Life is an adventure full of twists and turns, and learning to navigate it can take a lifetime. Unfortunately, that’s a little too late. That’s why planning early for your financial future is so important. Where to begin though? Read our article about the hierarchy of needs to learn more. Think about mountain climbers. They don’t start climbing the mountain then decide they need more equipment, nor do they get equipment then think about how to use it. They consider the challenges and risks they’ll need to overcome to reach the summit, then decide what equipment is necessary to achieve their goal. Financial Hierarchy of Needs So what challenges do you face climbing the mountain of life? A good way to visualize it is by applying Maslow’s Hierarchy of Needs *. Maslow divided all human needs into a hierarchy in which the base levels must be fulfilled before a higher level need is relevant. As an example, if you’re hungry and don’t have any food, you’re not likely to be thinking about what car you want to buy. You can use this as a road map to plan out your needs throughout life, then decide what tools can help you get there. Physiological Needs The first level in Maslow’s Hierarchy are physiological needs. These are the basics of survival such as food, sleep, clothing, and shelter. Meeting these needs are the first priority to ensure that a person can continue living at all. This step is straightforward, but it’s not always easy. At this stage it’s hard to think beyond putting food on the table. Safety and Security Assuming you’re still alive, have food, clothing, shelter, (and at least a bit of sleep!), the next priority is to ensure safety and security. In Canada, the government does a lot to try to ensure these needs are met through a justice system and universal health care. Health Insurance However, not all aspects of safety and security are addressed by the government. For example, one major dental procedure can present a financial challenge, so having some form of supplementary health insurance is important. This coverage is often supplied by employers in the form of a group benefits package. If your employer doesn’t provide any benefits though, or if your benefits are limited, it may be worth considering purchasing your own supplementary health insurance coverage. Living Benefits Thankfully at this point you have a job that pays the bills, keeps food on the table, and you likely have coverage for basic health care costs. But what if something happens to you that leaves you unable to work? How would you continue to pay the bills and feed yourself? A major part of providing security is ensuring that you’ll be able to continue fulfilling your physiological needs, even in the case of an accident or illness. Having a rainy day fund set aside is one idea, however it’s difficult to save enough to compensate for a lost career. Living Benefits coverage can play an important role protecting against the unexpected by providing a safety net that can pay a portion of your normal salary in the event of a long term disability or providing a lump sum benefit in the case of a critical illness. Learn More: Insuring Your Most Valuable Asset Love and Belonging Now that your basics needs are met and you’ve found a way to secure those needs, at this point in your life you may have started a family or be planning to. That’s great news, but ensuring your family is protected long-term gets a bit more complicated. You’ll likely want to start saving money for your kids to go to university or college, pay for their extracurricular activities… and possibly some therapy for yourself! Term Life Insurance One of the scariest questions you may face is, what would your family do if something happened to you? How would they continue putting food on the table? Or pay for post-secondary education? Life insurance is a great solution to hedge this risk. And the best part is, since the likelihood of you dying at a young age is low, term insurance can be relatively inexpensive. As an example, if you’re 30 years old with a newborn child and decide that your family would need $500,000 to support themselves if you died, you may only be paying a few hundred dollars a year to provide that amount of coverage for 20 years (until you’re 50). This is a simple and inexpensive way to provide security for your family in the early years. It’s important to note though, that because the risk of you dying increases dramatically as you age, renewing that same policy at age 50 will also be significantly more expensive. As a result, term life insurance is best used only as a short term solution. Permanent Life Insurance Another option is a permanent life insurance policy. As the name implies, instead of lasting only a set number of years, these policies last your entire life. They tend to cost a bit more because, unlike term insurance for which the insurance company rarely has to pay out, the company always pays eventually with permanent insurance, provided you keep your policy in force. Some newer forms of hybrid policies also provide more flexibility by building up a guaranteed cash surrender value. As an example, if you paid premiums for 20 years into one of these policies, and then decided you no longer needed life insurance, you could surrender the policy and potentially get back some or all the premiums you paid. Not such a bad deal. Esteem Once you’ve got your family secured and are on a good trajectory, you’ll likely begin focusing more on who you are, what you’ve done, and what you hope to achieve in your life. At this stage, your higher needs are for respect from others, and more importantly, respecting yourself. As an example, are you proud of your career? Do others look up to you as a role model? And what is it you hope to achieve in your life? These are difficult questions, so don’t despair if you don’t know the