3 Investment Tips for Millennials

 

 

Let’s be honest, investing isn’t always easy – at least it doesn’t always seem that way. With so many different options available on the market (from mutual funds to stocks), choosing the best strategy can be overwhelming. That’s where the assistance of a financial advisor comes into play.

 

It’s very easy to get caught up in hot tips, news headlines and guidance from family and friends. It seems like everywhere we look someone is giving millennials investment tips. The truth is finance is personal, and that’s why it’s so important to get tailored advice from a professional. With that being said, there are some pieces of advice that all young investors should know.

 

Here are three investment tips for millennials who want to start investing:

 

Start as early as possible

 

Yes, that’s right, young people should have started investing way before they were coined as millennials. As soon as you have an income (no matter how big or small) a portion of your paycheque should go into savings.

 

Thanks to a little thing called compound interest there are big benefits for millennials who start investing early. Compound interest helps your investments grow faster because your monthly earned interest (or dividends or capital gains) is reinvested back into your account. Therefore, the next month you earn interest on the previous month’s interest and so on for years to come. It’s brilliant.

 

Think long term with your strategy

 

According to Forbes, investing for the long term helps millennials see the bigger picture when it comes to risk versus reward in your portfolio. “Risk is kind of like that friend who regularly cancels plans but always comes through in a pinch. There might be heartache in the day-to-day, but in the long run, you’ll be glad you stuck it out.

In investing, more risk means the potential for more reward. Could you lose money and never collect that premium? Sure, but that’s unlikely when you’re in it for the long-term.”

 

Be honest with your financial advisor

 

Professional advice can help find an investment strategy that fits your individual plan, financial capabilities and life goals. However, that can only happen if you are completely honest with your advisor.

 

Think of a financial advisor as your financial doctor, they can’t totally assess the situation and provide a recommendation until they have all the information. This includes your short term and long-term goals, tolerance for risk, time horizon and general knowledge of the investing world.

 

If you have questions about investing or want to start investing but don’t know where to begin, I’m happy to help. Let’s chat about your goals and investment options for millennials.

 

*This content was originally created by Manulife Securities for information purposes only. It has been distributed for advisor publication.*

How tax and other changes coming Jan. 1 will affect your wallet

Published by on

New employment insurance rules, cancelled tax credits among changes for 2017

 

By CBC News Posted: Dec 31, 2016 5:00 AM ET Last Updated: Jan 01, 2017 11:37 AM ET

 

There were plenty of changes in 2016 as the Trudeau government put its priorities in motion.

 

When Canadians file their taxes this spring, they'll calculate how new tax rates and child benefits worked out for their household.

 

But the changes don't stop there. The start of 2017 brings a bunch more.

 

Here's some of what to expect.

 

More carbon pricing

 

Some Canadians already feel the effects of the fight against climate change in their wallets.

 

B.C. residents have paid a carbon tax since 2008. Quebec residents have absorbed the cost of that province's cap-and-trade system since 2013

 

As of Jan. 1, the prevalence of these kinds of costs expands, particularly in two provinces, as federal and provincial emissions reduction plans ramp up.

 

In Alberta, there's a new carbon tax.

 

Emissions from burning fossil fuels will be taxed at a rate of $20 per tonne. That increases to $30 per tonne in 2018, and Premier Rachel Notley's government is expected to keep moving towards the federal goal of $50 per tonne by 2022.

 

How much will that cost an Alberta household? Try CBC's carbon tax calculator.

 

Drivers in Alberta and Ontario will pay more at the pump for gasoline, as new carbon emissions reduction measures begin to bite. (Nathan Denette/Canadian Press)

 

Ontario's alternative plan — a cap-and-trade scheme that auctions off pollution credits to offer a financial incentive to reduce emissions — also kicks in. 

Its overall impact remains to be seen. But Premier Kathleen Wynne's government has warned consumers the system may add about $5 a month to home heating bills and about four cents per litre to the price of gasoline. 

 

Payroll deduction changes

 

Here's what to look for on your first pay stub in 2017.

