Manage your money better with financial education

Insurance: Your financial shield

Your brother-in-law has probably told you something like: “You don’t need individual insurance, your employer covers you. Why pay for nothing?” Sounds logical, sure. But let’s dig a little deeper.

Insurance provided by employers is temporary. They often only cover a fraction of your true needs and coverage comes to an end when your employment ends. So some people will wind up with no insurance at retirement.

And even if you remain with the same company, the group plan is not always sufficient. Individual insurance can round it out and offer you more widespread coverage. It’s a great security net for you and helps you protect your loved ones.

Not to mention that getting insured when you’re younger allows you to benefit from better rates and guarantees you access to insurance in the future.

You can learn more by consulting the Autorité des marchés financiers (This hyperlink will open in a new tab) and Government of Canada (This hyperlink will open in a new tab) websites.

Let’s move on to another misunderstood topic, savings and investments.

Savings and investments: The savings showdown

Maybe that same brother-in-law also said something like: “Don’t get an RRSP. You’re just going to have to pay more taxes when you withdraw money. A TFSA is better!” The reality is a little more complex.

The TFSA is often seen as the simpler, more flexible option, but it really depends on your needs. The RRSP reduces your taxable income. It can be really profitable if you’re in a higher tax bracket. The benefit of an RRSP is that you contribute to it while your tax rate is higher and you withdraw when you retire, when your tax rate is likely lower. That’s what makes the RRSP appealing, in addition to saving tax-free.

The truth is that there is no one-size-fits-all solution. Every person is in a different situation. That’s why financial advisors can help you develop a plan that’s suited to your needs.

Let’s now turn to a very important aspect of your life, planning your retirement.

Retirement: Plan in advance to reap the benefits

Perhaps your brother-in-law, ever so confident, also said something like: “You’ll have more than you need through the government plans! No use in planning for retirement.” That might be a tad optimistic!

In reality, government benefits, like the Canada Pension Plan (CPP) or Old Age Security (OAS) will not provide enough income to cover all your needs during your retirement. In fact, they will cover less than 35% of your work income. With life expectancy going up and the unpredictability of healthcare costs, a personalized plan becomes essential to ensure a safe and comfortable retirement.

Imagine maintaining your current lifestyle, travelling and pursuing your hobbies. With a retirement that can last 25 or 30 years, better start planning for it now to avoid any unpleasant surprises.

Once you have a retirement plan, you must also understand how taxes can make an impact on your savings and future income.

Talk taxes like a pro

What is taxation? Everything that deals with the taxes we pay on our income, property and purchases. Understanding the tax system allows you to not only better manage your money, but also to set aside a portion to save effectively.

Now your other brother-in-law is chiming in: “You pay 40% of your salary in taxes! How are you supposed to save?” Another misconception. The truth is that in Quebec, in 2024, a total income of $100,000 is taxed at 26.5%. You’d need a total income of $246,000 to be taxed at 40%.

To get a better understanding, let’s differentiate the marginal tax rate from the average tax rate (This hyperlink will open in a new tab) (French only). Our taxing system is progressive. That means that our income is divided into several brackets, and each bracket has its own tax rate. The marginal tax rate corresponds to the percentage of tax applied to the last bracket of your income. The higher your income, the higher the marginal rate, but only on the last dollars earned.

The average tax rate, on the other hand, represents the total taxes paid divided by your total income. For example, in Quebec, an income of $60,000 corresponds to an average tax rate of 20%, while the last dollars will be taxed at the marginal rate of 36.1%.

Furthermore, there are several tax strategies available to maximize your savings, such as deductions related to RRSPs, tax credits for donations, and many others. Learn more by visiting the provincial and federal (This hyperlink will open in a new tab) government webpages.

Understanding taxation is a key step, but to succeed financially, properly managing your personal assets on a daily basis is just as crucial.

Personal finances: the art of being well-surrounded

“No need for a financial advisor if you don’t have a lot of money to invest.” Another gem! On the contrary, you shouldn’t wait until you have a significant amount to invest before seeking the help of a financial advisor. These professionals can help you build a solid financial plan to help you achieve your goals.  They will guide you in managing your debts and choosing the right saving strategies, while making sure you’re financially secure in the event of unforeseen circumstances, such as an illness.

In short, even with just a few thousand dollars to invest, a structured plan will help you avoid mistakes and reach your objectives more quickly.

Take control of your financial future

Don’t wait for something unexpected to happen. Take charge of your financial future now and trust Beneva to support you every step of the way! What you do with your money today can make all the difference tomorrow. Protect yourself, save, and optimize your taxes.

The key? Smart management. Staying informed gives you the peace of mind you deserve. Consult our financial advisors!