IG Wealth Management
Q: What does IG Wealth Management do?
A: IG Wealth Management has been around for over 90 years and is Canada wide. We are comprehensive financial consultants who get to know you, your partner and family and get to know your goals and concerns. Developing these close relationships allows us to see the big picture of your life so that we can help you plan accordingly. We look at your overall financial well-being. This includes managing your cash flow, preparing for the unexpected with insurance and emergency funds, planning for major purchases and the lending behind these, maximizing your business success, optimizing your retirement, and sharing your wealth. We do all this while using tax-efficient strategies. We create a comprehensive living plan that is unique to your situation and the plan changes with you.
I personally am lucky enough to be a part of a team of four that has over 40 years of experience combined.
Q: What is the most common goal you see in clients looking to better plan their finances?
A: It definitely depends on the person’s situation and what state of life they are in. Whether it’s looking to buy a home, manage their finances, starting their career or preparing for retirement, each stage has different goals and steps depending on an individual’s financial well-being. One thing clients think about at any stage though is saving. Before you can allot money towards savings for a purchase, retirement etc. you must know your budget. The budget is integral to our planning for clients. We must know what your income after taxes is and what is going out for both your fixed expenses (rent, groceries, insurances etc.) and your discretionary expenses ( eating out, entertainment etc.). From here clients can see if they have a surplus at the end of the month or a deficit. If they have a surplus, we can see how much they can allocate to savings and if they have a deficit, we can review their expenses and if there is any place they can cut back on expenses. But a good rule for savings is to start early, even if you can only save $20 a paycheck. It is good to build the habit and you can increase the amount when you are able to. The longer your money is in the market the more it works for you. Time is your friend. Even better if you can set it up to come directly off your paycheque because then you don’t even see it leave your bank account. Take advantage if your work has retirement programs, this can be free money for you!
Q: Are people still taking advantage of TFSAs as much as they used to?
A: Definitely! Tax Free Savings Accounts (TFSAs) are a great account for people to have within their portfolio for so many reasons. You also can have more than one, each marked for different goals with different investment risk tolerances, as long as you don’t exceed your contribution limit. For example, you can have one for your emergency fund which should be about 3-6 months worth of your expenses which could be very conservative. Then you could have one for your long-term goals of retirement that could be more aggressive since there is a longer timeframe. Individuals also use them as their legacy money for their children. It also might make more sense for someone to contribute to a TFSA rather than a Registered Retirement Savings Plan (RRSP) when they know they will be making a higher income and will get more money back from their RRSP contributions in the future. Also, it’s best to avoid withdrawing money from your RRSPs outside of the different plans available such as the Home Buyer’s plan because you will be paying taxes on your withdrawal, and you also lose that contribution room. So, if you need $20,000 you actually need to pull out more from your RRSP depending on your tax bracket. When you withdraw from your TFSAs it’s just that tax free! Plus, whatever you withdraw from a TFSA you get that contribution room back on January 1st of the following year. Talk to a financial consultant to see what makes the best sense for your situation.
Q: Why work with a financial consultant?
A: It’s all about the big picture. You may hear of an opportunity from a friend or colleague that sounds terrific for an investment or purchase, but does this fit into your plan? By knowing our clients on a deeply personal level we can better plan for them and take into account multiple goals or concerns all at once, working towards the life they want. We fit together the pieces of the puzzle and see how one piece affects all the rest and what changes need to be made if necessary. Most of our clients have been with our team for over 20 years and so we know what worries them and what their dreams are. A part of financial planning is helping your client emotionally navigate their financial well-being. We also have technology that takes into account everything that goes into your financial plan and shows you in real time any improvements that could be made big or small from your present situation all the way to your estate or succession planning. Again, financial planning is so much more than just your investments. Seeing where you may be left vulnerable or areas you need to work to improve on are important to know. Managing your own financial well-being is a full-time job and can be a very daunting and emotional journey to have on top of all your other jobs in your life. Talk to a financial consultant to see what makes the best sense for your unique situation or even just get a second opinion from a professional. Maybe improvements can be made or maybe you are already on track.
Q: What are the repercussions of dipping into RRSPs for purchasing a home?
A: If you were to make a withdrawal from your RRSPs for a home purchase today, your withdrawal would be 100% taxable. Meaning, if you withdrew $50,000, the actual amount that would land in your bank account would be less because of taxes. Therefore, if you need $50,000 in your bank account, you actually need to withdraw more from your RRSPs. You also will not get your contribution room back.
However, the Government of Canada has a program to help first-time home buyers called the Home Buyer’s Plan (HBP). This program allows you to withdraw funds from your RRSPs to buy or build a home for yourself if it meets certain qualifications. The current maximum amount you can withdraw is $35,000 and this can be withdrawn without withholding taxes. It is a great program that allows you to pay back the withdrawn funds within a 15-year period. The repayment period starts the second year after the year of the withdrawals for the HBP. For example, if you withdraw funds for the HBP in 2022, your first year of repayment is in 2024. You can also repay the full amount at any time. These repayments do not affect your RRSP deduction limit. You can still make the repayments to your RRSP under the HBP even if your deduction limit for your RRSP is zero. You cannot claim these repayments as a deduction on your income tax to get money back. If you pay more than required in a year, your remaining balance for future years is reduced. However, if you pay less than required for a year, you must include the difference as RRSP income because when you initially withdrew it, it was withdrawn tax free. Again, talk to a professional to see if you meet all the eligibility requirements for the program and if you don’t what your best options for your purchase are.
Q: What is all-in-one -banking?
A: An All-In-One combines the features of a mortgage, line of credit, chequing and savings account into one product. While you pay down your outstanding debt you can access funds up to your approved credit limit. It gives you flexibility that a traditional mortgage does not and allows you to conveniently access money when the need arises.
Q: What is one piece of advice you would give to help people frantically plan for their futures?
A: Complete a budget spreadsheet to know what is coming in and going out each month. Start saving as early as you can with whatever fits into your budget. Plan for the unexpected by having an emergency fund for 3-6 months worth of expenses that is not invested in the market. Protect your money-making machine, which is yourself. We insure our houses and cars but we are far more likely to have something happen to us. You don’t want an injury or illness to derail your goals or eat into your savings. Protect yourself with disability, critical illness and life insurance. Review your group insurance through work because you might not be as protected as you think. Talk to a financial consultant and get a second opinion.
“Start saving as early as you can with whatever fits into your budget. Plan for the unexpected by having an emergency fund for 3-6 months worth of expenses that is not invested in the market.”
Saving doesn’t have to be some massive amount on a weekly or monthly basis. Small savings add up too and there is value in starting to save no matter what point you are at in life. It’s also integral that you don’t invest everything in your bank account – whether that be when buying a home or purchasing investment shares. You don’t want to be house poor and you don’t want to wind up without an emergency fund if something goes wrong!
If you’d like more information, contact Janine to see how she can help you reach your financial goals.
IG Wealth Management