“It is better to know some of the questions than all of the answers.”
—James Thurber (1894–1961) cartoonist, humourist, playwright
Investors know that not all components of their finances are created equal. Some areas definitely deliver more impact over the long run. Questions always arise as to which ones are best to consider closely. I’ve identified seven key money moves; something for everyone.
A smart step for individuals and families is to prioritize my core financial moves. Place them at the front of the line and carefully attend to the details.
Start an easy discussion about each one that applies. Preferably, outside the comforts of your home. I suggest a few walks with your spouse or partner and, perhaps, accompanied by the enthusiastic four-legged friend.
It’s a great way to enjoy the outdoors and have a relaxed chat about the all important finances. Make it a fun outing by indulging in that favourite treat. My suggestions touch on the core of investing, estate matters and retirement. Your mission is to ensure that each area delivers on your objectives.
Explore the tweaks that fortify your foundations. You want each area to fit like a glove into your total game plan. I summarize seven core areas that benefit from your attention:
1. Saving targets
Adding periodic savings to your investment plan is critical to achieve goals like retirement. Decide on your family saving targets and in whose hands they are best realized. Also aim to equalize assets and retirement incomes between spouses/partners. Always stick with realism.
2. Portfolio health
Are you managing all the risks? Is your nest egg well invested? Will it outlast you? Keep on top of your portfolio’s global health, during both bearish and bullish periods. Your long term retirement portfolio ought to be aligned with family goals, so make every effort to stay on track.
3. Beneficiary designations
Many financial instruments allow you to designate specific beneficiaries. Such as pension plans, insurance policies, RRSPs, RRIFs and TFSAs. Also understand the taxation and estate planning implications of a second marriage and designating the estate as beneficiary.
4. Wills and Powers of Attorney
Ensure that family Wills and Powers of Attorney are valid, up to date and synchronized. Start with your wishes for the estate allocations and providing for special needs. Appoint capable executors, trustees and guardians who are prepared for the long rigorous tasks.
5. RRSP room
Don’t delay RRSP deposits if cash is available. Your 2016 tax notice of assessment sets out the 2017 RRSP room details. Maximum RRSP room rises from $26,010 in 2017 to $26,230 in 2018. Investors turning age 71 in 2017 must convert the RRSP by December 31, likely to a RRIF.
6. TFSA contribution
The TFSA has become a meaningful contributor to retirement funding. It dovetails with the RRSP/RRIF and is available for lifetime, not just to age 71. A starting TFSA can receive a maximum $52,000 deposit to 2017 for investing by each spouse. This sum increases to $57,500 in 2018.
7. Entrepreneur issues
Owners of companies and the self-employed should review their 2017 remuneration mix. Creating maximum 2018 RRSP room requires employment income near $145,700 in 2017. Revisit your combination of salary, management fees, bonus and dividends as applicable. The Individual Pension Plan may be more beneficial than the RRSP for some.