All posts by Financial Independence Hub

Marketing tips for reaching the Seniors demographic

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By Meggie Nahatakyan

Special to the Financial Independence Hub

When selling to seniors in this age of digital marketing careers, it’s not just about making the fonts of your sales copy bigger and bolder. Yes, selling a product to this market sector is somewhat different than selling the same product to the millennials. So, how can you convince the elderly to buy your product?

Understand the seniors market

There are a number of fundamental things that you need to know before attempting to market your product to seniors.

1.) The very first thing to know is the exact places where the majority of them reside. You can get this information by researching their demographic records. There are online portals that offer this kind of service. Knowing where your market is concentrated will help you focus your marketing campaign more effectively and economically.

2.) Use the information contained in Amazon selling statistics. You will be able to get an overall picture of how your market reacts to certain products or services by using the information contained in this database. Information such as their spending habits and other stuff can help you successfully sell to this age group.

Think like a senior

If you put yourself in their shoes, you will get an inkling of their needs and wants. Here are some things that you might want to consider:

1.) Most seniors take drugs or medicine for their particular health conditions. Knowing the most prevalent health conditions of seniors will help you cater your product to their wants and wishes.

2.) Most seniors attend church. A report from a news network revealed that a majority of those who are 65 and older go to church each week. Churches usually have bulletin boards for their sundry announcements. You can use these venues to get your product in front of your audience.

3.) Publish your product in the pages of publications catering to seniors. Additionally, a study also showed that a lot of them choose to read their news from the traditional print copy or newspapers rather than surfing the web for online news.

Talk like a senior

The best way to sell a product to someone that you really don’t know is to speak his or her language. In other words, don’t use the language of a young person if you are trying to convince an elderly person to buy your product. You need to understand the psychology of the senior’s language.

For instance, most millennials are excited by the prospect of owning a certain electronic gadget. Seniors, on the other hand, are more concerned about how a product can improve the way they live. It pays to use their language and their way of communicating and to avoid the lingo that is most popularly used in your particular age group. Always remember that communicating is a way of relating tothe other person.

Know that seniors have different concerns

In marketing a product, it is fundamentally telling the other person what the product can do for him. It is not really just selling the product per se. Continue Reading…

The ABCs of Retirement Compensation Arrangements (RCAs)

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Tax Minimization Strategy for High Income Individuals

By Spencer Tilley, CFP, RFP, CFA

Special to the Financial Independence Hub

There is a common theme among high net worth and high-income earners:  “How can I save on tax?,” and “What are the most tax efficient ways to save for retirement?”

No question that focusing on tax savings is the most crucial component to some of the most successful individuals in the world.

In Canada, RRSPs, TFSAs and pension plans are commonly utilized retirement vehicles, but what happens when you max out your available room? Unfortunately, as a salaried employee, your additional options for tax-efficient retirement savings are limited, or non-existent.

Retirement Compensation Arrangements (RCAs) are one strategy that not many know but may be available to you as a high-income earner.

What is an RCA?

RCAs are a tool for a high-income earner to save additional funds on a tax-deferred basis, over and above the RRSP/pension limits, for their retirement. It is funded by an employer for the employee’s long-term benefit. It was created to help supplement and overcome the income gap in retirement that occurs because of the relatively low annual prescribed RRSP/pension limits.

Basically, RRSP room has not kept pace with wage growth and there is essentially a cap on the amount that can be saved tax-deferred for retirement. RCAs help make up the difference between what can be saved for retirement and what is needed in retirement, on a tax-deferred basis.

Here’s what you need to know:

Today, top personal tax rates are over 50% in 7 out of 10 provinces, with the other 3 provinces clipping north of 47.5%. With these high personal tax rates combined with the recent changes in the Federal Government Small Business Tax regime, RCAs, along with the Individual Pension Plan (covered here), are making a comeback as a strong player in the retirement game for highly compensated executives and can provide a huge tax benefit for those who may qualify to use it.