answers. Achieving these kinds of goals may require greater amounts of capital and thus more sophisticated planning. Some people may decide they don’t like what they do for a living and decide to turn their lifelong hobby into a business. This can be a very exciting time, but figuring out how to fund a new venture is rarely simple. Investing in a TFSA Your best bet is to start planning for this time well ahead. This can take the form of investing in a TFSA which can be drawn down without incurring any new tax on your investment income. Keep in mind that there are limits on how much you can invest in a TFSA each year. Investing in Life Insurance Another less frequently considered option is permanent life insurance. It sounds counter-intuitive, but because insurance can build a cash surrender value (CSV), it can actually be used as collateral for a loan. Hybrid Life insurance in particular is well suited to this as it generates CSV faster than traditional products. This can be a very effective way to fund a new business, or an expansion of an existing one. The best part is you still maintain your insurance coverage. In the case of a tragedy, your insurance death benefit can pay off the loan and the remainder still goes to your beneficiary. Self-Actualization The highest tier in Maslow’s hierarchy of needs is self-actualization, when you are committed to fulfilling your ultimate potential. This can include mastering a talent or skill, becoming a central figure in your community, or leaving a legacy for future generations. At this stage there are three primary considerations from a financial perspective: retirement, your estate, and your legacy. Your Retirement Preparing for retirement can take many forms depending on your career or business. Some people may rely on a pension while others will have invested in an RRSP or TFSA that they intend to dip into. Again, another often overlooked option is using the cash surrender value of life insurance as collateral for a loan that can be used for retirement planning. Exempt life insurance policies are not subject to tax on the investment income earned within the policy unless it is withdrawn by the policy owner. In addition to this benefit, newer hybrid policies also offer guaranteed cash surrender value and investment options, that can guarantee a return for life. Your Estate The second consideration is your estate. Life insurance is a clear and effective strategy for maintaining the wealth passed to your spouse, children, or estate. The reason why this is so effective is because when you pass away you are deemed to dispose of your assets which can result in an income tax liability. This can significantly impact the value of your estate. On the other hand life insurance death benefits (including any value in the policy’s fund) are received by a beneficiary on a tax free basis.  Learn More: Sharing Your Wealth with the Next Generation Your Legacy The third consideration is the legacy you leave after you pass away. Beyond the assets that you pass to your spouse or children, you may hope to have a lasting positive impact on the world. One of the most common ways of doing this is by donating to a charity. Did you know that you can name a charity as the beneficiary of a life insurance policy? Some people, as an example, will purchase a permanent life insurance policy when they’re young to ensure their family has security, but as they age and their children become successful, they find they no longer need the same amount of coverage. At that point they might choose to change the beneficiary from their spouse or children to a charity. Learn More: How Your Life Insurance can help Your Favourite Charity As you can see, there are many tools to help navigate the mountain of life. Life will always be full of risk, but by planning and equipping yourself, you can minimize the risks and maximize your opportunities. References *Maslow, A. H. (1943). A theory of human motivation. Psychological Review, 50(4), 370-396

Did you know that September is National Life Insurance Awareness Month? Summer is almost over, the kids are off to school and now is the perfect time for you to review your insurance needs and make sure that you and your family have the adequate protection in place. A good place to start is to assess your current situation. You more than likely already have life insurance in place (well done!) but do you have enough? In fact, your life circumstances have probably changed since you first purchased your insurance, so what’s changed and what do you need to do to update your financial protection? Yes, you have different needs at different stages of your life, so a few good questions to ask yourself are: Do I have the right life insurance plan in place for things like covering my mortgage, replacing my income, topping up the education fund or making sure retirement plans aren’t interrupted? Should I renew my term insurance, or should I switch to a more permanent plan because my needs have changed? Do I need to increase my insurance coverage to make sure all my obligations can be met? Do I have the right insurance to cover the tax bill for the assets I’m leaving to my children? Is my beneficiary designation still in line with my wishes? Whatever your life insurance needs, you have options. As it gets chillier outside and life resumes its normal pace, be sure to take a good look at whether you have the right insurance and enough of it in place to protect your heirs. For more information about insurance and how to meet your changing needs, read Choosing Insurance that Grows with You and Enhancing Your Benefits with Critical Illness and Disability Insurance , and watch the INFOclip: Building Lifetime Protection video. Not sure about the varying insurance plans and what they have to offer, find out with our Exploring Your Life Insurance Options tool.

