insurance Rule

Always have Sum Assured as 20 times of your Annual Income

20 X Annual Income