How it works:

The employer contributes 100% of the amount, of which 50% is sent to the CRA, held in a non-interest bearing, refundable tax account and 50% is deposited to your RCA Investment account, held with a custodian where it can be invested on a tax-deferred basis. Withdrawals are taxed as regular income. Giving the CRA 50% of your money today may seem like a bad deal, but let’s examine the benefits a little closer:

The Benefits    

Employee benefits (assuming top marginal tax rate):

  • In 7 out of 10 provinces, you would otherwise be paying the CRA 51.3%-53.53%, upfront and permanently. You are already ahead of the game in these provinces
  • In the other 3 provinces, you would pay 47.5%-49.8% to the CRA, so at most a 2.5% disadvantage. But …
  • The real advantage lies in your ability to withdraw the funds over time and at your discretion, rather than receive them personally all at once, thus (hopefully) reducing your income in any given year enough to drop you into a lower tax bracket and ultimately pay less tax
  • Contribution limits are not based on RRSP room and can exceed pension contribution limits by significant amounts
  • 50% is contributed to the RCA investment account and invested for your retirement.
  • When you withdraw funds in retirement, 50% of your withdrawal is added back to the RCA investment account via a refund from the CRA refundable tax account (the 50% that went to the CRA at the beginning)
  • Funds are the employee’s in the end, whether the company is around or not

Employer benefits:

  • 100% of the employer contributions are tax-deductible for the business
  • Key employee retention

The Downside/Risks

  • An actuary needs to be hired to implement and keep track of everything incurring an annual cost for administration” approximately $1,000/year
  • 50% of the contribution is sent to the CRA in the form of a refundable tax
    • Money in the CRA account is held in a non-interest bearing account
  • Investment risk is taken on by you and not your employer (unless the RCA is funding for a defined benefit supplemental pension guaranteed by your employer)
  • Employment income needs to be high over the last 15 years to qualify
  • This is only for those who have maximized their pension benefits and cannot achieve 70% of their current income as retirement income with existing retirement plans
  • A company cannot ‘bonus down’ to keep income lower than the small business limit

Who this is best suited for:

High-income earners: groups of managers or executives, successful business owners, or other highly compensated individuals where income is tied to special employment incentives, such as a professional athlete.

Let’s review a simplified example:

Assume you have earned a $1,000,000 incentive paid above your usual salary of $314,928/year in Alberta, which you have received for the last 10-15 years. If you were to pre-plan with your employer and utilize an RCA, the benefit could be upwards of approximately $200,000 using the RCA strategy vs straight T4 income: that’s like an extra $10,000/year for 20 years of your retirement!

Some technical details:

If this $1,000,000 incentive were paid as T4 income, in Alberta you would pay $480,000 (48%) tax and you would keep $520,000 (52%). Continue Reading…

New Millennial parents need to prepare for the future

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By Donna Johnson

Special to the Financial Independence Hub

One of the most exciting events in most people’s lives is becoming a parent. Those who are currently bringing new kids into the world tend to fall into the Millennial generation, which includes people born between 1981 and 1996. These parents need to be prepared for many things they may not be ready for. Having a home security system is a good idea, but there are also many other financial considerations to take into account.

Kids are expensive

The cost of raising a kid is now estimated to be around US$233,000. That’s just until they are 18. Therefore, Millennial parents can expect to pay more than $12,000 per year for their little bundles of joy. Of course, there are ways to avoid some of these costs, like skipping out on day care costs by having one parent stay home until the child goes to school and buying clothes at thrift stores. Additionally, family members like grandparents might be willing to watch kids for a reduced fee, if they charge anything at all. Regardless, there are costs that come with having a child, and new parents should be prepared for them.

