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Welcome to our wall, created by Liam Ferry & Brenndan Roper. Some topics we are going to cover revolve around setting up for Retirement and establishing financial security. These two factors are extremely important for everyone because they can help you out a lot in the long run if you are to take the correct steps. Once finished viewing our wall you will have a good understanding how you can be ready for retirement and crucial steps you should take in order to establish financial security in your retirement years.

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A lot of people don’t end up setting any type of retirement fun because they don’t know where to start. There is no real secret formula here, saving money is saving money and to do that you must not spend. Before you do any preparation for a retirement fund or anything similar, you want to be able to budget your money. This website talks about maintaining a positive cash flow. Personally I think this is the most important step in the process of setting up a retirement fund because if you can’t maintain a positive cash flow you are never going to acquire enough savings for your to live of when you retire.

One fact I found on this website that stood out to me is how much they stress Asset Security. They talk about how important Cash Flow is, but it is also extremely important to have some Assets incase something were to happen with your cash flow such as losing your job or an injury where you are unable to work. Why this fact stood out to me is because not everyone would think how important having assets is when you are trying to save money for later but why it is so crucial is to have something to always fall back on in times of need.

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I've been busy traveling for work and recently was up to Inuvik with my business partner. It's hard to believe we were only an hour from the Arctic Ocean. That will be one of my goals for the next time I am up there - to dip my toe in the Arctic Ocean.

To get to Inuvik, we had to fly from Edmonton to Yellowknife, Yellowknife to Norman Wells and then Norman Wells to Inuvik. With all that flying time, we had a lot of conversations about our business but one of the interesting conversations we had motivated me to write this article about financial security.

What is Financial Security? That was one of the questions we debated. Do we feel financially secure and why? What does financial security mean and where does financial security come from? What does it take to become financially secure and comfortable? Is financial security different than financial independence or financial freedom?

In our discussions, it was evident that financial security comes from different sources. Here are three keys to attaining financial security

Cashflow security

The first source of financial security comes from having positive cash flow (as opposed to negative cashflow). Positive cashflow comes when you live within your means and when your income is greater than your expenses. When you have positive cash flow, you can't help but feel more financially secure than someone who lives the opposite - they spend more than they make. When you spend more than you make, you will have financial stress. So clearly, there is a correlation between positive cash flow and financial security.
Related article: Do you know how much you spend?
After 25 years in this business, I have seen some people who make fantastic incomes but spend all of it and more. I've also seen people with modest incomes but manage their expenses well to create positive cashflow. This discussion reminds me of the old saying, "It's not how much money you make, it's what you do with it that makes all the difference."

The bigger the spread between your after-tax income and your outgoing expenses, the more financial security you will have.

Asset security

Although positive cashflow is important to financial security, it alone, may not be enough. What happens to the person that loses their income all of a sudden because they lost their job or got into an accident or had a heart attack. As important as having positive cashflow is, it's also important to have some assets in case your cashflow changes or stops. I think we can all relate to this: the more assets we have, the more financially secure we will feel. This is where emergency funds can be an important component of providing financial security. As important as emergency funds are, ultimate financial security goes beyond just having 3 to 6 months of income stashed away. The more money you have saved, the better. The more money you have stashed away, the more secure you will feel. This is where having RRSPs, TFSAs and other investments can help to create more financial security.
Related article: Calculating how much you are worth
Debt security

The last key to financial security is how much you have in debt. I think most people will agree, the less debt you have, the more financially secure you will feel. Even if you have enough income to make debt payments, you still have debt expenses and financial stress comes if something changes with your income. If you have no debt, it may be easier to deal with changes to your income.

I get that debt can be useful and productive. Even in our business, we sometimes use debt to productively to grow our income but in the end, debt creates a payment so less debt means greater financial security.
Related article: How to pay off debt faster?
I've been fortunate over the years to meet many people that have paid off their mortgages and live debt-free and they will all tell you they feel more financial security as a result of it. If anyone has debt, they will also be served well to pay off debts which will also positively contribute to greater financial security.

My five cents

At the moment, our business is going very well. We continue to enjoy a good income that provides good income security for our families. Despite the fortunes of the business, I think it's still important to use some of that income to build savings through Tax-Free Savings Accounts (TFSA) and RRSPs to create more asset security. It's also important for me to have some life insurance in place to make sure my family is financially secure if something happens to me. Overall, I'm feeling pretty good about the state of my financial security.

View all posts by Jim Yih

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Three keys to financial security - Retire Happy

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I've been busy traveling for work and recently was up to Inuvik with my business partner. It's hard to believe we were only an hour from the Arctic Ocean. That will be one of my goals for the next time I am up there - to dip my toe in the Arctic Ocean.

