Glossary of Terms

Savings & Investments

Registered Retirement Saving Account (RRSP)

An RRSP is an account designed to help you save for retirement. Your money inside the RRSP can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your RRSP are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

There are limitations to the amount of money you can contribute to the RRSP and any given year. For 2018, the maximum contribution amount is 18% of your income or $26,230 whichever is smaller. If you do not maximize your contribution, they are carried forward, to find out your contribution amount check your notice of assessment.

Any contributions are pre-tax income, meaning you can subtract the contribution amount from your income at tax time. For example, if you made $60,000 and contributed $5,000 to your RRSP, you only pay tax on $55,000. When you withdrawal the money you will have to pay taxes, but at retirement, you will hopefully be in a lower tax bracket. Lastly, your RRSP must be converted to a Registered Retirement Income Fund (RRIF) or Annuity the year you turn 71.

There are some benefits to owning an RRSP such as the Home Buyers Plan (HBP), which allows you to withdrawal tax-free up to $20,000 for the purchase of your first home. There is also the Lifetime Learning Plan (LLP), allows you to withdrawal up to $10,000 in a given year, or $20,000 total, towards your education.

Tax Free Saving Account (TFSA)

The TFSA is not actually a savings account, it is an investment vehicle like the RRSP. Your money inside the TFSA can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your TFSA all are tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

The TFSA was introduced in 2009 as a means to save for retirement. You are eligible to start a TFSA the year you turn 18. The contribution amounts are set by the government and right now sits at $5,500 a year. Unused contribution room is carried forward back to 2009 or the year you turn 18, whichever is sooner. The maximum contribution room for 2018 is $57,500.

The money invested into your TFSA is after-tax income, meaning you do not pay taxes on any of the growth or at the time of withdrawal. The added benefit is any withdrawal is added to your contribution room the following year. For example, if you withdrawal $5,000 this year, next year you can contribute the annual contribution amount of $5,500 plus $5,000.

An added bonus for retirees is any withdrawals from TFSA is not considered income. So this will not affect your retirement benefits life Old Age Security.

Locked in Retirement Account (LIRA)

A LIRA is an account designed to hold converted pensions. If you are leaving a job, prior to retirement, your pension will be converted to a LIRA. Your money inside the LIRA can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your LIRA are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

Once your pension has been converted into a LIRA, you are not able to make any additional contributions. Withdrawing from a LIRA is very difficult, and in most cases, you will not be able to withdraw the funds until you convert it to a Life Income Fund (LIF) or annuity.

Non-Registered Saving Account

A non-registered account can be used for either short-term or long-term investing. Your money inside the non-registered account can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. Any capital gains within your non-registered account will be taxed at 50% of your current marginal tax rate.

A non-registered account is very flexible as there are no contribution limits. A non-registered account is great if you have maxed out your RRSP and TFSA, or is great to start an investment for a minor, who is unable to own an RRSP or TFSA yet.

Registered Education Savings Plan (RESP)

An RESP is an account to help save for a child's education. Your money inside the RESP can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your RESP are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

RESP's are opened in the name of the child who will use the money from the account. These can either be an individual RESP for one child or family RESP for multiple children in a family. The lifetime maximum contribution amount is $50,000 per child. The money at the time of withdrawal can be used for educational purposes, as long as the child is enrolled in a qualifying post-secondary educational program.

The Canadian Education Savings Grant (CESG) will match 20% of the contributions to the RESP, at a maximum of $500 per year and $7,200 lifetime per child. At the time of withdrawal, the child who is withdrawing the money will pay taxes on the interest, dividends, capital gains and the government grants. Any contributions to the RESP will not be taxed, as that is after-tax income.

If your child chooses not to attend a post-secondary institution, at the time of closing the RESP all government grants must be paid back, and the interest accumulated must be withdrawn as income and taxes paid on it. Any contributions may be rolled over into the parents RRSP if their contribution room allows.

Guaranteed Interest Certificate (GIC)

A GIC is an investment held in your savings accounts, these savings accounts can include TFSA, RRSP, RIF, Non-Reg, RESP or others.

