Millennial money dilemma – RBC Poll

As Millennials move into their 30s, they share many of the same life goals as previous generations of Canadians; where they differ is in the challenge they face in financing those goals, according to RBC’s annual Financial Independence in Retirement Poll.

Poll findings indicate several financial disconnects for Millennials aged 25-34. While almost half (48%) of these respondents cited home ownership as a top financial priority, just over one quarter (28%) reported putting money toward this goal in 2017.

Another disconnect appears in responses about saving for their future. While 46% of these Millennials included retirement savings as another top financial priority, only 38% actually put any money into retirement savings last year. In addition, half (50%) don’t have an RRSP. In fact, if they could only afford to contribute to either an RRSP or a TFSA, almost half (48%) opted for a TFSA, compared to less than one-third (30%) for an RRSP.

“TSFAs offer a great savings vehicle, but Millennials can’t overlook RRSPs, particularly as they move into their 30s,” noted Richa Hingorani, Senior Director, Digital Strategy, RBC Mutual Funds Distribution & RBC Financial Planning. “While retirement can seem so far away for these younger Canadians, we want them to know that time can work in their favour. By starting to invest even small amounts on a regular basis into an RRSP now, they can build their future savings through the magic of compounding within their RRSP, with growth through a combination of interest and potential dividends.”

On the flip side, Millennials surpassed one of their financial priorities for last year – saving to reduce/eliminate debt. While under half (47%) identified reducing debt as a priority, over half (51%) actually put money toward that priority.

“Millennials have their eye on the ball – they’re saving for immediate needs. We’d suggest it’s now time they look a bit farther down the road, to save for their future needs too,” explained Hingorani. “We’re here to connect with them however they wish – including through MyAdvisor, our new digital experience, which can help them build a personalized plan online, in just a few minutes.”

MyAdvisor offers clients a way they can connect at their own convenience with a live advisor – online, by live video, by phone or in one of our branches. Clients can also track the progress they are making toward achieving their financial goals, through an interactive dashboard.

“We know Millennials have very busy lives,” added Hingorani. “We want to help ensure their finances keep up with their lifestyle, today and in the future.”

About the RBC 2018 Financial Independence in Retirement Poll
These are a selection of findings of the 28th annual RBC RRSP Poll, conducted by Ipsos from November 9 to 16, 2017 on behalf of RBC Financial Planning, through a national survey of 2,000 Canadians aged 18+ who completed their surveys online. Where appropriate, attitudes and opinions are tracked back to previous years’ surveys. Quota sampling and weighting are employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.4 percentage points had all Canadian adults been polled. The credibility interval will be wider among subsets of the population, such as among Millennials aged 25-34 (± 5.9 percentage points). All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About RBC’s MyAdvisor and financial planning advice
MyAdvisor provides a new digital experience for RBC clients by using an online advice platform to digitally connect a client to an advisor. MyAdvisor enables both the client and the advisor to view and adjust a dynamic dashboard showing the client’s savings and investment goals and to establish actions to achieve those goals – all in real time. MyAdvisor is a product of RBC’s Toronto-based innovation lab; other labs are located in the U.S., the U.K. and Europe. These innovation labs co-create new products and services based on direct input from RBC clients and employees.

RBC Financial Planning and rbc.com/savingsspot offer planning, budgeting and savings advice and resources and the RBC Retirement Planning website can help you plan for 30 years or more in retirement. In addition, for Canadians who want to get more from their day-to-day banking, protect what’s important, save and invest, borrow with confidence or take care of their businesses, RBC Discover & Learn offers free online advice, resources and tools, including the RSP-Matic Savings Calculator.

SOURCE RBC Royal Bank

What’s love got to do with money?

A national survey, commissioned by Financial Planning Standards Council (FPSC) and Credit Canada in time for Valentine’s Day (February 14), reveals more than one third (36%) of Canadians are victims of financial infidelity.

The two non-profit organizations co-sponsored the Financial Infidelity Survey – a Leger poll that asked Canadians the following question: What is the worst form of financial infidelity you have been a victim of from a former or current partner?”

