Happy New Year! Wow, 2007, I don’t know about you but I am shaking my head wondering what happened to 2006. It went by very fast for me. I spent my last two weeks of the year at a great resort in Huatulco, Mexico. It was amazing, so much so that Wayne and I are going back next year! (That’s me beside the cactus overlooking our beach and also the view from our room!) I want to thank everyone that has contributed to the past issues of my newsletter – my goal is to create awareness in not only financial matters but also in life. After all, our lifestyle is in direct proportion to our attitudes, values, and beliefs.

The beginning of a new year is a time many people evaluate their life, look at what they have and haven't accomplished in the previous year, and plan for the current year. New Years resolutions are made and plans are put in place.

While each of us may have a different focus, we all benefit by having a personal foundation - a strong base - to build from and create the life we truly desire. An important piece of our personal foundation is setting our goals based on what's important to us - our true values.

When goals are driven by needs, wants, or should, they can be a heavy burden. When we base our goals on things we value, believe in, and are important to us - achieving them can be effortless and enjoyable.

Money alone cannot guarantee happiness. However, it can go a long way towards the purchase of other valuable commodities – like security, satisfaction and that ever-elusive peace of mind. (I know … a new car, vacation, might also be on the list!)

Retirement may seem like a long way off for some of you, but the financial steps you take now can make a difference to your finances at some point down the road. One of the steps to achieving these goals is to contribute to an RRSP. Please read the article below for more information.

Joan Granger, CMA of McKinnon, Germann Granger, has graciously submitted tax tips for 2006.

I wish all of you a healthy prosperous 2007!

Cheers,

Understanding the benefits of an RRSP.

RRSP’s are one of the few ways that you can shelter your income from taxes, helping you save money today through tax savings and provide you with a larger investment portfolio at retirement. But the thing with an RRSP is it only works if you actually use it. Most people do not take advantage of their RRSP eligibility. Statistics Canada’s latest figures for 2004 are that only ¼ of Canadians are taking advantage of their RRSP contribution limit. The average amount saved was $6,400 and RRSP investments represented approx. 50% of their total savings. I get asked the question all the time – “Are RRSP’s still a good idea?” I say “Absolutely!” Where else can a person earning $60,000 a year paying income tax at a rate of 40% , put away $10,000 and get a $4000 gift in return? As companies cut back on their pension plans, people have fewer opportunities to force themselves to save. People have to be pro-active and put something away to supplement their income in their retirement years.

The best time to start contributing is now!

I advise people to save in the easiest way possible, which is to contribute monthly on a pre authorized chequing throughout the year, rather than investing a single lump sum at tax time. This way you do not have to come up with the money at tax time or be tempted to reduce your amount that you contribute to spend elsewhere.

What about all that unused contribution room available? The CCRA allows you to carry it forward from one year to the next.

So even if you’ve missed making contributions in previous years, don’t worry… there’s no time like the present! Luckily there is a way to get your retirement savings back on track; you can borrow money to maximize your RRSP contribution. This only makes sense if you meet certain criteria. It really has to fit into your financial situation and you have to make sure you have the cash flow to handle repayments. I advise clients to pay off their RRSP loans with their tax returns and sometimes advise against maximizing your RRSP just to receive the tax break. It really has to fit in your overall financial goals. Another strategy is to consider income splitting. If your spouse’s future tax rate is expected to be lower than yours, you may want to consider income splitting by directing your contributions to a spousal RRSP.

There are many investments to choose from. Make sure that you get the advice that is tailored to your situation.

What does retirement look like for you? It’s a personal vision of course, but my guess is that – at least for the majority of you – it doesn’t look like the brochures, slim mature models sailing on your yachts. Maybe it means traveling the world. Are you hitchhiking or flying Concorde? Perhaps you’ll finally build that greenhouse you’ve always wanted, or maybe take up photography.

Your vision for retirement is an important step in your planning for the last 30 years of your life. (Yes 30! Life expectancy is on the rise.)

When I sit down with my clients – I want to hear about their personal dreams; when they want to retire and what they want to do.

Spend some time dreaming then give me a call and we can talk about some retirement planning options!

Catch 22 - Mortgage vs RRSP

Click here to read the article (it will open in a new window).

Tax Planning & Tips

2006 Tax Tips

Here are a few items you should be aware of before you file your 2006 personal tax return.

1) Universal Child Care Benefit - if you received this child care benefit commencing July, 2006, it is taxable, and must be reported on line 117.

2) There are two different types of dividends commencing in 2006, and the tax treatment is different. They will be clearly identified on the T5 slip issued by the payee.

3) Full amounts of scholarships, fellowships or bursaries that are received by a student, who is entitled to claim the education amount, are no longer taxable. For the student who is not eligible for the education amount, amounts over $500 are taxable.

4) Tradesperson's Tools Expenses - a portion of the cost of eligible tools acquired by you as an employed tradesperson after May 1, 2006, is deductible.

5) Non-capital losses incurred in tax years after December 31, 2005 can be carried forward 20 years.

6) The Age Amount has been increased to $5,066.00

7) Canada Employment Amount of $250 in 2006 is available for all employees.

8) Public transit Pass amount - you can claim the cost of public transit passes after June 30, 2006. Public transit includes bus, streetcar, subway, train and ferry.

9) Pension Income Amount has increased to $2,000.00

10) Students entitled to claim the education amount are now entitled to claim an amount for textbooks.