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Registered Retirement Savings Plan (RRSP)

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Registered Retirement Savings Plan (RRSP)

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A Registered retirement savings plan (RRSP) is an account to help Canadians save money for when they decide to retire. All the contributions you make to the account are tax-deferred, which means that any of the money you put into it is only taxed when you withdraw it from the account. In the website it tells you that if you earn more then your spouse, you can contribute to a spousal RRSP. This will help the amount when you retire be more equal and reduce the total amount of tax you will pay. It also tells you that you can convert your savings into a registered retirement income fund, but you will have to pay tax on the regular payments each year. It will help pay less tax if you are in a lower tax bracket also.

Something I found in this website to be interesting is that you can convert your RRSP to get regular payments when you decide to retire. Personally, I did not know about this but when I read up on it, I realized how great of an idea it is. Setting this up can save you time and frustration when you are older and allowing you to be flexible with the hard-earned money you have saved.

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1. Contributions are tax deductible

You claim your as a deduction on your return. For example, if you're in the top in Ontario, every $1,000 you contribute reduces the tax you pay by approximately $535. And if your income is lower in a year, you can carry forward the deduction for your contribution to a future year when your income may be higher. That way, your tax savings are greater when you're in a higher tax bracket.

2. Savings grow tax free

You won't pay any tax on as long as they stay in your RRSP. This allows your savings to grow faster.

3. You can convert your RRSP to get regular payments when you retire

You can transfer your RRSP savings tax free into a RRIF or an annuity when you retire. You'll pay tax on the regular payments you receive each year - but if you're in a lower tax bracket in retirement, you'll pay less tax.

Make sure your RRSP fits into your overall financial and retirement plan. Learn more about retirement planning.

4. A spousal RRSP can reduce your combined tax burden

If you earn more money than your spouse, you can help build their tax-free savings by contributing to a spousal RRSP. Retirement income will then be split more equally between the 2 of you - which may reduce the total amount of tax you pay. Learn more about spousal RRSPs.

5. You can borrow from your RRSP to buy your first home or pay for your education

You can take out up to $25,000 for a down payment for your first home under the Home Buyers' Plan (HBP). You can also take out up to $20,000 to pay education costs for you or your spouse under the Lifelong Learning Plan (LLP). You won't pay any tax on these withdrawals as long as you pay the money back within the specified time periods.

Start saving now

The sooner you start contributing to an RRSP, the more money you'll have when it's time to retire. That's because of tax-free compounding.

Take action

Use this RRSP savings calculator to figure out how much your RRSP will be worth at retirement.

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5 reasons to open an RRSP | RRSPs | GetSmarterAboutMoney.ca

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You claim your as a deduction on your return. For example, if you're in the top in Ontario, every $1,000 you contribute reduces the tax you pay by approximately $535. And if your income is lower in a year, you can carry forward the deduction for your contribution to a future year when your income may be higher.

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This image here give you a good idea how well a RRSP account can work for you. Having a slump of money when you are younger can turn into a large sum of money with just time!

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Many people don’t know all the options out there that are available to them for Retirement Savings and trying to get ahead on your financial life. This website talks about the importance of Pensions, another form of Retirement fund. Pensions are great for people because its basically a RRSP but linked to your employer. This mean a small portion of money from each pay cheque you get will be put into a fund for when you retire from that company. This is extremely helpful because people don’t usually see the money deducted from their account so its like they never even had it.

One fact that i found about this website is its not as easy for everyone to get a good pension plan and i really matters on youre work place. This is why it is so important for people to learn about their retiremnt funds early on in life and get them set up so they dont have to worry about it but also get a understanding of how much money you will have saved. Having both of these factors is great to get ahead on situations like these where you dont want to miss out on anything because the less you know the less money you will save.

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Canada Pension Plan (CPP) is one of the cornerstones of retirement income planning. Here are the maximum benefits at age 65:

Don't count on the maximum

When planning for retirement, the first piece of advice I give is not to plan on getting the maximum. When you look at the average CPP payment, it's just a little over $640 per month, which is a long way from the maximum. In other words, not everyone gets the maximum. At the most basic level, the amount you get from CPP depends on how much you put into CPP.

The best way to figure out how much CPP you qualify for is to get your CPP statement of contributions. Call Service Canada 1-800-277-9914 and ask for a CPP Statement of Contributions. They will provide you with access to your online statement.

How to get the maximum?

