It is no surprise that our health and well being is at the forefront of conversations these days. Covid has brought mental health and the need for disability insurance to top of mind.

Most often when we think about disability, we think of someone who engages in risky behaviour like heli or back country skiing, driving erratically and without care, or a deep-sea scuba diver or one with bad lifestyle habits like smoking or drinking excessively. However, less than 10% of disabilities are caused by accident, including workplace accidents or motor vehicle accidents.

Statistics Canada states 1 in 7 Canadians have a disability. The most common ailments may surprise you. Mental health being the leader in claims for disability followed by musculoskeletal (i.e., arthritis), then cancer and heart disease. Age does not matter, when 1 in 6 individual disability claims are made by someone under 40. And records show, more than 30% of all people who are between the ages of 35 and 65 will suffer a disability lasting longer than 90 days and about 1 in 6 can expect to become disabled for more than 5 years.

Disability insurance is about protecting your income, making sure you can cover your bills should you become sick or injured. How would your finances fair should something happen to you?  During the early part of Covid last spring, many businesses were forced to shut their doors; the realisation of no income for several months was devasting for some.  An injury or illness for several months or years too can become a real financial hardship for many to overcome.

As anyone who has been off work for an extended period will tell you, the financial cost associated with that circumstance is unfathomable. Consider a cancer patient who has been off work for nearly a year with surgery, treatments, and physical and emotional recovery or someone who has been in a motor vehicle accident and requires ongoing rehab. Some costs may be covered, and while some expenses may drop off (e.g. travel, hobbies, dining out), you are likely to incur many new ones. Some of these may be covered by employee extended health benefits, MSP or ICBC but typically you will be responsible for the majority of them. Ongoing business expenses are not covered by any government or group program. While you are likely familiar with typical rehab expenses like chiropractic treatment, physiotherapy and massage, a long-term disability can bring unexpected additional expenses such as house cleaning, help with shopping, childcare expenses and meal preparation.

When applying for disability insurance, or any insurance for that matter, remember, not all policies are created equal. If you need to claim on the policy, making sure you’ve invested in a good one can make all the difference. Some plans offer very restrictive definitions and/or broad exclusions and are not underwritten until claim time. As a result, they may not pay out as you had hoped. Being surprised at a vulnerable time, when you need protection the most, can be very upsetting so you should know the terms and benefits of your contract before you buy the insurance. This will help give you peace of mind that your insurance will pay out when you need it most.

There has also been some confusion about how the COVID vaccine will affect your benefits which by the Canadian Life and Health Insurance Association, “Getting the vaccine will not affect your insurance coverage. No one should be afraid and choose to not protect themselves from COVID-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government approved vaccinations to protect themselves from serious illness and death.”

COVID-19 vaccinations have been approved by and are being administered through Health Canada. These vaccines have no impact on the application or claims practices of insurance policies.

While it may be tempting to view disability insurance as an additional expense, the cost of not having a plan in place can be devasting to your financial future. Pricing is influenced by a number of factors including, disability claims statistics, health, age, sex and benefit amount. The younger and healthier you are, the cheaper the insurance. We have not seen a change in insurance premiums due to Covid yet, but we may see rate increases in the future depending on how this global pandemic affects claims. Therefore, exploring your options sooner may allow you to lock in premium rates.

Comprehensive professional plans have guaranteed premiums, are non cancellable by the insurance company and provide protection for your working years right up to age 65. A layered approach or hybrid type of plan, with short term and long-term disability can adequately protect your income and help you financially survive a disability.

This article has been provided by Sindy Billan, SB Wealth Solutions* and Saskia Vermeulen, Southlands Financial is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness. *SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2021

As a Naturopathic Doctor, you’re used to taking care of other people. You help your patients improve their health so they can enjoy their lives. But, what about yourself? Who will take care of you as you age?

This past year has shown us all that even the best laid plans can go awry and that we never know for sure what will happen in the future. When you’ve decided to stop working, you might already have ideas of how you’d like to enjoy your retirement. Maybe you would like to travel, renovate your home or pick up a new hobby. The possibilities are endless, and it can be a lot of fun to plan. But, what if your health doesn’t cooperate? If you need care, do you have the savings to pay for it?

Should you need long-term care, the BC government has some public care homes that are partially subsidized. However, these can have long waiting lists and take a while to get into. This can be stressful if you only apply as the need arises. As BC’s population ages and people from the “baby boomer” generation start to access these residences, those wait times will only grow. Another option is private facilities, which can cost anywhere from a few thousand dollars to well over $10,000 per month. And what if you want to stay in your home and bring care in? That can be extremely expensive as well. So how can you protect yourself and make sure you can afford the care you may need?

A good retirement savings plan is a solid start, but expensive care can still derail your retirement plans. Long-term care insurance was invented to help address a short fall triggered by the need for assisted living. Long-term care (LTC) plans are designed to give you peace of mind and security. Many of them allow you to stay in your home and receive care there if that is your preference. The financial benefit helps keep you in control so you can live with dignity. LTC insurance protects you from having to deplete the savings you’ve worked so hard for to cover the costs associated with care. It also enables you to remain financially independent, rather than needing to rely on family and friends for help.

When is the best time to purchase long term care? The younger you are, the less expensive your premiums will be and the easier it is to medically qualify for the insurance. However, some plans currently available accept enrolment up to age 80.

Not all plans are created equal. When choosing a long-term care plan there are a number of factors to consider:

1. Under what circumstance would you like your plan to pay out? Many of the plans currently on the market will pay out if you are unable to do two of six of the activities of daily living (bathing, dressing, toileting, transferring, continence, feeding) or are cognitively impaired.
2. What would you like the benefit to pay for? Some benefits will pay for home care, while others will require you to move to a facility. You may need to produce receipts to be reimbursed for claims. Other plans will pay you your monthly benefit as long as you’ve met the terms to claim.
3. When would you like the benefit to start? Benefits may pay out as soon as you meet the claim terms, or only after you reach a certain age. You will also get to choose a waiting period (how long you will wait to start receiving benefits after you meet the claim terms). The longer the waiting period, the less expensive the premium.
4. How long would you like the benefit to pay out for? You can choose to have a set maximum period the benefit will pay out for, or set it for the rest of your life.
5. How much would you like to receive each month? You can set the benefit amount between a predetermined minimum and maximum.

Long-term care is something we all hope we will not need. However, since the future is impossible to predict, it is important to find a plan that fits your needs. If you have questions or would like more information about long-term care plans, your independent broker can help you explore the options that are currently available.

This article has been provided by Saskia Vermeulen, Southlands Financial and Sindy Billan, SB Wealth Solutions* is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness. *SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2020

The financial future for millennials is vastly different from that of previous generations,” said Martin Joyce, partner and national leader of human and social services at KPMG, in a press release. “They face unique challenges when it comes to building wealth despite having more education and income, primarily because of housing unaffordability.”

Relying on government programs to fund your retirement is risky. Given your many professional and personal demands, you may wonder how you’ll ever be able to save for a new home, new baby, pay down your student loan debt and mortgage, and put enough money aside for retirement.

A survey by Blackrock Canada reveals that 62% of non-retired respondents are generally confident that they have planned well for retirement. But only 59% of these people actually have a plan. And fewer than half of Canadians who have saved less than $100,000 for retirement have a plan—even though they are, arguably, the group that needs it most. As self- employed professionals, you must consider where the income will come from when you are no longer working.

All or part of your retirement funding may come from government sources; Canada Pension Plan (CPP), Old Age Security (OAS), guaranteed Income Supplement (GIS )and the Registered Disability Savings Plan (RDSP).

CPP was designed in 1965 to help Canadians save more for retirement and prevent seniors from poverty. At the time of introduction, life expectancy for females was 73 and males 66.  Life expectancy today is 84 for women and 80 for men. It will cost a lot more to fund a retirement. When all things considered; a decade of a low interest rates, market volatility, inflation and the future economic impact from Covid, the ability to stretch your dollar even more becomes challenging.  While some may still dream of an early retirement, the world where freedom 55 seemed like a genuine possibility is no longer the world we live in today.

To receive the maximum CPP payment, you would have to contribute the max CPP contribution each year for many years. As of 2020, the maximum benefit amount is $1175.83 /month, however, the average CPP for 2019 was a much lower $679.16 per month. This is because not all individuals have contributed enough to receive the full CPP payment. The CPP was intended to supplement a person’s retirement plan, not to be the only plan. Unlike today, in 1965 the majority of working people had work pensions.

As times have changed, is the government doing more to help with retirement? There are several initiatives the government is taking to improve retirement security for Canadians. The Government has implemented in a number of key reforms, such as indexing for cost of living, increasing the disability pension and offering their pension management infrastructure to assist public and private sector employers with a multi-employer retirement savings program.  However, this still leaves a large gap in resources when it comes to serving the small business owner and self-employed individual to save for retirement.

OAS was also designed to supplement retirement income when you turn 65. In 2020 the full monthly benefit is $613.53.  You are eligible to receive a benefit if you are a Canadian citizen or legal resident, have lived in Canada after the age of 18 for 10 years or more (different criteria for Canadians or legal residents not living in Canada).  If your net world income exceeds the threshold amount $79,054 for 2020,  you have to repay part or your entire OAS pension.  If you earn $128,137, you will be required to pay back the entire OAS benefit.

It is important to note that neither of these benefits is paid out automatically; you must apply for each one in order to begin receiving benefits.

Guaranteed Income Supplement (GIS) is for low income seniors. It is available for individuals earning less than $18,600 annually. Planning and implementing an effective retirement strategy early on, during your working years, can prevent you from depending on GIS to live.

Have you heard of the Registered Disability Savings plan (RDSP)? If you or a loved one has a disability, Canada’s RDSP can be a great way to secure a solid future. The plan became available in 2008.  This very lucrative federal program can go a long way to ensure someone with a disability can be cared for financially and thrive. An RDSP functions similarly to an RRSP but receives government funding in addition to personal contributions. It’s unfortunate, despite this tool’s ability to improve the lives of people with disabilities, just over 10% of the 500,000+ eligible Canadians have opened an RDSP since the program’s inception.

