Gifts to grandchildren-Blue sky financial planners in Regina

Gifts For Grandchildren

By Grant Karst, CFP, CLU, CHFC

Someone once said, “If I had known how much fun grandchildren are, I would have had them first!”

Grandchildren truly are special and grandparents love to shower them with attention and gifts. Here are a few ideas for gifts that won’t end up in the toy pile and will provide a lifetime of benefits.

Registered Education Savings Plan (RESP)

The value of a post-secondary education is priceless, but it is also expensive. The costs of tuition, books, and accommodations are increasing faster than inflation and it is difficult for parents to set enough money aside for education while paying their mortgage and for their children’s activities. Fortunately, the federal government provides assistance by offering education grants in an RESP, but there is a catch— money must go into the plan before the grant is awarded.

Where will the money come from? You guessed it— generous grandparents who are able to leverage their savings in an RESP for their grandchildren. For every dollar deposited into an RESP, the federal government adds a 20 per cent education grant. The deposits and grants grow tax-sheltered until the funds are used for a qualifying post-secondary program. When the money is paid out, the grants and earnings are taxable to the student which usually means little or no tax is paid. A $100 per month deposit plus the 20 per cent grant earning five per cent interest over 18 years will grow to over $35,000!

Life Insurance

Starting a life insurance program for a grandchild is a gift that keeps on giving. Whole Life insurance is a popular choice for this gift because it offers the following benefits;

  • Level life-time premiums based on the age of the child.
  • Tax-sheltered cash values.
  • Dividends that purchase additional paid-up insurance which also grows tax-sheltered. Dividends are not guaranteed and will vary upward or downward.
  • Protection of insurability. Once the policy is in force, any changes in health or risks associated with occupation, avocation or lifestyle will not have an impact on the premiums.

Let’s examine a policy for a new granddaughter. The premium for a $100,000 policy is $75 per month. At age 20, the dividends purchasing additional insurance more than doubles the original value to over $200,000. At age 40, the policy has grown to half a million. If the child lives to 100, which may be common by then, the policy has a death benefit of over three million dollars and the premium is still 75.00 per month. The grandparent can start the policy and transfer it without incurring any taxes to the grandchild when she is an adult.

Critical Illness Insurance

Purchasing critical illness insurance for a grandchild has similar benefits—level premiums based on the age of the child and protection of insurability—but there are additional features unique to this type of policy. A lump sum benefit is paid out in the event the child is diagnosed with a critical illness like cancer (over 25 illnesses are covered). No one likes to think of this happening but if it does, money is often needed for treatment, care and recovery.

The parents in this situation don’t need financial stress added to their plate and the grandparents may be called upon to help out. On the bright side, if a claim is never made, all or a portion of the premiums paid can be recovered. For example, a premium of $57.00 per month will pay for a $100,000 policy on a new granddaughter. At age 25, 75 per cent of the premiums paid ($12,697) are paid out if there hasn’t been a claim. The policy continues to provide coverage at the same premium rate and 100 per cent of the premiums paid can be recovered any time after age 40 if the policy is terminated.

Do you want to give something special to your grandchild? Give them a gift they will never grow out of. Give them a gift that will make a difference in their lives long after you are gone.

 

Will You Bogey Your Retirement-Regina financial company

Will You Bogey Your Retirement?

The golf season has finally arrived – a little late, a little wet – but golfers are hitting the links with vigour. It is a relatively short golf season is Saskatchewan so we learn to play in all kinds of conditions; wind, rain, mosquitoes, and more wind! It is much like life where we control some parts of our environment and learn to deal with the rest.

Did you know the game of golf has much in common with financial planning?

Let’s have a look;

