Monthly Archives: September 2011

The value of an RESP for your children

10 reasons to set up an RESP for your child

  • 1. Simple to set up, 3 forms includes the government grant paperwork.


  • 2. Receive up to $500 per year, contributed every month, from the Federal Government.


  • 3. Long Term Stable Growth, with wealth bonuses as the child gets older.


  • 4. You can transfer from an existing RESP to an enhanced RESP.


  • 5. Education options that are flexible, which even include out of country study, and apprentice programs.


  • 6. The money grows TAX FREE.


  • 7. An RESP should be integrated with your entire Family Financial Plan.


  • 8. Flexible contributions can start small and increase over time.


  • 9. Lump sum contributions can be made, such as gifts from Grandparents, Aunts, Uncles or even events such as Baptisms…etc, etc.


  • 10. You wont have to exhaust your retirement money when it is time for your child to go to school.


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Saving for the Future, but also for Today…

RRSP Solutions from deGraaf financial services


The rule of thumb taken from both the Wealthy Barber and the Richest Man in Babylon, is that we need to save 10% of everything we make to ensure a comfortable and prosperous future. This is a very general rule, and most Canadians have a very difficult time even saving 3% of their income towards a future savings plan. Why is this?

When we talk with our clients, the one thing that we see over and over again, is that retirement seems like a goal so far into the future it is hard to conceive its value today, let alone take from today's lifestyle to fund a future obligation such as retirement. Many people believe that they can just catch up later on in life, when money becomes more available and accessible. But if you are not willing to take $100 out of $1000, you are far less likely to take $100,000 out of $1,000,000!

So how do we save today, enjoy it today and still save for the future? The answer is proper allocation of your savings. Instead of putting 100% of all your savings into an RRSP, you need to also plan for saving goals in the near term or an emergency fund, and also saving for something you enjoy like a new car, a new boat or a family vacation to name a few. If you only have a long term vision on your savings, then it becomes more difficult to commit the money every month. But if you knew that every month you were also putting some money away into a side account for a trip to Disney World, saving becomes fun!

Here's the Secret Formula: Out of every dollar you invest, you should allocate 60% towards a Future Savings goal such as retirement, 20% into an Emergency Fund, and 20% into a "Fun Fund".

If your furnace or dishwasher or car breaks down, your emergency fun will be the source of the funds, without having to use credit to fund the purchase. By also allocating money every month towards your Fun Fund, it will allow you to watch it grow and grow, and properly plan for things such as family vacations or special items that are important to you and your family without getting in the Credit Trap to fund these purchases.

A typical Bank advised client does not generally get this kind of advice, because the Banks are be fixated on RRSP deposits, and it is a measured metric at each Bank branch. So year after year the branch needs to increase its RRSP's under management, and encourage customers to move large sums of money from their savings accounts into the RRSP's that the banks manage. And when you need to make large purchases or take a family vacation, they have just the Credit Vehicle for that!

If we continue to buy through borrowing, we will always be at the mercy of the lenders, and will always be paying much more for our purchases than the simple cost of the item due to the incredibly high cost of interest expenses. Take control today and become your own bank, and when it comes time to repay a loan from your Fun Fund or Emergency Fund, you simply pay yourself back. A much more attractive solution than paying someone else back.

Call our office today, and we will show you how to build the right financial future that you can enjoy both today and into retirement.

Steffen deGraaf

Your Human Economic Value…

Human Economic ValueWho has ever dreamed of being a millionaire? What would we do with all that money and what would we buy with it all? The fact of the matter is that almost everyone we meet with are millionaires... Think about it, if you worked for 25 years from starting your first career to your retirement party, you would only need to make $40,000 per year to be a millionaire! That's it, so are you a future millionaire?

See the problem is that we don't want to be paid over 40 years to be a millionaire, we would like it all in one big cheque! But the fact of the matter is, that most of us will be $1 millionaires, if not $2 millionaires or $3 millionaires. So this shows the importance of what I like to call our Human Economic Value. If you have a spouse and a few children, this is so important to realize.

When we sit with a family, our job is not only to help them accumulate assets over time for both their retirement goals or children's education, but our job needs to focus on your Human Economic Value towards your family's financial plan as well. It would make no sense to put a plan into place, without discussing some of the risks to the plan. Most people see the risks to their plan as being controlled by the stock market or GIC rates, but these pale in comparison to some of the greater risks your plans face, if you are not able to fund it anymore.

If your plan was set into place to put $250 per month away into an RRSP or savings program over 20 years, what would happen to that plan if you were to get laid off, got sick or injured or at worst even died before retirement? Think to yourself of anyone close to you who has not made it to retirement, as this is a very common situation...

When people get sick or face a terminal illness, the first thing to focus on is your health and your family, and not necessarily your job. We see so often that people will exhaust their savings and every dollar they have, if it will allow them to live longer or better. This is something that can be planned and prepared for years earlier at pennies on the dollar, if you understand the importance.

It is interesting that as Canadians we believe that we have the luxury of free Healthcare, this is true that we do not have to pay extra to go to a hospital, but it also means that everyone is entitled to the same level of service...

So if you happen to be near the end of the list when you are in need of an important medical procedure, the only option you have through OHIP is to wait.

Did you know there is a website in the US called MediBid. On this website you can find nearly any medical procedure you could need or think of, ready at a weeks notice in most situations. So if you did not want to wait months for a procedure to be covered by our healthcare system, you could go online and search the website for the procedure you are awaiting, and for a small fortune, get it done in record time!

