Help out the kids without hurting your retirement
As parents we want nothing more than for our kids to succeed. Often, we wish to give our children a "leg up" in their transition to adulthood by helping them out with a larger expense, such as tuition for post-secondary education, a down payment on a home or even a reliable vehicle. If you find yourself in this situation, be sure to carefully consider where you take that money from so that helping your kids doesn't hurt your retirement.
For people who don't already have savings set aside for their kids, such as an RESP or a savings account, there are generally two options available:
1. Retirement Savings: Tapping into your retirement savings may be the quickest way to access cash but it could have some undesirable consequences. For example, you'll be charged taxes on a withdrawal from your RRSP and you'll lose contribution room forever. You'll also forego any future growth on the amount you've withdrawn, which will most likely mean you'll have less money available for retirement.
2. Home Equity: Some people are reluctant to take on more debt in the years leading up to retirement. However, using a home equity line of credit to help out your kids may be the wiser choice in some instances. Here's why: you won't be charged any tax when you access your home equity and your existing retirement savings can remain intact and continue to grow. Some accounts will even allow you to track different portions of your debt separately. This can be particularly useful if you're providing money to more than one child and/or if you wish to track the interest charged for different portions of the debt.
We all want to help our kids succeed. By carefully considering how you can help, you can help to ensure that you don't compromise your own financial security.
If you'd like to help your kids with a large expense, give me a call and I can help you determine which option makes the most sense in your specific situation.
Article Courtesy of Manulife.
What is due diligence?
Have you ever wondered how we decide what solutions or product to use with our WealthCo clients? We use a process of due diligence to ensure that the product and services we provide are of the highest quality. The process that we use is dynamic and changes to meet market and consumer needs.
Step 1: Identifying the Right Companies
There are many product providers in the Canadian marketplace. We want to work with those who share similar business philosophies as ours and who will work to ensure that the consumer always comes first.
Step 2: Identifying the Right Products
75 years of combined financial & risk management experience at WealthCo means that we have the expertise to analyze the many products that exist and find the right ones for our clients.
Step 3: Testing
We have implemented many of the solutions we use with clients within our own financial plans! What better way to test and see how they work.
Step 4: Verification
3rd party verification is also important and part of the due diligence process.
For more information on WealthCo's Due Diligence process please contact me at 403-537-5853