L’inflation restant plus persistante que prévu, il est probable que, du moins pour le moment, les taux d’intérêt plus élevés soient là pour rester. Avec la hausse rapide des taux d’intérêt à ce jour, les taux de rente ont atteint des niveaux jamais vus depuis plus d’une décennie. 1 Ils garantissent actuellement le taux de versement le plus élevé jamais offert depuis des décennies. Dans le contexte actuel de baisse des régimes de retraite à prestations déterminées, de volatilité des marchés financiers et de longévité croissante, la possibilité d'obtenir un revenu stable à vie grâce à une rente peut être une option viable. Qu'est-ce qu'une rente viagère ? Une rente est une forme d'assurance qui fournit un flux de paiements à un individu à vie en échange d'une prime forfaitaire. Pour les personnes qui souhaitent un flux de revenu fiable ou qui craignent de survivre à leurs actifs, elle offre l’avantage d’un flux de revenu stable garanti jusqu’au décès. En général, le meilleur moment pour souscrire une rente est lorsque les taux d’intérêt sont élevés et que l’inflation potentielle est faible. En effet, le montant du revenu versé au titulaire est généralement fixé au moment de l'achat et basé sur les taux d'intérêt en vigueur. Si une rente est achetée pendant une période de taux d’intérêt plus bas, les paiements seront inférieurs à ceux s’ils étaient achetés lorsque les taux d’intérêt sont plus élevés. Étant donné que la rente prévoit des versements fixes, l’inflation érodera le pouvoir d’achat des futurs versements de rente. Bien que les paiements fixes soient garantis aussi longtemps que le ou les rentiers sont en vie, l'inconvénient correspondant est que le capital initial investi dans la rente ne peut pas être récupéré car il a été échangé contre un flux de revenus continu. Ainsi, l’idée d’immobiliser une quantité importante de fonds de retraite dans une rente n’est peut-être pas préférable pour certains en raison du manque de liquidités. De plus, les rentes ne fournissent généralement pas de fonds à laisser dans une succession après le décès, bien qu'une stratégie de rente assurée puisse être mise en œuvre si la préservation du capital est importante. Les rentes sont idéales pour : • Quelqu'un qui craint de survivre à ses revenus. • Quelqu'un qui aime les garanties. Une rente pour maximiser vos versements au Régime de pension canadien Les bénéficiaires admissibles pourraient choisir de retarder leur choix de retirer leurs prestations du RPC, maximisant ainsi les paiements mensuels reçus au cours de leur vie. Une rente certaine peut aider à combler cet écart entre 60 et 70 ans et à rendre cela possible. Une rente dans le cadre d'un portefeuille équilibré En règle générale, une rente viagère agit comme un type d’instrument à revenu fixe illiquide et permanent. Elle est considérée comme « permanente » car, contrairement aux obligations traditionnelles dont le prix baisse lorsque les taux d’intérêt augmentent, le revenu généré par une rente n’est pas affecté par l’évolution des taux. De nombreux investisseurs détiennent des placements à revenu fixe pour procurer un revenu et une stabilité face aux baisses des marchés boursiers, et une rente peut jouer un rôle complémentaire similaire au sein d'un portefeuille. Certains investisseurs choisissent de placer une plus petite proportion de leur épargne dans une rente et d’augmenter le montant au fil du temps afin d’atténuer les éventuelles augmentations futures des taux. Planification successorale avec rente assurée Une rente assurée offre le flux de revenu garanti d’une rente tout en maintenant le capital disponible pour le transfert à la génération suivante. Elle consiste en la souscription d'un contrat d'assurance vie permanente et d'une rente viagère, le capital-décès du contrat d'assurance étant égal au montant de l'investissement en rente. Celui-ci remplace le capital utilisé pour acheter la rente dans la succession au profit des héritiers. Les primes du contrat d'assurance-vie peuvent être financées par une partie des versements de rente reçus, et le produit de l'assurance est versé aux bénéficiaires désignés. Puisqu’une partie du paiement est considérée comme un remboursement de principal, seule la partie des revenus d’intérêts du paiement est assujettie à l’impôt chaque année. Lorsque