Now if money were no object, would you hesitate? Probably not. So why not plan for the event?

Your Human Economic Value is too great, to not protect. Using Life Insurance, Disability Insurance or Critical Illness Insurance is the most cost effective way to protect your future $ millions...

As we say in our office, "It's really about what's important to your family, You..."

Call us today, and we can help protect you, and your Families financial Future...

Steffen deGraaf

Should you pay Taxes on the Seed or the Crop?

Pay Taxes on the Seed not the Crop...

One day a farmer was on his way to the local seed shop. When he got out of the truck, there was a man dressed in a fine black business suit standing by the door. This caught the farmer off guard, so while on his way into the seed shop he greeted him hello. The man returned the welcome, and told him that he worked for the "Tax Man". Today only he was going to give the farmer the opportunity to either pay tax on the seeds he was about to plant, or the crop when it was all harvested. He thought for a moment, and graciously accepted the opportunity to pay tax on the seeds before they went in the ground.

Over the season he tended to his seeds, he watered them and placed them in the finest soil. When the seeds became a plant, he continued to water and prune and fertilize his crop throughout the season as well. And then the day came where all his hard work and time was before him.

As he watched truck after truck leave his farm loaded with the fruits of his labour, a car pulled up to the front, and out got the man in the fine black suit. He approached the farmer and shook his hand, and congratulated him on his wise choice. He then explained to him that the Tax Man didn't care when he payed taxes, just that he did pay his taxes. When asked why every farmer didn't do this, he shrugged his shoulders and said he could only see so many people in a day, and drove away...

Wouldn't it be nice to get a visit from someone who can actually help you prepare your affairs in the most tax advantaged way? Well when it comes to our typical Bank Educated clients, we see over and over that people are far more educated to pay tax on the crop instead of the seeds.

The best example of this bad planning advice comes in the form of RRSP's. Now while it is true that you should hold some RRSP's in your Retirement Savings Plan, more than 75% of the new clients we meet with,  only have RRSP's to provide an income in their retirement years.

The mentality of the years gone by has been to invest into an RRSP and get a tax break from the Government come Tax Time. But there are two main problems here.

1. You need to re-invest your tax refund when you receive it to get the full tax advantages of the investment program. Most people do not do this! When people receive their "refund" cheque from the government, less than 30% actually put it back into their RRSP's! This means that you are simply taking a loan today against your future tax obligation, an obligation that will grow & grow each and every year.

2. The money is only Tax deferred, this means that you still owe the tax, but it is not required to be paid until you start using the RRSP money in the future. And here's the big problem, the refund you receive today will also compound inside your investment. So as your money grows, so does the tax owing on that money. As an example if you had invested $1,000 at the age of 30 in an RRSP, and received a tax refund (deferral) of $250, by age 65 you will owe $608 in taxes on that $250 refund you received years before, assuming your money grew conservatively at 5%.

So you see, most people have been trained all these years to pay the tax on the crop instead of the seed, because retirement seems so far in the future, we don't care to think of the taxes that will be due. If you had the opportunity to pay the tax on the money before you invest it, when you need it, you know it will be there in its entirety and will not be diluted by the effects of taxation. This process is completely legal, and falls within the rules of Revenue Canada, but it is not advertised nearly as much as RRSP's.

We use an incredible solution to this growing problem with our clients. We show them how they can pay pennies on the dollar in tax today, to save thousands in tax into the future.

Let us show you today how you can protect your nest egg from the effects of taxation in retirement. These tools are not new and fashionable investment products, in fact they have been around for over 100 years, and are the same financial tools which have helped people such as Walt Disney, JC Penny and Ray Kroc build some of the biggest and best businesses the world has ever known.

Call our office today, and let us show you how to pay tax on the Seeds and not the Crop.

Savings vs Income


One of the most common goals we often hear from our clients, is that when they have $1,000,000 in savings they will have a comfortable retirement. Wow what a goal! But there are many variables of that million dollars which needs to be looked at in very simple terms.

Variable 1. How old will I be, and how long will the income last? We are living longer these days, and we may need to use the income longer than traditional planning used to have dictated.

Variable 2. How tax efficient is that income going to be? Because it is not how much money we will have, but how much money we will keep.

Variable 3. Will future large purchases (withdrawals) affect the income I will receive throughout my retirement years? We will always need a reserve of savings to fund things like, car purchases in retirement, vacations or kitchen & bath renovations to the home.

Variable 4. If there is a Market crash either before or during my retirement, how will that effect my Income? It is not hard to believe that market crashes have and always will happen, when they happen in retirement, it can change your standard of living.

These are all variables that are never properly planned for by using a Savings Mentality. In our practice, we do not simply focus on Savings, but we focus on Income, income that you will receive in the future. By looking at Income instead of Savings, we are able to plan a predictable income no matter what happens in the market. By using Income as the end result, we can know years earlier if we will be financially stable in retirement.

If you knew your retirement income would not sustain you in your leisure years, when would you like to know, now or at retirement? Do you know currently how much income would be provided for you through things like Pensions, Personal Savings, CPP and OAS. If you have only been thinking of Savings up to this point, it is time to have a review with our office to see how much Income will truly be provided from your years of hard work.

Because if all you had believed to be true were not true, when would you like to know about it? Call our office today for a no obligation review, it's our business & it's our pleasure...