Say that a couple is struggling to decide whether to help their child buy a home. They wonder—and worry—if the cash outlay will interfere with their retirement.
Financial advisors often help with this type of financial planning situation—when you must look to the future to make a decision today. In this case, the look to the future is estimating the amount that the couple needs to retire. With that projection, an advisor can ultimately determine how much of a cash outlay the couple can afford.
Projections lead to solutions
Here are a few more examples of projections advisors create to help individuals make financial planning decisions.
A vacation property owner is deciding whether to transfer the property to their children now or through their will, based on tax implications. To help them decide, their advisor presents the current tax that would be payable on capital gains and an estimate of the tax amount at life expectancy.
An individual nearing retirement wants to know the best time to begin Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) benefits and Old Age Security (OAS) benefits. Their advisor shows how the monthly and cumulative dollar differences compare when starting at earlier and later years.
A retiree is determining how to cover the tax payable on estate assets. Their advisor begins the process by putting together a projection of the estimated amount of the eventual tax liability.
A business owner is planning retirement savings, and their advisor creates projections to compare the performance of a registered savings plan, registered pension plan and accumulating funds within the corporation—a choice that’s more exacting in light of the new passive income rules.
Whenever you face a situation that calls for a look into your financial future, please give your advisor a call. They can provide the projections you need and help you make an informed decision.