Investor Resources

Definition

An investment fund is a collective investment in securities. By purchasing units, you join other investors with objectives similar to your own. The pooled assets are entrusted to a portfolio manager, whose goal is to generate a return. Changes in the market will lead to fluctuations in unit value. Any profits or losses generated by the fund are distributed between unit holders in proportion to the number of units they own.

Advantages

Professional Management

Portfolio managers use sophisticated tools to determine which securities to purchase and which investment options are best.

Diversification

With even a modest sum, you can acquire shares in all of a fund’s securities, reducing the risk of asset concentration.

Buying Power

Investment funds give you access to specialty and international markets that would otherwise be reserved only for seasoned and/or wealthy investors.

Simplicity

It is easy to open and modify an account. The required upfront investment is often very affordable. You can also sell your units at any time.

Registered Plan Eligibility

Investment funds may be held in TFSAs, RRSPs, RRIFs, LIFs and other plans.

Income

As a unit holder, you can benefit from investment income in the form of either cash or additional units.

This is called interest or dividend income. Disbursement frequency will vary according to the fund.

In addition, at the end of the year, the fund manager may decide to distribute the capital gains accumulated after having sold some of the securities in the portfolio.

These gains are distributed in proportion to the number of units held by each investor.

Some investment funds offer a fixed monthly distribution which has a fiscal benefit, which is an advantage for retirees.

Lastly, you stand to make a capital gain upon selling your units if they are sold for a higher price than you originally paid.

How to Choose

There are a number of funds on the market, which can be divided into three main categories.

Fixed Income Funds

Assets invested in treasury bills, government and corporate bonds, etc.

Growth Funds

A portfolio made up of shares from domestic or international companies

Balanced Funds

These include both shares and fixed income securities.

To find out which fund is best for you, you need to determine your investor profile. Your advisor will guide you through this essential process.

You will need to clearly answer three questions.

Your Objectives

You may be looking to accumulate capital for retirement or to finance a short term project, for example.

Investment Horizon

If you intend to keep your units for at least 10 years, you might opt for growth funds, which maximize their return potential over the long term.

Risk Tolerance

Your investment should not be a cause of concern in the event of a market downturn.

1. Fees

As is common in the industry, all investment funds have fees attached. Some are added on when you make a transaction, such as a purchase, sale or transfer of funds. Others are deducted for as long as you hold your mutual funds. These include management costs.

2. What is a Management Expense Ratio?

The management expense ratio (MER) represents the total annual expenses required for the fund to operate. The MER is a percentage of the fund’s total assets. In concrete terms, it can amount to 2%, even 3%, reducing the fund’s return by the same percentage. The MER depends on the type of product. A bond fund, for example, is likely to be less costly than an equity fund, for which choosing securities demands greater expertise.

3. What are the Components of an MER?

The ratio takes into account three main expenses.

Management fees

This covers the fees paid to the investment fund and portfolio managers; the trailing commission, if any, given to your brokerage firm and investment advisor; and other related charges.

Fixed administrative fees

These include legal and accounting fees, bookkeeping and other common expenses.

Other fees

These include any applicable taxes, borrowing expenses and all fees incurred in obtaining external services.

4. What is a Trailing Commission?

Trailing commissions are remuneration for the advice you receive. The fund manager pays trailing commissions each year to the financial firm that sold you the fund (a stock brokerage, for example). This firm may then allocate a portion of its commission to your advisor. Trailing commissions are included in the fund’s management expense ratio.

5. What are the Acquisition Costs for Desjardins Funds?

Charges may be incurred when you buy or sell units, depending on the category or series of units you choose.

Purchase Fee

This is also referred to as a "front end load" or "upfront fee." It may be negotiated with your brokerage firm and will be deducted from your investment. For example, with a 2.5% purchase cost, the net amount of a $1,000 investment will be $975.

Redemption Fee

Also known as a "back-end load" or "contingent deferred sales charge" or "exit fee", it is non-negotiable and charged only when you sell your units. It decreases over time to nearly nothing after six or seven years.

Low Load Sales Charges

As the name suggests, this is lower than the typical redemption charge and runs out more quickly, to 0% after approximately three years.

Fees

In certain cases, there will be no charge, but instead a fee based on the value of your assets.

You Deserve One
You are unique. So is your portfolio.

There is no shortage of economic and financial information, such as tips, tricks and investment techniques on the Internet. Don’t settle for cookie cutter formulas and stereotyped methods. An advisor will offer customized solutions and personalized strategies that are always designed to suit your specific needs. Your advisor will monitor your account, ensure that your decisions are carried out and help you achieve your goals. Your advisor is your ally.