11) An Apprentice Job Creation Tax Credit is available if you are a self-employed individual who employs an eligible apprentice in your business.

12) Refundable Medical Expense Supplement has increased to $1,000.00

RESP Planning Point:

If you have invested in a RESP and it appears that no beneficiary will use the plan before its mandatory 25 year expiration, you should consider foregoing RRSP contributions, if necessary, to ensure adequate contribution room to cover a return of plan earnings. You can roll the plan earnings into your RRSP. Remember that only earnings give rise to income, contributions can be returned without tax consequences, as you were not allowed a deduction for the contributions to the plan.

RRSP Planning Points:

1) Consider contributions to a spousal RRSP. These must be made within your own contribution limits, but can result in significant future income splitting with your spouse.

2) Since you can build up unused contribution room, it may be worth foregoing deductions when income is relatively low, to use the deductions against higher marginal rates, especially when you know you are going to have a larger income in the subsequent year. In general however, it is almost always beneficial to contribute to an RRSP insofar as possible.

3) There is probably no rule without it's exceptions, and the bias toward making maximum possible contributions to an RRSP may reach its limits as you approach the age of 69, and it appears that your annual retirement income will be taxed at top marginal rates.

REGISTERED RETIREMENT SAVINGS PLANS

This method of tax deferral is one of the most significant tax planning ideas available to Canadian taxpayers. By making contributions to a plan not later than 60 days after the current year-end a deduction from income can be taken in the current year for the amount of contribution - up to of coarse your contribution limit. An immediate tax saving results and the tax refund can be reinvested or used for whatever purpose you choose.

Although there are many ways to invest your hard earned dollars which can provide for your retirement, RRSP's are an important vehicle. They can be invested in vehicles that are in line with the amount of risk you are comfortable with. From GIC's and savings bonds, to mutual funds, to venture capital. They are flexible, meaning there are avenues to withdraw the funds for specific purposes. At death, they can be easily transferred to the named beneficiary. They also provide an immediate tax deferral. This allows you more time to plan properly with more available funds.

To discuss these, and other tax questions, please feel free to contact Joan Granger at (250) 748-6256

Joan Granger, CMA
Joan is a partner with McKinnon Germann Granger, Professional Accountants

Life Insurance

In its simplest form, life insurance is meant to provide safety and security for the ones we love. It is one of the most unselfish acts that we can do. It is for the benefit of our loved ones we leave behind. I am compelled to add this in my newsletter this month due to an article that was in the Nanaimo News Bulletin on Thursday Jan 4, 2007 (see attached link to view article). When we buy a house or get a loan, the banks are very efficient in making sure that they ask if you want to insure the loan. As some of you who know me – I call the paper signing the “nodding dog in the back of the car syndrome” – you know the ones our grandparents used to have.
 

Tell me if this sounds familiar; you have a mountain of paperwork to sign to complete the mortgage transaction… you are signing paper after paper – then the representative asks you (at this point your hand is sore!) “Would you like to insure that the balance is paid off in the event of death?” You answer of course, keep nodding, they tell you how much, but you really are not listening… “When will this be done?” is more of what you are feeling.

They say, “We will add that amount to your mortgage payment and so the bottom line is $...” This is not a bad thing – you have coverage at least you assume you do – oh – did they ask you any questions? Four… okay what about a pre-existing condition?

My point is that the banks are specialists in banking and loans. That is what they are good at and why we go to them. Seek out a professional licensed broker to handle your life insurance needs. It’s what we specialize in and do every day. Ask questions! I talk to so many people that have not got a clue what they have, how much they pay or understand how the policy works.

For more information on Mortgage Insurance please click on the link below to my website which gives you a comparison of mortgage insurance through your lender vs a financial institution.

If you have any questions, please do not hesitate to call me.

http://www.molchanfinancial.com/mortgage_insurance.htm

Oysters & their attributes

The "R" Myth
Folklore says that oysters should be eaten only in months with "r's" in them -- September, October, etc. Oysters can be eaten 12 months a year. The notion that oysters should not be eaten in "r"-less months -- that is, months that occur during warm weather -- may have started in the days when oysters where shipped without adequate refrigeration and could spoil. But today all that has changed and we can enjoy oysters twelve months a year.

Oysters and Their Nutritional Value
Oysters are not only delicious, but they're also one of the most nutritionally well balanced of foods, containing protein, carbohydrates and lipids. The National Heart and Lung Institute suggest oysters as an ideal food for inclusion in low-cholesterol diets. Oysters are an excellent source of vitamins A, B1 (thiamin), B2 (riboflavin), B3 (niacin), C (ascorbic acid) and D (calciferol). Four or five medium size oysters supply the recommended daily allowance of iron, copper, iodine, magnesium, calcium, zinc, manganese and phosphorus.

Health Tip
Because raw foods including oysters may carry bacteria, persons with chronic liver disease, impaired immune systems or cancer should avoid eating raw oysters.

What to Drink with Oysters
There are hundreds of oyster varieties, each with distinctive characteristics. The top layer and after-flavors of each can be subtle or distinct and pairing the ideal wine with oysters is always a topic of debate.

Champagne can be the perfect marriage, but it is not always necessary to serve expensive white wine with oysters. You may also want a Chardonnay, whether Californian, French or Australian, but in particular one with the rich wood flavor Remember that you are trying to marry the distinctive seaweedy, salty and mineral tastes with which the wine will have to compete.