 

Employment insurance (EI) and Canada Pension Plan (CPP) deductions will reappear on the paycheques of workers who maxed out their deductions part way through 2016.

 

But the move to a new, seven-year "break-even" calculation for EI premiums could bring savings worth up to $118.85 annually for those making $51,300 or more.

 

Previous premiums, set at $1.88 per $100 earned, were delivering more revenue to the government than it required to administer and pay benefits. A new, lower premium was announced in September for workers ($1.63) and employers ($1.63 x 1.4 = $2.28). Some small employers qualify for an additional premium reduction.

 

Federal tax brackets and several kinds of deductions are indexed to inflation, which means that even if a salary hasn't changed, an employee's bottom line might. (Graeme Roy/Canadian Press)

 

In Quebec, where EI works differently, 2017 premiums will be $1.27 per $100 of earnings, down from $1.52. Quebec residents covered under the Quebec Parental Insurance Plan (QPIP) will see their premiums reduced by 36 cents. 

 

The lower payroll deductions may translate into $955 million in savings for employees and their employers. (That's also less revenue for the federal government to balance its books.)

 

The maximum annual insurable earnings for both EI and CPP are indexed to inflation and will increase slightly in 2017.

 

That translates into deductions of up to $836.19 for EI and $2,564.10 for CPP.

 

That CPP premium has risen by $19.80 for those making $55,300 or more — partly offsetting the savings from the EI premium cut. 

 

The agreement between the federal government and the provinces (excluding Quebec) to enhance the CPP won't be felt until 2019, when contributions begin rising over seven years at levels beyond this year's adjustment for inflation. 

 

 

Workers may also notice the effects of indexation on the amount of federal tax deducted from their pay. Federal income tax thresholds, the basic personal amount and several other credit amounts, will increase by 1.4 per cent for 2017. 

 

The new calculation for EI premiums could bring savings worth up to $118.85 for workers making $51,300 or more. (Carlos Osorio/Associated Press)

 

Shorter waiting period for EI

 

The two-week waiting period before EI benefits, including special benefits for maternity or disability leave, start paying out will be reduced to one week starting Jan. 1. 

 

Employers that co-ordinate their benefits with EI may need to adjust for the shorter wait time.

 

Self-employed workers who opted in to the EI system and wish to draw on special benefits in 2017 will need to have earned a little more in order to qualify: the annual earnings requirement increases to $6,888, up from $6,820 in 2016.

 

Tax credit elimination

 

Several federal tax credits have been eliminated for 2017. (That doesn't mean you can't claim them one last time this spring on your 2016 tax return.)

 

Federal textbook and education tax credits have been eliminated because they're not targeted based on income — income-targeted policy has been a priority for this Liberal government. Leftover amounts from these tax credits carried forward before 2017 can still be claimed in subsequent years.

 

The tuition tax credit remains unchanged.

 

Federal textbook and education tax credits have been eliminated, but the tuition tax credit remains. (CBC)

 

The children's fitness and arts credits are eliminated for 2017, after being cut in half for 2016.

 

 

The federal credit for labour-sponsored venture capital corporations has also been eliminated, although a federal tax credit for provincially registered corporations was restored in 2016 and is worth up to $750.

 

Life insurance tax changes

 

A bill passed under the previous Conservative government in 2014 to "modernize" the taxation of life insurance policies also takes effect Jan.1. The delay gave Canadians planning their retirements and the insurance industry time to prepare for the change.

 

In simplest terms, the changes impact the total amount of money that can accumulate in a life insurance policy that gets preferential tax treatment. The changes aim to differentiate between protection-oriented policies and investment-oriented policies. 

 

Policies issued prior to Jan.1 are "grandfathered," so the changes won't retroactively affect retirement plans unless changes are made after this date, such as converting to another type of policy coverage.

 

The amount of tax paid on a prescribed annuity is changing, as the Canada Revenue Agency updates its tables to reflect longer expected lifespans. Annuities bought before the end of 2016 could provide higher after-tax income than those purchased later.

And don't forget: after rising to $10,000 in 2015, the limit for contributions to a tax-free savings account dropped back to $5,500 and stays there for 2017.