Better Results
An advisor client relationship should be long term

A study conducted in 2012 showed that having an advisor raises the probability that an individual will save, and that savings rates increase with the length of time an investor works with an advisor.

This gap only widens with time.

###
Length of relationship 4 to 6 years 7 to 14 years 15 years +
Added value of advisor 1.58x 1.99x 2.73x

The same study revealed that savings rates are twice as high for households using advisory expertise (8.6%) as for those that are not (4.3%).

Peace of Mind
Your advisor is an expert.

With your best interests in mind, your advisor studies market trends to determine how they will affect your assets.

Because advisors belong to a financial services or securities brokerage firm, they are governed by regulatory compliance and a code of ethics. Their activities are monitored.

They have access to financial planners, tax specialists and accountants – the professionals that are likely to have a hand in managing your assets.

Your advisor has you covered

Services Offered

  • Evaluating your personal, family, professional and financial situation
  • Determining your investor profile
  • Developing a savings plan that will allow you to achieve your goals
  • Proposing a method of asset allocation based on your needs and objectives
  • Recommending investments and/or securities
  • Preparing your retirement
  • Monitoring your investments
  • Encouraging and facilitating saving
  • Rebalancing your portfolio
  • Maximizing potential returns and minimizing risk
  • Preparing your retirement
  • Estate planning
  • Carrying out transactions

Guidance at every stage in your life

Finding an Advisor

Ask your neighbours, colleagues and friends; they’re sure to have one or two recommendations.

Don't be afraid to meet with a number of professionals before making a decision. Here are a few questions to keep in mind.

  • What type of educational background do they have? Do they receive ongoing training?
  • What licences do they hold? Do they belong to any professional associations?
  • Who are their main clientele? What experience do they have in the financial industry? Can they provide you with references?
  • What is their investment policy? How do they choose investment funds and or stocks and bonds?
  • What type of remuneration do they prefer?
  • When and how will they get in touch with me? How often will you be meeting?
  • Do they work closely with tax specialists, accountants and notaries? To which firm or financial institution do they belong?

The most important criterion is a partnership that clicks

  1. Source: An Econometric Analysis of Value of Advice in Canada, Claude Montmarquette and Nathalie Viennot-Briot, CIRANO (Center for Interuniversity Research and Analysis on Organizations), 2012

Definition

The idea behind responsible investing (RI) is quite simple; generate a return and make the world a better place.

RI is based on a stock selection process that considers not only the potential for return, but also the activities and practices of the issuing companies with a view to promoting sustainable development.

From a strictly financial point of view, there are three aspects to RI: environment, society and governance (ESG).

For example, RI might involve assessing:

  • A company’s energy management policy (environment)
  • The working conditions of employees (society)
  • Executive compensation and shareholder rights (governance)

RI does Not Perform Well

False Between 2000 and 2016, the Jantzi Social Index® , which tracks RI, achieved a return higher than that of the S&P/TSX 60 , which contains the heavyweights in the major sectors of the Canadian economy.

It’s For Idealists

Analysts estimate that companies that meet RI requirements are better equipped to face the challenges of the global economy. It's why their stocks are drawing more and more institutional investors known for their meticulous and pragmatic approach; pension plans, labour sponsored funds and religious organizations.

The RI Market is Underdeveloped

It’s actually quite the opposite. According to the Global Sustainable Investment Review, global RI assets as of December 31, 2013, amounted to $21.4 billion USD, of which $945 million USD lies in Canada.

Desjardins is a national pioneer in RI.

  • 1990: Creation of the Desjardins Environment Fund
  • 2009: Launch of SocieTerra Portfolios
  • 2013: $1 billion in RI assets under management
  • 2015: Introduction of additional SocieTerra Funds

Our partner, NEI Investments, is recognized as Canada’s leading manufacturer of socially responsible funds.

Our RI approach lies on four main strategies.

  1. Exclusion screening: Arms, nuclear energy and tobacco companies are immediately filtered out.
  2. ESG evaluation: Our analysis considers environmental, social and governance practices in addition to financial data.
  3. Shareholder engagement: As a shareholder, we make our presence known by:
    • Speaking with companies about their practices
    • Making proposals at general assemblies, to stimulate change
    • Exercising the right to vote
  4. Collaboration: Along with other institutional investors, we join coalitions to advocate for improvements in corporate policies, industry standards and regulations.