Here are some of the standout findings:

  • 34 percent of those in a relationship keep financial secrets from their current romantic partner
  • 36 percent of those in a relationship have lied about a financial matter to a partner
  • Younger adults who are not married, aged 18-54, tend to be victims of financial unfaithfulness
  • Women and men are equally likely to become victims of financial infidelity (men: 35% vs. women: 37%), keep financial secrets from their partner (men: 35% vs. women: 34%) and lie about a financial matter (36% both)

“Talking about money can be difficult for an individual, but when in a relationship, whatever issues each of them has is exacerbated,” said author, personal finance educator and FPSC’s Consumer Advocate, Kelley Keehn. “For example, 50 percent of Canadians are $200 away from not being able to pay their bills and we owe $1.71 for each dollar we bring in. That means we owe a lot more than we’d like to think about and that can lead to a great deal of stress and strain on a relationship.”

“Often individuals going into a relationship do not discuss money matters,” states Laurie Campbell, Credit Canada CEO. “It doesn’t seem romantic. As such there may be a lot you don’t know about your partner. You may not know how they handle money, their values around money, or their thoughts on credit and debt. This leaves room for miscommunication and at worst dishonesty and possibly financial abuse of their partner.”

Kelly Keehn’s 6 Step Conversation

Use the following questions and to-dos to get financially naked with your spouse and ensure you are on the same page:

  1. What are our goals?
  2. Write a needs and wants list
  3. Where are we now?
  4. How are we going to get there?
  5. Are there any changes?
  6. Develop an action plan

Also, asking open-ended questions like: What are your financial goals in the next five or 10 years? If one wants to get another degree and travel the world while one partner wants to settle down and buy a home, there’s going to be a major disconnect. Or, ask, what does money mean to you? If one says “Freedom” and the other “Security” – you can guess which one is likely the spender and which is the saver – and can guess at the friction that will cause in the future.

Laurie Campbell and Credit Canada’s Tips to Combat Financial Infidelity

Red Flags:

  • Regular cash withdrawals
  • Unaccounted purchases and expenditures that cannot be explained
  • Partner lies about purchases and expenditures, to you and/or to others
  • A change in behaviour, either in spending habits or attitudes towards you and money, in order to deflect attention away from themselves
  • Spending more, on themselves and/or others
  • A change in mail, such as regular statements or promotions from credit cards you don’t normally use, or investment firms you have never dealt with
  • Less frequent mail from your regular financial services and creditors
  • Partner is very concerned about the mail and doesn’t let you to see it first

What To Do:

  1. No surprises. Have regular discussions with your partner about money, as well as your individual assets and debts, whether in savings, chequing or credit accounts.
  2. Keep a detailed budget and spending plan. So you know exactly how much money is coming in and how much is going out (and on what).
  3. Do not sign any document without reading it first. They say love is blind, but you don’t have to be. Read everything before signing anything. If you’re not sure what something means seek the advice from a professional or expert.
  4. Maintain separate accounts. Have one joint account for all household expenses, which each partner contributes to in proportion to their respective income.
  5. Individual credit cards in your own names. Don’t run the risk of someone else ruining your good credit. Plus, two good individual credit histories are better than one joint history when you apply for a loan. And if one of you has a blemished credit record, the other’s clean record can be an asset.
  6. Speak to a certified credit counsellor. Some non-profit credit counselling agencies can do a free soft inquiry on your credit report to check for any inconsistencies. You can also see a credit counsellor as a couple for advice on managing money together and setting future goals.

The full results of the Financial Infidelity survey can be found here.

About Credit Canada
Credit Canada is a not-for-profit and charitable organization that provides free and confidential credit counselling, personal debt consolidation and resolutions, as well as preventative counselling, educational seminars, and tips and tools in the areas of budgeting, money management, and financial goal-setting. Credit Canada is Canada’s longest-standing not-for-profit credit counselling agency, helping Canadians manage their debt since 1966.  Please visit www.creditcanada.com for more information.