Why is it that so many people do not qualify for the maximum amount of CPP? The best way to answer that is to look at how you get the maximum retirement benefit. Eligibility to receive the maximum CPP benefit is based on meeting 2 criteria:

1. Contributions - The first criteria is you must contribute into CPP for at least 83% of the time that you are eligible to contribute. Essentially, you are eligible to contribute to CPP from the age of 18 to 65, which is 47 years. 83% of 47 years is 39 years. Thus, the way I like to look at CPP is on a 39-point system. If you did not contribute into CPP for at least 39 years between the ages of 18 to 65, then you won't get the maximum. If so, then you might get the maximum but there is another consideration.

2. Amount of contributions - Every year you work and contribute to CPP between the age of 18 and 65, you add to your benefit. To qualify for the maximum, you must not only contribute to CPP for 39 years but you must also contribute 'enough' in each of those years. CPP uses something called the Yearly Maximum Pensionable Earnings (YMPE) to determine whether you contributed enough. Here's the YMPE figures for the current and past years:

Basically if you make less than $55,900 of income in 2018, you will not contribute enough to CPP to qualify for a point on the 39-point system. For those of you that make more than $55,900, you will probably notice that part way through the year, your paycheques will go up a little. This happens because you have paid the maximum amount of CPP for the year and no longer have a CPP deduction.

As you can see, it's not easy to qualify for full CPP especially with the trend of people entering into the workplace later because of education and people retiring earlier.
Related article: New CPP Rules are here
The easiest way to figure out your CPP eligibility is simply get your CPP statement of contributions. Once you have that document, it will list all the years you are eligible to contribute from age 18 to 65. It will show you how much you contributed in each of those years. If you contributed the maximum, it will have the letter 'M" assigned for that year. All you have to do is add up all the M's to see if you are eligible for the maximum. If you have 39 M's you'll get the maximum. If you have 20 M's you will get approximately half the maximum (you might get some partial credits for part years).

Planning your retirement needs and income requires some understanding of how much you will get from CPP. Many people either assume they will get the maximum or assume they will get nothing at all because they fear the benefit may not be there in the future. Both these assumptions have significant flaws. Take the time to personalize the planning by understanding how the CPP benefit is calculated and how much you will receive.

Here's an article give you a more detailed calculation on How to Calculate Your CPP Retirement Pension
For more information on CPP and other government benefits, check out my ONLINE GUIDE to CPP And OAS
Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace.

For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

View all posts by Jim Yih

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CPP Payments: How much will Canada Pension Plan pay in retirement?

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Canada Pension Plan (CPP) is one of the cornerstones of retirement income planning. Here are the maximum benefits at age 65: When planning for retirement, the first piece of advice I give is not to plan on getting the maximum.

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Pension Plans

I chose to pick this image because to me it symbolizes an employer putting money into a retirement fund which when broken down is what a pension is. The reason I wanted to show this picture is because its one of the reasons why I think pensions are so great for people. Reason being is because no matter how well you are at managing your money a pension plan will still benefit you in the long run and it could be the money you never knew you had that you really need at the time.

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I chose this picture to represent what a tax-free savings account is. This picture here gives us a clear example of how a long-term period can impact your savings account tremendously. Having a slump of money in this type of account to build internet over time is the whole goal. Another reason why I chose this photo is it shows a good representation of how much more money you will be saving with a TFSA rather than a regular account.

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A Tax-Free Savings Account is one of the most useful financial tools available in Canada. The reason I think a TFSA is useful to anyone of all ages is because you can start saving whenever you decide to, as young as 18 years old. All the money you put into a tax-free account will increase with inflation and will also avoid taxes. Personally, I started a high interest savings account when I turned 18. For my financial goals my family's financial advisor recommended this to me. I don’t have any outstanding debt and just wanted to save for my Retirement. If I had to choose between a RRSP and TFSA id chose an RRSP. I really like the idea of only being able to withdraw money when retired or when truly needed. It allows me to add money without thinking twice about it or even thinking about withdrawing it. Focusing on your retirement fund allows for a healthy financial life and a stress free Retirement.

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Table of Contents ▼

Tax-Free Savings Accounts (TFSAs) are truly unique. As a banking and investment banking account, TFSAs allow Canadians to earn tax-free interest their savings or untaxed gains on their investments.

Additionally, TFSAs come with the flexibility of unlimited, penalty-free withdrawals and contributions. The only catch of a tax-free savings account is the TFSA contribution limit, but even that increases for every Canadian yearly.

Not sure what a Tax-Free Savings Account is exactly? Unsure of what your TFSA contribution limit is? Are you having a good old TFSA vs. RRSP debate? These frequently asked questions about TFSAs can be found below.

What is a tax-free savings account (TFSA)?