Funds and portfolios may contain securities in companies that belong to the energy and materials sectors, which includes tar sands, shale gas and mining development.

We have three good reasons for making the decision to include these sectors.

Relative importance

Both sectors alone represent a significant portion of Canadian market capitalization. Neglecting them would go against the rule of diversification and jeopardize returns.

Responsible attitude

We expect that the companies in question will be effective in managing risk, correct any potential mistakes and demonstrate a constant desire to improve, perhaps even becoming a model for their competitors.

Shareholder role

We promote change from within companies

2016: a record year for our responsible investment initiatives


Besides voting 15,376 times at company annual meetings last year, we also sat down with 96 companies to discuss 23 different topics related to responsible investing--the environment and social and governance factors.

Rosalie Vendette

As I've mentioned a few times, shareholder activism is one of the key responsible investment strategies used by Desjardins. From an environmental, social and governance perspective, we consistently seek to improve the results of companies in which our SocieTerra portfolios invest and we keep an open dialogue going in order to influence them.

Our efforts peaked in 2016, with the launch of three new funds and the creation of new partnerships with specialized responsible investment portfolio managers.

In a push for transparency, we've prepared a new report that will help you understand our initiatives and the added value our products generate.

You'll learn that, besides voting 15,376 times at company annual meetings last year, we also sat down with 96 companies to discuss 23 different topics related to responsible investing--the environment and social and governance factors. These are all opportunities for Desjardins to influence major companies such as Canadian Tire, Starbucks and Suncor, and to talk about various issues, including climate change and human rights as it relates to supply chains.

Our initiatives led to a real impact on 44 companies, which tells us that the approach is moving along very well. Overall, we've reached 7 of the total targets we set.

We recommend that you consult the report.

42 companies challenged to review their environmental practices in 2016


This year, we'll be talking to companies about the Fund's needs and how they can provide better environmental information.

Rosalie Vendette

In 2016, the Desjardins SocieTerra Environment Fund will challenge 42 companies to improve their environmental, social and governance (ESG) practices.

The companies, which are part of the Desjardins SocieTerra Environment Fund, will be encouraged to disclose more of their environmental data. The Fund chooses companies for its investment portfolios based on strong environmental performance. 

Using special databases, our partners are able to target opportunities to maximize the companies' disclosure. This year, we'll be talking to companies about the Fund's needs and how they can provide better environmental information.

Here a list of the 42 companies that will be challenged in 2016.

  1. C.H. Robinson Worldwide, Inc., 
  2. Workday, Inc., 
  3. Ameriprise Financial, Inc., 
  4. Porsche Automobil Holding SE, 5 Networks, Inc., 
  5. SINOPEC Engineering (Group) Co., Ltd., 
  6. Computershare Ltd., 
  7. FleetCor Technologies, Inc., 
  8. Sumitomo Corp., 
  9. Industrial & Commercial Bank of China Ltd., 
  10. Citizens Financial Group, Inc., 
  11. Franco-Nevada Corp., 
  12. Sinopharm Group Co., Ltd., 
  13. M3, Inc., 
  14. Flight Centre Travel Group Ltd., 
  15. Robert Half International, Inc., 
  16. Sun Art Retail Group Ltd., 
  17. China Petroleum & Chemical Corp., 
  18. Frontier Communications Corp., 
  19. Windstream Holdings, Inc., 
  20. Netflix, Inc., 
  21. Rakuten, Inc., 
  22. The Priceline Group, Inc. 
  23. COSCO Pacific Ltd., 
  24. Core Laboratories NV, 
  25. National Oilwell Varco, Inc., 
  26. Superior Energy Services, Inc., 
  27. Southwestern Energy Co., 
  28. Endo International Plc, 
  29. Regions Financial Corp., 
  30. BB&T Corp., 
  31. M&T Bank Corp., 
  32. SunTrust Banks, Inc., 
  33. Monster Beverage Corp., 
  34. H&R Block, Inc., 
  35. Crown Castle International Corp., 
  36. Sanrio Co., Ltd., 
  37. New York Community Bancorp, Inc., 
  38. People's United Financial, Inc., 
  39. Fastenal Co., 
  40. United Rentals, Inc., 
  41. SBA Communications Corp., 
  42. T-Mobile US, Inc.

Our partner, NEI Investments, will also be talking to 21 companies. The analysis of key ESG issues has helped identify opportunities for change.

