RRSP Financial Sales People Are On the Move In Canada – It's February

Apart from cold weather, February is a special month in Canada, it's RRSP season. It's a potential bonanza for financial institutions and financial sales people trying to prod folks to beat the contribution deadline for tax year 2010, March 1, 2011.

What is an RRSP? A Registered Retirement Savings Plan is a savings plan registered with Canada Revenue Agency. Contributions are tax exempt; so too, is income while the funds remain in the plan. Generally, you must pay tax on withdrawals from the plan. Many folks misconstrue today's potential tax break and allow sales people to convince them that they need an RRSP now.

Though not the popular view, an RRSP is merely one part of retirement planning. It must fit your overall retirement goals and plans. Before you decide to buy RRSP's, it is essential you understand these points:

  1. An RRSP is merely tax deferral. Taxes you "save" are today's value of taxes you will pay later – think about this.
  2. If you don't buy an RRSP this year, that's not a problem, your entitlement rolls forward when you might be at a higher tax rate.
  3. Don't decide to buy based on pressure, overt or covert, from anyone – even if they are your church brothers or sisters!
  4. Repay all debts, including your mortgage, before buying RRSP's. Exception: if your employer matches your contribution, maximize your contribution. Invest those funds in money market funds to safeguard capital. When contributions vest, examine tax effects of withdrawals; if favorable, pay down your mortgage.
  5. Learn about Tax Free Savings Accounts (TFSA's) – unlike an RRSP, TFSA contributions' aren't tax-deductible. But income earned is tax-exempt. So too, are withdrawals.

Here is a simple procedure that could help you evaluate your RRSP decision, and help fend off aggressive financial advisors who try to get you to buy (usually by borrowing) RRSP's … and boost their sales!

  1. I repeat, before you decide to buy RRSP's, review your retirement goals and plan, specifically, proposed timing of retirement, estimated value of other pension plans, projected net worth, and size of retirement budget gap. Identifying this gap is essential because this is what you should be trying to fill with your RRSP.
  2. If you do not have goals and plans I suggest you set some now – including a plan to become debt free, before you start your RRSP contribution.
  3. Your age and retirement timing should influence how you invest funds – the closer to retirement, the more secure the investment medium.
  4. If you are in debt, you need to understand the before tax cost of each debt compared to the potential income from investing. Removing debt is a guaranteed interest expenses' reduction. Repaying $ 10,000 debt with 30% before tax cost would reduce interest costs by $ 3,000 in one year. Even at a lower interest cost, consider debt repayment over investing. Remember too, the emotional and family cost of carrying debt.
  5. Do not borrow to contribute: If you need to borrow, probably you will not have funds to repay the loan amount. Your tax refund will be less than the amount you borrowed to contribute to your RRSP. And you don't know the future (James 4: 13-16)
  6. Despite pressure from media and salespeople, don't make your RRSP decision based solely on the tax benefit.

Should you repay your mortgage before starting an RRSP? Subject to available employer matching contributions I mentioned earlier, before any investing, I suggest you repay all interest bearing debt, and start saving to buy big-ticket items. Remember, repaying loans reduces interest expenses!

Seek help from an independent financial advisor before deciding on a path.

Copyright (c) 2011, Michel A. Bell


10 Reasons Why Buying a Home in Palm Coast Florida Is a Smart Move

Options abound when it comes to buying property in Florida, including homes on the ocean or a bit further inland. One city to seriously consider is Palm Coast, which is on Florida’s east coast, on the A1A River and the River to Sea Preserve. It offers the best of all worlds, with its size of more than 70,000 and its beautiful scenery. Here are the top 10 reasons to buy in this location.

1. Proximity to Large Cities

It’s not far from some of Florida’s larger cities, such as Orlando (82 miles away), Gainesville (also 82 miles away) and Jacksonville (58 miles away). It’s also near Daytona, which is 37 miles to the south, and St. Augustine, which is 37 miles to the north.

2. Near Key Attractions

It is also near some wonderful attractions. For example, since Orlando is only 82 miles away, it’s an easy day trip away for enjoying the city’s theme parks and other attractions.

3. Things to Do

Residents of Palm Coast have plenty to do and see without leaving town. There are golf courses designed by Jack Nicklaus, fishing expeditions on the Intracoastal Waterway, tours at formal gardens, birdwatching on the Great Birding Trail and explorations of wildlife areas and marshlands.

4. Quiet and Peaceful

While Palm Coast provides easy access to cities and attractions, it is out of the way and therefore doesn’t have the hustle and bustle of a larger place.

5. No State Income Tax

Florida is one of the few states with no state income tax.

6. Great Schools

The nine elementary schools, six middle schools and four high schools serving the Palm Coast area are highly rated and offer various options, including public, charter and private education.

7. Beautiful Waterfront Homes

In Palm Coast, there are plentiful waterfront homes that offer fun, relaxation and beauty. These range from those on the ocean to spots along the Intracoastal Waterway.

8. Mild Climate

The area offers mild weather year-round and pleasant ocean breezes to cool things off in the summer.

9. Reasonable Prices

Home prices in Palm Coast are reasonable, with numerous options in the $200,000 and $300,000 range.

10. Highway Access

It’s easy to get in and out of town, thanks to Interstate 95 being nearby.

Palm Coast is an ideal spot for all ages and stages of life. It’s in a booming real estate market, and now is a great time to buy in this thriving area.


Is Refinancing My Mortgage a Wise Move?

Choosing to refinance an existing mortgage is quite a complicated and baffling course of action, even with the tantalizing no cost refinance, which simply means you will be paying higher interest rates. Although there a lot of mortgage options available, there are refinancing costs that can add to the confusion and make it even harder for you to decide if the you are making a wise decision in refinancing an existing mortgage.

