As you approach retirement, it’s important to have a solid plan to ensure a steady income stream. This blog discusses a popular and tax-efficient option, the Registered Retirement Income Fund (RRIF). What is a RRIF? A RRIF is a tax-deferred investment account designed for individuals who have reached retirement age
As you approach retirement, it’s important to have a solid plan to ensure a steady income stream. This blog discusses a popular and tax-efficient option, the Registered Retirement Income Fund (RRIF).
A RRIF is a tax-deferred investment account designed for individuals who have reached retirement age and are seeking a steady income stream. It serves as an extension of your Registered Retirement Savings Plan (RRSP), allowing you to transfer your accumulated savings from your RRSP into a vehicle that provides regular payments while continuing to grow your investments on a tax-deferred basis.
One of the primary advantages of a RRIF is its flexibility. Unlike traditional pension plans, which often have rigid payout structures, a RRIF empowers you to tailor your income stream to your unique financial needs and lifestyle preferences. You can choose the frequency and amount of withdrawals, subject to certain minimum requirements, enabling you to strike the perfect balance between meeting your expenses and preserving your savings.
RRSPs are primarily focused on accumulating savings during your working years. The government mandates that these accounts be converted into a form of retirement income by the end of the year in which you turn 71. This is where RRIFs come into play, providing a seamless transition from the accumulation phase to the distribution phase of your retirement planning.
The conversion process is straightforward: you can transfer your RRSP holdings directly into a RRIF, typically on a tax-deferred basis. Until you start making withdrawals, you won’t incur immediate tax consequences, allowing your investments to continue growing tax-free.
The Government of Canada has established a schedule that explains the minimum amount you must withdraw from your RRIF based on your age and the value of your account at the beginning of the year. However, note that you can elect to have your RRIF payment calculated based on your spouse’s or common-law partner’s age, rather than your own. This flexibility allows you to adjust your withdrawals based on your changing financial needs and circumstances throughout retirement. It is also worth keeping in mind that withdrawals from your RRIF are subject to income tax at your marginal tax rate. You can learn more about this by speaking with your financial advisor or visiting the Canadian Revenue Agency’s (CRA) articles on the topic.
When you convert your RRSP into a RRIF, although you cannot continue to add to the account, you can continue investing in a wide range of eligible investment products. Examples of eligible investment products might include:
Whether self-directed or via a professional, this versatility allows you to maintain a well-diversified portfolio tailored to your risk tolerance, personal circumstances and investment objectives.
When it comes to receiving your RRIF payments, financial institutions typically offer a variety of options to accommodate your preferences. You can choose to receive payments in:
You can select the frequency of your payments, ranging from bi-monthly to annually. It allows you to align your income stream with your budgeting and cash flow requirements.
There are many other considerations such as spousal or common-law situations, attribution rules and rollback options, fees, and more. It is crucial to evaluate your options and consult with a professional to determine the most suitable approach for your unique circumstances.
While RRIFs are a powerful tool for generating retirement income, they should only be viewed as part of a complete retirement plan. Your holistic retirement blueprint should encompass various income sources, investment strategies, and risk management considerations.
Working closely with a qualified financial advisor allows you to develop a retirement plan that integrates your RRIF with other retirement vehicles. Examples of retirement vehicles are:
Your retirement plan should be tailored to your specific goals, risk tolerance, and lifestyle aspirations. Take some time to think ahead. It will provide you with the financial security and the peace of mind you deserve when you retire.
There are many useful sites and tools, like the Canadian government website, that can help you learn more about RRIFs so you will be prepared for conversations that will help you best manage your retirement.
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The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.