The strategic dialogues will focus on 5 specific areas:

1. Energy transition

The transition towards energy modes that are less dependent on fossil fuels is still a topic of debate. NEI wants to continue using a systemic approach which, of course, involves reducing greenhouse gas emissions. NEI plans to keep pressuring companies about this and encouraging their constructive participation in climate change talks.

2. Human rights

NEI has encouraged extractive sector companies to respect one of the principles of the United Nations guidelines on human rights and to implement a free, prior and informed consent policy for First Nations as soon as exploration initiatives get underway.

3. From farm to fork

NEI will talk about social and environmental risks and issues related to food production and distribution.

4. Pharmaceutical companies

NEI will be approaching pharmaceutical companies to encourage greater transparency when disclosing clinical trial results and talk about improving access to medications in developing countries. 

5. Governance

NEI will be speaking with a number of companies about a variety of governance-related issues, including diversity and the disclosure of ESG targets.

NEI will also be talking with other companies in the financial industry. For conflict of interest reasons, we will not be engaging in dialogue with companies in this sector. NEI is also willing to meet with other companies over the course of the year to discuss ESG issues. The results of these dialogues will be published at the end of the year.

Here a list of all the companies in the SocieTerra Portfolios, their activity sector and the topics of discussion.

Below you will find a table with a list of all the companies in the SocieTerra Portfolios, their activity sector and the topics of discussion.

Company

Topic

Energy

Chinook Energy

  • GHG emissions, climate policy and energy transition
  • Board diversity
  • Enhancing ESG disclosure

CNRL

  • Oil sands
  • GHG emissions, climate policy and energy transition
  • Uburnable carbon and stranded assets

Gibson Energy

  • GHG emissions
  • climate policy and energy transition
  • enhancing ESG disclosure

Suncor

  • Oil sands
  • GHG emissions, climate policy and energy transition
  • Unburnable carbon and stranded assets

Utilities

Canadian Utilities/ATCO

  • GHG emissions, climate policy and energy transition

Materials

Alcoa

  • GHG emissions and climate policy

Goldcorp

  • GHG emissions and climate policy
  • Responsible water use
  • Respecting human rights

Industrial

CN Rail

  • GHG emissions and climate policy
  • Safe transportation of oil and hazardous goods

Lumenspulse

  • Enhancing ESG disclosure

IT and Telecommunications

CGI

  • Respecting privacy and human rights
  • Cybersecurity governance
  • Anti-corruption
  • Enhancing ESG disclosure

Manitoba Telecom

  • GHG emissions and climate policy
  • Respecting privacy and human rights
  • Cybersecurity governance

Mitel

  • Respecting privacy and human rights
  • Board diversity
  • Cybersecurity governance
  • Anti-corruption
  • Enhancing ESG disclosure

Rogers

  • GHG emissions and climate policy
  • Respecting privacy and human rights
  • Cybersecurity governance

Telus

  • GHG emissions and climate policy
  • Respecting privacy and human rights
  • Cybersecurity governance
  • Equitable compensation

Consumer

Canadian Tire

  • GHG emissions and climate policy
  • Sustainable apparel supply chains
  • Cybersecurity governance
  • Enhancing ESG disclosure

Coca-Cola

  • Access to nutrition
  • Equitable compensation linked to ESG performance

Empire (Sobeys)

  • Food waste, animal welfare and access to nutrition
  • Cybersecurity governance
  • Enhancing ESG disclosure

Loblaw

  • GHG emissions and climate policy
  • Food waste, animal welfare and access to nutrition
  • Sustainable apparel supply chains
  • Cybersecurity governance
  • Enhancing ESG disclosure

Métro

  • Food waste, animal welfare and access to nutrition
  • Cybersecurity governance
  • Enhancing ESG disclosure

Yum! Brands

  • Animal welfare and access to nutrition

Health Care

Johnson & Johnson

  • Access to medicine 
  • Clinical trials transparency
  • Preventing tax base erosion

Responsible investing means leaving a positive impact on both the planet and your finances. Contact your advisor for more information.

