How to be financially secure in your business

How to be financially secure in your business & personal life Philip Boland, CIM, CFP, CLU, FCSI Director, Private Client Group Financial Advisor Mike Busby, CFP, Associate Financial Advisor

Overview • 3 Keys to Success • Issues to Consider 2

#1 Success – Have a Plan • Plan for your business • Plan for your personal finances • Review and Update your plan Those without plans, plan to fail 3 3

#2 Success – Build Equity Build personal + business equity Prudent borrowing Pay down debt 4 4

#3 Success – Work with Professionals • Assemble a team • Help get you there 5 5

3 Key Issues to Consider 1) Am I going to be okay? 2) If I cannot work, will my family and I be okay? 3) If I am no longer around, will my loved ones be okay? 6

Basis of financial comfort during retirement > Income CPP/OAS Company Pension RSP/RIF TFSA Open Acct Financial Comfort 7

Magic Formula… Today @ age 42 Retire at age 67 1) Income Goal 2) Savings today 8 8

Mike and Angela age 42 • Retire at age 67 • Require Annual Income $45, 000 • 23 years of income (90 -67) • Inflation 2%+ 4. 5% annual return 9 9

Basis of financial comfort during retirement > Income CPP/OAS Company Pension RSP/RIF TFSA Open Acct Difference $25, 000 $20, 000 Financial Comfort 10

$45, 000 per yr or $20, 000 (age 67 -90) Today @ age 42 Retire at age 67 1) Income Goal 2) Savings today At age 67 need $282, 955! 11 11

Mike and Angela… Today @ age 42 $60, 000 Retire at age 67 What do I need to save today? Age 42 -67 At age 67 need $282, 955! 12 12

Financial Plans … 13

Need to save $2, 302 per yr…. Today @ age 42 $60, 000 $2, 302 year or $191/mth Retire at age 67 At age 67 need $282, 955! 14 14

We are Living Longer! 15

Basis of financial comfort during retirement > Income CPP/OAS Company Pension RSP/RIF TFSA Open Acct Financial Comfort 16

CPP Changes : Early CPP, lower benefits Later CPP, higher benefits ü 2012 you can continue to work and also start drawing CPP ü If you do this, you’ll be required to make further contributions until 65 (voluntary thereafter) ü If you work past 65 and keep contributing, your employer is obligated to kick in its share too! ü In past, took at age 60, 30% less than you took it at age 65 ü By, 2016, take at age 60, 36% less than you take it at age 65 ü Take CPP after age 65 > 0. 7% per month vs old 0. 5% per month 17 17

CPP Estimate Sheet Request 18

OAS Changes Raising qualification from age 65 > 67 • Born March 1958 or earlier – You do not need to worry! • Born Apr 1958 > Jan 1962 – Eligible between ages 65 > 67 • Born Feb 1962 or after – Eligible age 67 • Can defer OAS now – (7. 2% increase every yr or by age 70 > 36% increase) • 2014, Full OAS is about $6, 612 annually or $551 month 19 19

Basis of financial comfort during retirement > Income CPP/OAS Company Pension RSP/RIF TFSA Open Acct Financial Comfort 20

TFSA • Tax sheltered • Withdrawals are not taxed • Money you take out won’t effect your Federal income-tested benefits like OAS, GST, Canada Child Tax Benefit • Estate Planning purposes 21

Am I going to be okay? 1) Level of Contribution 2) Time 3) Return (%) 22

3 Key Issues to Consider 1) Am I going to be okay? 2) If I cannot work, will my family and I be okay? 3) If I am no longer around, will my loved ones be okay? 23

Protection of Income and business interruption sickness/disability 24

Job A / Job B Consider two job Opportunities? Healthy Sick or injured Job A: $120, 000/yr $0 Job B: $116, 000/yr $60, 000/yr tax free If offered, what would you choose? 25

Disability Protect your Income Loss of driving force of the leader > lose momentum 26

Getting insurance for things less likely to happen • Chances of your house burning down 0. 08% • Chances of being involved in an auto accident 4% • Chances of developing a critical illness before 65 35% • Chances of developing a critical illness before you are 81 27 65 -70%

The impact of suffering a critical illness… 28

Causes of Critical Illness insurance claims paid in Canada (up to 2012) 29

$16, 000 in claims up to 2013! 30

Withdraw RSP to pay expenses. . Net RRSP Withdrawal + Your Marginal tax rate Gross RRSP withdrawal Marginal tax rate $50, 000 $75, 000 $100, 000 $150, 000 $200, 000 $250, 000 $300, 000 30% $35, 000 $52, 500 $70, 000 $105, 000 $140, 000 $175, 000 $210, 000 35% $32, 500 $48, 750 $65, 000 $97, 500 $130, 000 $162, 500 $195, 000 40% $30, 000 $45, 000 $60, 000 $90, 000 $120, 000 $150, 000 $180, 000 45% $27, 500 $41, 250 $55, 000 $82, 500 $110, 000 $137, 500 $165, 000 50% $25, 000 $37, 500 $50, 000 $75, 000 $100, 000 $125, 000 $150, 000 The above example is for illustration purposes only. Situations may vary according to specific circumstances. 31

Closing thought’s on Critical Illness 1) Do you know of anyone who in the last few years has suffered from cancer, heart disease, or a life threatening illness? If Yes > Did that event have an impact on their lifestyle and finances? If Yes > Would a lump sum benefit have helped? 32

If I cannot work, will my family and I be okay? sickness/disability 33

3 Key Issues to Consider 1) Am I going to be okay? 2) If I cannot work, will my family and I be okay? 3) If I am no longer around, will my loved ones be okay? 34

Don’t leave a mess for your family… ü ü 35 35 POA – Personal Care POA - Property Estate Directory Will

Do you have a Will? No Will • “Intestate” > arbitrary formula • • Take longer for estate to be distributed to beneficiaries • 36 36 Court will appoint a “Personal Representative” Higher cost of administering your estate

“Talking to your customers about wills, estates and Joint ownership” “Keep costs down through preparation and forethought. You can reduce 50% of legal costs if everything/all appropriate information is packaged together properly” Arthur Fish, Borden Ladner Gervais LLP 37 37

Purpose for Life Insurance: Early and Later in Life Early in Life Later in Life • Protection for surviving dependents On death of 2 nd spouse… • Replace earnings • Future Education costs Solution: A)Term Insurance Or B) Combination of Term Insurance + Permanent Insurance 38 Insurance to assist in funding your estate’s eventual tax liability Solution: A) Permanent Insurance

Priority of the Estate Distribution 39

Terminal Tax Return > Deceased Female, single 76 Market Value RRIF, beneficiary son $475, 000 $350, 000 Nonregistered Assets $66, 000 Bank Account Townhome RRIF, beneficiary son $8, 000 $6, 000 Nonregistered assets $0 $220, 000 Bank Account Explanation $475, 000 $50, 000 $150, 000 purchase price $483, 000 @ 45% MTR = $217, 350 tax owing! 40 Taxable Income on the Terminal return Original Cost Townhome $0 Terminal Income Tax! $483, 000 $66, 000 -$50, 000 = $16, 000 @ $50% = $8, 000

3 Key Issues to Consider 1) Am I going to be okay? 2) If I cannot work, will my family and I be okay? 3) If I am no longer around, will my loved ones be okay? 41

How to be financially secure in your business and personal life • Build a plan/work with people you can trust • Supported by Hollis Wealth Advisory 42

Questions? 43