To be eligible, you must qualify for the Disability Tax Credit, be under the age of 60, and be a Canadian resident with a SIN. The plan offers a matching grant  up to 300%, depending on the beneficiary’s family income and contribution. Not all investment companies or financial institutions offer the RDSP, mostly because of its administrative cost and cumbersome paperwork.

On the first $500 you contribute, the Government will deposit $3 for every $1 you put into the plan, that’s 300% = $1,500 a year.  The next $1,000 you contribute each year, the Government will deposit $2 for every $1 you put into the plan, up to an additional $2,000 a year. That’s $3,500 per year of grant money, with a limit of $70,000 grant money. Grants can only be received up to the age of 49. Total lifetime contribution is $200,000.

Contributions and grants are tax sheltered and can grow tax free while invested.

Because the RDSP was designed to encourage long term savings and to protect those who may be at risk, complicated rules and stringent guidelines, prevented many from opening a RDSP.  For example, if a person was no longer eligible for the disability tax credit, the plan had to be closed.  Another barrier was accessing funds from the plan. The ten-year rule meant if a grant was received, no portion of the funds could be withdrawn until 10 years after the last grant was paid. This made it unreasonable for some to open a plan because of the nature of their disability, 10 years may be too long as life expectancy was uncertain. As of March 2019, under proposed changes for 2021, the existing time limitation on the period that an RDSP may remain open after a beneficiary becomes ineligible for the disability tax credit (DTC) will be removed.  The rules and guidelines have changed since the inception of the RDSP. If you are eligible or have a loved one who may be eligible, we recommend you consider the RDSP and speak with a qualified advisor.

Regardless of how you plan your retirement, it is important you do just that – plan. The sooner you start saving, the easier it will be to comfortably retire. The government benefits are a nice supplement to your income but as a self-employed professional you’ll need to make sure you’re setting aside money to pay yourself in retirement. As a starting point, the BCNA offers a group retirement savings plan to help you reach your goals.

Published in the BCNA Bulletin, Fall 2020 

This article has been provided by Sindy Billan, SB Wealth Solutions* and Saskia Vermeulen, Southlands Financial and is for informational purposes only.

It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness.

*SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2020

 Many people know they should have life insurance but put off getting it because they feel overwhelmed. How much should you get and how do you know which type to buy? A good financial/ insurance advisor’s job is to help you answer those questions. Often people spend more time planning their vacations than they do their financial future despite the importance of the latter. Premature death or disability can derail your personal and retirement objectives if not planned for in advance. 

In general, there are two types of insurance – term (you rent it) and permanent (you own it). Much like real estate, there are pros and cons to both. As with rent, term insurance premiums increase over time and will often become too expensive in the future. Insurance is priced based on the level of risk the insurance company is taking on. As you age, the risk increases as do the premiums. Therefore, if you need insurance in the short-term (for 10 years for example), term insurance will be much less expensive — because the insurance company is assuming it is a lower risk for something to happen to you in that time. Conversely, permanent insurance will have to pay out eventually because the mortality rate for all of us is 100%. 

Permanent insurance is an asset that you own. Depending on how it is set up, the premium will stay the same regardless of how old you are (its based on your age at the time the policy is issued) but the death benefit may increase. This helps to offset inflation as your purchasing power will likely be reduced by the time your dependents are making a claim (think about groceries costing more now than they did 20 years ago). There is also a provision in many policies where the policy accumulates what is known as a cash value. Depending on the terms of the policy, this will likely allow you to access some of the cash value of the policy during your lifetime. 

When you’re deciding what kind of insurance to get, a good starting point is to ask yourself what the insurance is intended to do. Do you need it to last your lifetime or only a specific time (e.g., to cover a 20 year mortgage), will you need it to cover off other debts, replace your income, send your children to university, cover final expenses including your funeral, etc.? 

Consider Carol and John. They have three kids, a home, a cottage which has appreciated in value since they bought it and various investments. All children are under the age of 15. Carol and John want to ensure that their mortgage is paid off if one of them dies p r e m a turely. They also want their kids to inherit their cottage without having to pay a large tax bill. They would like to fund their children’s post-secondary education in the event they are not around to pay for it. It is important to them that the survivor can meet their current financial obligations in the case one of their incomes ceases due to death. 

 The mortgage and schooling are both short-term expenses. Eventually, Carol and John will not need the insurance anymore as the mortgage will be paid off and the kids will have finished their schooling. Therefore, term insurance would likely be the appropriate choice to cover these expenses. 

Regardless of how long they live, their cottage will trigger a taxable event upon the second death. The tax will be equal to the capital gains rate (currently 50%) multiplied by the increase in value since they purchased the property. For example, if the cottage was purchased for $200,000 and is valued at $400,000 at the time of death, this would trigger a $100,000 tax bill. Their funeral expenses will also apply regardless of age. Income replacement to help pay bills in the event one of them outlives the other will continue regardless of when death occurs but the amount needed will change depending on how far into their working career or retirement they are. For these reasons, permanent insurance would likely be used for these items. The income replacement may be a combination of term and permanent insurance. 

Regardless of the combination of insurance Carol and John’s advisor helps them select, meeting their immediate and long-term needs is easy with one application. 

Throughout your lifetime, your needs and obligations will change. For this reason, it is important to review your plan on a regular basis and update it as needed. You should meet with your advisor for an annual review or as you experience a life change (i.e. you get married or divorced, have a child, change your job etc.). As Lewis Carroll said, “If you don’t know where you’re going, any road will get you there.” In order to get where you would like to go, creating an intentional roadmap is vital. A sound financial plan reviewed regularly with the help of a competent financial advisor will help you stay on track to reach your goals with peace of mind. 

Published in the BCNA Bulletin, Spring 2020 

This article has been provided by Saskia Vermeulen, Southlands Financial and Sindy Billan, SB Wealth Solutions* and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness. 

*SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2019

“I have been saving for just over a year, & I’ve already saved >$14,000. Sindy helped me set up an RRSP & a TFSA. It’s automatically taken out of my account each week, so that I don’t even have to think about it. I’m able to easily access it & make changes to my contributions as needed. Easy peezy! I’m so relieved that I finally started saving for retirement!”

Investors who work with an advisor have been shown to have almost 4 times the assets of investors who don’t work with an advisor over a 15-year period. And, despite the prevailing opinion that advisors only work with the wealthy, many Canadian investors had investable assets of under $25,000 at the beginning of the advisory relationship.

What does an advisor do for you? They can provide a detailed step by step, financial plan that is tailored to your individual financial goals and situation. Your plan will be monitored and updated regularly so it grows with you throughout your career and in retirement. An advisor can offer financial solutions for your investment portfolio, education to help you understand and gain confidence in your plan as well as guidance and support to instill good savings habits.

A good advisor will poke and prod the way a doctor does. Just as doctors listen to their patients regarding symptoms and ask questions to gain a better picture of their physical health, an advisor will ask questions to gain a better understanding of one’s financial health. A professional advisor looks at the whole picture to ensure your plan is comprehensive and will help you achieve your objectives. Services such as insurance protection and tax and estate planning go hand in hand with retirement planning. While an advisor will make suggestions based on your situation, you are the one who will ultimately decide what works best for you.

The BCNA is constantly evolving to better serve its members. In September 2013, they launched their group retirement savings plan. This plan allows members to save for their retirement and other life events by offering RRSPs and TFSAs. Since it is structured as a group plan, there are several benefits offered to you which are not available to many individual investors:

1. Lower management fees – range from 1.86% -2.0% – which means more money in your pocket. As the BCNA plan continues to grow, the fee may be further reduced and
2. Investors with over $25,000- fee will reduce “proportionately” over time as the account value grows
3. Education and guidance- information and support, online plan information, tools and calculators designed to help you plan ahead
4. Top of class investments- pension style investing with professionally managed portfolios
5. Death benefit guarantee on the book value of your investment
6. Personalized consultations – advisors who can help guide you through the process: how much should you save and into what accounts? What is the most tax-efficient way to structure your investments? As a member of the BCNA plan, this service is complimentary for you.

What could $25,000 have done for you, if invested in the BCNA Group Retirement Savings Plan? Since its inception in 2013, members who deposited $25,000 at the start of the plan and continued contributing $500 at the beginning of every month, would have accumulated between $72,700 – $80,400. This range is dependant on risk tolerance and consequently, which portfolio was selected. There are many investment options ranging from portfolios designed for the very conservative investor to those who are seeking aggressive growth. Regardless of which is chosen, the composition in your portfolio automatically changes as you approach retirement. This is another benefit available to the BCNA Group Retirement Savings Plan members. Over time, investments become more conservative to protect your investments when you are nearing retirement.

Those who set up an automatic debit for $1000 per month into the Melodia Maximum Growth Fund now have close to $89,255. Investors who took it one step further and invested their tax refund of approximately $3600 into their plan, have over $116,300+, in just 6 short years!**

Investment returns are important but saving on a regular basis is equally important when it comes to reaching your financial goals.

“Sindy and Saskia have helped me navigate the daunting world of insurance, investing, and retirement planning. Retirement planning especially is complicated and full of emotion. They explain everything so clearly and are always there to answer my questions and support me, which takes all the fear right out of it. I’ve been working with Sindy for a decade now and refer to her any chance I get and there’s a reason for that!”

Greater peace of mind comes with knowing you have set yourself up for success in your retirement. This allows you to choose if and when you would like to slow down your practice while being confident that you will be comfortable in your retirement. According to the 2019 Sun Life Barometer, people who work with a financial advisor feel more secure in retirement. In fact, 62% of Canadians with an advisor are satisfied with how much they saved for retirement, compared with 37% of those without an advisor. Investing in the BCNA’s Group Retirement Savings Plan allows you to save to secure your future and encourage and support your fellow colleagues for the same success.

With online access, online enrollment, online or telephone communication and personalised advise, makes it easy to get started.

“I have been working with Sindy since graduation from Naturopthic College. With her help saving for my future has been one area of my complicated professional life that I know is taken care of. From day 1, and ongoing, I feel like she has my best interest in mind.”

“Being self-employed and therefore not having a pension or employee retirement fund, thinking about the future can be somewhat stressful. Investing in the BCNA Group Retirement Plan has provided me with an excellent way to put money aside for retirement. Given that I’m not “investment-savvy”, I very much appreciate the time Sindy spent with me prior to my committing, educating me on the plan and its profile, and that I can communicate with her on a yearly basis to review my plan.”