  1. The Jantzi Social Index® (JSI) a socially screened, market capitalization-weighted common stock index modelled on the S&P/TSX 60 Index, consisting of 60 Canadian companies that pass a set of broadly based environmental, social and governance rating criteria. | Source: www.sustainalytics.com
  2. The S&P/TSX 60 Index is designed to represent leading companies in leading industries. Its 60 stocks make it ideal for coverage of companies with large market capitalizations and a cost-efficient way to achieve Canadian equity exposure. The S&P/TSX 60 Index also represents the Canadian component of Standard & Poor’s flagship S&P Global 1200 Index. | Source: www.tmxmoney.com
  3. The Desjardins Funds are not guaranteed, their value fluctuates frequently and their past performance is not indicative of their future returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Desjardins Funds are offered by such registered dealers as Desjardins Financial Services Firm Inc., a mutual fund dealer belonging to Desjardins Group that distributes the Funds in caisses throughout Quebec and Ontario.

Zero tax

Created in 2009, the TFSA was an immediate success, which continues unabated.

Of all registered plans, the TFSA is the only one that allows you to make withdrawals for any reason without ever having to pay a cent in tax.

Using funds from a TFSA is therefore the ideal way to finance both short and long term projects.

It is also appreciated by taxpayers who are already contributing the maximum authorized amount to their RRSPs and who are looking for an additional way to save tax.

The annual TFSA contribution limit has fluctuated over the years:

###
From 2009 to 2012 $5,000
2013 and 2014 $5,500
2015 $10,000
2016 and 2017 $5,500
Total contributions
$52,000 by 2017

Unused contribution room may be carried forward and used at a later time. For example, if you were 18 years of age or older in 2009 and do not have a TFSA, you could open one today and contribute a maximum of $52,000 before the end of 2017.

To find out the exact amount of contribution room available to you, visit the “My Account” section on the Canada Revenue Agency website.

Withdrawal Terms

Another important feature to keep in mind is that when you dip into your TFSA, the amount withdrawn is added to your contribution room for the following year.

Be aware, however, that some investors have been penalized for an overly rapid succession of withdrawals and contributions. Therefore, it is important to ensure you always respect you contribution limits for the current year. For more details, please consult the Canada Revenu Agency website.

In addition, your withdrawals and any income your investments generate do not affect your eligibility for social programs based on net income (individual or family), i.e. the Canada Child Tax Benefit, GST credit, Old Age Security, Guaranteed Income Supplement.

Three Conditions

To contribute to a TFSA, you must:

  • Be a Canadian resident
  • Be ages at least 18 years old
  • Have a social insurance number

Speak with your advisor about including a TFSA in your investment strategy

Contributions 100% Tax Deductible

The RRSP is an investment plan that was introduced by the federal government in 1957. The objective of an RRSP is to encourage Canadians to save for their retirement.

Still popular, RRSPs offer a distinct advantage. The contributions are fully deductible from your taxable income.

Every year, you are entitled to make an RRSP contribution equal to a maximum of 18% of the income you earned in the previous year, provided you do not exceed the annual limit ($26,010 in 2017).

You can find your exact RRSP contribution limit on the notice of assessment sent to you by the Canada Revenue Agency upon receipt of your tax return. The amount is shown under your “RRSP/PRPP Deduction Limit statement.”

This information can also be found in the “My Account” section on the Canada Revenue Agency website.

Your RRSP contribution limit will be affected if you belong to an employer sponsored retirement savings plan (or pension fund).

Accumulated Unused Contributions

What happens if, over the course of a year, you do not contribute the maximum authorized amount? You will end up with unused contribution room that can be used in subsequent years. In other words, nothing goes to waste.

Spousal RRSP

In some cases, contributing to your spouse's RRSP can be of value if you anticipate that his or her retirement income will be lower than your own.

Your spousal RRSP contributions are deductible from your taxable income while still belonging to your spouse.

Your advisor will talk you through the possibility of using this strategy.

Important: You will need to stop contributing three years before your spouse begins making withdrawals, or these withdrawals will be included in your taxable income.

Taxable Withdrawals

Your investments grow tax free as long as they are kept in your RRSP.

In fact, the only time you have to pay tax is when you actually withdraw money from your RRSP. Ideally, this will be in retirement, when your tax rate is likely to be lower than while employed.

It is also possible to make tax free withdrawals before you retire, provided the money is used to buy a house or finance training or education.

Become a homeowner

You may withdraw up to $25,000 from your RRSP to buy or build a home (maximum of $50,000 per couple). The withdrawal is tax free.

You are essentially granting yourself an interest free loan.

Your repayment period starts the second year after the year you withdrew funds and can be spread out over 15 years.

Conditions

You and your spouse did not own a home in the year in which you retired or at any time in the four years previous.

For more details, visit the RRSP section of the Canada Revenue Agency website.