The Essence of RESPs: Securing Educational Futures A Registered Education Savings Plan (RESP) is a tax-advantaged investment vehicle designed to assist families in funding their children’s post-secondary education. This long-term savings strategy empowers parents, grandparents, and other contributors to proactively plan and invest in higher education, be it at trade
A Registered Education Savings Plan (RESP) is a tax-advantaged investment vehicle designed to assist families in funding their children’s post-secondary education. This long-term savings strategy empowers parents, grandparents, and other contributors to proactively plan and invest in higher education, be it at trade schools, colleges, universities, or apprenticeship programs.
Recognizing the significance of accessible education, the Canadian government provides incentives for RESP contributions through grants, making these plans beneficial for families across socioeconomic spectrums. By leveraging the power of compound growth and government assistance, RESPs are a tool for financing educational aspirations and may help reduce the potential burden of student debt.
There are a few things to consider when informing yourself about RESPs:
In this article, we will discuss the types of registered education savings plans as well as government grants. Be sure to monitor Magenta’s social media channels for our next blog on strategies and tailoring your investment.
Characterized by their simplicity, individual RESPs allow anyone to open and contribute to an RESP for a designated beneficiary. These plans offer a straightforward path to educational savings, making them an accessible choice for many families. You cannot have more than one beneficiary on an individual RESP.
Designed to accommodate multiple beneficiaries within the same family, Family RESPs enable parents, grandparents, and siblings to collectively contribute towards the educational pursuits of their related children or grandchildren. This plan type fosters a collaborative approach to investing in the futures of loved ones. However, while you can have multiple beneficiaries on this plan, only the subscriber can make the deposit.
Group RESPs allow a collective of individuals to pool their resources and contribute towards a single beneficiary’s education. This arrangement transcends familial ties, fostering a sense of community and shared responsibility in nurturing the academic aspirations of the next generation. Each group plan is different and has its own rules.
At the heart of an RESP’s effectiveness lies a strategic combination of personal contributions and government incentives, working in tandem to maximize the growth potential of your educational savings.
While RESP contributions are not tax-deductible, they serve as the foundation upon which your child’s educational fund will be built. Contributors can allocate funds annually, subject to a lifetime maximum of $50,000 per beneficiary. To optimize government assistance, it is advisable to contribute at least $2,500 per beneficiary each year. Reaching this threshold unlocks the maximum annual grant entitlement. Subscribers can go back a year to invest the $2,500 per year for their beneficiaries if they miss it. Contact the Canada Education Savings Program (CESG) at 1-888-276-3624 for more information to find out your contribution amount.
The Canadian Education Savings Grant (CESG) is a powerful incentive that matches a percentage of your contributions. For children under 18, the government contributes 20% of the first $2,500 contributed annually, up to a maximum of $500 per beneficiary per year. This grant can accumulate a lifetime maximum of $7,200 per beneficiary, providing a substantial boost to your educational savings.
Moreover, low and middle-income families may be eligible for the Additional CESG (A-CESG), which can add an extra 10% or 20% to the first $500 contributed annually, further amplifying the impact of your contributions.
Furthermore, for families facing financial constraints, the Canada Learning Bond (CLB) offers a non-repayable grant of up to $2,000 for eligible beneficiaries, providing a head start on their educational journey.
Once contributions and government grants are deposited into the RESP, they are invested in various financial instruments, such as mutual funds, stocks, bonds, and guaranteed investment certificates (GICs) etc. This strategic investment approach harnesses the power of compound growth, allowing your educational savings to accumulate markedly over time. Potentially, this could yield substantial returns by the time your child is ready to pursue their post-secondary aspirations.
Finally, according to the new federal budget, from 2029 onward, parents may be required to open RESPs for newborns. Stay tuned in the coming months for more information on RESPs. For more information on the CESG visit their website or call 1-888-276-3624.
The opinions and viewpoints presented in this document are exclusively those of the several writers and do not represent the perspectives of any associated individuals or organizations, including but not limited to the writers’ current or former employers. This article serves purely informational purposes, and the writers have made efforts to verify the accuracy of the information and analysis. The writers take full responsibility for any opinions, forecasts, or predictions made. They do not guarantee the precision or completeness of the document’s contents. This document does not offer professional or investment advice. The writers will not be liable for any consequences resulting from reliance on this piece. Readers should consult with a certified expert before making any financial decisions.