For more information on this plan, please contact

Sindy Billan at sbillan@telus.net or

Saskia Vermeulen at saskia@southlandsfinancial.com  604-862-7891

*Past performance does not indicate future returns. Returns will be determined by the investments chosen and the markets and timing of deposits.

Assumptions: Melodia Moderate Growth fund, Melodia Maximum Growth fund Annual rate of return, net of fees, over a 5-year period, 4.07 and 6.34% respectively. Marginal tax rate of 30%.

Source: The Gamma Factor and the value of Financial Advice, Claude Montmarquette, Natalie Viennot-Briot, 2016

Source: Canadian Investors’ Perceptions of Mutual Funds and the Mutual Fund Industry, Pollara 2016.

This article has been provided by Sindy Billan, SB Wealth Solutions* and Saskia Vermeulen, Southlands Financial and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness. *SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2019

After graduating and attaining certification as a naturopath, there are plenty of expenses to be thinking about. You’ll have the costs associated with setting up a new practice, the cost of living, and before you know it, it’s time to start paying off your student debt. On top of that, you know you’re supposed to be saving for retirement. So, what’s the best approach? Should you pay off your student loans as fast as possible, and then then begin to save that same amount for retirement? Or is it more efficient to pay off the loans slightly slower, but make a small contribution to your RRSP every month, increasing that amount once you are officially debt-free?

Let’s a take a look at a sample scenario to see how it plays out.

Dr. Brittany Carter and Dr. Nicole Armstrong are both naturopathic doctors in Vancouver, BC. They met in school and have been practicing for 40 years. This year, they are both hoping to transition out of their practices and as a result, are evaluating whether they are financially prepared for retirement.

Both doctors graduated from their naturopathic programs in 1978 and opened their practices the same year. They each graduated with $100,000 of student loans and their earnings over the last 4 decades have been fairly similar. Both doctors started repaying their loans 6 months after they graduated and had 15-year terms on the loan with 6% interest (a realistic estimate given that the historic rate of return of the S&P500 for the past 40 years has been 13%). The suggested monthly payment to meet the 15-year term was $843.86.

Dr. Carter’s goal was to get rid of her student loans as fast as possible, so she paid $1000/month in an effort to pay them off sooner. She paid off her loan in 11 years and 7 months. Then, she began making $1000 monthly payments into her RRSP, where she averaged 6% interest.

Dr. Armstrong wanted to pay off her student loans, but she also wanted to start saving for retirement, recognizing that it can take a while to build up capital. She contributed the recommended $843.86 to her student loans, plus an additional $150/month to her RRSP. Each year, she got a tax deduction of $540, and she paid off her loan in 15 years. After repaying her loans, Dr. Armstrong also put $1000/month into her RRSP.

In the above example, both doctors have paid out the same amount of money, roughly $1000/month for 40 years. Both have paid off their student loans and saved for retirement. Dr. Armstrong received a tax deduction of $540/year during her loan repayments, which Dr. Carter did not get until her loans were paid in full. This enabled her to save $540 in taxes which was helpful in the early years of her practice where her earnings weren’t as high. Both women received a $3,600 tax deduction in the years that they invested the full $1000/month in their RRSP.*

Dr. Carter paid off her loan 3 years and 5 months before Dr. Armstrong. She therefore contributed the full $1000/month to her RRSP for much longer. In the end, however, Dr. Armstrong’s $150/month contribution during her loan repayment term helped her enter retirement with $740,300 while Dr. Carter had $696,459. By saving something each month in addition to her loan repayment, Dr. Armstrong was able to amass an additional $43,841 even though both doctors contributed the same amount.

Each situation will be different, and the above numbers are hypothetical and used to illustrate the importance of starting to save early. When starting out as a naturopath, most doctors have a high level of student debt, and it may feel like it’s not feasible to save anything for retirement in the early years of your career. In reality, student loans are an investment in yourself.

As a self-employed person, you are completely responsible for your retirement. If you aren’t saving, there is no safety net and no employer contribution helping to prepare you for your exit from the workforce.

If a large contribution isn’t realistic now, don’t be disheartened—a smaller regular contribution now can still make a significant difference down the road. The BCNA Group Retirement Savings Plan is an excellent way to start. With low fees, carefully managed funds, and a portfolio specifically tailored to the needs of naturopathic doctors, it’s a great benefit of being a member of the BCNA.

To learn more about saving for retirement, find out if you’re ready, or set up a customized plan to help you prepare in a way that works for you, speak to a financial advisor.

* It is worth noting that while the interest paid on student loans is tax deductible, for the sake of this example it has not been factored in for the sake of simplicity.

This article has been provided by Sindy Billan, SB Wealth Solutions* and Saskia Vermeulen, Southlands Financial and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness.

*SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2019

At the beginning of the 20th century few Canadians could expect to live past 55. Retirement was not a cause for worry. Today, the situation is different. Now, a woman who retires at age 55 can expect to live, on average, another 30 years and a man, 26 years. All that retirement time has a price attached to it.

Retirement has become more complex. In this article, “Are you ready for Retirement?” part 1 of a 2-part series, we will look at sources of income, tax considerations and longevity. Part 11 will be published in the BCNA Spring Bulletin 2018 and will cover wills, estate planning and tax & cost saving strategies.

For most, the idea of freedom 55 is not reality. Many have financial and family obligations and may also choose to continue to work. Brenda, age 65 and Gary, age 60, are a married couple have been contributing to their Registered Retirement Savings Plan (RRSP) for years and they now want to retire. They have considered their expected income from Canada Pension Plan (CPP), Old Age Security (OAS) and Brenda’s work pension. They are a little confused about the three options they have for their RRSP and want to make sure they make the right decision for their situation.

The first option they have is to cash out their RRSPs. In this case, the government demands all the deferred tax be paid in a lump sum.  In most cases that would be a 50% tax bite out of your savings.  Lump sum withdrawals do not qualify for any pension tax credits and can only be made up to age 71. Consequently, this is this least beneficial idea and Brenda and Gary would be very unlikely to choose this option.

Their second possibility is to convert the RRSP to a Registered Retirement Income Fund (RRIF). RRIF money can continue to be held in the same types of investment products as the RRSP and are therefore exposed to the market fluctuations and risk associated with the investment choice. RRIFs can start at any age, but an RRSP must be converted to a RRIF no later than the end of the year in which the taxpayer turns 71.  Minimum withdrawals are required and based on a formula which gradually increases up to age 95.   RRIF minimums are based on the age of the taxpayer.  However, Brenda could elect to use Gary’s age, as he is the younger spouse. This will reduce the minimum amount the couple will be required to withdraw and lower the tax Brenda will owe on her retirement income. It is important to note all RRIF withdrawals are taxable. Minimum payments are not subject to withholding tax and it may be a good idea to have tax remittances set up by your financial institution to avoid any big surprise on April 30th.

The third option is to buy an annuity with the RRSP money. An annuity functions similarly to a defined benefit pension plan. The monthly payout is fixed and guaranteed for life. It can also be purchased with an indexed benefit to keep up with inflation. Annuity payments are considered taxable income.  Usually, they will pay out for a minimum period regardless of whether the owner is still alive.  If Brenda were to choose an annuity, she must understand that no changes can be made once the contract is signed. An annuity can provide security that Brenda will not outlive her money. Both RRIF and annuities qualify for pension tax credits and pension income sharing.

Brenda and Gary are also concerned with the impact of an unexpected illness and how it could affect their retirement plan. Brenda, having been the primary care giver for both aging parents, has witnessed the emotional stress and financial toll a dependent family member had upon herself and her siblings.

Over the next 30 years the largest segment of our population, the baby boomers, will retire. As a result, our health care system will feel the pressure from longevity. Based on the current Canada Health Transfer (CHT), it’s projected that in 25 years, healthcare expenditures by provinces and territories will account for 97% of total available revenues.*  To protect their retirement plan and avoid transferring a burden to their children, Brenda and Gary may consider a long-term care insurance plan as an integral part of their retirement planning.

One of the biggest concerns for many Canadians is running out of money in retirement. As medical advances continue, and health improves, this will continue to be a problem for many retirees. When choosing what to do with their retirement income, Brenda and Gary should consider their health with respect to life expectancy, the lifestyle they are hoping to enjoy early in retirement, factor in the cost of inflation and account for adjustments in the later years. They will need to balance these factors with the level of income they will be able to generate for and during retirement.

It is important to note that Brenda and Gary do not have to choose only one option for their RRSP. They could also use a combination of the three. To make the most informed decision and address their questions about long-term care insurance, they may want to see a financial advisor to ensure they are on the right track.

 *Source: Sustainability of the Canadian Health Care System and Impact of the 2014 Revision to the Canada Health Transfer, Canadian Institute of Actuaries and Society  of Actuaries, 2013

This article has been provided by Sindy Billan, SB Wealth Solutions** and Saskia Vermeulen, Southlands Financial and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness.

**SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2019

Adam is invincible. He is 31, engaged and practices as a chiropractic doctor. Tiffany, his fiancé, is 30 and a well qualified legal assistant for a major law firm in Vancouver. She is also invincible. Both Adam and Tiffany live life to the fullest. They love to travel, cycle in the summer, hike the Grouse Grind on weekends and ski in Whistler during the winter season. Adam has no life insurance, no disability, no long-term care insurance or critical illness. Tiffany has some benefits offered through her work employee plan. Too much to review here so let’s look at critical illness benefits, especially in light of the recent news Adams’ colleague has learned. Susan, also a chiropractic doctor, is 36 years old. She normally joins Adam on the Grouse Grind every Saturday; however, she was recently diagnosed with thyroid cancer and is unable to hike the grind. Susan has asked Adam to locum for her while she undergoes surgery and chemotherapy.

Let’s consider some of the latest predictions from the Canadian Cancer Society, 1 in 2 Canadians will be diagnosed with cancer in their lifetime and 1 in 4 will die from the disease. This is due to the growing and ageing population. Adam felt invincible up until now. He always thought those from his parents’ generation were more likely to be affected by a critical illness. Information about cancer rates show the fastest growing range is those between 19 to 39.

Just this summer, a member of our family was diagnosed with colon cancer, stage 1V. She is 35 years old. Her treatment includes partial removal of the colon, lymph nodes and 3 months of chemotherapy.

