WINTER UPDATE 2018/2019

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1 Suite Riverbend Drive Kitchener, ON N2K 3S2 Tel: (519) Toll-free: (866) 950-LIFE(5433) ADVISORS CORNER On behalf of the advisors and staff at Century Group, we hope that you had a very enjoyable Christmas celebration and wish you all the best for 2019! Volatility! Defined as the liability to change rapidly and unpredictably, especially for the worse. For the most part, in 2018, this was very much the case, and most mutual funds were affected. Low risk investments were affected as much as the low-medium and medium risk mutual fund investments. Why do you ask? One of the factors was: interest rates! Rising rates have caused bond markets to be volatile thus reducing values and affecting low risk portfolios. Bonds are the protection we need against stock market volatility, yet in 2018, for the first time in many years, it succumbed to interest rate risk. It is hard to say where the end to the rising bull market is. As a result, it makes your review meetings with us even more important than ever to make sure that your investments are performing in relation to market conditions and your personal objectives. Thank you for taking the time to meet with us. By working together, we can help you achieve your financial goals. The Team at Century Group TFSA CONTRIBUTION LIMITS ANNUAL CUMULATIVE ANNUAL CUMULATIVE 2009 $5,000 $5, $10,000 $41, $5,000 $10, $5,500 $46, $5,000 $15, $5,500 $52, $5,000 $20, $5,500 $57, $5,500 $25, $6,000 $63, $5,500 $31,000 WELCOMING... IN THIS ISSUE: Advisors corner TFSA contribution limits TFSA or RRSP? How RRIFs work Recipe corner Eden Faith Baxter to the extended Century Group family. Born to Andrew Baxter, Associate Advisor and his wife Julie on October 4th. REMINDERS... The annual RRSP contribution limit for 2019 is 18% of your 2018 earned income to a maximum of $26,500, plus any unused contribution room carried forward from previous years. The TFSA has received an inflation-adjusted increase to $6,000 for Keep in mind that any withdrawals made from your TFSA in previous years can be added back in. The advisors at Century Group Financial Solutions Inc. are contracted with Sun Life Financial Distributors (Canada) Inc., a member of the Sun Life Financial group of companies. Sun Life Assurance Company of Canada is a member of the Sun Life Financial group of companies. Sun Life Assurance Company of Canada, 2019.

2 PAGE 2 TFSA or RRSP: Which one is better for you? From The math is simple. Tax timing based on your financial situation and discipline will help you decide whether to save your money in a TFSA or an RRSP. Choosing between a tax-free savings account (TFSA) and registered retirement savings plan (RRSP) is one of those personal finance decisions that can leave you spinning your tires like a bike messenger in February. What s the difference between a TFSA and a RRSP? Both vehicles offer a tax benefit. The difference is that while there is no immediate tax advantage to be gained from TFSA contributions, neither your principal nor the investment income you earn on funds in the account are taxed when you make a withdrawal. On the other hand, RRSP contributions are deductible on your annual tax return. Effectively, RRSPs provide a tax deferral, which is to say that you re taxed when you make a withdrawal down the road. In other words, it s up to you whether you take the tax hit now or later. Deciding which is right for you depends partly on what you earn now versus what kind of financial situation you anticipate for yourself in the future. Which savings option is right for me? Deciding which is right for you depends partly on what you earn now versus what kind of financial situation you anticipate for yourself in the future. For younger people, especially lowerincome people, the math might favour the tax-free savings account because they re in a lower tax bracket at the time, said Robert Brown, author of Wealthing Like Rabbits: An Original Introduction to Personal Finance. There s another way to look at this, though. The fact that withdrawals from an RRSP are taxable is a powerful motivator for a lot of us. It s meant to make us think twice before drawing down retirement savings, and it works. If you re in your early 30s and living with multiple financial obligations, there are real advantages to an RRSP from a behavioural finance perspective. You get the tax savings when you re 32 or 33, explained Brown. You still have to pay the tax further down the road when you re 70 or 71. But hopefully at that time you won t have the mortgage. You won t be saving money for the kids education. You ll be in a better overall position financially. So even if you pay a little more in taxes, it might be better from a timing perspective, because you can afford it at that stage of life. Why you should open a TFSA Of course, TFSAs are ideal for less long-term savings goals. If you re saving to buy a car, make a down payment on a house or a shorter-term thing, I m all over the tax-free savings account, said Brown. By the way, Brown s Wealthing Like Rabbits is excellent. It s an introduction to personal finance best practices, so it s not for everyone. But if you re looking for a smart gift for one or two 20-somethings in your life, it s a terrific, plain-language read. Whether you decide to read Brown s book or not - we are always here to help you make decisions about all of your investments.