You can participate in the HBP without having an RRSP
Speak with your advisor to learn more about strategy

Going back to school

Use your RRSP to pay for full time studies for you or your spouse.

Withdrawals remain non-taxable as long as they do not exceed $10,000 in a calendar year; and up to $20,000 in total.

You must repay the amount within 10 years.

This period is calculated from the earlier of the following two dates:

  • Five years after your first withdrawal
  • Two years after the last year you indicated you were entitled to the education amount on your federal tax return

For more details, visit the RRSP section of the Canada Revenue Agency website.

Plan Termination

You will need to close your RRSP by the end of the year in which you turn 71.

Before this deadline, you can transfer your investment to a Registered Retirement Income Fund.

Meet with your advisor today to discover proven solutions for maximizing your RRSP - Put your trust in an expert

TFSA and RRSP comparison chart
  TFSA RRSP
Contribution deadline January 1 to December 31 of current year March 1, 2017
Age limit None The year of your 71st birthday
Contribution amount Annual maximum:
  • 2009 to 2012: $5,000
  • 2013 and 2014: $5,500
  • 2015: $10,000
  • 2016 and 2017: $5,500
18% of income earned the preceding year, up to $25,370 in 2016 and $26,010 in 2017.
Are contributions income tax deductible? No Yes
Withdrawals Non-taxable Taxable
Investment income Non-taxable Non-taxable
Unused contribution room The unused portion of your maximum allowable contributions since 2009 The unused portion of your maximum annual amount deductible since 1991
Excess contributions Not allowed Up to $2,000 above the maximum allowable annual contribution
Impact of withdrawals on benefits from social programs None Added to taxable income.
Do withdrawals increase contribution room? Yes, equal to the qualifying amount withdrawn and added to the contribution room for the following year. No
Are spousal contributions allowed? No. However, money you give your spouse to contribute to a TFSA is not subject to attribution rules. Yes. The contributing spouse claims the tax deduction even if he or she not the beneficiary.
Taxable upon death? No. Amounts generated prior to death can be rolled over to the spouse tax-free. Yes, except if rolled over to spouse, or to minor or disabled child.
Can it be used as collateral for a loan? Yes No

Making use of your retirement savings

As its name suggests, the RRIF provides retirement income. It is aimed at investors who are looking for some flexibility in asset management.

A RRIF is like a sequel to your RRSP, but with a twist: you can’t make regular contributions to a RRIF, only withdrawals. A RRIF can only be funded by the transfer of stocks, bonds and cash inside your RRSPs. Like an RRSP, RRIF income is completely tax free inside your RRIF account.

Withdrawals

Your withdrawals are taxable.

You are legally required to withdraw an annual minimum that increases every year.

To minimize this amount, it can be calculated based on the age of youngest of both partners.

Your withdrawals may vary depending on your needs and projects.

There is no maximum withdrawal limit.

At death:

  • At death, the RRIF balance is transferred to the surviving spouse, or, in some cases, to the heirs
  • Since July 1, 2011, to defer RRIF taxation, it is possible to transfer up to $200,000 from the RRIF of a deceased annuitant to the Registered Disability Savings Plan (RDSP) of a child or grandchild with disabilities who was financially dependent on the deceased

From a tax standpoint, it is not always advisable to wait until the maximum age of 71 to switch from an RRSP to an RRIF. Find out what is best for you.

Money from your pension fund

Do you belong to a company pension plan? What happens if you leave your job before retirement?

You can:

  • Leave amounts you have earned in the plan
  • Transfer them into a tax free LIRA and manage them personally with the help of your advisor

Read the terms and conditions of your company plan carefully. Some will restrict you to a certain option. Others allow you to choose.

Remember that it is not possible to contribute directly to an LIRA.

The plan is considered "locked in" because it can only be used as retirement income (except in certain circumstances, which your advisor will be able to explain).

The plan goes by different names depending on the jurisdiction: Locked-In Retirement Account, Locked-In RRSP. However, the product is essentially the same.

By age 71, at the latest, you must convert it into an annuity or Life Income Fund (LIF).

Enables you to gradually withdrawing assets from your LIRA

The LIF is to the LIRA what the RRIF is to the RRSP.

Its features are similar to those of an RRIF

  • Retirement income plan
  • Tax sheltered investments
  • No contributions permitted
  • Withdrawals are taxed
  • Minimum Annual withdrawal

Unlike the RRIF, the LIF has a maximum withdrawal limit.

In certain jurisdictions, there are also Locked-In Retirement Income Funds (LRIF), and Prescribed RRIFs. Don’t hesitate to speak with your advisor to find out more.

