There are a number of obstacles that could potentially de-rail a comfortable retirement. These include marriage breakdown, a stock market crash, and being sued. Another huge obstacle would be the diagnosis of a life threatening critical illness affecting you or your spouse. While it might be difficult to insulate yourself against some of the threats to retirement security, Critical Illness insurance goes a long way to mitigate the financial disaster that could result from a change in health as we approach retirement.
Considering that the wealth of many Canadians is comprised of the equity in their homes and the balance of their retirement plans, having to access funds to combat a dreaded illness could put their retirement objectives in jeopardy. Imagine that you are just a few years into or approaching retirement and you or your spouse suffers a stroke. The prognosis is for a long recovery and the cost associated with recovery and care is projected to be substantial. Statistics show that 62,000 Canadians suffer a stroke each year* with over 80% surviving* many of whom would require ongoing care. Since 80% of all strokes happen to Canadians over 60 those unlucky enough could definitely see their retirement funding jeopardized. Read more
Lately, one question clients are asking me is whether they should contribute to a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP)? Personally, I really like the TFSA, however it doesn’t have to be an either or choice. Why not do both? If both, in what proportion should you divide your contributions? In order to make an informed decision, let’s quickly review the main features of each program. I will use bullets to illustrate the features as nothing gets people’s attention more than bullets.
TAX FREE SAVINGS ACCOUNT
- Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income. There is no maximum age for contribution.
- Maximum contribution is $5,000 for each year from 2009 to 2012 and must be made by December 31st of the year of contribution. For 2013, due to indexing the maximum contribution is $5,500.
- There is carry forward room for each year in which the maximum contribution was not made.
- The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
- Withdrawals may be made at any time on an income tax free basis. Withdrawals create additional deposit room commencing in the year after withdrawal.