The current information from the Canadian Heart & Stroke Foundation is 1 in 4 Canadians will contract some sort of heart disease and more than one third of those affected are under the age of 65 and that number is growing.

Dr. Richard, my optometrist, follows a fit and healthy lifestyle. He is a marathon runner, eats clean, non-smoker and non-drinker. He had a heart attack at age 58, just this last spring.

Who hasn’t been affected by a critical illness within their circle of family or friends?

Anyone who has been off work for an extended period will tell you, the financial cost associated with that circumstance are almost unfathomable. Consider a cancer survivor who is off work for nearly a year with surgery, treatments and physical and emotional recovery. Some costs drop, but there are many more that start and easily fill the short-term void and then some. Even with short term or long-term disability benefits from work, most people don’t recognise there will be many expenses that will follow along with their illness.

Adam and Tiffany have been saving to buy a condo or townhouse in the not too distant future. Interesting, lenders report that more than 50% of foreclosures or re possession are due to an injury or illness. About 45% of RRSP withdrawals are made to cover costs related to an illness. Not an ideal situation as this may create more of a tax burden and additional financial stress.

Let’s consider some of the “sneaky” items: numerous taxi rides, non-traditional treatments beyond the scope of employee benefits, help with shopping, caring for children, babysitter, nannies, help with household chores such as cleaning, meal preparation, costs for toileting and bathing appliances, to name just a few.

There is additional cost of a spouse or family caregiver taking time off work and lost opportunity to save for retirement when stopping RSP contributions.

While nothing can replace the emotional, mental and physical losses experienced in such cases as this, there is something that can be done to protect the financial loss – Critical Illness Insurance.

Critical Illness Insurance provides a lump sum of tax free cash to use at your discretion. Most polices cover 24 illnesses. A few of the most common claims are for heart attack, stroke, cancer, MS and coronary bypass and have been paid out for some as young as 25 and as old as 78. Some polices offer additional benefits as well; locating a general practitioner, a second opinion on test results and recommended treatments, nutritional guidance service and counselling service.

Considering critical illness?

Adam realised he needed some protection in place. He opted for the low cost, affordable plan for $30 per month. His plan is $100,000 of tax free benefit if he becomes critically ill with one of the 24 covered illnesses. It is guaranteed to renew in 10 years without having to provide medicals, however, at the current premium rate at the time. Tiffany decided to make her plan as part of savings strategy and lock in the premium rates with a guarantee. She chose the Term75 with a return of premium at age 65 or upon death. This plan allows for a lump sum benefit of $100,000 for a critical illness or if she does not become sick, she is rewarded her money back. Starting at age 65, she could choose to cancel her insurance and receive cash back, about $32,700. A win win situation. The cost of her plan is $85 per month.

Strongly consider the purchase of even a nominal amount of critical illness insurance while you are healthy. The tax free benefit is paid to you, normally within 30 days after a diagnosis for one of the covered illnesses or accidents.

And remember no-one is invincible – we are all exposed to the same risks.

This article has been provided by Sindy Billan, SB Wealth Solutions** and Saskia Vermeulen, Southlands Financial and is for informational purposes only. It is not intended to provide legal, accounting, tax, investment, financial or other advice and such information should not be relied upon for providing such advice. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by Sindy Billan or Saskia Vermeulen as to its accuracy, completeness or correctness.

**SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions E&O/E 2019

Housing is one of the hottest topics of conversation lately.  Housing is not only a necessity of life but also the most single largest investment for majority of Canadians.  Experts from various industries; urban planners, real estate developers, government, economists, mortgage brokers, financial planners  and others have recently reported on issues affecting homeowners. Subjects such as affordable housing, residential real estate prices, historically low interest rates, increased density in urban areas, paying down a mortgage and high cost of living in the greater lower mainland have been on top of most peoples’ mind.

One common question we hear as financial advisors, in regard to housing, is “Which is better, pay off the mortgage or buy an RRSP?”  To answer this question I will refer to an article written for Money Magazine by a colleague of our firm, Ian Whiting.

Lee and Daphne, age 30, are aware of the huge cost of interest on their mortgage,  but are quite ambitious and would also like to retire in their late 50’s or early 60’s.  Can they do both at the same time or do they have to choose?

Through diligent saving and a sizeable down payment, their condo mortgage is only $150,000. They are able to afford higher than normal payments so decided on a 20 year term mortgage at a fixed rate of 5%.  Over 20 years they will pay about $87,000 in interest, assuming rates don’t change of course.  If they decide to make a principal payment of $6000 on each mortgage anniversary, they would pay it off in 11 years and reduce their interest costs to about $46,000.  In theory, they would start contributing $6000 to their RRSP after the mortgage is paid off. But is this the best option?

If they choose to wait until age 41 to start making RRSP contributions, assuming a consistent rate of return of 7% to age 60, they would accumulate about $230,000. At current rates, this could pay them a lifetime income of about $1300 per month. Even including OAS and CPP at current maximum rates and applying the effects of inflation for 30 years, up to retirement and beyond, this is not going to provide much of a lifestyle.

Let’s examine this more closely. To pay down their mortgage by $6000 annually, this young couple has to earn just over $9100 before taxes (BC tax rates 2013) . If they made annual deposits of $9100 after their mortgage is paid, using the same 7% rate of return, they could have nearly $350,000 at age 60- which could mean a monthly income of $2000. Better, but not by very much.

So, by doing some reverse math, if they agree to pay off the mortgage in 15 years and starting with $9100 of pre-tax earnings, they could deposit $6800 into their RRSP every year. The estimated tax savings would be about $2300. The $2300 is then used as prepayment for the mortgage. The mortgage would now be paid in full after 15 years with interest costs of $64,000.  By putting $6800 per year in to their RRSP and increasing the contribution to $9100 when the mortgage is done, they would accumulate $710,000 at age 60! At current rates this would apply a lifetime monthly income of $4100.

To summarize, their choices come down to 3:

1. Eliminate the mortgage in 11 years by making $6000 annual principal payments. Then contribute the $6000 to RRSP’s until age 60. Total interest cost $46,000. A potential RSP fund of $230,000 provides a monthly income of about $1300.
2. Pay off the mortgage in 11 years and then start $9100 RRSP deposits each year until age 60. Total mortgage interest costs $46,000.  The RRSP total $350,000, potential monthly income of $2000.
3. Decide to clear the mortgage in 15 years and contribute $6800 to RRSP each year and apply the tax savings of $2300 toward the principal payment each year. When the mortgage is gone, increase RRSP payments to $9100 per year. Total mortgage interest cost will be about $64,000. However, the RRSP can grow to $710,000 and generate $4100 income per month.

Understanding the time value of money and interest costs are important financial concepts to consider when making these kinds of decisions.

Lee and Daphne decided that the 3^rd choice was the better option to accomplish their future goals. It gives them the best of both worlds; pay down the mortgage and allow for saving on taxes with the potential of retirement income from their RRSP. Even though they will pay an additional $18,000 in interest, there is a significant difference in both, the retirement savings and potential for lifetime income. The RRSP more than TRIPLES- increasing by $480,000 from time in the market and compounding rates of return.

Doesn’t it make sense to do the same series of calculations on your mortgage? Happy number crunching!

This article was written with the permission of our advisory team, Ian Whiting, Customplan Financial Advisors Inc. published in Money Magazine, 2014.

Sindy Billan, SB Wealth Solutions, is an associate at Customplan Financial. The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, insurance , tax or legal advice. Practitioners must seek their own independent professional advice to discuss their personal circumstances before implementing this type of arrangement.  

SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions.

A colleague once told me that as business owners, from a CRA perspective, we are given the keys to a Ferrari and yet we drive it like a compact car!  A Health Spending account is one of those powerful tools that are only afforded to business owners.  They transform health, dental & vision expenses from an after tax cost to you personally to a full tax deduction within your corporation.

There are two basic types of plans; one that is prefunded and another that is a pay as you go.

With a prefunded plan, as an employer you deposit a fixed amount per employee into an account with a third party administrator to be used for various expenses.  The amounts then sit there until a claim is made by the employee.  The claim is made directly to the administrator and charges the employer a small fee to do this.  Both the fee and the amount deposited are fully deductible to the employer as a business expense.  This plan is nice because you make a onetime lump sum deposit and don’t have anything else to do.  The downside is that you are required to make a large cash payment and if the employee doesn’t use the funds within 2 years the deposit is non-refundable.

The pay as you go plan works like this:

$1,000 of approved expense incurred personally (requires $1,400 of income withdrawn from the business if you are at a 40% tax rate)

Complete form and send payment from the business to the Administrator with fees ($1,055 – fully tax deductible for the business)

Administrator sends $1,000 to the employee’s personal bank account

Your total out of pocket expense is the tax you paid on the income you paid yourself!  These are nice because it is a pay as you go and don’t have to worry about large cash injections and don’t risk losing the funds if claims are made. There is a one-time fee to set up this program.

While Health Spending accounts are called many things (Health & Welfare Trusts, Private Health Spending Accounts to name a few) they operate in the same manner as described above.  It is a very simple and powerful tax planning tool.

Submitting a claim is simple, and many providers have online systems to help streamline the process.  It works like this:

Your  business  submits  the  employee’s  claim  that  includes  the  original  receipts  and  a  company   cheque for the amount of the receipts plus the cost of processing.  The cost of processing ranges from 5% – 10% plus tax. Once the claim is processed your business deducts the entire cost. The Administrator (the company whom you have the plan with) then issues a tax-free reimbursement to the employee.

For as little as 5% of the amount of the claim a third party Administrator can convert personal health and dental expenses into a deductible business expense.

This strategy is available to incorporated businesses or sole proprietors with employees.  Unfortunately you don’t qualify if you do not have employees. This is because there isn’t any element of risk as a one person sole proprietor. That said, one-person corporations do qualify with the CRA guidelines but the total costs must be reasonable, that is, you can only remit an annual amount that you would allow an unrelated employee to claim. The total amount available ranges between $6,000-$10,000 per year per family member.  Yes, you can have your spouse and children on this plan as well!