des fonds non enregistrés sont utilisés, le traitement fiscal préférentiel peut être important. Demander de l'aide Avec la hausse des taux, les rentes pourraient redevenir une stratégie de retraite viable pour les investisseurs. Pour plus d’informations sur l’opportunité potentielle, veuillez contacter votre conseiller Echelon. Voici une idée de ce à quoi ressemble cette stratégie de « réglez et oubliez » basée sur : Différents âges indiqués ci-dessous correspondent au moment où la rente est achetée. Un investissement REER de 1 000 000 $ Revenu garanti jusqu'au jour de son décès, il y aurait également une période garantie de 10 ans où, en cas de décès au cours des dix premières années, le bénéficiaire recevrait le revenu jusqu'à la fin des 10 ans. Notez que le scénario de conjoint réduirait le revenu à 60 % au premier décès.

With inflation continuing to be more persistent than anticipated, it is likely that, at least for now, higher interest rates are here to stay. With the rapid rise in interest rates to date, annuity rates have reached levels not seen in over a decade. 1 They are currently guaranteeing the highest payout rate that has been offered in decades. In this current climate of declining defined benefit pensions, volatile financial markets and increasing longevity, the potential for stable income for life using an annuity may be a viable option. What is a Life Annuity? An annuity is a form of insurance that provides a stream of payments to an individual for life in exchange for a lump sum premium. For individuals who want a reliable flow of income or worry about outliving their assets, it provides the benefit of a stable income stream that is guaranteed until death. In general, the best time to purchase an annuity is when interest rates are high and prospective inflation is low. This is because the amount of income paid to the holder is generally set at the time of purchase and based on prevailing interest rates. If an annuity is purchased in a period of lower interest rates, the payments will be less than if purchased when rates are higher. Since the annuity provides fixed payments, inflation will erode the purchasing power of future annuity payments. While the fixed payments are guaranteed as long as the annuitant(s) is alive, the corresponding drawback is that the initial capital put into the annuity cannot be reclaimed as it has been exchanged for the ongoing stream of income. As such, the idea of locking up a substantial amount of retirement funds in an annuity may not be preferable for some due to the lack of liquidity. As well, annuities generally do not provide funds to be left within an estate after death, although an insured annuity strategy could be implemented if capital preservation is important. Annuities are great for: • Someone who is worried about outliving their income. • Someone who likes guarantees An Annuity to Maximize your Canadian Pension Plan Payments Eligible recipients could opt to delay electing to withdraw their CPP benefits, thus maximizing the monthly payments received over their lifetime. A term certain annuity can help bridge that gap between ages 60-70 and help make that possible. An Annuity as Part of a Balanced Portfolio Generally, a life annuity acts like an illiquid, permanent type of fixed-income instrument. It is considered “permanent” because, unlike traditional bonds which fall in price when interest rates rise, the income generated by an annuity remains unaffected by changing rates. Many investors hold fixed-income investments to provide income and stability against stock market declines and an annuity can play a similar complementary role within a portfolio. Some investors choose to put a smaller proportion of savings into an annuity and increase the amount over time as a way of mitigating potential future rate increases. Estate Planning with an Insured Annuity An insured annuity provides the guaranteed stream of income of an annuity while maintaining capital available for transfer to the next generation. It consists of the purchase of a permanent life insurance policy and a life annuity, with the insurance policy death benefit equal to the amount of the annuity investment. This replaces the capital used to purchase the annuity in the estate for the benefit of heirs. The premiums for the life insurance policy can be funded by a portion of the annuity payments received, and insurance proceeds are paid to named beneficiaries. Since a portion of the payment is considered to be a return of principal, only the interest-income portion of the payment is subject to tax annually. When non-registered funds are used, the preferential tax treatment can be significant. Seek Assistance With rising rates, annuities may once again become a viable retirement strategy for investors. For more information on the potential opportunity, please reach out to your Echelon advisor. 