The GIC is a secure low-risk investment that guarantees 100% of your original investment while earning interest at a fixed annual rate. The duration for the GIC depends on your investment choice, which can be 1, 2, 5 or even 10 years. The longer the duration of your investment the higher the interest rate. Withdrawals from the GIC can only occur at the time of maturity. As an independent financial company, we are able to search the market for the best possible rates on your GIC.

Registered Retirement Income Fund (RRIF)

An RRIF is an account designed to provide income during your retirement years, which is created when you convert your RRSP. Similar to your RRSP your money can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your RRIF are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

There are rules that indicate how much money you must withdrawal each year, at age 71 you must take out a minimum each year. The withdrawal amount is determined by your age. At age 71 you must withdrawal 5.38% from each RRIF account, by the time you turn 80 the minimum is 6.82%. You are able to withdrawal more than the minimum in any year, all withdrawals are considered income and you have to pay income tax on it.

Life Income Fund (LIF)

A LIF is an account designed to provide income during your retirement years, that is created when you convert your LIRA. Similar to an RRSP your money can be used to purchase a variety of investments including, mutual funds, segregated funds, stocks, bonds, guaranteed investment certificates (GIC) and others. These investments within your RRIF are all tax-sheltered, meaning you do not pay any interest on the dividends, or capital gains.

There are rules that indicate how much money you must withdrawal each year, at age 71 you must take out a minimum each year. The withdrawal amount is determined by your age. At age 71 you must withdrawal 5.38% from each RRIF account, by the time you turn 80 the minimum is 6.82%. You are able to withdrawal more than the minimum in any year, all withdrawals are considered income and you have to pay income tax on it.

Annuity

An annuity is a contract with a life insurance company, in which the life insurance company will a guaranteed set income for a specific time frame or for life. Once the annuity has been purchased you are not able to make any changes to the contract. The amount of money you will receive on either a money, quarterly, semi-annual or annual basis is based on specific factors. These include current interest rates and life expectancy.

Within a life annuity, you have the ability to set guaranteed payment periods, such as 5 or 10 years. If you were to pass away during the guarantee period, your named beneficiary or estate will continue to receive the income until the period ends. Annuities are a great way to secure your income for retirement.

Insurance

Life Insurance

Term Life Insurance

Term life insurance is affordable protection that is flexible and easy to understand. It is a practical solution if you are looking for affordability, value, temporary protection, or simplified protection.

The cost is guaranteed for a specific period of time (term) and renewable for additional terms. The term of the policy can range from 10 to 30 years depending on your needs. If you die when the policy is in effect, a tax-free payment goes to the person or people (beneficiaries) you named in the policy. Policies can also be converted to permanent insurance regardless of your health or lifestyle.

Some policies can be approved without any medical exams (blood, blood pressure, and urine) depending on your age, amount of coverage, and answers to the questionnaire.

Whole Life Insurance

Whole life insurance, or permanent life insurance, offers protection for your entire life and has the added benefit of additional features that can generate added value to your policy. Whole life insurance is a practical solution for lifetime coverage, level premiums, protection for your family, funeral or estate.

The cost is guaranteed for the life of the policy, or in some cases, you can pay for a limited time such as 20 years. If you die when the policy is in effect, a tax-free payment goes to the person or people (beneficiaries) you named in the policy.

Whole life has additional features such as the ability to purchase additional insurance or gain cash value over time.

Universal Life Insurance

Universal life insurance offers protection for your whole life with the added benefit of building your savings. Universal life insurance is a practical solution to increase your savings alongside your TFSA or RRSP, leave money for your beneficiaries or use to pay future premiums.

The cost is guaranteed for the life of the policy with the benefit of savings component when you pay above the premium. The savings component has a variety of investment options to increase your savings growth on a tax-preferred basis. If you die when the policy is in effect, a tax-free payment goes to the person or people (beneficiaries) you named in the policy.

The savings component is great for business owners looking for a tax-efficient method to protect the value of their business.

