Spring Cleaning Your Finances - Do You Have A Will And Life Insurance?

*This is a guest post by Katelyn Aitcheson, a Financial Planner with Sun Life Financial

As I sat down to write this post last week in the frigid -2 degree weather I thought to myself how can I label this blog post “Spring Cleaning Your Finances” if I truly believe that spring (or summer for that matter) will never come!  It is a pleasure to be able to share a few ideas and insights into the world of personal finances and insurance with you. My name is Katelyn Aitcheson and I am a financial planner with Sun Life Financial.

Although insurance and finances are not the most “fun” or “sexy” topic out there it is definitely one of the most important for families. As a financial advisor/planner my role is to get you from point A to  point B as seamlessly as possible. Taking care of the uncontrollable’s first (dying prematurely, suffering a serious illness, etc) and tending to the controllable priorities second (trips to Disney, RESP’s, and purchasing a second home or cottage).

In my first post I am going to take you through the three most common questions I see every year.

1. I don't have a lot of money to leave to people, why do I need a will?

They’re called the “accumulation years,” the 20, 30, or 40 years we work and earn money. During this time we buy a home, donate to charities, dabble in stocks, buy life insurance. Whatever our assets and interests, we want them protected and passed down to good hands.

The solution is to create a will and keep it updated – not the most enjoyable of life’s task, but one of the most important. Yet about half of us don’t have a will or a power of attorney document. Bottom line, most people would agree that they would rather decide who their children should be raised by instead of having the government make that decision.  If you don't have a will, you won't get to make that decision.

2. How do you know how much life insurance you need if you have young kids? Do both parents need to be insured?

Life insurance is something you don’t buy for yourself – you buy it for the benefit of others. When should you think about buying it? Certainly, when you get married, have children or have someone dependant on your income. Then the question is: How much do you need?

A general rule of thumb is you should be covered for 10 times your annual income, so if you earn $70,000, you’d be looking at $700,000 in coverage. But every individual situation is different and should be examined as such. An advisor will help you fill out a needs analysis to determine the appropriate amount, taking into consideration your annual income, net worth, debts and existing life insurance. At the end of the day you need to be comfortable with the coverage you have.

Do both parents need to be insured? Absolutely! Even in a one income family it is important to take into consideration what the stay at home spouse brings to the family in terms of savings. Childcare can be quite expensive, if the stay at home spouse passes away there will need to be childcare put into place so the surviving spouse can continue to work. The intent of insurance is to be able to maintain the standard of living for the surviving spouse and children.

Feel free to take a peak at this life insurance calculator on the Sun Life Financial website.

3. Saving for retirement can be confusing and overwhelming. What advice do you have for those in their 30's or 40's?

Ahhhh, the ultimate question. How much money do I need for retirement? When should I start saving? What type of plan should I be putting my money into? (RSP, TFSA, Group Pension).

Saving for retirement requires some planning and it is always best to seek advice from professionals. In general, most Canadians are not saving enough for retirement according to various reports and sources. At retirement you will have multiple sources of income (TFSA,RSP’s, CPP, OAS etc) and it is important to ensure that you have a strategy in place to make sure that you will be paying as little tax as possible.

If you are enrolled in a group RRSP or pension plan through work, chances are you are on the right path. If your plan is voluntary and you are not taking advantage of free matching money from your employer, you are missing out on a huge opportunity.

Use your Tax Free Savings account to your advantage!! In my experience most people are not taking advantage of this account. Depending on your income level this account can be more useful than an RSP.
Working with a holistic advisor that can take into consideration both your wealth goals and insurance needs will enable you to know where you are financially.

I hope you've found this information helpful. Please feel free to contact me via email with questions at katelyn.aitcheson@sunlife.com. I am more than happy to set up a time to chat.