About Financial Planning Standards Council
A professional standards-setting and certification body working in the public interest, FPSC’s purpose is to drive value and instill confidence in financial planning. FPSC ensures those it certifies―Certified Financial Planner® and FPSC Level 1® Certificants in Financial Planning―meet appropriate standards of competence and professionalism through rigorous requirements of education, examination, experience and ethics. With FPSC’s formal partnership with the Institut québécois de planification financière (IQPF), which is the only organization authorized to certify Financial Planners in Québec, there are more than 23,500 Financial Planners in Canada who have met, and continue to meet, FPSC’s standards. More information is available at FPSC.ca and FinancialPlanningForCanadians.ca.

About the Financial Infidelity Survey
Leger conducted a survey of 1550 Canadians between Jan 2 and 5, 2018 using its online panel, LegerWeb. A probability sample of the same size would yield a margin of error of +/-2.5%, 19 times out of 20. Leger’s online panel has approximately 475,000 members nationally – with between 10,000 and 20,000 new members added each month, and has a retention rate of 90%.

SOURCE Financial Planning Standards Council

www.fpsc.ca

Retirement: Planning for the future – but still not confident

Canadians want to live a full lifestyle in their retirement and see many things as being important to their enjoyment, according to a recent survey by Ipsos for RBC Insurance. For Canadians aged 55 to 75, keeping a sense of independence trumps all: eight in 10 (80 per cent) want to live at home for as long as they can and 72 per cent say it’s important to own a car. The majority also say it’s important for them to be able to travel at least once a year (68 per cent), shop for the things they want (62 per cent), and go out for lunch or dinner a few times a week (53 per cent).

Yet, while the retirement years can be a time to enjoy life to the fullest, having enough money to support their desired lifestyle is a real concern. In fact, a majority (62 per cent) are worried about outliving their retirement savings.

“Canadians are living longer than in years past, and they want active and productive lifestyles in retirement,” explains Jean Salvadore, Director, Wealth Insurance, RBC Insurance. “However, some are better prepared for retirement than others. Having sufficient retirement savings is critical, and Canadians should consider a combination of tools and a well-diversified retirement plan to ensure they have enough money to stretch over decades.”

Planning for the future – but still not confident
Despite using various financial tools for retirement savings such as RRSPs (45 per cent), cash savings (43 per cent), or TFSAs (39 per cent), 45 per cent of Canadians are still not confident that they will have enough money in retirement to afford the lifestyle they want.

Furthermore, only one in 10 Canadians (12 per cent) say they are using/planning to use an annuity to ensure they have enough money to lead their chosen lifestyle in retirement.

“An annuity provides a predictable income stream for as long as you live. They are particularly helpful if you have a certain amount of fixed expenses you want to cover throughout your retirement, and that way you can use your additional savings to fund those activities that are important to you,” adds Salvadore. “Yet, most Canadians are unaware of annuities and lack an understanding of the product, which can be the very reason why few are building them into their retirement plan.”

Annuities knowledge gets a “C” grade

Canadians aged 55 to 75 get an average grade of “C” when their knowledge of annuities is put to the test, scoring an average of 3 out of 5 questions right.

  • Nine in 10 (91%) know they don’t need to invest their entire retirement savings into an annuity
  • Seven in 10 (72%) know it’s possible to invest in an annuity using their RRSP and/or RRIF savings
  • Six in 10 (63%) know that an annuity provides a predictable income stream for as long as they live, regardless of whether financial markets rise or fall
  • Six in 10 (63%) know they can stagger their annuity purchases to help increase payouts
  • Just three in 10 (28%) know that an annuity does not have to be managed once it has been purchased

About the RBC Insurance Survey
These are some of the findings of an Ipsos poll conducted between November 13 and November 17, 2017, on behalf of RBC Insurance. For this survey, a sample of 1,000 Canadians aged 55 to 75 was interviewed including 500 Canadians aged 55-64 and 500 Canadians aged 65-75. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.5 percentage points, 19 times out of 20, had all Canadians aged 55-75 been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About RBC Insurance
RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, one of North America’s leading diversified financial services companies. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,500 employees who serve more than four million clients globally. For more information, please visit rbcinsurance.com.

SOURCE RBC Insurance

Some of the worst mistakes you can make after retirement

Some of the worst mistakes you can make after retirement

The Financial World

1) Not Changing Lifestyle After Retirement

Among the biggest mistakes retirees make is not adjusting their expenses to their new budget dependent life. Those who have worked for many years usually find it hard to reconcile with the fact that food, clothing and entertainment expenses should be adjusted because they are no longer earning the same amount of money as they were while in the work force. For example, you might need to do a little less dining out and learn to enjoy more home cooked meals.