A Tax-Free Savings Account (TFSA) is widely considered more of a tax-shelter for savings and investments, rather than merely a savings account. Still, it operates as both. TFSAs shelter your savings or investments from tax, making them incredibly versatile accounts. These investments include Guaranteed Investment Certificates(GICs) stocks, bonds, mutual funds and exchange-traded funds (ETFs), among others.

For liquid assets, tax-free savings accounts typically offer lower interest rates than non-registered, high-interest savings accounts. However, any interest earned is tax-free.

Anyone seeking to open a TFSA must be a Canadian citizen, have a Social Insurance Number (SIN), and at least 18 or 19 years old, depending on the province in which they reside.

How to choose the right tax-free savings account

The most important feature of any type of bank account or investment is its interest rate, and TFSAs are no different. You should always ensure that you're getting the best interest rate on your deposits-regardless of what type of account it is.

A good interest rate is important for many reasons, but primarily because it keeps should keep up with inflation.

Each year, inflation increases as a result of economic growth. Money loses value-unless it's earning interest. TFSAs allow money to grow tax-free, meaning your money increases with inflation and avoids taxes.

Keeping all of your money in an account with no interest or with an interest rate lower than 2% will see your money decrease in value each year.

Beware: some accounts offer "teaser" rates that start high at sign-up but drop once the promotional period is complete.

Other features include whether the account charges a monthly fee or transaction fees. You should also be aware of whether the account allows you to transfer money back and forth from your regular chequing account. While TFSAs allow unlimited transfers, the bank or credit union offering them might have their own conditions.

How does a TFSA contribution limit work?

TFSAs come with a contribution limit, known as a TFSA contribution limit. The simplest way to explain how a TFSA contribution limit works are that once you've contributed to the maximum amount for that year, you won't be able to add more until the room increases in the new year.

However, any unused room gets added to the following year. In other words, unless you've reached the contribution limit, you can keep contributing.

If the money is withdrawn, the contribution limit remains the same for that year but carries forward into the following year once a new year starts.

As of 2019, the TFSA contribution limit is $63,500. This limit applies to every Canadian citizen. Exceeding this limit, your entire deposit gets taxed on a month-to-month basis at 1% each month.

If you've reached your contribution limit for the year, contributing to your RRSP might be the right next step for you, but if that's also at its limit, consider maximizing your earning potential using GICs and high-interest savings accounts.

Other types of savings accounts

TFSAs are exceptional savings accounts-but not the only ones available to Canadians. Below are the different types of savings accounts that also provide exceptional benefits.

Traditional Savings Account

The most basic savings accounts provided by banks is the conventional savings account. Unless specified otherwise, a savings account provides interest less than 1.05%.

High-Interest Savings Accounts (HISAs)

High-Interest Savings Accounts (HISAs) offer interest over 1.05%. Unlike the TFSA, income tax is charged on interest earned, as it is a non-registered account. They do offer high-interest, however, and are excellent options to reach short-term savings goals.

Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a savings plan which offers tax-benefits for retirement saving. Like a TFSA, it comes with a contribution limit.

Youth Savings Accounts

Some banks and credit unions offer exclusive savings accounts just for kids, allowing them to save their own money and learn how banking works. Interest is usually lower, and accessibility is typically limited.

Senior Savings Accounts

Canadians 60 and over can take advantage of seniors savings accounts that have lower transaction fees and other perks just for seniors.

TFSAs vs. RRSPs: Which one is right for you?

The answer to the TFSAs vs. RRSPs debate relies heavily on what your personal goals are. That said, using both certainly have their respective advantages.

TFSAs vs RRSPs are a common topic of discussion in the personal finance world. However, both accounts are quite similar, with minor differences between them.

TFSAs offer interest and tax-free financial growth with unlimited, tax-exempt withdrawals and a contribution limit.

A Registered Retirement Savings Plan (RRSP) offer tax-breaks but does not offer free withdrawals. The account is meant for retirement savings, meaning you will get taxed if you make an early withdrawal. The withdrawals are taxed based on the tax bracket that you fall into. Ensure your deposits don't exceed your yearly RRSP contribution limit .

If you have money set aside for an unforeseeable emergency in an emergency fund , it's probably best to make minor contributions into an TFSA, instead of keeping all of your funds parked somewhere that is taxed on withdrawal.

You should still regularly contribute to your RRSP. It will save you money come tax season and have you seeing your financial future in good hands-ensure you're realistic with it!

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Compare the Best Savings Accounts in Canada | Ratehub.ca

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Table of Contents ▼ Tax-Free Savings Accounts (TFSAs) are truly unique. As a banking and investment banking account, TFSAs allow Canadians to earn tax-free interest their savings or untaxed gains on their investments. Additionally, TFSAs come with the flexibility of unlimited, penalty-free withdrawals and contributions.