One of the big questions we are asked is what can go through the plan.  Any medication prescription by a medical doctor and filled at a pharmacy (must have a DIN), vision care including glasses & contacts, and most dental expenses including major procedures such as braces & implants. Paramedical services are also allowed such as chiropractic, massage, and visits to Naturopathic Doctors.  Also, treatments received in an ND’s office are included but regular supplements purchased are not.  This could be very beneficial to your practice as your patient may be more willing to have a treatment if they know it will go through their plan!

Be sure to include your accountant when you decide to move ahead with this type of plan so they can ensure the expenses are recorded properly.

This article was written by Sindy Billan, SB Wealth Solutions and Christine Lang, BA (Econ), CPA, CGA LANG Financial Consulting & Wealth Solutions Ltd.

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, insurance , tax or legal advice. Practitioners must seek their own independent professional advice to discuss their personal circumstances before implementing this type of arrangement.

SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions

LANG Financial Consulting & Wealth Solutions Ltd.

When talking to prospective patients or engaged in consultations you probably spend a lot of time clarifying what you do. People see NDs because they’ve heard good things about the profession, or have a friend who had good results.
Regardless of the positive feedback, there’s still some confusion about what role an ND can play in a patient’s overall health. When it comes to your own financial health and well-being, there may be some confusion too. You didn’t study all those years to become a financial whiz, but like many health issues, it’s important to set a goal and develop a plan for a healthy financial future. If you’re a little confused about retirement planning, you’re not alone.

Traditionally, we are most familiar with the Registered Plan (RRSP), Defined Contribution Plan, Defined Benefit Pension Plan, and Group Retirement Savings Plan. The most recent addition to deferred income plans is the Pooled Registered Pension Plan (PRPP). BC’s PRPP is voluntary and optional. It was implemented to reduce the administrative burden, transfer the fiduciary duty and responsibility from the employer and provide tax and cost savings for employers and self-employed individuals.
When offering a PRPP funds are contributed directly to the pension plan, thereby providing a key cost saving advantage over other plans. There are no payroll taxes, i.e., CPP, EI, and WCB. This plan suits small businesses offering a workplace savings plan.
Incorporated self-employed business owners also have the option for an Individual Pension Plan (IPP). An IPP has features with significant benefits upon retirement. It works like a defined benefit pension. The company pays 100 per cent of the contribution, and the pension plan is funded to provide a defined benefit. The contribution is a tax deductible expense. Administration and management fees are also tax deductible. One strategic advantage for a profitable company is upon retirement of the shareholders: The pension plan may be topped up from the proceeds of the sale of a clinic or practice and the contribution to the plan is tax deductible, thereby reducing the tax payable on sale of the business.

BC is the only province which does not require the company to meet an annual minimum deposit in funding the plan. This type of arrangement is suitable for practitioners over the age of 45, T4 income of $75,000 or greater, with past service or RRSP contribution room.
A June 2014 Conference Board survey found that while many Canadians are saving for retirement, the majority are concerned that they haven’t saved enough. Sixty per cent of respondents felt they haven’t saved enough to comfortably retire. Women and those with lower levels of household income were even less likely to have put money aside. However, there’s some good news in the survey.

A larger number of younger Canadians are beginning to prepare for their financial situation after they stop working. About 34 per cent indicated that planning for retirement is a priority for them, while 24 per cent said that they have made a plan for their eventual retirement. Based on these results, how would you rate your retirement planning confidence on a scale of one to five, if one was the lowest? Are you like some people who find the whole topic very confusing?
What would it take to overcome your fear and finally start investing in your future? Similar to starting a treatment plan, a diet or quitting smoking, it usually takes a shock to your system to make critical behavioural changes. For example, maybe your parents or grandparents had to keep working past their ideal retirement age because they didn’t save enough or suffered investment losses. They’re likely scared and feeling desperate. “That’s not going to be me,” you tell yourself even though you’re afraid it just might be.
Put your money where your emotion is. Before hitting your financial rock-bottom, why not decide to put your money where your emotion is? You can set up a plain and simple saving plan that is so automatic, you won’t even notice you’re saving. One easy option to consider is to contribute to your BCNA retirement savings plan.

Part of the pay-yourself-first concept: Your contributions are made automatically through pre authorized debit plans, so it’s virtually painless. If you don’t have it, you won’t spend it.
Tax savings: Your contributions are tax deductible. This means you’re lowering your taxable income and your contributions can grow, tax-deferred. Employer contributions: Depending on the features of your plan, you may also contribute for your employees. This could provide an incentive for key employees to stay.
Choice of investment options: You may have access to a variety of investment options that have been carefully selected by experts.
Lower investment/No transaction fees: Take advantage of group buying power, lower investment management fees and no front-end, back-end or deferred sales charges.
Speak to an investment advisor: Finding the right fit for your retirement
plan will depend on your company structure, tax deductibility,
marginal tax rate, family assets and net worth.
Home buyer/life-long-learning possibility: You may be able to use
some of your savings, as a first time home buyer, to purchase a
house or return to school.
Portability: You have the option of transferring your plan to another
investment vehicle or savings plan.
Meet your fears head-on: There’s so much information about retirement
saving, that it’s easy to feel overwhelmed and to avoid it. Instead, try to meet your fears head-on. Make regular retirement saving your goal and you’ll end up changing your financial future for the better.

Posted in BCNA Bulletin Articles

The top three critical illnesses affecting Canadians today are cancer, heart attack and stroke. How many of your patients, friends or family members do you know who have been affected by one of these dreaded diseases? Cancer seems to initiate a range of emotional reactions, varying from fear, distress and worry to positivity and triumph. There seems to be a current trend with cancer patients facing the illness with hope and courage and then making the shift from a place of victim to survivor. The statistics speak loudly where two out of five Canadians will develop cancer in their lifetime. In 2013 there were 96,200 new cases of cancer for males and 91,400 new cases of cancer for women. Prostate cancer leading the way for men at 24.5 per cent and dominating the women’s arena is breast cancer at 26.1 per cent. The cancer cases following prostate and breast are lung and colorectal. These types of cancer affect men and women almost equally, at around 13 per cent each. In 2013, the Globe & Mail reached out to their readers asking to share their stories of cancer. They received over 80 replies from cancer survivors. Here is what some had to say: “I expected pain and discomfort during treatment. And I expected fatigue after treatment. But I didn’t expect the amount of pain I’d experience during my treatment, and how severe the level of the pain would be. I was shocked by the time the treatment took (well over a year) and the time it’s taking to heal and get back to feeling normal.” A.P., age 33, Manitoba “The most surprising was that, no matter what, life must go on. Even if your puking and crapping the bed at the same time from chemotherapy, you still have to get up and go pay the Visa bill.” K.F., 57, Alberta It was Dr. Marius Barnard who had addressed financial help for his patients with the introduction of critical insurance in 1983. Dr. Barnard was a renowned heart surgeon in South Africa who had assisted his brother, Dr. Christiaan Barnard, with the first human heart to heart transplant in 1967. It was a young woman, a divorcee mother of three small children, whose circumstance compelled Dr. Barnard to talk to insurance companies. He felt his patient’s financial health was equally important for their physical health to be well. The mother who entered his office was very sick and diagnosed with lung cancer. Dr. Barnard was able to remove the affected lung and she was sent home five days later to recover. He later learned she had returned to work in just three weeks. Two years later this woman was back in his office. This time she looked pale, was extremely exhausted, just skin and bones. He knew she was at a terminal stage. When he asked why she would come in to see him now, in such bad health, she said, “Well doctor I have come straight from work, I need money to feed my children.” Sadly, the mother died. Her children received money from a life insurance policy. However, Dr. Barnard felt if she could have received the insurance money sooner, while alive, it may have given her a much better chance to survive cancer and be with her children. Unfortunately, she had worked herself to death. Dr. Barnard was compelled to approach the insurance industry to address insuring people for when they need it most, while living and managing a critical illness. Critical Illness insurance protection was created over 30 years ago. Today, the need continues to rise. Some are purchasing critical illness through their group plans or buying it individually. However, too many Canadians underestimate the health costs associated with a severe illness. According to a report from Sun Life Insurance nearly half of Canadians facing a major health incident like cancer or stroke are struggling financially. As a result of critical illness, with the loss of family income, not having enough saved and paying for additional expenses not covered by our medical system, the impact can be devestating. People tend to avoid the simple thought of getting a dreaded disease, either because of fear or feeling it won’t happen to them. Critical illness insurance was designed to provide options; take the necessary time to heal, alleviate the worry of paying the bills, fund alternative health treatments and reduce overall financial stress. Statistics from BMO Insurance from Jan 2007- May 2013 show benefits that were paid out; 61 per cent went to males and 39 per cent to females. The youngest being a 24 year old female with a benign brain tumor and the oldest a male, 78, diagnosed with prostate cancer. Total benefits paid out for illnesses were, 62 per cent for cancer, 19 per cent for heart attacks, seven per cent for stroke, three per cent to MS, six per cent “other,” and three per cent coronary bypass. Payout as high as $750,000 went to an investment consultant at age 61 with liver cancer. Credit goes to Dr. Barnard in addressing financial wellness and affordable insurance. Critical illness costs can be affordable. The industry has adopted standard definitions for 24 critical illnesses covered under most plans. For $50,000 of critical illness insurance for a healthy person age 35, with guaranteed premiums for 20 years, the cost is about $30 per month. $50,000 for a 50 year old with guaranteed premiums for 10 years will cost about $60 per month. Good health and good family health history is needed to qualify for personal critical illness insurance.

Published in the BCNA Bulletin 

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, insurance , tax or legal advice. Practitioners must seek their own independent professional advice to discuss their personal circumstances before implementing this type of arrangement.

E&OE/ 2014 SBILLAN Wealth Solutions doing Inc. business as SB Wealth Solutions.

Life and Health insurers often require medical information and attending physician statements (APS) in order to underwrite insurance applications. As an insurance advisor I have received enquiries from ND’s asking about the role and responsibilities as physicians in regard to the APS and also about the process as an individual applying for insurance and giving consent for the release of medical information to the insurance provider.

