The Plan by Investors Group^TM

A healthy lifestyle – More than just carrots and yoga

Balanced meals. Portion control. Jogging. Yoga. Pilates.

Many of us work hard to maintain our health and ensure our lifestyle is not marred by illness or injury. We want to feel good about ourselves and enjoy the best quality of life possible.

Whether it be family car trips to the mountains or a lazy week at the cottage, our well-being depends on a number of considerations. That’s why every year we spend money to protect assets such as our car, home and cottage against unforeseen events. But what about ourselves? What about our health and our ability to earn an income?

Why do so many of us leave our most important asset unprotected?

According to the Canadian Fitness and Lifestyle Research Institute, 70 per cent of us maintain regular physical activity in addition to eating well. It seems we care about our well-being; so why is it that, according to a national poll conducted by Decima Research, less than 5 in 10 Canadians are proactive with their financial fitness?¹ What many people don’t realize is that if you’re 30 years of age, and earn $4,000 a month, you could earn approximately $3 million over the course of your career, assuming you work until you are 65. That’s $3 million to enhance your family’s lifestyle, put your children through university and save for retirement.

So what happens if we suddenly find ourselves unable to work?

Protecting your financial fitness

We’d all like to ensure our family’s income stream and dreams for the future are protected in case of accident or illness. This means that, when faced with an unforeseen disability, instead of using savings, withdrawing from RRSPs, taking out a mortgage (or second mortgage) on our home or selling assets, an alternate source of income is available.

Let’s look at an example. You and your spouse are in your early forties, you each earn about $40,000 per year and you have an RRSP portfolio worth $135,000. One weekend, doing maintenance work around the house, you fall off a ladder and seriously injure your back, putting you out of work for six months.

During your time off, you find the need to supplement your spouse’s income with an additional $2,000 per month and you decide to pull this from your RRSP. What does this mean to your retirement nest egg?

Assuming you are in a 40 per cent marginal tax bracket, you need to withdraw $3,350 from your RRSP to get $2,000 after tax. If you do this for six months, you’ve withdrawn $20,100 from your RRSP.

But that’s not the total cost of the RRSP withdrawal. If you are 41 years of age and intend to work until you are 65, you and your spouse have lost 24 years of tax deferred investment growth on your $20,100 RRSP withdrawal. At an average annual rate of return of 8 per cent for 24 years, a $20,100 RRSP withdrawal means your RRSP is worth $127,458 less at retirement. That’s a significant derailment from your future plans for one small slip off a ladder.

Which raises the question: why leave it up to chance? Why not give ourselves the same consideration we give our cars and our homes?

¹ The Decima data was gathered between October 20th and October 30th, 2006, through Decima eVox, the company’s large national online panel. Results are based on a sample of 2,170 Canadians and the corresponding margin of error is 2.2%, 19 times out of 20.

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This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.