  • Environment: The course is where the golf game is played with lush fairways and hazards along the way. You can take lessons, use course knowledge and a game plan to improve your chances of scoring well or play with reckless abandon and take what you get. Working with a financial advisor and having a plan increases your chances of hitting your financial goals or you can” wing it “and see what happens.
  • Equipment: The tools of golf are clubs and a ball. Some are better than others but you have to learn to use them. Millions of dollars are spent to convince you that new equipment will change your game, however, your natural ability, commitment to improving and practice will have a bigger impact. Investors look for a “get rich quick” scheme or a hot new product they learn about at a seminar. Occasionally it works. More often, a solid framework for making investment decisions along with a plan to make your efforts relevant to your life goals with win the day.
  • Tracking Progress: In a golf game every hole is tracked – eagle, birdie, par, bogey are terms to measure your efforts against a standard. Your handicap tells you how your overall game is progressing. A financial plan, whether formal or ad hoc, is measured too. A financial advisor will chart your progress towards financial and life goals to keep you motivated and make adjustments where necessary. Individuals who are working their own plan often use short term results to make long term decisions, often with negative consequences.
  • Attitude: In golf, as in life, you often get what you expect. If hitting over water intimidates you, there is a good chance your shot will end up wet. When you can block out negative thoughts and leave a bad hole behind, your score will improve. Realistic expectations of your efforts to achieve financial targets will go a long ways towards a successful plan. If you only invest when you “have the money” or when markets are good, there is a good chance you will come up short. Expecting reasonable long-term returns with a disciplined investment plan will give you the results you want.

Will You Bogey Your Retirement

There is one major difference between golf and financial planning. If you have a poor golf game because of lack of effort, preparation and practice, you can blame your old clubs or the “golf gods” and get on with life because it is only a game. If your financial plan doesn’t work – and everyone has one by design or default – you live with the consequences forever. It may even hurt your golf game!

“Retirement Planning with Yogi” By: Grant Karst

The Baby Boomers have arrived at the retirement stage and like every stage of life they have gone through, it is going to be different for them. In fact, one financial institution has already given them a new name, “Generation I” with the “I” standing for “income.” As the Boomers approach retirement they are confronted by many circumstances different from their parents’ generation:

  • They have spent more and saved less

 

  • They want to retire earlier and expect to live longer

 

  • Markets have not been kind to them in the last decade

 

  • Interest rates are at an all time low

Perhaps Yogi Berra has some nuggets of wisdom for Generation I. He is one of the most quoted personalities of our time, so let’s see how his “Yogi-isms” apply to retirement planning.

  • “It ain’t over ’till it’s over”  –  Longevity is becoming increasingly important as retirees try to stretch our retirement assets over two or three decades. Most people don’t have defined benefit pension plans so there is a real possibility of outliving their income. But how much time do you want to spend managing your money when you are 80 years old?
  • “I usually take a two hour nap from one to four”  –   Having enough income to live comfortably is where most people focus their attention but preparing for a different lifestyle where every day is like a weekend presents challenges as well. How many games of golf do you really want to play in a week and what do you do in the other seven months in Saskatchewan?
  • “It’s Déjà vu all over again”  –    Maybe not. If Boomers are looking at their parents’ retirement as a reference point they may be disappointed. Their parents retired with little or no debt, were older, less active, and accustomed to living with their means. Interest rates were much higher and annuities were a popular choice for guaranteeing lifetime income.
  • “When you come to a fork in the road… Take it”  –   What to do? Leave your money in equities for better potential returns to fight inflation or move to fixed income assets to counter volatility and uncertainty. Should annuities be considered? What about these new Guaranteed Minimum Withdrawal Benefit plans? Saving may have been difficult but spending may be harder.
  • On why New York lost the 1960 series to Pittsburgh “We made too many wrong mistakes”  –  If you make a mistake when you are still earning an income, you can adjust and recover. Mistakes made during retirement often have permanent consequences. Not having the right asset mix, spending too much too soon, or not factoring inflation into your plans can leave you wanting later on.
  • “You can observe a lot by watching”  –   Look around and see how others have prepared for retirement. Did they discuss how spending 24/7 together will impact their marriage? Are they counting on their kids looking after them when they need long-term care? Do they have a retirement budget? Did they start with a retirement spending plan?
  • “The future ain’t what it used to be”  –    For some who retired in the last two to three years, their future is not what they thought it would be. For others retiring without a retirement spending plan as a guide, their future is a moving target changing with markets, interest rates and unforeseen challenges.
  • “If the world were perfect, it wouldn’t be”  –   You can’t plan everything but you can start with getting expert advice from someone who specializes in retirement spending. It is a different skill set than providing advice on accumulating assets because new factors like sequence of returns, survivor income and estate planning must be incorporated.

When is the right time to start your retirement spending plan? When Yogi was asked what time it was he asked “You mean now?”

He also said, “It gets late awfully early around here.”

Thanks, Yogi!