A Mortgage Investment Corporation (MIC) is an investment fund where investors pool their money to lend to borrowers as private mortgages. By adding their money to this pool, an investor purchases shares in a MIC. This is an alternative fixed-income investment: a security which pays investors fixed amounts on predetermined dates.
A Mortgage Investment Corporation (MIC) is an investment fund where investors pool their money to lend to borrowers as private mortgages. By adding their money to this pool, an investor purchases shares in a MIC. This is an alternative fixed-income investment: a security which pays investors fixed amounts on predetermined dates. Most MICs then supplement the pool of shareholder funds by borrowing money from banks in the form of loans, though the precise arrangement varies from MIC to MIC.
This combination of shareholder funds and bank loans is then lent by the MIC to borrowers in turn. Collectively, the agreements of these borrowers to repay the MIC, together with the real estate that serves as these agreements’ collateral, compose the MIC’s mortgage portfolio. When the borrowers make their mortgage payments, any associated fees and interest are cycled back into the fund. This allows the MIC to pay shareholders their dividends, and if the MIC was themselves a borrower, the banks their interest.
MICs are subject to regulatory requirements and oversight, ensuring compliance with securities laws and investor protection. In Canada, MICs have been commonly used for real estate investment since 1985, when they were created as a result of Section 130.1 of the Income Tax Act. This federal statute allows investors to invest in a pool of mortgages.
In Ontario, the Ontario Securities Commission is the regulatory body responsible for the management and operation of MICs. The Income Tax Act requires mortgage investment corporations to distribute 100% of net income, as verified by independent audit, to shareholders by way of dividends. Typically, a Board of Directors provides additional strategic oversight.
Choosing which MIC is right for you is not as simple as who has the highest Return on Investment (ROI). It’s important for investors considering a MIC to carefully assess a corporation’s portfolio composition, track record, and mortgage underwriting process. To learn more, check out our “Selecting The Right Mortgage Investment Corporation” blog post. Similarly, ensure you assess your own overall risk profile before choosing to invest in a MIC. This could involve consulting with a financial advisor or professional to understand the specific details and risks associated with a particular company.
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind.
Investing with Magenta offers:
Magenta has delivered strong returns and a reliable income to our investors. We safeguard capital by applying a risk-mitigated portfolio strategy. We hand-pick our portfolio of residential, primarily first mortgages located exclusively in selected Ontario markets.
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Early on in your journey into alternative investment options, you likely came across the term Mortgage Investment Corporation (MIC). MICs have entered the spotlight in recent years as a key piece in both the wealth accumulation and the wealth preservation strategies of a variety of investors. This surge in popularity can be
Early on in your journey into alternative investment options, you likely came across the term Mortgage Investment Corporation (MIC). MICs have entered the spotlight in recent years as a key piece in both the wealth accumulation and the wealth preservation strategies of a variety of investors. This surge in popularity can be credited to the many advantages this investment format has to offer, such as reduced risk through diversification, as well as strong and reliable rates of return.
Choosing which MIC is right for you is not as simple as who has the highest Return on Investment (ROI).
Here are five factors to consider when deciding to invest in a MIC:
Read the subscription agreement closely to see how quickly you can withdraw your investment. No one wants to be in a situation where they need access to capital but are stuck in a long waiting period to withdraw an investment- and some MICs will only allow redemptions once per year.
Ask for information on the actual ROI vs. target ROI of the past 5-10 years. This will give you a sense of how accurate the MIC is at estimating ROI and indicate if the MIC can consistently meet or exceed target ROIs. While macroeconomic factors such as the Bank of Canada rate directly affect MIC ROIs, it’s still vital to look for trends in the data to determine the growth trajectory of a MIC.