It’s important to get your documents together

Many parents fail to adequately prepare for the future. No one wants to die before their kids reach adulthood. However, there is always that possibility. Therefore, taking out a solid life insurance policy is a good idea. Also, setting up a will that indicates where the kids should go in the event that both parents die or become incapacitated will help ensure that the children stay out of the foster system.

College is coming up

Those who have a child this year will likely have between 18 and 19 years to get ready for college expenses. As of 2018, a year at a public four-year school at the in-state tuition rate averaged US$20,770, while a year at a private school costs just under US$47,000. Continue Reading…

Social Isolation: a growing epidemic

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By Candace Hartman

Special to the Financial Independence Hub

There is a growing surge of isolation and loneliness in our communities.

Social isolation affects all ages, in every level of society, and results in serious health consequences. Last year the British Parliament appointed Tracey Crouch to address the issue in their country and in our city, Vancouver released its year long study on the problem shortly afterwards.

These events caught the attention of the public and resulted in a minor media storm which eventually faded away.

And what has changed? Urbanization, immigration, the impact of technology, economic factors, securalism, an aging society with mobility and health challenges – the causes of isolation and loneliness are multi-faceted and complex. These are not issues easily addressed by government.

Isolation and Loneliness are social issues needing a response

Isolation and loneliness are social issues needing personal response within our own individual communities.

The past year in Vancouver has seen the exponential growth of Beyond the Conversation, a non profit agency creating connections among hundreds of seniors, new immigrants, refugees, international students, and youth who have joined their groups.

The South Granville Seniors Centre are enthusiastically embarking on a year long outreach project to contact isolated seniors within their community; Knox United Church are coordinating meetings among support organizations to facilitate networking, as well as promoting social connection within their community through a number of creative initiatives

Intergenerational housing – such as Happipad’s Igen project – is growing in Canada, organizations which pairs students in need of housing with seniors seeking companionship.

This spring, in southwest England, a community group hosted a “Make Someone Welcome” event where neighbours and locals came to learn the skills to better respond to the climbing loneliness of residents in their town.

These are just a very few of the endeavors I’ve had the honour of discovering over the past year, there are countless caring, compassionate and enthusiastic individuals and organizations reaching out worldwide.

The power of community.

Candace Hartman is a writer and social advocate who can be contacted at QuadraGranvilleSeniors.com. This blog was originally published on the organization’s blog on April 14, 2019 and is republished on the Hub with permission. 

Maxed out RRSP and TFSA? Non-registered investments vs. HISAs or GICs

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By Julia Faletski

(Sponsor Content)

So, you’ve maxed out your registered retirement savings plan (RRSP) and tax-free savings account (TFSA). Maybe you’re a diligent saver. Or you’ve just sold a home or a business. Maybe you’ve inherited wealth. Whatever the reason, you’ve got additional money to invest. And if you were thinking about putting it into a high-interest savings account (HISA) or GIC, think again. There are better ways to grow your money.

Earn more with Non-Registered Investments

Any investment that generates positive returns will bring you closer to your financial goals. And while GICs and HISAs do generate small but guaranteed returns, historically you’re much better off generating growth in an investment than letting it sit in a slow-to-grow savings account.

The chart1below compares the growth and performance of a non-registered investment, GIC and HISA overtime. While HISAs and GICs promise consistent returns, you can see that the non-registered investment account comes out significantly ahead.

How are non-registered investments, HISAs & GICs taxed?

The most common types of investment income include: dividends, interest and capital gains. And while the income earned from investments is always subject to tax, not all forms of investment income is taxed the same way. Some investment income attracts less tax. 

Investment income from HISAs and GICs is considered interest and the taxes owed are based on your marginal tax rate (which varies by income and province). This is noteworthy because this type of tax is the most expensive.

Non-registered investments have a unique advantage in that they can earn a blend of different types of income as a result of what’s held within the account (the most common includes dividend income and capital gains). This is an advantage because the gains earned are taxed at different rates, opening up an opportunity to reduce the taxes paid on the income earned. Continue Reading…