3 PAGE 3 How RRIFs work From A registered retirement income fund (RRIF) is a common way to turn retirement savings into income. Here are some important facts you need to know. While most Canadians understand the importance of putting money into their RRSPs, there is less chatter about what to do with your retirement nest egg once you re forced to withdraw those funds. RRSPs are great vehicles for driving your retirement savings, but ultimately these accounts have an expiry date. By law, you must convert your RRSP into some form of income by December 31 of the year you turn 71. But if you simply convert your RRSP to cash, this additional income can leave you with a massive tax bill. So what s the best way to deal with your retirement savings when you turn 71? As an alternative to withdrawing your savings as cash (or purchasing an annuity, another option), an excellent way to maximize your hard-earned savings is to transfer your RRSP funds into a registered retirement income fund, commonly known as a RRIF. What is a RRIF? Think of a RRIF as the older sister of your RRSP there are several similarities between the two plans. Just like with an RRSP, you can defer paying tax on your investments in a RRIF while they grow. Also just like an RRSP, a RRIF can hold a variety of investments, such as mutual funds, guaranteed investment certificates (GICs), stocks and bonds, or actually be investments such as insurance GICs and segregated funds. Kevin Potvin is the owner and principal financial advisor at Ottawa-based Potvin Financial Services. He says RRIFs give you the flexibility to liquidate some of your funds if you need extra cash, while still letting you grow your investments and postpone your tax bill. You can own more than one RRIF, and you can withdraw more than the minimum if you need it (keeping in mind that doing this will deplete your RRIF faster). How do RRIF withdrawals work? RRIFs differ from RRSPs significantly when it comes to withdrawals. Because the tax bill on your retirement savings has been deferred not eliminated first through your RRSP and then your RRIF, the government will eventually get its due. RRIFs require minimum annual withdrawals based on your age (starting the year after you open your account), and you must continue to make these minimum withdrawals until no funds remain. The Canada Revenue Agency (CRA) has a table showing the minimum withdrawal factors for RRIFs. The financial institution from which you bought your RRIF will calculate your minimum withdrawal dollar amount every year. As you gradually draw down your savings, the balance can remain and grow in your RRIF tax-free Note: If your spouse or common-law partner is younger than you are, you can make your RRIF last longer by basing your withdrawals on your spouse s age rather than yours. If you choose this option, you ll need to register this information when you first open your RRIF account. What if you don t need the money right away? You will be taxed whenever you take money out of your RRIF, but if you don t need the cash immediately, there are ways to make the most of your required withdrawals. For example, if you have the contribution room, you can put the money in a tax-free savings account (TFSA) so that it can continue to grow tax-free. You could also put it in non-registered investments, but be prepared to pay tax on the investment growth. How do you transfer funds into a RRIF? RRIFs are funded by transferring money from your or your spouse s or common-law partner s RRSP (if you are living apart at the time of the transfer and the transfer is made as a result of the breakdown of your relationship), or from your employer s deferred profit-sharing plan. Your financial institution or advisor should notify you when your RRSP is nearing the conversion deadline, and offer you various retirement income options.

4 PAGE 4 When should you open a RRIF? The CRA requires Canadians to convert their RRSPs into income by December 31 of the year they turn 71; however, you may want to do it sooner, A lot of people think they can t open a RRIF until they re 71, but you could do it at 30 if it makes sense with your situation, says Potvin. If you retire early, or take a sabbatical or a break from work due to a family emergency, then it may be beneficial to convert your RRSP into a RRIF, especially since your loss of income likely means you ll be in a lower tax bracket, says Potvin. For example, when the wife of one of Potvin s clients was ill, his client took time off work to care for her. During this time he converted his RRSP into a RRIF and withdrew income from his RRIF to pay the bills while he wasn t working. When he returned to work he converted the RRIF back into an RRSP. You can convert your retirement savings back and forth between a RRSP and RRIF if you are under 71. Keep in mind, though, that you will still have to take the minimum withdrawal in the tax year you convert it back to a RRIF. Also note that once you withdraw cash from any tax-deferred account an RRSP or a RRIF you ll have to pay tax on it. So consult your financial advisor to find the most taxefficient option for you. A common misconception about RRIFs Here s another reason to talk to a financial advisor: Keeping up with all the tax laws can be a challenge, and people may not always understand them. The number-one misconception I find with RRIFs is how surprised clients are to be told that in the absence of a rollover to a spouse on death, the remaining market value of your RRIF is taxable to your estate, says Potvin. This means your estate will be on the hook for a tax bill if you die while the account still has funds unless your beneficiary meets certain criteria. For example, if you have financially dependent disabled children or grandchildren who receive a disability tax credit, they can move the funds from your RRIF into a registered disability savings plan (RDSP) tax-free (up to certain limits), lowering the estate s tax bill. There are a few other ways you can transfer funds from your RRIF to your loved ones tax-free. For example, you could arrange for a financially dependent child or grandchild under 18 named as the beneficiary to use the funds to purchase an eligible annuity. For more information on transferring funds to your family, speak to an advisor.

5 PAGE 5 Recipe hub From HEALTHY TURKEY SALAD WITH GRAPES, APPLES & WALNUTS Ingredients 2 cups finely chopped turkey breast 1/4 cup chopped apple 1/4 cup chopped grapes 1/4 cup chopped onion 1/4 cup chopped celery 1/4 cup chopped walnuts 2 to 3 tbsp low fat mayonnaise 2 to 3 tbsp 2% plain Greek yogurt 1/2 tsp kosher salt 1/4 tsp fresh ground black pepper Directions 1. In a medium bowl, mix all the ingredients together starting with 2 tbsp. of mayonnaise and yogurt. If you want creamier turkey salad, add the remaining tablespoon of each. 2. Cover and refrigerate for an hour.