Critical Illness Insurance

Term Critical Illness Insurance

Term critical illness insurance can come in two different forms.

In the first form, the cost is guaranteed for a specific period of time (term) and renewable for additional terms. The term of the policy can range from 10 to 20 years depending on your needs. This type is affordable and a practical solution if you are looking for affordability and value.

In the second form, the cost is guaranteed until a specific age and then terminates. The age can be either age 65 or 75 depending on your needs. This type is more expensive but the cost is known for the lifetime of the policy.

If you are diagnosed with one of the covered critical illnesses and survive 30 days, a tax-free payment will be paid to you. Policies can also be converted to permanent critical illness insurance regardless of your health or lifestyle.

Lifetime (Permanent) Critical Illness Insurance

Lifetime critical illness insurance, or permanent critical illness insurance, over protection for your entire life and has the added benefit of additional features that can add value to your policy. Lifetime critical illness insurance is a practical solution for lifetime coverage, level premiums, and savings protection.

The cost is guaranteed for the life of the policy and any payout after the survival period is tax-free and can be used any way you choose. The money can be used to pay medical bills, allow additional time off of work, modifications to your house, or even your mortgage payments.

Child Critical Illness Insurance

Child critical illness insurance offers protection as early as 15 days old until age 18.

Policies have the additional benefit of protection against 5 critical illnesses that can occur in children. Policies can either be a stand-alone policy or a rider attached to a parents life insurance policy or critical illness insurance policy.

Policies can be converted at age of maturity to a stand-alone policy with no medical evidence.

Disability Insurance

Individual Disability Insurance

Individual disability insurance provides financial security by protecting a portion of your income. Disability insurance is a practical solution to protect your income if you become injured or sick, especially if you are self-employed.

The amount of coverage you can apply for depends on your occupation class and your annual income. The waiting period can be as short as 30 days or one year or more. Coverage can last anywhere from 2 years or until age 65. The cost of insurance is guaranteed and is non-cancellable.

Individual disability insurance has many added benefits such as "own occupation", future insurability options, cost of living increases, and even return of premium.

Overhead Expense Disability Insurance

Overhead expenses disability insurance provides a monthly income to pay for your business expenses such as rent, heat, electricity, etc. The amount of coverage available depends on the monthly expenses of your business.

The premium payments can be tax-deducted by the business, but when receiving the benefit they will be taxed as income. The premium payments are guaranteed for the life of the contract and are non-cancellable.

Buy/Sell Disability Insurance

Buy/Sell disability insurance covers the cost to purchase a partners shares within a corporation. This allows for funds to be available rather than using personal or business assets. Thus keeping the business alive without having to sell the business to a competitor.

The company owns and pays for the policy, but the premiums are not tax-deductible. At the time of claim, the corporation receives the proceeds and buys back the shares from the disabled partner. The premium payments are guaranteed for the life of the contract and are non-cancellable.

Health and Dental Insurance

Health and dental insurance plans help to lower the burden of expenses for preventative care, medical bills, or dental costs. Not all medical expenses are covered by the federal and provincial plans, such as physiotherapy, massages, or dental work. Group plans through work may provide some coverage, yet they may not cover all the expenses.

Plans can be tailor to fit your needs for both medical and dental, or just one category. Coverage amounts and out of pocket expenses can also be tailored to your needs and budget.

Travel Insurance

Travel Insurance

Travel Insurance provides protection from unexpected medical and health costs when travelling. Policies can be purchased for single trips or multiple trips.

Provincial medical policies only cover a percentage of your medical expenses when travelling outside of the province. Travel insurance can help cover the expenses not covered due to unforeseen medical expenses.

Coverage can also include trip cancellation/interruption, baggage loss and travel accidents.

Long Term Care Insurance

Long Term Care Insurance

Long Term Care Insurance provides financial protection should you not be able to take care of your self, or perform many of the tasks of daily living.

Policies can be either an income style, where money is paid out monthly or reimbursement style, where receipts are submitted and paid back from the insurance company.

Policies can pay for your care at home, at an adult day-care program, in an assisted-living or long-term care facility.