When life changes, so do financial plans

Jan 7, 2019
Retired woman standing in living room

Life is what happens to you while you’re making other plans, the saying goes. We just never know when the unexpected may happen. Here are four scenarios that look at various life changes and how financial plans adapt to evolving needs.

Tara launches a business

After 20 years in management, Tara lost her job in a reorganization. Her friends, who loved Tara’s home-baked scones, often told her to open her own shop. So, she took the plunge and opened Tara’s Tea & Scones.

With no track record as an entrepreneur, Tara’s start-up capital came largely from her Tax-Free Savings Account (TFSA), which she plans to replenish. Tara worked with her advisor to develop a new financial plan. This includes the purchase of disability and critical illness insurance that would help pay for a contract person if an illness or injury prevents Tara from working. She also made her investment portfolio more conservative as she was assuming enough risk launching the business.

Denis and his blended family

Denis had been divorced for three years, paying spousal and child support. He didn’t expect to remarry and become a stepdad to two young boys.

Denis and his wife Gina have found that communication and fairness go hand-in-hand with financial planning. Denis discussed the challenge of providing his stepsons with the same level of financial support for education savings, summer camp and vacations that he has committed to his daughter, Natalie. They determined that Denis would focus on education savings, which had been lacking for the boys. Denis and his advisor developed a plan that includes catching up on missed grant money for the boys’ Registered Education Savings Plan (RESP).

For his estate plan, Denis and his advisor are leaning toward a spousal trust to be funded by estate assets. Gina would receive lifetime income from the trust and, after her passing, trust assets would go in instalments to his daughter.

Geoffrey is now alone

Geoffrey’s wife recently passed away. She managed all of the finances and now Geoffrey, in his late 60s, is getting help from his late wife’s advisor. Geoffrey’s son administered the estate and oversaw the registered plan transfers and rollovers.

Geoffrey is overwhelmed by the task of managing the Registered Retirement Savings Plan (RRSP), TFSA, non-registered account and Registered Retirement Income Fund (RRIF) his wife opened for the pension credit. His advisor learns that Geoffrey has two main worries – handling all the logistics and being at the mercy of the markets. His wife had chosen balanced portfolios, whereas Geoffrey is more comfortable with conservative investments.

The advisor comforts Geoffrey by letting him know there’s no rush. They’ll deal with each account and transaction one at a time. Portfolios will be adjusted to focus on fixed income and guaranteed vehicles, with some investments sold to purchase a life annuity.

Ravi, Aisha and two generations

A few months ago, Ravi and Aisha were nicely getting used to life in their empty nest. Retirement is approaching and they talked about travel destinations. But their son who recently graduated from university is now moving back home; he has decided to apply to law school. And Aisha’s mother has suffered a stroke and needs constant care.

Financial plans are changing. Ravi and Aisha hadn’t banked on their son pursuing a law career, and they want to cover education costs. Aisha wants to leave her job and care for her mother who would move to Ravi and Aisha’s home.

The couple can afford all of this, but costs would come from savings designated for retirement. They consult their advisor who puts costs together and shows the effect on their savings and retirement date. With this financial information, Ravi and Aisha can better decide what choice is best for everyone.

Your life may follow a different path than those in the above scenarios, but we all encounter life changes. And when changes do occur, please let us know. We’ll work with you to ensure your financial plan continues to meet your needs and life goals.

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