Many retirees also tend to forget to take into account healthcare and long term care costs that usually come into play as a person ages. If you have never considered this before, it’s time to talk to a trusted financial planner to iron out your retirement planning. With some appropriate adjustments to your budgeting and proper planning, you’ll make sure you are set for any eventuality.

2) Failing to Move to More Conservative Investments

Once you have retired, you can’t afford large negative swings in your savings. You regularly hear financial advisors recommending a long term strategy and touting the strategy of leaving money in the market regardless of the ups and downs.  That’s because over time, the market, while very volatile at times, has historically ended up rising in the long term. When you retire however, you have to think more short term as you will need to access the cash.  It’s still probably smart to keep some money in more aggressive growth investments, but not nearly at the level you did when you were younger. A financial advisor can offer advice on how your investments should be diversified. You might not make as huge gains in net worth, but you will be protected.

3) Applying for Social Security Too Early

Just because you are already eligible to apply for Social Security at 62 does not mean you should. If you start taking benefits at age 62 will get you about 25% less than what you would get on your full retirement age of 66. You will also get 32% less than if you wait until age 70.

If you have the means to pay your bills, try to delay your application for retirement benefits for a few years more. The benefit increase is maxed out by 70 years old and will not increase any further, so that’s the target age you should shoot for.

4) Spending Too Much Money Too Soon

Before finalizing your retirement, you must take into consideration that you will only be living on a fixed amount of money.  Oftentimes the amount of retirement savings looks pretty large, but retirees must keep in mind that money will have to last a very long time – hopefully a very, very long time! Avoid the temptation to spend large chunks of that nest egg early in retirement.  The temptation to spend your money can be almost iresistable, but discipline is vital. Depleting your money beyond the interest that it earns will hurt the principal and would leave you with nothing after just a few years.

5) Failure To Be Aware Of Frauds and Scams

Retirees unfortunately are among the most targeted for scams. Be sure to consult an advisor prior to making any investment or laying out a large amount of cash on anything. Scammers will prey upon your desire to grow your savings.

Even if you are not retired or about to retire, always keep a certain level of skepticism when it comes to the investments being presented to you. Do your research first: ask about it and search for it online. You might just find out that this whole system is just an elaborate way for people to get money out of you.

Read more here: 

Infotrends Canada is an online continuing education company in its 28th year of serving and meeting the education needs of the Canadian financial services industry. 

For more information on Infotrends Canada read more here: 

 

What women want from financial advisors

What women want from financial advisors

By Paul Lucus | WP

Sometimes statistics speak for themselves – 73 per cent of women are ‘unhappy’ with the financial service industry, while 87 per cent of females looking for a financial advisor say they can’t find one they can connect with.

These are the damning results of a survey by StrategyMarketing.ca pointing to a significant disconnect between what women want and what they are actually being offered from the financial services industry. Even though the industry has earmarked women as a valuable demographic, its efforts to actually retain them seem to be falling short.

So what mistakes are they making and what can they do to put them right? Wealth Professional spoke to Paulette Filion and Judy Paradi, the authors of the report and partners at StrategyMarketing.ca, to find out.

One of the biggest issues, it seems, is that financial advisors see women as a niche market and don’t develop a strong female friendly brand. Even though they may design marketing campaigns to appeal to women they aren’t actually doing the things needed to make them happy. Indeed when part of a couple, men are almost two times as likely to be approached by a financial advisor and the male partner is 58 per cent more likely to be seen as the primary contact.

“Male advisors still seem to have the deep down gut feeling that women are a secondary market – not really interested in finances,” commented Paradi.

“Financial advisors consider couples as one client, not two and that’s not true – they are two distinct people,” continued Filion. “With single female clients, advisors think how they’ve approached other clients in the past is the same for these female clients. It may not be. Women face challenges that male clients don’t face and have different communication styles that may appear to indicate hesitation, risk aversion or lack of trust when, actually, nothing could be further from the truth.”