Insurer’s Perspective

I will describe the insurer’s perspective on the information they require from a physician and explain how it is used in the underwriting process. To begin, the insurance advisor as well as the insurers make every effort to protect client confidentiality while respecting  the client’s personal, financial and medical information. A request for medical information includes a signed consent form which allows the insurance company to share test results with the client’s physician. This will allow your patients to ask for the medical tests and lab results to be sent to their doctor of choice, at no cost to the patient. An insurer is under no obligation to offer this; however most are willing to provide this service.  It is also common practice for the insurance company to advise the client’s physician of any abnormal test result found during the underwriting process, in hoping this will help physicians with the care of their patients.

Physician’s responsibilities

Medical information is collected by a third party service provider, and physicians are paid a reasonable fee for the service. (Fees paid may vary dependent on provider- current schedule “2013 Guide To Fees for uninsured services” an APS fee is $129.45).

Doctors requesting pre-payment must realize they are legally bound to provide the report immediately. The insurance company’s expectation is that an APS should be completed within 2 weeks. The service provider may request the information be faxed or mailed, and can provide physicians with information about the process. An effective way to complete a statement is to list the client’s problems and provide supporting documents of relevant test results.  Example:

CHART

Unless it is requested, you do not need to see your patient. If further information is required, you will be advised. If you feel you need to see your patient, for professional reasons, discuss this with the person asking for the report so that delays can be taken into account.  It is important NDs recognize that failure to complete and offer full disclosure in these statements can have legal ramifications.  Time too is a factor, as in the case of a doctor in Quebec who was charged with delaying medical evidence and on the client’s death was made responsible for the value of life insurance.   With this in mind, a copy of the chart can be as good, if not better, than completing the written report. Physicians play an important role in the insurance application process.

Applying for insurance

What to expect during the underwriting process. There are a number of insurance tests that may be required. These services are covered by the insurance company.

• Paramedical exam:  this is where a health professional will ask health history questions, and they will measure and record applicant’s blood pressure readings and pulse, height and weight and this can be done, at your home, place of work or a medical facility.
• A Medical Exam:  a paramedical questionnaire and full physical exam conducted by a physician. This can be done as a mobile visit or at a fixed facility
• Blood  profile:  health professional collects a few vials of blood using a sterile lab kit,  conditions tested : heart , live function, alcoholism, diabetes, kidney function
• Urinalysis- sample will be tested for nicotine use, drug use, HIV
• Resting ECG:  can be done at home or office- records electrical activity of your  heart
• Stress ECG: test is completed in a fixed facility, monitored by an internist or cardiologist

Insurance can provide peace of mind and financial security to protect you and your loved ones. The application process can take several weeks to complete. To reiterate, delays can be caused by incomplete questions on the application, unfulfilled medical requirements, incorrect contact information, the locating of physicians and medical reports, the forwarding of the APS in a timely manner and possible further medical testing.

I hope this article helps you when you are asked to complete an APS or when going through the process with applying for personal and business insurance.

Sindy Billan

Published in the BCNA Bulletin 

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, insurance , tax or legal advice. Practitioners must seek their own independent professional advice to discuss their personal circumstances before implementing this type of arrangement.

E&OE/ 2014     SBILLAN Wealth Solutions doing Inc. business as SB Wealth Solutions

Still unsure about the differences between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP)? According to Alfred Roissl, a Toronto-based managing director with Desjardins Financial Security Independent Network, it’s all about the tax.

First, let’s review the main features of this tax-free registered savings account:

How much can I put into my TFSA? Starting this year, you can now contribute up to $5,500 a year. Your annual contribution limit will appear on your Notice of Assessment after your tax return has been processed. At the end of the year, any remaining balance will be added to your contribution limit in the following year. One great TFSA advantage is that there usually isn’t a minimum deposit required to open an account, which makes it easy to pay yourself first. And you can easily access your funds if you’re in a tight financial spot. It’s also worth noting that your withdrawals won’t compromise your eligibility to receive federal benefits like the Guaranteed Income Supplement, Employment Insurance or the Canada Child Tax Benefit. Any withdrawals you make can be replaced in the following year.

It’s a great retirement savings tool: If you’ve successfully reached your RRSP contribution limit, continue to make deposits to your TFSA, within your annual limits. Remember, these deposits are tax-free and tax-receipt-free. In other words, deposits you make to a TFSA won’t reduce your taxable income, you won’t receive a tax receipt for your deposits nor will your withdrawals be taxed like an RRSP.

“By contrast,” explains Roissl. “Any deposits you make to an RRSP are deducted dollar for dollar from your taxable income in that tax year. For example, if you make $40,000 a year and contribute $2,000 to an RRSP, the tax on your income would be calculated on $38,000 only. However, any withdrawal you make from your TFSA will be tax-free and the funds are not declared as income.”

Don’t forget to diversify: Consider shaking things up with a little diversification. You can choose investment options like stocks, bonds, mutual funds and guaranteed investment funds (GIFs). Also, you now have the option of borrowing your full contribution limit. However, unlike other investment loans, the interest paid on this loan cannot be used as a tax write-off.

“If you could afford to, contributing to each year’s maximums in both plans would be ideal,” advises Roissl. “Of course, it comes down to finding a balance between creating a strong nest-egg and paying off debts. But, these tax considerations can certainly help you meet your long-term financial goals.”

Planning your retirement Income:  Apply money concepts such as time value of money; invest money wisely to earn interest and appreciate in value. Earning interest and appreciation will maintain the purchasing power of your dollar and contribute to a positive return for retirement income.  Include dollar cost averaging as part of your investment strategy. Dollar cost averaging is used to minimize the overall effect of volatility in the markets. Instead of investing assets in a lump sum, the investor works his way into a position by slowly buying smaller amounts over a longer period of time. This spreads the cost basis out over several years, providing insulation against changes in market price. Benefit from investing early; understanding the effect compound interest plays over time can dramatically reduce the stress of catching up for retirement.  Utilize these money concepts along with the tax advantage government incentives to save for your retirement.

2013 Limits: TFSA (total maximum contribution limit 25,500), RRSP (18% of earned income up to a yearly max of $23,820), Canada Pension Plan (max monthly benefit $1012.50), Old Age Security (max monthly benefit $546.07).

BCNA members, their spouses and staff are eligible to savings benefit in the group plan for both RRSPs and TFSAs.

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, in­vestment, tax or related advice. It is recommended to consult independent professional financial advice to discuss personal circumstances before implementing any type of arrangement. Mutual funds are provided by Sindy Billan as a mutual fund representative with Investia Financial Services Inc.  Other eligible products are offered through other regulatory bodies.  Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

E&E/O 2013      SBILLAN Wealth Solutions Inc. doing business as SB Wealth Solutions

As the saying goes, only two things in life are certain: Death and taxes. In respect to taxes, there are ways to reduce payments required upon a death in the family. In Canada, the greatest transfer of wealth will occur over the next several decades as the population ages and the estates of the elderly transition to their heirs. The expected one trillion dollars of accumulated assets is attracting interest. Are heirs prepared to manage large sums of money, real estate and investments? Effective planning can reduce the emotional and financial challenges of a poorly prepared will, or no will at all, the erosion of an estate to taxes, probate fees, legal and accounting costs and the possibility of tarnishing family relationships.

One effective tool to minimize the impact of all these issues upon death would be under the umbrella of an insurance policy.

Employing the benefits offered in a life insurance makes sense to potentially: Reduce the risk of financial ruin to your family or business; protect a business partners’ interest; maximize the value of your estate and transfer wealth to your heirs; reduce a corporate tax bill and protect the value of your business; take advantage of the ability to designate a beneficiary and bypass probate.

Could there be risk of financial loss to your loved ones in the event of an unexpected death? Are others dependent on your ability to generate income? Do you have partners in your business? Does your corporation hold surplus cash, perhaps in a holding company that is not required for day-to-day operations? Are you looking for tax effective strategies to transfer the proceeds of your estate to your heirs?

If you can answer “Yes” to any one of these questions, perhaps a discussion about the use of life insurance should be addressed.

How can personal non-registered assets be transferred to heirs in a tax effective manner? The life insurance strategy is called “Transgenerational Wealth Transfer.” Non-registered assets are subject to annual tax on the growth of the money; an important consideration is the annual taxes and estate taxes upon death. If current assets of non-registered money are not required while living and the intention is to designate these monies to heirs, an opportunity with life insurance can be considered. Purchasing a permanent life insurance policy with the ability to accumulate cash value, allows the growth of the premiums paid into the policy to be tax exempt (within limits). Proceeds of the life insurance go to the beneficiary tax free, maximizing the transfer of wealth to the next generation. The policy can be purchased on the child or grandchild of the owner, allowing wealth from the elder to transfer effectively from one generation to the next.

How does a business transition wealth to heirs through life insurance? The strategy is called a “Corporate Asset Transfer.” When it comes to reducing your tax bill and protecting the value of your business, business owners can significantly increase the after-tax value of their corporation by using the passive assets in their business. How does it work? Let’s use a practitioner as an example: Susan is the Medical Director of her clinic, a private corporation. After 15 years in practice she has generated significant profit and, as a result, her business is thriving and operating smoothly. At age 50 she’s considering her options for succession of the business. Her primary concern is to transfer the business—or proceeds of the business—to her children in a tax effective manner, while enhancing the estate value. She currently has $250K in her corporation’s holding account. The funds are invested conservatively in a balanced fund earning six per cent annual return. Last year when she had factored in the annual tax paid on the investment (corporate tax rate 45 per cent), the net return was 3.3 per cent. Upon death this account would be subject to capital gains taxes and estate fees.

Insurance offers an alternative to reduce corporate tax. Although complex, Susan’s corporation becomes the owner and beneficiary of a $1M life insurance policy on Susan’s life. Over a period of five years the sum of $250K would be invested into the policy, allowing it to grow tax sheltered in an investment suitable to Susan’s risk tolerance. This has the ability to greatly reduce Susan’s corporate tax bill. At time of death the corporation receives the insurance money, then pays out the death benefit minus the Adjusted Cost Basis (all premiums paid minus the cost of the life insurance ) as tax free dividends, through the Capital Dividend Account( CDA). The ACB is paid out as at taxable dividend, benefiting from favorable tax rates.

Who qualifies? This strategy is best suited for practitioners who are incorporated, between the ages of 50-80. As in the example, you will require the business to purchase life. If you don’t already have a policy, you will need to be in good health to qualify for insurance. Your intention is to pass “locked-in” wealth from the business to your heirs. You have surplus cash flow available in your business. Finallly, you’re interested in a tax sheltered, flexible investment to house a portion of your corporate investment.

