Financial and Tax Planning For Seniors

Welcome back to The Village Blog! Our monthly Resources for Seniors Seminar in March focused on Financial & Tax Planning for Seniors. It was presented by Foundation Board Member Peter Provencher, a local Investment Advisor. Peter agreed to provide us with some helpful information to share with you! Read on to learn some basics designed to help you navigate planning for your future through investments and how to see benefits come tax season!

Welcome back to The Village Blog! Our monthly Resources for Seniors Seminar in March focused on Financial & Tax Planning for Seniors. It was presented by Foundation Board Member Peter Provencher, a local Investment Advisor. Peter agreed to provide us with some helpful information to share with you! Read on to learn some basics designed to help you navigate planning for your future through investments and how to see benefits come tax season!

 

Planning for the Future

As we age, we start thinking more and more about retirement, including the adventures and challenges that will come at that stage of life. As we know well at Grace Village, unexpected health challenges can arise that makes comprehensive financial planning early so important. One of the best ways to save for retirement is through Investment Income. Take a look at the most common types of Investment Income below:

1. Interest Income: Earnings generated through interest-yielding accounts; You receive revenue for allowing the temporary use of your funds or financial assets
  • This is the most highly taxed form of investment income. It is taxed at your marginal tax rate (based on your tax bracket), up to 53%.
  • Examples include GIC’s (Guaranteed Investment Certificate), Corporate Bonds, and Savings Accounts

2. Dividends: Income earned through holding shares in a company; a percentage of the company’s earnings are divided among shareholders
  • As an individual, you can purchase Common or Preferred Shares, or invest your money in a Mutual Fund, where a Mutual Fund Manager will decide on which shares to invest in.
  • Dividends are not locked in or guaranteed, but they offer a good rate of return (e.g. 4.5%), and benefit from a preferred tax rate.

3. Capital Gains: The profit earned from selling a financial asset, the difference between buying low and selling high
  • Benefits from favourable taxation; only 50% of the capital gain is taxed.
  • Taxed at your marginal tax rate (based on your tax bracket)
 

Which Investments are Most Tax Efficient?

The best strategy for making wise choices with your finances is to talk to an Investment Advisor. Their job is to help make your money grow in a way that works for you. With that being said, there are a few investment options which provide regular income (especially important for seniors) that are particularly tax efficient:


1. Corporate Class Mutual Funds
: This is a type of mutual fund, which on one hand provides less income than other funds, but is also more tax efficient


2. T-SWP
: This is an acronym for Tax (Smart) Systematic Withdrawal Program. It is a program which allows you to draw consistent, monthly income from non-registered investments and minimises the taxes paid on this income.


3. Annuity
: Another option is purchasing an insured annuity, which pays a regular stream of tax efficient income for the life of the investor. A portion of that income is used to purchase a life insurance policy that is paid to the estate (or named beneficiary) upon the passing of the investor.

Of course, these investment strategies are not mutually exclusive – the best strategy is usually a combination of them!

What about Charitable Donations?

One final note on tax efficiency – if you are looking for additional tax benefits, consider charitable donations of items such as shares, life insurance policies, or financial assets. The tax benefit is based on their current value, not your original investment amount.

 


If you want to learn more, we plan on re-hosting our Financial & Tax Planning Seminar for Seniors in the future. Contact us at (819) 569-0546 or by email at info@masscom.ca to let us know if you would be interested in attending. Our next Resources for Seniors seminar will be Tuesday, April 30, at 6:30pm and the topic will be Caring for Caregivers.

Thank you for reading!


Learn More:

What are Corporate Class Mutual Funds: https://www.moneysense.ca/columns/ask-moneysense/how-do-corporate-class-funds-work-and-how-can-i-find-out-more/

What is a T-SWP: https://www.jwmfinancial.com/t-swp

What is an Annuity: https://www.caringforclients.com/index.cfm?id=76456&modex=blogid&modexval=20316&blogid=20316

 

To learn about charitable donations to Grace Village through the Dr. W. J. Klinck Foundation, click here: https://www.gracevillage.ca/donations