Learn which housing markets you are investing in and what types of mortgages your money is financing. The specific housing markets and types of mortgages that compose a MIC’s portfolio, whether urban or rural, first mortgage loans or second mortgage loans, are important factors that go into how a MIC determines interest rates and subsequently the potential pitfalls associated with an investment. You should find a MIC whose acceptable level of risk matches your own.
Ask when and how dividends are distributed, especially if you plan to reinvest the dividend in the MIC, as the investment is compounded based on a predetermined schedule. Not all MICs issue dividends on the same schedule, some issue monthly, some quarterly, and others annually.
Prudent investors keep tabs on their investments, and prudent MICs know that the best questions are the ones shareholders shouldn’t have to ask. Check to see not only that the MIC reports with clarity and regularity, but that they can handle ad hoc requests for information. You never know when you’ll need to be able to access relevant details related to your investment at a moment’s notice. Your prospective MIC should have an investor relations manager ready to answer questions, provide additional information, or help you understand the product.
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind. Magenta has delivered strong returns and reliable income to our investors while safeguarding capital by applying a risk-mitigated portfolio strategy. The portfolio is constructed of residential, primarily first mortgages located exclusively in carefully selected Ontario markets.
Investing with Magenta offers:
A 30-year track record of reliable income and strong returns.* Summer has begun! Airlines are booked for family vacations abroad while the beaches here in Ontario will host crowds of people. Cottages and campsites will see loved ones enjoying outdoor sports, campfires, and quality time. That’s what summer is all
A 30-year track record of reliable income and strong returns.*
Summer has begun! Airlines are booked for family vacations abroad while the beaches here in Ontario will host crowds of people. Cottages and campsites will see loved ones enjoying outdoor sports, campfires, and quality time. That’s what summer is all about – resetting, clearing our heads and choosing how we want to spend our valuable time and energy – whether that’s through self-care or making memories with loved ones.
But how do we achieve a carefree summer in a world where we are overly scheduled and carrying the mental load of current events, money, and more specifically, investments? We know we should build for our future and our children’s futures, and that pressure can be stressful…but it doesn’t have to be.
Since 1994, our goal at Magenta has been to empower our investors to build for their tomorrows and achieve peace of mind by applying a conservative portfolio strategy to deliver reliable income and strong returns. As one of Canada’s largest and most established MICs, we have maintained our strong track record by financing quality residential real estate in carefully selected Ontario markets.
Continue reading for more information on our performance history, portfolio strategy, examples of financing and fund details, as well as contact information to start investing today!
Investing with Magenta offers:
Performance History
To learn more about investing with Magenta, e-mail shareholders@magentainvestment.ca.
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How We Manage Our Portfolio
We have a risk-mitigated portfolio strategy. This means we know our markets intimately and we assess our borrowers and their homes thoroughly. We acquired this knowledge over three decades and evolved to become industry experts, assuring you and your family peace of mind.
Portfolio Composition:
Examples of Financing
Our Investor Relations Team
Our Investor Relations Team has combined experience of over 60 years in the mortgage and financial industry. Our collective experience includes strategic oversight, operational risk management and building and maintaining client relationships. We pride ourselves on our excellent customer service and operational excellence. This means you have easy access to not only speak with someone but receive best-in-class service and communication that reassures you every step of the way – from the moment you connect with us to the moment you feel like you’ve finally built for your tomorrow.
Big or small, every investment is a step toward your world of possibility. There is no better time to invest in Magenta than now. After all, 2023 is the year of Magenta.
To find out more on how you can invest in Magenta reach out to Allison Daines Allen at shareholders@magentacapital.ca.
Allison Daines-Allen
Manager, Investor Relations
shareholders@magentacapital.ca
Direct: 613-699-4939
Toll-free: 1-888-267-1744
Investment Advisors:
Click here for our subscription forms.
