Tax Planning - Keep more of your Capital
Taxes... they are leaving a hole in your bank account.
Do you ever wonder if you're paying more in tax than your
It seems like the rich keep getting richer, and of course, vice versa, but is that really the truth?
Canada minted some 36,000 new millionaires in 2016, according to a new report from consulting firm Capgemini;
Is it true what they say, the rich get all the tax breaks? No, the tax breaks are achieved through a financial plan with tax reduction strategies.
The simple truth is, the rich ARE using strategies that you can use too. They're not secrets, but it can be complicated with the tax code being over 1000 pages. This is where a financial advisor will find advantages that are relevant to you, your family and business. A good financial advisor will complete your tax planning at the beginning of each year, as it is an intricate component of a Financial Plan.
In my experience, the most common question for an advisor is, "what kind of returns can you get me?"
Return on Investments (ROI) is important, but what's equally, or sometimes more important is reducing your Marginal Tax Rate (MTR). When we reduce your MTR it will give you capital for investments and debt reduction. The short-term goal is retaining more of your income. The long-term application is being able to retire sooner and with more money.
Let's do some really simple numbers to illustrate what I mean.
Imagine in 2017 you made $105k, your MTR in Alberta would be 36%. I know if we can get your taxable income below $91,831 your MTR would drop to 30.5%. Here's what it would look like:
As you can see dropping your MTR saved you $4,842 annually.
What would happen if you took that $4,842 and invested it over 25 years at 7.5% ROI? This strategy will net you over $350,000, as shown below.
Anyone can benefit from the guidance of a Financial Planner, not just the rich. There is a common misconception that a Financial Advisor is just another bill and their compensation comes from your hard-earned money. This is untrue, they're paid by the companies they do business with similar to a mortgage broker.
It's time to change your ideology! If you're leaving large sums of money in the bank that's earning less than 1% you're not even beating inflation. Over the last 25 years, inflation has averaged around 2%. That would give you a loss of about 1% annually. Let's change that around and get your money growing for you.
So how exactly does a financial advisor get paid? We're not talking about an advisor who is on salary, where their earnings are consistent regardless of how well your portfolio performs. I'm talking about an Independent Financial Advisor, one who gets paid solely on commission usually about 1-1.5%. To put this into perspective, that's less than a realtor or mortgage broker charges.
If a financial advisor can help you get returns of 6-10% while reducing your MTR, would that be worth their rate?
Financial Advisors are not here to take your money, they are here to help you grow your wealth, reduce your taxes and reach retirement. Canada's Tax and Investment systems are complicated but can be made simple with the help of a Financial Advisor.
See the Alberta Marginal Tax Rate Chart and see where you fit in.
If you're ready to implement a Tax Savings strategy to retain more of your income, call us today and let's get started.