“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

How To Invest A Large Sum Of Money

How To Invest A Large Sum Of Money

At some point in their life many investors are faced with deciding how to invest a large sum of money. This large sum of money could be from something like an unexpected bonus, or the proceeds from downsizing a home, or from something unfortunate like the passing of a family member.

Investing a lump-sum can be a daunting experience for even the most experienced investor. There can be a lot of fear and worry when it comes to investing a large lump-sum. Fear of what could happen if the market drops right after you invest.

Often this fear and worry can cause delays. Sometimes these delays can extend for months or even years, with large piles of cash sitting in a savings account waiting for the “right time” to invest.

These fears are understandable. There is a fairly good chance when investing a lump-sum that you could see the balance drop in the future. In the example below you’ll see that during approximately 67.3% of historical periods investing all at once is the better financial decision, but that means 32.7% of the time it is not.

There are two main methods when it comes to investing a lump-sum. Which method you choose will depend on how you’re feeling. Are you worried about what might happen if you invest a lump-sum all at once? Or are you ok with the risk because there is a good chance of higher financial gain?

When deciding how to invest a large lump-sum there are two common methods. One method is to invest the entire lump-sum all at once. This is mathematically the best option. The other is to dollar cost average smaller amounts into the market over time. This is psychologically often the best option.

Psychology is one consideration when choosing how to invest a large sum of money. Probability and expected return is another consideration. These are two important considerations when choosing how to invest a lump-sum.

read more
Best Way To Save Money For A House? Save Or Invest?

Best Way To Save Money For A House? Save Or Invest?

What is the best way to save money for a house? This is an interesting question and the old advice might require a new perspective given the reality of the current housing market. Home prices have changed dramatically over the last few years and this is impacting how people are making decisions around home ownership.

Over the last few years we’ve seen the average home price increase faster than our ability to save for a down payment. This can make it difficult to save money for a house and this can push home ownership to later stages in life.

This trend in home ownership has been happening for decades, with home ownership shifting later and later. This may be due to a number of factors but there is a definite trend towards purchasing a home later in life.

In 1981 approximately 55.5% of those who were over age 30 lived in their own home.

In 2016 approximately 50.2% of those who were over age 30 lived in their own home.

With the continued increase in home prices since 2016 it’s reasonable to assume that home ownership will continue to shift into the 30+ age group.

So if purchasing a home is happening later in life, does that change the way we save money for a house? Does that change the way we build up our down payment?

Conventional financial advice would suggest that any savings required in the next 1-5 years should be kept in something safe, like a GIC or a high-interest savings account. Historically this meant that savings for a down payment would go into one of these safe investment vehicles.

But what if someone is starting their career in their early 20’s and isn’t planning to purchase a home until their early 30’s, late-30’s or maybe even their 40’s? Should they still be saving for a down payment in a safe investment like a GIC?

Maybe, or maybe not. In this post we’ll explore a different way to save money for a house. A way that is perhaps more reflective of purchasing a home later in life.

read more
What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway?

While its true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more

Owen Winkelmolen

Fee-for-service financial planner and founder of PlanEasy.ca

“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

How To Invest A Large Sum Of Money

How To Invest A Large Sum Of Money

At some point in their life many investors are faced with deciding how to invest a large sum of money. This large sum of money could be from something like an unexpected bonus, or the proceeds from downsizing a home, or from something unfortunate like the passing of a family member.

Investing a lump-sum can be a daunting experience for even the most experienced investor. There can be a lot of fear and worry when it comes to investing a large lump-sum. Fear of what could happen if the market drops right after you invest.

Often this fear and worry can cause delays. Sometimes these delays can extend for months or even years, with large piles of cash sitting in a savings account waiting for the “right time” to invest.

These fears are understandable. There is a fairly good chance when investing a lump-sum that you could see the balance drop in the future. In the example below you’ll see that during approximately 67.3% of historical periods investing all at once is the better financial decision, but that means 32.7% of the time it is not.

There are two main methods when it comes to investing a lump-sum. Which method you choose will depend on how you’re feeling. Are you worried about what might happen if you invest a lump-sum all at once? Or are you ok with the risk because there is a good chance of higher financial gain?

When deciding how to invest a large lump-sum there are two common methods. One method is to invest the entire lump-sum all at once. This is mathematically the best option. The other is to dollar cost average smaller amounts into the market over time. This is psychologically often the best option.

Psychology is one consideration when choosing how to invest a large sum of money. Probability and expected return is another consideration. These are two important considerations when choosing how to invest a lump-sum.

read more
Best Way To Save Money For A House? Save Or Invest?

Best Way To Save Money For A House? Save Or Invest?

What is the best way to save money for a house? This is an interesting question and the old advice might require a new perspective given the reality of the current housing market. Home prices have changed dramatically over the last few years and this is impacting how people are making decisions around home ownership.

Over the last few years we’ve seen the average home price increase faster than our ability to save for a down payment. This can make it difficult to save money for a house and this can push home ownership to later stages in life.

This trend in home ownership has been happening for decades, with home ownership shifting later and later. This may be due to a number of factors but there is a definite trend towards purchasing a home later in life.

In 1981 approximately 55.5% of those who were over age 30 lived in their own home.

In 2016 approximately 50.2% of those who were over age 30 lived in their own home.

With the continued increase in home prices since 2016 it’s reasonable to assume that home ownership will continue to shift into the 30+ age group.

So if purchasing a home is happening later in life, does that change the way we save money for a house? Does that change the way we build up our down payment?

Conventional financial advice would suggest that any savings required in the next 1-5 years should be kept in something safe, like a GIC or a high-interest savings account. Historically this meant that savings for a down payment would go into one of these safe investment vehicles.

But what if someone is starting their career in their early 20’s and isn’t planning to purchase a home until their early 30’s, late-30’s or maybe even their 40’s? Should they still be saving for a down payment in a safe investment like a GIC?

Maybe, or maybe not. In this post we’ll explore a different way to save money for a house. A way that is perhaps more reflective of purchasing a home later in life.

read more
What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway?

While its true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

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