To learn more or speak with someone at Magenta reach out to Greg Sinclair or Daniel Werner:
Greg Sinclair
COO
gsinclair@magentacapital.ca
Direct: (613) 699 4963
Toll-free: 1-888-267-1744
Daniel Werner
Account Manager, Investment Advisors
dwerner@magentacapital.ca
Direct: (613) 699 6485
Toll-free: 1-888-267-1744
*This article does not constitute an offer to sell securities and should be read in conjunction with the offering memorandum dated March 28th, 2023, available for download at this link or from our office. Investors should read the offering memorandum before investing. The foregoing historical performance achieved by the Corporation is not a guarantee of future results.
In addition to obtaining advice from your financial advisor, performing your own due diligence is a first step to investing. Beyond the Mortgage Investment Corporation’s (MIC) own publicly available information, it’s prudent to look at external, unbiased sources of information to get a clear view of where exactly you are
In addition to obtaining advice from your financial advisor, performing your own due diligence is a first step to investing. Beyond the Mortgage Investment Corporation’s (MIC) own publicly available information, it’s prudent to look at external, unbiased sources of information to get a clear view of where exactly you are putting your hard-earned capital.
In our previous post, Investor Tips: Selecting the Right MIC, we focused primarily on information that the particular MIC provided: offering memoranda, subscription agreements and associated fees, liquidity, portfolio composition, how dividends are distributed, frequency and transparency in reporting to shareholders, etc. With that context in mind, this entry looks at building a more complete picture of your potential investment by looking at external sources of information.
Without further ado, here are some great places to gather information and properly vet a MIC:
First off, CMHC has a superb collection of data that is regularly updated and analysed by leading economists. Of particular interest to investors is the Housing Market Information section of the website: included are data sets and reports that range in scope from the national housing market to more local housing markets to even more granular neighbourhood details. You can use the information here to evaluate the MIC’s lending policies against your own appetite for risk. For example, you notice that a sizable chunk of the MIC’s portfolio is allocated to higher risk rural properties. Then, using CMHC’s data sets, you can see that the market outlook for these regions is not ideal. While the potential return is high, you decide it isn’t worth the risk and continue your search.
CMHC’s housing portal is an invaluable resource used at all levels of the industry. Best of all? It’s free.
Try using a keyword search with Google’s handy News filter to get a feel for how the housing market you are interested in is performing. For example, “Ottawa Housing Market” pulls up plenty of relevant articles from reputable sources. Furthermore, ou can even set a custom Time filter via search tools to focus your research on a specific time period. While National publications such as the Financial Post or The Globe and Mail do a fantastic job of covering broad housing market news, they are inherently focused on only the big stories (read: major urban centres such as Toronto, Vancouver, and Montreal). It’s important to go to local sources for specific details on a given market.
While slightly less focused than CMHC’s or CREA’s analysis, Stats Canada has a breadth of information on housing and other indicators of economic growth to help inform your decision. Pro tip: use Google to search for region specific data sets. StatsCan’s website is notoriously difficult to navigate.
Websites such as Mortgage Broker News and Canadian Mortgage Trends offer a lot of insight into how professionals in the industry are reacting to industry changes and new MIC products.
CREA provides monthly updates on home sales and home prices for a given housing market. Once you’ve navigated to their statistics page, select the community you want to research and a report for the previous month will appear. Along with the tools above, this creates a detailed picture of where a potential MIC would be lending your capital.
These are just a few resources to help jumpstart your own research. Ultimately, the basis for any investment decision needs to be rooted in a methodical approach to understanding an investment product.
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Magenta is one of Canada’s leading residential, private MICs. Since 1994, we’ve specialized in flexible mortgage solutions for Ontarians who fall just outside of bank lending criteria, while delivering on strong, consistent returns for shareholders across Canada. Our goal is to empower our customers, partners and employees to build a better tomorrow.
For more information, visit www.magentacapital.ca.