1. https://www.cannex.com/index.php/services/canada/annuity-products/income-annuities/ Here’s an idea how this set it and forget it strategy looks based on: Various ages listed below are when the annuity is purchased. A $1,000,000 RRSP investment Guaranteed income until the day they die, there would also be a 10-year guarantee period where if they die in the first ten years the beneficiary would receive the income to the end of 10 years. Note that the joint life scenario would reduce income to 60% upon first death

Il y a eu une augmentation de l'activité dans le secteur des rentes depuis l'été 2022. Comme vous auriez pu le deviner, ils sont plus attrayants maintenant qu'ils ne l'étaient au cours de la dernière décennie. Les rentes sont idéales pour : Les personnes qui craignent de survivre à leur revenu Les personnes qui aiment les garanties Un moyen de diversifier un portefeuille, un substitut aux titres à revenu fixe Les personnes qui sont sensibles aux frais ou qui ne sont pas sûres du type d'investissement à utiliser Voici à quoi ressemble cette stratégie de réglez-le et oubliez-le, basée sur : Différents âges énumérés ci-dessous au moment de l’achat de la rente Un placement REER de 500 000 $ Revenu garanti jusqu'au jour de son décès, il y aurait également une période de garantie de 10 ans où s'il décédait au cours des dix premières années, le bénéficiaire recevrait le revenu jusqu'à la fin des 10 ans Notez que le scénario de conjoint réduirait le revenu à 60 % au premier décès

There has been an increase in activity in the annuity space since the summer of 2022.  As you could have guessed they are more attractive now than they had been in the past decade. Annuities are great for: People who are worried about outliving their income People who like guarantees A way to diversify a portfolio, a substitute for fixed income People who are fee sensitive or are not quite sure if what type of investment to utilize Here’s an idea how this set it and forget it strategy looks based on: Various ages listed below are when the annuity is purchased A $500,000 RRSP investment Guaranteed income until the day they die, there would also be a 10-year guarantee period where if they die in the first ten years the beneficiary would receive the income to the end of 10 years Note that the joint life scenario would reduce income to 60% upon first death

Le CELI est un excellent véhicule d'épargne à court terme destiné au prochain achat important ou au fonds de prévoyance. Cependant, nous avons constaté que de nombreux clients fortunés effectuent le dépôt maximum chaque année et ne font jamais de retrait. Le compte d'épargne libre d'impôt devient effectivement un compte successoral libre d'impôt. Nous pouvons vous montrer comment créer un deuxième compte successoral libre d'impôt sans la faible limite de cotisation maximale annuelle du CELI. Par exemple, deux conjoints, âgés de 65 ans, créent un compte successoral libre d'impôt et déposent 12 000 $ annuellement. Voyons comment cela se compare à un rendement de 5 % dans un CELI traditionnel :

The TFSA is a great short-term savings vehicle intended for the next big-ticket purchase or rainyday fund. However, we have found that many affluent clients make the maximum deposit each year and never make any withdrawals. The Tax-Free Savings Account effectively becomes a Tax-Free Estate Account. We can show you how to create a second Tax-Free Estate Account without the low annual maximum contribution limit that the TFSA has. For example, two spouses, age 65, create a Tax-Free Estate Account and deposit $12,000 annually. Let’s see how it stacks up to a 5% return in a traditional TFSA:

Why is there a Need for Disability Insurance?