There are a few reasons why mortgages are refinanced, besides the no cost refinance. Such reasons may include reducing the span of the mortgage, paying other overdue amounts by add in those amounts in the mortgage, as well as dropping the amount of mortgage payments. Whatever your reasons are for refinancing your mortgage, a beneficial refinancing will entirely depend on how you go about the whole process.

There are two basic types available when it comes to mortgages, the adjustable rate and the fixed rate. No cost refinance offers will most likely fall under the adjustable rate, since this type of mortgage recalculates monthly payments based upon the interest rate modification after a year, four years, six years, eight years, or even ten years, depending on the agreed terms between the lender and the borrower. Typically, when the adjustment period is shorter, a lesser preliminary interest rate is to be expected.

The fixed rate, on the other hand, may not offer a no cost refinance since payments are fixed and is typically offered in fifteen and thirty year terms, the longer the length of the loan, the lesser the monthly payments. However, in the overall scheme of things, you may be paying more in a fixed rate mortgage compared to the adjustable alternative.

The benefits of refinancing a mortgage may include lower interest rates as well as no cost refinance. Having a low interest rate can produce a lower monthly payment and the overall interest paid can be significantly lower compared to other alternatives. Refinancing a mortgage to pay off amounts overdue like credit card debt or car loans will also have a tax advantage. This is because mortgage interest is typically tax deductible whereas interest paid on other forms or methods are frequently otherwise.

When planning to refinance your mortgage, you need to consider the possible costs of refinancing as no cost refinance are not always available. The length in which you will be using the property or living in that home should also be taken into account. If your reason for refinancing your mortgage is to pay off your credit card debt, or other debts for that matter, be mindful in not stringing your debts back up.

Auto Loans

Online Auto Loan Calculator: Your Smartest Move Before Buying a Car

Buying a car on loan requires a careful evaluation of expenses as it may lead to a budgetary imbalance. If you are not aware of factors such as monthly payments, interest rates, term of the loan, loan conditions, etc., it can cause a financial disaster. But, do not worry because an auto loan calculator is one of the most important financial tools that can help you avoid the times of distress. If you use it, it can prove to be your smartest move as a car buyer.

Let us look into the Basics of an Auto Loan Calculator – what, how and why?

What is an Auto Loan Calculator?

An auto loan calculator is a tool which helps in calculating the amount of loan to be repaid. It also includes the interest rate, price of the car, term of the loan, the monthly payment amount and the additional car-related taxes that you have to pay to the local government.

It is available online and can be helpful at the time of negotiating with car dealers. Basically, it helps you to do homework before you step out of your home to buy a car.

How does it work?

You can access the calculator by visiting the websites of a car dealer or an online auto financing company. In order the find the total payable amount and the total interest amount, you will have to fill the following required fields:

· The loan amount approved by the lender

· The interest rate

· Number of months

Once you provide the details, the total payable amount will be calculated in seconds.

Why Use an Auto Loan Calculator?

The foremost advantage of using the tool is the ease of calculating monthly payment. It helps to avoid confusion by letting you calculate your monthly payments in advance so that your expenses do not interfere in making regular payments.

It is difficult to compare two loan quotes on the basis of monthly payments. But, with the help of an online calculator, you will be able to compare each and every aspect of the loan quote. It will help you in choosing the best car loan quote.

Last but not the least; a good calculator saves you time and money. You can request the lenders to send you loan quotes. It will help you to compare them online without the need of visiting several lenders and dealers for loan quotes.

So, before you set out to sign the loan contract, make sure that you do not forget to use the online auto loan calculator because it can be your smartest move as a car buyer.


Is Treasury Secretary Mnuchin’s Move to Reduce Capital Gains Taxes Naive or Genius?

When I heard the news yesterday, I nearly fell off my chair, not because it’s a bad idea, but the timing in my humble opinion could not be worse. The Treasury Secretary is studying the ramifications of reducing capital gains taxes on investments like stocks, bonds and real estate, by taking into account inflation before levying taxes on investors selling those assets. Capital gains currently are figured by subtracting original asset purchase prices from current sale prices without adjusting for inflation. Obviously, such a move would be seen as favoring the rich who have more assets to sell and would thereby benefit most from such a proposal. In addition, at least in the short run, naysayers contend that the move would further increase our already obscene and growing Government debt, which nobody thinks is a good idea. However, proponents of the proposal would argue that reducing capital gains would in the medium to longer term increase economic activity and ultimately lead to an increase in tax collections by the Government.

Notwithstanding the economic merits of such a proposal, the politics of doing this and doing it now seem to be ill-advised. The Democrats already depict this administration as favoring the rich, there’s all the noise about Russia, world trade and tariffs, immigration, not to mention there’s a midterm election coming in a few months. Why would the GOP propose something like this, that is likely to inflame the media and has NO chance of happening any time soon? It would seem like a bone-headed move, right?

Or perhaps it’s a stroke of pure genius. Stock market followers sensing pending doom in the markets for months may now believe that the recent tanking of market stalwarts like Netflix and Facebook is signaling the imminence of a market correction. If history is any guide, August is a good time for a stock market sell-off. The GOP knows that the only hope of sustaining the heady economic growth recently reported (and give them a fighting chance in the midterm elections) is to delay a stock market sell-off until at least next year. What better way to keep folks from selling their stocks now, but by holding out even the possibility that if they wait until next year, their tax bills will be lower? The genius part of the move is that such a “bluff,” if you will, won’t cost taxpayers a dime and isn’t that a better idea than spending trillions propping up the market by getting the Fed to lower interest rates, print money or restarting quantitative easing again?