Critical to the strategy is qualifying for life insurance. During the earning and growth years of a business it would be prudent to purchase a low cost, fixed term, guaranteed, renewable and convertible life insurance policy. Getting insurance in place early preps an ND to utilize this strategy later on in his/her career. Age being another relevant factor in cost, applying earlier is better. As affordability is critical in having this strategy work, effective planning makes sense. Life insurance affords the individual or business with certainty and assurance to deliver their assets to whom they want and when they want, while maintaining control.

Published in the BCNA Bulletin Spring 2013

Insurance concepts and corporate tax strategies can be complex. The information in this article is presented for general knowledge and the content should not be relied upon as containing specific financial, investment, tax or related advice. Practitioners must seek their own independent professional advice to discuss their own personal circumstances before implementing this type of arrangement.

E&OE/2013 SBILLAN Wealth solutions doing business as SB Wealth Solutions sbillan@telus.net; www.sbwealthsolutions.ca

Patients suffering from a severe and prolonged impairment may qualify for a Government of Canada grant program. The Canada Disability Savings Grant (CDSG) is for eligible disabled person 49 years and under. The purpose of the program is to provide financial support and encouragement to assist with retirement savings for someone suffering with a long term disability.

Registered Disability Savings Plan (RDSP) established in 2008 is a long term savings plan for persons with a disability; much like Registered Retirement Saving Plan (RRSP) is used for others. However, the power of grant money makes it exceptional. Just by depositing a $250 GST cheque each year, starting at age 32, could provide over $29,000 in RDSP, by the age of 60.

Unfortunately, 80% of BC beneficiaries, who qualify, have not opened one. One such recent enhancement announced by Jim Flaherty to make the plan more accessible and useful, has been to allow a person who loses his disability credit to keep the plan.

The government matches contributions up to 300%, depending on the family income. The maximum grant available is $3500 each year, up to a lifetime limit of $70,000, and payable up to the age of 49. For example, if a family’s income is less than $85,414 the first $500 contributed each year will receive $3 for every $1, that’s $1500 of grant money. The next $1000 of contribution will receive $2 for every $1, up to $2000 per year. Maximum received of $3500 grant money for the $1500 contribution. Family income over $85,414 will receive $1 for $1 up to $1000 a year. In addition, to receiving free grant money and bonds, the plan has the ability for earnings to accumulate tax-free. The holder of a plan is usually the beneficiary themselves, a legal parent or legal representative. To be eligible for the CDSG one must be 49 years or under, qualify for the Disability Tax Credit, a Canadian resident, have a Social Insurance Number, and make contributions to the RDSP. To encourage savings, contributions, bonds and grants the money must remain in the plan for at least 10 years. Any person or organization can contribute to the RDSP on behalf of the Beneficiary, with written permission from the plan holder.

The government has also recently expanded the opportunity to allow rollover provision where proceeds from a deceased parent’s or grandparent’s RRSP, RRIF or Registered pension plan to a RDSP of a financially dependent child or grandchild with a disability.

Setting up and establishing the plan must be done with one of the participating financial organizations. Not all institutions are offering the RDSP plan. This may be due to the cost of administration and the ongoing expense with the plan. The CRA website lists the participating banks, credit unions, and investment companies.

One significant factor to note is money paid out of the RDSP does not affect the federal benefits such as Canada child tax credit, GST credit, Old Age Security and Employment insurance and social assistance payments.
RDSP offer a great advantage for people with disabilities to protect their savings and enhance their financial income benefits.

Published in the BCNA Bulletin Fall 2012

E&OE/2013 SBILLAN Wealth solutions doing business as SB Wealth Solutions sbillan@telus.net; www.sbwealthsolutions.ca

There are a few money saving strategies that are not commonly discussed. I would like to share two real-life examples that I have recently encountered. One is for business owners and the other is for a family. The first involves insurance protection for a business loan and the second, protecting capital in an estate.

First example, business loan:

It is common for lending institutions to request disability and life insurance protection on business loans and mortgages. Typically, during the application and approval process, creditor insurance is offered. It is a tick of a box to accept, there are a few medical questions, the process is easy and the insurance coverage is almost immediate. However, the hidden cost is overlooked. The entire insurance cost is added to the total cost of the loan, which results in interest being charged on the insurance. Most times, the lending institution does not present alternative strategies.

In this case study, two ND’s decide to form a partnership and open their first clinic. They apply for a business loan of $90,000. The loan is approved with a requirement of disability and life insurance coverage. The lending institution receives absolute assignment to the insurance; meaning if one of the partners become sick, injured, or dies the loan payment would be covered.

The total cost of insurance is $11,000 for this particular 5-year term. The insurance cost is tacked onto the loan, thus, adding insult to injury, interest is also payable on the insurance premium. The interest cost alone on the insurance is over $2,000 for the 5-year term. We looked for an alternative cost-saving and effective solution, which was to apply for personal business loan insurance for the two partners using one of the largest national insurance carriers. The monthly premium to their business, for the insurance, was now about $75; the cost for the 5-year term was about $4,550, providing a saving of 60% in insurance premiums. This is in addition to avoiding $2,000 of interest charges. The combination of saving interest and reducing premiums provided over $8,400 of available money for reinvestment into the business.

The downside to this process is that it does not provide immediate coverage. When applying for individual insurance, a medical history is taken and there may be medical tests required. Considering the possibility of some delay, an extension in time for approval should be expected. This loan insurance application took longer for approval due to health related issues. However, with a little patience and understanding of the process the final approval was received. The final result was still a remarkable savings of over 48%.

Second example, estate planning:

This case study discusses how to preserve the capital of an estate by using life insurance. This strategy is called a back-to-back insured annuity. I find most people are quite surprised to learn that registered accounts such as RRSPs and RIFs are fully taxable at time of death, unless there is a rollover provision to transfer the funds to a surviving spouse or partner.

My client, we will call her Jane, has just turned 71. Jane is retired with a full pension. In addition, she receives CPP and Old Age Security. Therefore, Jane has plenty of income to cover expenses and her lifestyle. She has two daughters and a granddaughter. Her intention is to leave the value of her RRSP to her daughters, as she has enough retirement income to live comfortably. Now at age 71, her RRSP of $130,000 must be converted to a Retirement Income Fund (RIF) and she must start drawing income from this RIF account. This income will be taxable. When Jane passes away the RIF account will be deemed “disposed of” the moment before death and fully taxed at the highest tax bracket of 44%. Therefore, her estate would owe approximately $57,000 in taxes, leaving $73,000 to the beneficiaries, her daughters. The estate would also have to absorb expenses such as probate fees, accounting & legal fees, and executor fees. In order to protect the inheritance for her daughters, the strategy recommended in this situation is to insure Jane for the taxable portion of her estate. This will preserve the capital, cover estate costs and cover funeral expenses. The most cost effective way to achieve this is to purchase a $100,000 life insurance policy that is paid up at age 100, with no more premiums after age 100. Jane has longevity in her family. Therefore, using the RIF account to purchase an Annuity would be the better option as it provides a guaranteed monthly payment for Jane’s remaining lifetime. This annuity will be used to cover the cost of the life insurance. The Term 100 insurance annual premium is $4,141. The annual annuity payment to Jane is $7,981.92, leaving about $1,446.34 after-tax per year. We suggest contributing the $1,446.34 to a Tax-Free Savings Account. If Jane were to pass away at 92, the life insurance value would be $100,000, helping to preserve the value that was in her original RRSP retirement account. She would also have $30,373.14 in Tax-Free Savings. During this time she would have received over $159,638 in annuity payments.

This strategy has now converted Jane’s $130,000 taxable money into a tax-free amount of $130,373.14 for her family at the time of her death.

Published in the BCNA Bulletin Summer 2012

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, in­vestment, tax or related advice. Clients must seek their own independent professional advice to discuss their own personal circumstances before implementing this type of arrangement.

E&OE/2012 SBILLAN Wealth solutions doing business as SB Wealth Solutions

Planning for retirement starts with the basic principle of setting aside money for the future. The concept is simple, however the practice and practicality of applying it, is not easy. There are numerous statistical data reporting that many Canadians are not contributing to their Registered Retirement Savings Plans (RRSP), nor are they taking advantage of the Tax Free Savings Account (TFSA), and those nearing retirement have no formal retirement plan. The government is in the process of introducing yet another new plan. The Pooled Registered Pension Plans objective is to encourage savings for retirement for small business owners and their employees. These pension style savings will be government-regulated, private-sector funds aimed at the small business owner, as an option, to provide retirement savings for the employees of their company, similar in structure to Defined Contribution Plans. Other plans include Defined Benefit Plans, Group Retirements Savings Plans, Individual Pension Plans and Employee Profit Sharing Plans.

Is it any wonder Canadians are confused as to where, what or how to save. Let’s examine the most common individual plans, the RRSP and TFSA.

In building comparisons with the RRSP and the TFSA, I like to demonstrate the analogy to purchasing a vehicle. To establish which vehicle will deliver the better mileage and be the most reliable for you is dependent on a number of factors.

The benefit with contributing to an RRSP is the tax deduction while in higher income earning years. The annual allowable contribution to an RRSP is calculated at 18% of the prior year’s earned income, up to a max $22,400 for 2011. You would have had to earn a salary of $124,722 in 2010 to contribute the maximum for 2011. The tax savings would be $9116.80 at a marginal tax rate of 40.70%. The investment earnings inside the registered plan are tax deferred until age 71, whether it be earned as interest income, dividends or capital gain. At such time, the RRSP must be converted to a RRIF, where money is withdrawn and taxed as income at the marginal tax rate. The premise behind deferring the tax, is that less income will be needed at time of retirement, therefore expecting to pay less tax overall.

Therefore this vehicle could prove better mileage, a higher maximum allowance plus prospect of greater growth, at a reduced tax rate.

The TFSA is a registered savings account plan. To be eligible you must be over 18 yrs of age, a Canadian resident and hold a SIN. Contributions are made with after tax dollars, there is no tax deduction. The annual allowable contribution has been $5000 per year since 2009. The benefit with a TFSA is the investment can grow tax exempt. And more importantly, no tax will be applicable when the money is withdrawn.