READ MORE HERE:

Ring in the new year with 10 tax tips

Canadians, and especially business owners, who take the time to plan ahead – rather than look back – will find that opportunities around personal taxes can be more than a holiday wish this season, according to EY Canada’s Asking better year-end tax planning questions.

“Tax rules are always changing and this year it’s more important than ever for Canadians to understand how the federal government’s private company tax reform proposals might impact their bottom line,” says David Steinberg, EY Canadian Tax Leader, Private Client Services. “The proposals are far-reaching and it’s critical for Canadians to pay close attention to what these changes mean for their tax planning now,  and well into the future. Early planning and action means taxpayers can prepare accordingly and save money on their 2017 returns.”

This December, EY suggests Canadians consider the following 10 questions as they plan their tax returns for 2017 and beyond:

1. Do you income-split private corporation business earnings with adult family members?
On 18 July 2017, the federal government introduced proposals and draft legislation that may limit income splitting opportunities with adult family members through the use of private corporations beginning in 2018. Consult with your tax advisor and consider maximizing income splitting with adult family members by distributing private corporation business earnings to them before the end of the year.

2. Do you receive non-eligible dividend income?
The tax rate applicable to non-eligible dividend income will be increasing for dividends received on or after 1 January 2018. If you have discretion over the amount of dividends received, consider receiving more non-eligible dividends prior to the end of the year. But be sure to weigh the savings of the lower non-eligible dividend tax rate against the tax deferral available by retaining income within the corporation.

3. Do you hold passive income?
The federal government has proposed to increase tax on passive earnings above a $50,000 threshold that will apply on a go forward basis. Draft legislation is expected to be released along with the spring 2018 federal budget. Now is the time to speak with your tax advisor on how to optimize grandfathering.

4. Do you have capital gains?
Although the government has indicated that it won’t proceed with proposals to restrict access to the lifetime capital gains exemption, and other capital gains planning, it’s important to review your capital gains transactions. Taking the time now to plan ahead can help you save on future returns.

5. Have you paid your 2017 tax-deductible or tax-creditable expenses yet?
There are a variety of expenses, including interest and child-care costs, which can only be claimed as deductions in a tax return if the amounts are paid by the end of the calendar year. You’ll want to check on expenditures that give rise to tax credits and consider if the deduction or credit is worth more to you this year or next.

6. Have you maximized your tax-sheltered investments by contributing to a TFSA or an RRSP?
Make your tax-free savings account (TFSA) and registered retirement savings plan (RRSP) contributions for 2017 and catch up on prior non-contributory years. In order to maximize tax-free earnings, consider making your 2018 contributions in January. If you’re considering making an RRSP withdrawal under the Home Buyers’ Plan, you can withdraw up to $25,000 from your RRSP with no tax withheld, but must acquire a home by October of the following year. The funds must be repaid over 15 years starting the second calendar year after withdrawal. So if you can, wait until January 2018 before making the withdrawal.

7. Have you maximized your education savings by contributing to an RESP for your child or grandchild?
Make registered education savings plan (RESP) contributions for your child or grandchild before the end of the year. With a contribution of $2,500 per child under the age of 18, the federal government will contribute a grant (CESG) of $500 annually.

8. Is there a way for you to reduce or eliminate your non-deductible interest?
Interest on funds borrowed for personal purposes is not deductible. Where possible, consider using available cash to repay personal debt before repaying loans for investment or business purposes on which interest may be deductible.

9. Have you reviewed your investment portfolio?
Consider if you have any accrued losses to use against realized gains and determine if you have realized losses to carry forward.

10. Have you thought about estate planning?
Take time to update your will and consider if there are changes to your life insurance needs. It may be the right time to consider an estate freeze to minimize tax on death and/or probate fees. Developing a comprehensive succession plan can help you pass the benefit of your assets.

Steinberg explains: “These questions may seem familiar, but as tax rules change and become more complex, it becomes increasingly important to think of the bigger tax picture continuously throughout the year, as well as from year to year as your personal circumstances change. Start a conversation with your tax advisor to find better answers.”

To read EY tax insights and tips, visit ey.com/ca/taxmatters. To learn more about how EY works with private companies, visit ey.com/ca/private.

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

SOURCE EY (Ernst & Young)

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