Financial security planning with Scott Beck – December 1, 2010 – Cornwall Ontario

Cornwall ON –We’re starting a new series on financial security planning  from Scott Beck of Freedom 55 here in Cornwall Ontario.
Tax-efficient investing beyond RRSPs

The tax advantages registered retirement savings plans (RRSPs) offer make them the default choice for many Canadians. Investors often use them to save, and then roll the money into registered retirement income plans at retirement.

While typically the right strategy, RRSPs have restrictions that limit how much you are eligible to invest on a yearly basis when working towards your retirement goals. Many investors are not familiar with the options available to help them invest for retirement beyond their registered plans to further reduce taxes payable each year.

Whether you are in the process of deciding what products to use to save for retirement or are starting to consider from where you will take your income at retirement, there are many things you can do to help you reach your retirement income goals, while strategically deferring tax.

Increasing your savings

Many Canadians consider tax-free savings accounts (TFSAs) as short-term options. They allow funds to grow tax-free and withdrawals do not affect investor eligibility for income-based credits like old age security, age and certain tax credits. When used over the long term, they are a useful product for saving but should not be considered a normal savings account. A penalty of one per cent per month is levied for over contributions so speak to your financial security advisor about how to structure a TFSA within your financial security plan as to ensure you do not over contribute into the account.

Corporate class mutual funds are structured to provide maximum tax efficiency in non-registered accounts. The funds can reduce ongoing distributions and defer taxes when switching to other funds to rebalance your portfolio. The funds are also designed so you receive tax-preferred capital gains or dividend distributions from the fixed income and cash management funds.

Planning an income

You can set up tax-efficient systematic withdrawal plans (TSWPs) from investment funds. They pay you tax-deferred monthly payments that consist primarily of your original investment – return of capital – plus any income. Return of capital isn’t immediately taxable when you receive it. TSWPs are also offered with corporate class funds, allowing you to combine the tax-deferral benefits of both products.

Whether you’re saving for retirement or beginning to think of ways to draw income from your non-registered funds, there are tax-efficient solutions to help maximize the efficiency of your financial security plans. Your financial security advisor can help you determine what combination is most beneficial for you.

Scott Beck, B.Comm, EPC, RHU  is a financial security advisor with Freedom 55 Financial, a division of London Life Insurance Company, and an investment representative with Quadrus Investment Services Ltd. He can be contacted at 613-577-9407, by email to or by clicking on the ad below.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of the writer’s knowledge as of the date submitted for publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.

Scott Beck

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