TFSA is not income tested, which means that Old Age Security(OAS) and the Guaranteed Income Supplement(GIS) would not be reduced or clawed back if you accumulated a lot of growth within the TFSA and withdrew it at retirement, whereas income from an RRSP/RRIF , pensions or other investments could reduce your OAS /GIS benefits. Therefore, this vehicle could be more reliable, calculating how much income you could expect during retirement.

Most Canadians have a limited amount of money to invest after paying for the essentials in life, food, shelter and clothing. Ideally, one would wish they had the resources to annually max out contributions to the RRSP and the TFSA. If paying less tax overall is the purpose of using either of the vehicles, which then is better?

General factors to consider when a TFSA makes better sense:

1. If you are in a low income bracket, just starting out in your career, have student loan interest deductions or business expenses to write off to reduce your tax obligation, it is better to put your money into a TFSA. This will enable you to accumulate RRSP contribution room which could be used to save future taxes when your income increases.

2. If the investment is for a short term goal, i.e. saving for a vacation, the TFSA will allow you to grow the money, tax exempt and withdraw tax free. You will also be able to contribute all the money withdrawn back to the TFSA the following year.

3. You have been contributing to your RRSP for years now, you are single and you expect your income will continue to be in the higher tax bracket when you reach retirement, therefore invest in the TFSA first.

When an RRSP first, might make better sense:

1. Your marginal tax rate is at or above 30% and the refund cheque (tax savings) could be reinvested into TFSA, RRSP, your practice or pay down debt obligations.

2. You have some money set aside for a down payment on a home which you plan to purchase in the future. It would be wise to invest in the RRSP and take advantage of the tax savings if you are a first time home buyer. The Home Buyers Plan (HBP) allows you to withdraw the RRSP money to buy a home and not pay the tax, however the money will have to be repaid back to your RRSP in equal instalments over 15 years. The HBP allows up to $25,000 to be used.

3. You have been contributing to your RRSP for years now, your spouse has a defined benefit pension, and the new pension splitting rules may lower your tax bracket in retirement and allow you to avoid the OAS claw back. The RRSP with its tax refund may be in your favour.

The most common statement I hear is, “I think I should get an RRSP”.

Remember the RRSP and TFSA are plans; they are vehicles to help you collect your savings for retirement. What is the purpose of your vehicle? Where do you want the vehicle to take you? How fast? How far? What type of fuel will it need? Your vehicles performance will be dependent on the types of investments it runs on. Eligible investments include cash, GIC’s, bonds, stocks, mutual funds, mortgages, ETF’s, certain annuities, and gold, silver bullion.

There is no simple rule or answer to confirm which type of vehicle is better. Both plans have limitations, rules and are subject to penalties for over contributing.

Published in BCNA Bulletin Winter 2011

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, investment, tax or related advice. It is recommended to consult independent financial advice to discuss personal circumstances before implementing any type of arrangement.

Mutual funds provided by Sindy Billan as a mutual fund representative with Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

E&E/O 2011

In this new world, where technology is advancing at an unprecedented pace, social media continues to expand. An immediate response to all forms of communication is expected. Managing change is essential to security and prosperity. Effective financial planning, therefore, becomes an integral part of today’s world as it allows us to manage change in business, daily life, financial obligations, and health, without losing our bearings.

The following article presents scenarios depicting potential business obstacles and challenges, together with possible cost and tax effective solutions to be considered.

David, 35, has been practicing naturopathic medicine as an associate of a clinic for over five years. He has established a solid foundation of committed patients and his practice is growing steadily. The timing is optimal for him to pursue his dream to open a clinic together with Rob, his long time friend and a chiropractic doctor. They played football in high school, attended university as high performance sportspersons and discussed opening an integrated clinic of health care professionals specializing in sports medicine. David and Rob are both married and each is expecting a child—for David, it will be his first, for Rob, his second. David and Rob signed a lease on a location, secured financing of $150,000 and contracted other qualified practitioners who will join as associates of their clinic.

David and Kathy, his wife, are looking forward to exciting changes ahead; however, with change comes risk.

Approaching the lender, it was brought to David and Rob’s attention, that assurance for the debt obligation in the event that either partner succumbed to sickness, injury or death would be required. This could be accomplished with Life & Disability insurance. Rob had purchased personal life and disability insurance, years prior, for himself and his wife. However, David in the early years of his career did not appreciate the value or recognize necessity of insurance. The business partners and their wives all felt it crucial to keep the business debt separate from personal obligations. The solution was to purchase a 10 year term insurance policy on David and Rob whereby the benefit of $150,000 would be paid on the first death. They each purchased a disability policy that would provide a monthly benefit to cover the amortization period of the loan. This proved to be a cost effective plan providing assurance with guaranteed fixed payments. The partners were one another’s beneficiary allowing proceeds to be received tax free. To satisfy the lender, an absolute assignment was established. This stipulates the lender has an interest in the life and disability proceeds. The insurance contract in conjunction with the absolute assignment will protect David, Rob, their business, families as well as the lender. Since insurance was required to satisfy the loan, premiums can be deductible as a business expense.

The process gave David a better understanding of risk management. The due diligence practiced by lender and insurance companies alike proved to be a valuable lesson. David began to ask questions of risk in his own business and personal life. If he were to die, how would Kathy and his new baby be affected financially? Would she have to choose between staying home with their child and going back to work? Would she be at risk of losing the house, or suffer a drastic reduction in lifestyle?

David knows the effectiveness of healing with innovative therapies and alternative treatments. Allowing the body time to heal can reduce the time in rehabilitation and promote better health. However, treatments are costly and time is money lost. Was there a prudent strategy which could provide David and his family with the required monies in the event he became ill or injured? Insurance can provide peace of mind, reduce the possibility of severe financial ruin, give an individual, their family, business and partners an opportunity to gain control and most importantly provide choices. It is important to know what is available in the marketplace as well as the possible deductibility of premiums.

Coverage can be structured so as to protect a business need, such as a Buy/ Sell agreement (where the continuation of the business and the future purchase of shares amongst shareholders is duly funded in the event of death or disability); Key Person coverage (to protect the business from the loss of its most valuable contributors); Business Overhead Protection (which provides reimbursement for business expenses in the event of an owner’s disability); Business Loan Protector (which makes funds available to cover outstanding business loans or loan interest); Critical Illness coverage (which pays a lump sum tax-free benefit upon diagnosis); as well as various personal life and disability insurance plans.

Managing change is essential. There is no time like the present to take control and manage the future. Knowledge, especially as this pertains to effective financial planning, is required in order for us to make sound, educated decisions. This allows us to manage change in all aspects of our business and daily life. As strategies can be complex, it is prudent to always consult an insurance specialist.

Published in BCNA Bulletin Summer 2011

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, investment, tax or related advice. Clients must seek their own independent professional advice to discuss their own personal circumstances before implementing this type of arrangement.

E&E/O 2011

In the early years of a business practice, most of us spend the majority of our time learning to survive. Many naturopathic doctors graduate with extensive student loan debt, must absorb the mandatory costs of setting up a practice, and are often in a position where a line of credit is necessary. I believe it’s essential that individuals in practice develop good business skills to minimize debt and improve clinic operations. Understanding basic business skills and operating as a better business person not only increases productivity and profitability, but allows a person to have fun in the process.

In the famous Aesop’s fable about the goose and the golden egg, an impoverished farmer finds a golden egg in the nest of his goose. This happens consistently every morning making him exceptionally wealthy. Though happy with his newly acquired riches, he wasn’t happy enough and greed soon set in. Hoping to access the gold faster, he kills the goose and is left with nothing. The story’s moral is paralleled with how many of us choose to run our businesses. By that I mean we often put more emphasis on short-term success at the expense of long-term goals. People have a general tendency to focus on doing right (efficiency) rather than doing the right things (effectiveness). There is a not so subtle difference between the two which can radically impact your bottom line. To become successful business people, NDs have to apply effectiveness into their practices.

The first step of effectiveness is developing a budget. Budgeting is key in the structure of a solvent business practice. I recommend that individuals attempt to establish an overall profit plan for periods of less than one year, one year, three years and five years. The shorter the time frame, the greater the detail. Objectives are determined by establishing income goals and expense budgets. Once a budget is established, an individual (or group in a clinic) will have a clearer picture of short and long-term goals.

It’s important to remember that a business is not static. Rather, it’s a dynamic enterprise which requires periodic reviews and revisions—just as a patient protocol does. Creating an expense budget helps a person obtain a clearer understanding of the costs of doing business. For example, it will help you differentiate between fixed and variable expenses as well as reinforcing cost reduction strategies and minimizing fixed expenses.

In business, time is a valuable resource. A written plan can help you direct efforts to reach pre-determined goals. Sound financial management is a necessity for all business people; it will allow you to streamline everyday processes and alleviate some financial pressure. The absence of financial pressure will allow you to successfully conduct the “real” business, health care. As you are the source of business revenue, plan a reasonable amount of income to be reinvested in your practice—it is also important that this be done for proper tax planning. Think ahead! For example, set aside a special account for your HST. On a daily or weekly basis transfer your HST collected into the separate account. When you reconcile your taxes quarterly you will have ready income for CRA.

I also recommend that even young doctors, just starting out, think of their practice as finite. In other words, prepare for the succession of your practice from its inception. Ideally, a succession plan should be in place from the start of the business itself as you never know when it will be needed. Having a plan increases business value in the eyes of future associates, lenders and clients alike.

Self-employed does not necessarily equal self-sacrifice! We are dependent on ourselves for the success of our practice. A businesses future lies solely on the structure you’ve put in place to secure its existence. The planning process is therefore not complete until all facets of risk management have been addressed. How do the issues of disability, a critical illness, retirement or death manifest themselves for a practitioner, their family and their business? Whether a new or seasoned practitioner, it is prudent to address the holistic wellness of your professional practice (e.g., financial planning, insurance, etc.), do it now, and review it annually, much like a business plan. This allows you to plan your business operation for maximum effectiveness and profitability. To take control of your business, enjoying the fruits of your labour, you need to be effective practitioners, making proper choices necessary to ensure your success.

Published in BCNA Bulletin Spring 2011

The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, investment, tax or related advice. Clients must seek their own independent professional advice to discuss their own personal circumstances before implementing this type of arrangement.

E&E/O 2011