Grants for the taking

Investing so that a child can have the opportunity to pursue higher education is a great way to invest in their future.

All the more so when you have government support, specifically:

  • Canada Education Savings Grant (up to $7,200).
  • Canada Learning Bond (up to $2,000).

Additional provincial grants may also be available, depending on where you live. Contact your advisor for more information.

You may contribute a maximum of $50,000 per beneficiary, with no annual limit.

If you didn’t set up an RESP when your child was born, you can make up for lost time and even obtain grants retroactively.

  1. Following changes recommended by Finance Canada, withdrawals of overcontributions, non-qualified investments and amounts attributable to swap transactions, or of any related investment income, do not create additional TFSA contribution room. Some of this income will be taxed at 100%.

Accumulate necessary capital

Will You Have Enough

In order to maintain the lifestyle you’re accustomed to when you retire, you will need an annual income equivalent to roughly 70% of your gross salary at retirement.

Why 70%? Because certain expenses disappear or decrease once you stop working, e.g. professional or union fees, transportation, clothing, etc.

We use 70% as a target. Retirees who are particularly fit and active will want to have a little more flexibility – anywhere from 75% to 85%. It all depends on your plans.

Lengthy Retirement

Many people prefer to leave the job market early, often once they have reached their 50s.

Moreover, advances in medicine continue to extend life expectancy; 79 years for men and 83 years for women, according to Statistics Canada.

As a result, retirement today can last up to 25, even 30 years – in other words, approximately the same length as your active working life.

However, during these two to three decades of freedom, inflation will chip away at your purchasing power. The Consumer Price Index can be expected to rise at an average annual rate of 2%.

Your advisor will be able to provide you with detailed financial projections to paint a clearer picture.

Sources of Income

As you approach or once you have reached retirement, you will qualify for certain benefits offered through public programs:

  • Quebec Pension Plan or Canada Pension Plan
  • Old Age Security pension and, if applicable, Guaranteed Income Supplement

These benefits are only intended to ensure a minimum subsistence level and are subject to limits being easily reached. In other words, they should not be your sole sources of income.

You may be among those who belong to an employer sponsored retirement savings plan, also known as a pension fund.

These plans include annuity payments of varying amounts. Certain circumstances (redundancy, dismissal or early retirement) will lead to smaller payments.

Consequently, personal savings, investments included, are quite important in sound retirement planning:

  • RRSP and TFSA
  • Non-registered accounts
  • Primary and secondary residences
  • Rental properties

A Registered Retirement Savings Plan is Essential

Of all of the financial options you have at your disposal when planning this crucial part of your life, the Registered Retirement Savings Plan (RRSP) is, without a doubt, the best known and most popular option.

Who would say no to a making a contribution to a savings plan that is 100% tax deductible and more often than not, leads to a tax refund?

For any given year, you may contribute up to 18% of the income you earned in the previous year.

There is a maximum limit, however, set at $26,010 for 2017.

Should you invest less than the authorized maximum for a particular year, you will accumulate unused contribution room that carries forward to subsequent years.

Almost all investments are permitted, including money market securities, stocks, bonds, and investment funds.

In addition, it is possible to contribute through regular instalments, a simple and practical option.

If you are young, your investment horizon affords you the option of choosing riskier investments, namely in the stock market, which offer long term potential.

If you’re nearing retirement, your best option may be investing in a conservative portfolio in order to protect your assets.

Retirement is complicated - Make it simpler by speaking with an advisor

  1. CANSIM 2012-05-31
  2. Statistics Canada CONSUMER PRICE INDEX FOR CANADA, MONTHLY (V41690973 series) from 1990 to 2016

Ensure your child has the means to go as far as possible

Higher Education is Expensive

The average tuition for undergraduate (bachelor's degree) students for the 2016 – 2017 school year in Canada was $6,373 (up 2.8% compared to the previous year) and $2,851 in Quebec.

Add on housing and living costs if your child attends an institution outside of your home town.

It’s no secret that some young graduates enter the job market with a considerable amount of debt.

Registered Education Savings Plan

The Registered Education Savings Plan (RESP) is an investment option that allows you to set aside money to secure a bright future for your children and or grandchildren.

Under this plan, your contributions grow on a tax sheltered basis and entitle you to significant government grants, which effectively accelerate the growth of your assets.

