Insurance, Investments and Group Benefits

In my last post, I shared the issue of naming an adult, independent child as a beneficiary of a registered retirement plan, (either a Registered Retirement Savings Plan or a Registered Retirement Income Fund (income version). (see Registered Retirement Plans with Named Beneficiaries: Unintended Consequences ) You may wish to avoid paying probate and estate costs on your plan. You may want to make the transfer as seamless and efficiently as possible. You may want to leave someone something extra. One issue is that the person receiving the money usually pays no tax. The estate usually pays the tax. The Canada Revenue Agency first looks to the estate to pay any income taxes owing. Only when there are insufficient monies in the estate, does the Canada Revenue Agency assess the beneficiary of the registered retirement plan for any balance owing. That means the beneficiaries in the will shoulder the tax bill. Is that the intention?

Let’s say you’re single, divorced or widowed. You have saved up some money for retirement. Perhaps you are already retired and are taking out an income from your registered plan. You may not get to spend all of your savings during your lifetime. Where does the balance go?

The European Central Bank (ECB) announced a number of new policy initiatives on March 10, including:

Global stock market volatility accelerated in recent days on renewed global economic weakness concerns. Continued economic and stock market weakness in China has received much of the blame for the recent volatility. Last week’s devaluation of the Chinese renminbi against the U.S. dollar was an attempt by the Chinese government to boost exports, but may also signal an economy that is weaker than official reports indicate.

The old proverb “may you live in interesting times” certainly applies to the bond market these days. It has been an extremely volatile year so far, with Government of Canada 10yr bond yields dropping from 1.80% at the start of the year to a low of 1.24% in February. But since then they’ve bounced right back up to around where they started!

Some of my fellow blog writers have previously commented on the benefits of downside protection through the teams’ value oriented approach to investing. For example, Nessim Mansoor wrote about Rule #1 and Gaelen Morphet wrote about The Asymmetrical Nature of Risk and Return. Today, I’d like to look at it from an asset allocation point of view.