Give the gift that lasts a life time

Everyone enjoys buying gifts for their children and grandchildren. You buy toys, candy, bicycles, clothing, movies and video games, etc. Unfortunately, these things are soon worn out, consumed, outgrown or forgotten. There is one gift, however, that won’t be forgotten; that you can be sure they will remember for the rest of their lives. A Registered Education Savings Plan (RESP).

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Does your financial plan provide support if your children get ill?

Most people understand the importance of having some sort of financial plan in place and many people have taken the obvious steps to prepare themselves and their families for the unexpected. But take a moment to consider the less obvious.

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Important Changes to Canada Pension Plan

On May 25, 2009 Finance Canada announced some proposed changes to how Canada Pension Plan (CPP) will work. The changes are proposed to take effect over a period of time from 2011 to 2016, and will affect anyone planning to retire after 2010.

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Give the gift that lasts a life time

Brian Langlois CFP

An RESP can be a unique and lasting gift. You will be helping provide funds for an education they may otherwise be unable to afford. While that Batman action figure may soon be collecting dust in the closet, an RESP may allow them to achieve their goals and get the education they need to have their dream job for the rest of their lives.

The government will help you to save for your child or grandchild’s education. The government will match 20% of the first $2,500 you put into a child’s RESP each year up to a lifetime maximum of $7,200. You may even receive more depending on household income.

The funds grow, tax deferred, inside the plan until withdrawn. While you do not receive any deduction for deposits made into an RESP, any growth inside the plan is deferred until withdrawal. When the funds are withdrawn, assuming they are used for a qualifying education program, the growth will be taxed in the hands of the child not the contributor. This can be a very big tax advantage depending on how much the funds grow.

An RESP is also very flexible when it comes to what the money can be used for. In order to avoid any penalties the funds must be used for a qualifying education program. A qualifying education program is defined as; an educational program at post-secondary school level, that lasts at least three consecutive weeks, and that requires a student to spend no less than 10 hours per week on courses or work in the program.

If the child, for whatever reason, decides not to attend post-secondary education the money isn’t lost. A subscriber may withdraw all of their deposits from the RESP without paying tax but the Grant must be repaid to the government. The growth in the RESP may either be withdrawn and fully taxed (plus 20% extra tax to return growth on the grant money) or it can be rolled directly into the subscribers RRSP assuming there is adequate RRSP contribution room up to a lifetime maximum of $50,000. By rolling the growth to an RRSP not only do you defer the normal tax payable but you also avoid the 20% extra tax.

Everyone likes giving and receiving gifts, but gifts that will last are even better. Twenty years from now a child will not likely remember the yellow transformer they got for their birthday but they will remember the education that helped them become successful. So this year give the gift that lasts a lifetime: Contact Langlois Financial Services Inc. for additional information.

Does your financial plan provide support if your children get ill?

Mike Langlois CSA

Most Canadians have life insurance to cover their debts and possibly replace their income in case of an untimely death. Many have some form of disability insurance to help replace their income while they are unable to work as a result of an injury or illness. Some of you have even taken the extra precaution of insuring yourselves and spouses against critical illness, to allow you the opportunity to spend time with your loved ones while you are recovering or provide access to the best medical care in the world when you may not otherwise be able to afford it. (If you haven’t you should read our article Critical Illness: What Everyone's Talking About) We now have the opportunity to provide important protection in an area often overlooked; your children’s health.

Why do people not think to insure their children against a critical illness? The answer is threefold:

It is often too horrible a possibility for parents to believe their perfect baby could possibly get ill. Everyone wants their child to live a long, healthy life and nobody wants to consider the alternative.
A child obviously isn’t providing income to the household so, if they are ill, there is no income to be replaced and no financial loss to protect against.
People believe that, if their child became ill, they could always take out a loan against the family home or get a line of credit to cover any out of country medical expenses.

Here’s why you should consider critical illness insurance for your children:

The sad reality is children do get ill. Hopefully, your children will live the long healthy life you expect but, if they don’t, you want to be prepared.

When the insured child reaches the age of 25 the plan is fully convertible to an adult plan. This means that they will be able to convert their plan to an adult plan, without any increased ratings, regardless of their health or the health history of their parents.

Also at age 25, depending on your child’s age when the policy was purchased, all premiums will be returned to you if you have not collected on the policy.

As we stated earlier a child obviously doesn’t have an income, but if your son or daughter were to become critically ill, it would definitely affect your earning capability. Are you going to want to sit at the office while your child is in a hospital bed? Are you going to be able to be productive? Probably not. It is not unusual for one parent to need to stop working altogether in order to keep up with the schedule of medical appointments needed for their child. There is definitely a huge burden on family finances when a child becomes ill and finances are not what you want to be thinking about at a time like that.

Everyone around the world has been affected, in some way, by the recent economic downturn and banks around the globe have been tightening their lending criteria. Obviously, if your child became ill and there was a treatment somewhere that could help, you would want to do everything in your power to provide that treatment for your child.

At a time like that, do you want to be relying on the bank to forward credit? Can you be 100% certain that, if something happens, the banks will be willing to increase or provide you with a mortgage? To know that your only hope of helping your child is for a bank to give you a loan is a scary situation, especially in the current economic times, and no one should risk being in that situation.

Child Critical Illness Insurance is a low cost protection which covers many illnesses that affect children and can provide 100% return of premium at age 25. It will provide you with a lump sum of cash when you need it most. We strongly recommend you contact a professional from Langlois Financial Services Inc to see how this new benefit can help you and your family.

Important Changes to Canada Pension Plan

Mike Langlois CSA

Early retirement, before age 65, will result in a reduction in CPP benefits by 7.2% per year, which is up from the traditional 6%. This means that if you begin to take your pension at age 60, your payments will be cut by 36%, not 30%.

On the flip side of this, late retirement, after age 65 but before age 71, CPP benefits will be increased, not by 7.2% but by 8.4%, which is also up from the traditional 6%. This means that if you wait until age 70 to take your CPP, the benefit payments will be 42% higher, compared to the 30% higher today.

If you want to begin to collect CPP while you are still working, then instead of having to stay out of work for 2 months like you do now, you can begin to collect CPP at age 60 even if you continue to work. After age 65 if you are collecting CPP but want to continue to work, the proposal is that you can contribute to CPP through your employer to increase your benefits.

The calculation for CPP will change as well. Currently, the lowest 7 years of earnings is deleted from the calculation. Under the proposal, the lowest 8 years will be omitted so that the benefits are not weighed down by low earnings.

We feel these are very exciting changes that will increase the benefits for many Canadians while at the same time help to ensure the continued sustainability of the Canada Pension Plan. Although these changes will not take effect until 2011, at Langlois Financial Services Inc., we feel it is very important to keep our clients informed of the changes which may possibly affect their future retirement plans. If you have any questions do not hesitate to contact our office.