Below is an excellent article from the Financial Post, on what you can do to avoid the stress of trying to come up with a last-minute RRSP deposit.

Contributing to an RRSP doesn’t need to be traumatic. For many, simply changing their savings schedule can eliminate anxiety. However, although it might be easier to make smaller regular contributions throughout the year, most people still wait until the end of each year to make a lump sum payment.

Twelve smaller sums should not only be easier than finding one large sum right after holiday season expenses, but paying by automatic withdrawal also makes it difficult to skip a month for an impetuous purchase. The investor no longer frets about funding and the retirement savings discipline is reinforced.

Funding stress can be lowered further if the expected tax refund is received during the year. An employed investor can file a T1213 form, advising the CRA and the employer about their RRSP savings plan, and have tax deductions reduced at source to improve cash flow and make the payments easier.

Regular RRSP contributions are also beneficial from an investment perspective because investors can take advantage of dollar-cost averaging, buying more of their investments when prices are low and less when they are high. Investing equal dollar amounts over a set period of time generally achieves a lower average cost and the worry about buying shares amid market excursions is decreased.

It’s wise to think about the RRSP’s place among other priorities such as eliminating high-interest debt. If an RRSP’s benefits don’t support those goals it may need to wait. Acting on knowledge and planning is less stressful than making quick decisions and then wondering if they were right.

Thought should be given to the way RRSPs work. For investors in higher income tax brackets, RRSPs make sense because their tax deduction is likely at a higher marginal rate than it will be when withdrawals are taxed in retirement. For those in the early stages of a career with a low income, it may be better to accumulate RRSP headroom until their higher marginal tax rate is higher.

For the investor who has determined that an RRSP is the retirement vehicle they need, there is comfort in having the right strategy. It begins with examining the way in which the RRSP is invested. Generally speaking, bonds and other interest-bearing investments are best kept within an RRSP to remain tax sheltered while the most favorably taxed investments, such as those that produce capital gains and dividends, should be outside the RRSP.

Asset allocation relative to age is an important consideration. According to a BMO study, 60% of Canadian investors have specific time frames or target dates to reach their financial goals and 89% agree that it is important to hold investments that evolve over time, becoming less risky as key life events approach. While that may be what the majority believes, only 49% invest accordingly.

At any stage of life, retirement planning requires careful thinking. Don’t allow an investing process to impede your thought processes by introducing stress.

Kim Inglis is an investment advisor & portfolio manager with Canaccord Wealth Management, a division of Canaccord Genuity Corp.

Original article here.

Photo credit: “Confused Man” by SalFalko on Flickr

10 financial New Year’s resolutions

Five moves to get your finances in order for the New Year

Canadians’ choice for New Year’s resolutions: “save money”

Make a financial resolution to start your New Year

Sensing a theme?

There’s no surprise here. “Saving money” follows close behind the perennial champions “lose weight/quit smoking” for New Year’s resolutions by Canadians.

But just like so many other goals, we often give up in frustration long before reaching the objective. The biggest reason: taking on too much too fast. If you want to lose weight, don’t try to go from couch-surfing and nachos to marathon workouts and all-broccoli diets overnight. Very few people can quit smoking cold turkey. And most people aren’t going to be able to cut their spending in half and start maxing out their RRSPs if they were living paycheque-to-paycheque.

The secret to success? Start small.

I’m only now coming back from nearly three years of physical inactivity due to injuries. I’ve lost a lot of muscle and put on a lot of weight. If I tried to jump right back in to where I was at my physical peak I would very likely re-aggravate my injuries and set myself back another six months or more. Instead, I’m taking it slow, and getting help. I’ve been meeting with a physiotherapist and a personal trainer to help design an exercise program that is appropriate for where I am today, and gets me started on the path to my short- and long-term goals.

So if you’ve never considered your long-term financial plan and haven’t started saving for retirement, here’s your first step: $25 a month into a TFSA. Put it in a 50% equity/50% income balanced portfolio fund.

You’re not going to retire rich on $25 a month, but it’s a start. That’s the real key here. Get comfortable with the money going out. Don’t pay too much attention to the account (so it doesn’t become a temptation to withdraw). Just let it run on auto-pilot for a few months. Then we’ll look at the next step. It might be increasing the deposit to $50, or opening an RRSP. It might be cleaning up your budget to pay off debt faster. But don’t try to do it all at once.

Start small. Get help.

Good luck in 2012!

When your children are young they require constant care and attention. As they grow into strong, independent adults, you’ll know all the sacrifices were worth it. Giving your child a good start in life paves the way to a future of successes.

• Have you considered how you can help shape your child’s financial future?
• Did you know life insurance pays an important role in their future financial security?

Tax-advantaged growth of policy values

Besides providing surviving family members with a death benefit, some types of life insurance can accumulate cash value on a tax-advantaged basis. If the accumulation stays within prescribed limits, the cash value that builds in the policy is only subject to income tax when it’s withdrawn. Consider the financial benefits to your children’s start into adulthood if they could access their accumulated cash value to help pay for their education, put down a down payment on their first car or home, or travel the world!

Unlike traditional investments, a permanent life insurance policy is exempt from annual income taxes on the growth of policy values, provided certain conditions are met. As a result, with permanent life insurance more of your cash value goes towards your child’s future instead of income taxes.

Protecting your child’s insurability

Life insurance is best purchased when your child is young and healthy. Some policies guarantee insurability, allowing your child to purchase more life insurance as an adult, regardless of disability, illness, occupation, residency, or foreign travel.

Without proper life insurance planning, a child who develops serious health problems or is diagnosed with a major illness may not be insurable as an adult. In addition, foreign travel to world hot spots may significantly increase your child’s life insurance premiums or even lead to being denied coverage as an adult. If this occurs and your child is not adequately insured, his or her loved ones may face a large financial burden in the event of premature death.

Covering unforeseen expenses

The tragic loss of a child is unpleasant to think about and even worse to endure. The last thing you’d want is to worry about money. Life insurance not only covers immediate expenses, such as funeral costs, it can also be used for grief counselling, taking time off work, moving costs, or whatever is needed in your personal situation. While children should never die before their parents, are you financially prepared if the worst was to happen?

Reasonable doubts

Some people believe life insurance for children is unnecessary, because they don’t contribute to a family’s income. However, when you factor in the benefits life insurance can provide through tax-advantaged growth, protecting your child’s insurability and paying for unforeseen costs, they outweigh the notion that life insurance is only for individuals with an income.

Find out how life insurance fits into your child’s future.

Photo credit: “like a record…” by shoothead, on Flickr
“Untitled” by Noukka Signe, on Flickr