  1. Source: Statistics Canada, 2016-17 University tuition fees, September 7, 2016

Borrowing is good - Saving is better

Have you ever thought about taking a sabbatical leave? Are you about to have a baby? Are you in the process of renovating your home?

Whatever your plans, the steps taken to achieve your goals are the same.

Key Factors

  1. Cost: The total amount you will need
  2. Time frame: Your ideal deadline
  3. Means: How much you can save without sacrificing a balanced budget

Suitable Investments

One of the benefits to putting your money into investment funds is because they are liquid and offer a strong potential for return.

To withdraw your money, simply ask your advisor to redeem units.

Regular Instalments

Planning regular instalments allow you to set the amount and frequency of the amounts to be invested and may be modified at any time.

The amount is drawn directly from your account and transferred into your investment fund portfolio, where they are used to acquire new units.

As it involves spreading out your investment over time, this technique has a balancing effect, mitigating market downturns while allowing you to benefit from market upturns.

Dipping into Registered Savings

If you would like to purchase property or return to school, you are entitled to make tax free withdrawals from your RRSP.

It’s like having an interest free loan.

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Buying a House Returning to Studies
Investment Plan Home Buyers’ Plan (HBP) Lifelong Learning Plan (LLP)
Maximum Withdrawal $25,000
or $50,000 per couple
$20,000
($10,000 per year)
Repayment Deadline 15 years 10 years

Under the HBP, the repayment deadline is calculated starting on the second year following retirement.

As for the LLP, repayment is calculated from the earlier of the two following:

  • Five years after your first withdrawal
  • Two years after the last year you indicated you were entitled to the education amount on your federal tax return

Become the Beneficiary of your RESP

If you open a RESP for a beneficiary who has chosen not to pursue higher education, you have the option of designating yourself as beneficiary, thereby financing your own return to school.

Whether planning a budget, setting your savings targets, or choosing investments, you can count on the expertise of your advisor every step of the way.

Your advisor is there to help

The importance of effectively planning how to use your retirement income cannot be overstated. Which option should you turn to first - your registered plans or your personal non-registered savings? Should you convert your RRSP before or after the age of 71? What is the best way to benefit from a TFSA? What is the best way to maximize your investments and increase capital longevity? How can you spread out your withdrawals? Sit down with your advisor for the answers to all of your questions. You’ll obtain a customized strategy that takes your personal circumstances, fiscal situation and potential unexpected events into account.

Annuity or Registered Retirement Income Fund (RRIF)

The law requires that you cash in your RRSP by the last day of the calendar year you turn 71. At this time, you may choose to invest your assets in an annuity or in an RRIF.

Annuity

You sign a contract with a financial institution, which provides guaranteed regular income payments.

Annuities are calculated at the rate of interest applicable at the time of purchase: the higher the rate, the more appealing the annuity.

An indexation mechanism may apply (maximum of 4% per year).

You are free of management responsibilities.

RRIF

This option puts you in control of your capital; you decide how to allocate your assets and where to invest.

You can therefore leverage market volatility.

It is up to you whether to make a lump sum withdrawal or a series of regular withdrawals.

The Life Income Fund offers the same features.

Fixed Monthly Income

Certain products, such as investment funds and portfolios, are designed specifically to give retirees a fixed monthly income. When held in a non-registered account, these investments include a tax relief mechanism that reduces the tax payable on withdrawals. Your advisor is your best resource for learning how this process works.

Ensure your final property and health care wishes are honoured

Three Important Tips

  • Prepare your will and your mandate in case of incapacity
  • After reaching a certain age, make it easier to locate and manage your investments and accounts by grouping them in a single financial institution
  • Make sure you have an up to date inventory of your estate and let your loved ones know where you keep your most important documents

Trust

Depending on the size and complexity of your wealth, it may be worthwhile to set up a trust.

All or part of your property will be assigned to a trustee, who will be responsible for administering it according to your instructions.

The potential advantages of a trust, whether living or testamentary, include protecting certain beneficiaries, protecting your assets, controlling how property is distributed among heirs in a blended family and, in certain cases, lowering the tax burden on beneficiaries.

Find out more from your advisor.

Philanthropy

Combining tax credits with community involvement? Why not?

During your lifetime or at death, you may make a donation of money or property, including investments and life insurance, to a foundation or charitable organization.

You may also opt for an endowment fund. This type of fund is a long term investment (rather than a one time, final gift), on which only the income is used and directed toward the organization(s) you wish to support.

Don't hesitate to speak with your advisor, who has a broader professional network of experts to call upon if needed.