Harvest Moon Insurance

MORTGAGE

Interest paid on a residential mortgage is not tax deductible (unless the mortgage money was used to invest in a business, however, this is not usually the case as most mortgage loans are used to purchase the family home).
Interest paid on the mortgage, therefore, is usually paid with "After Tax Dollars".
One of the best investments you can make is to pay down the principal on your mortgage.

EXAMPLE

Assume:

The interest paid on your mortgage is 9%.
The interest portion of a monthly mortgage payment is $1,000.
Your marginal tax rate on your income is 40%. To pay the $1,000 of interest on your mortgage, you have to earn $1,666, pay tax at 40%, which equals $666, leaving $1,000 for the mortgage interest.
The interest portion, will have cost $1,666 of your "before tax income".
Now, if $1,000 represents 9% interest- the interest charged on your mortgage, then $1,666 represents 15%.
Paying down the principal of a 9% mortgage, is equal to investing money for a return of 15% and is RISK FREE!

YOU NEED A TAX SHELTER:

Saving in an R.R.S.P. marginal Tax Rate of 40%

Inside an R.R.S.P.	Outside an R.R.S.P.
$3,000 available each year, as the deposit is tax deductible, and 10% interest will compound tax free for 20 years.	$1,800 available each year as $1,200 is paid in tax. The interest is not sheltered, but taxed at 40%. The funds compound at 6%.
Account value after 20 years=$171,825 taxable when withdrawn with balance on deposit sheltered from tax.	Account value after 20 years=$66,215 tax free when withdrawn but balance on deposit subject to tax on interest.

Combining an R.R.S.P. and paying down your mortgage:

Assume:

A 40% marginal tax rate.
Mortgage interest rate of 9%.
$7,500 available to invest.
Deposit $7,500 into your R.R.S.P. and reduce your income taxes by $3,000 (40% of $7,500).
Use the $3,000 of tax savings to reduce the principal on your mortgage.

Result:

You effectively have $10,500 working for you compared to $7,500 of all of your money had been used to pay down the mortgage.

If you paid $3,000 off the principal and maintained the same monthly payment you would reduce your payment period by 20 months, saving $19,040.
If you did this each year the benefit would compound.

STEP 1

Purchase Life Insurance, Critical Illness Insurance, Disability Insurance. Transfer these risks to insurance companies.
You are really sharing this risk with other policy holders, there is a large discount given to each policy holder as some will cancel their coverage, and the insurance company will get off the risk.
This means purchasing these coverages is a bargain for those who keep their policies.

STEP 2

Implement a savings strategy to provide educational savings for your children and your own retirement.
Your Ten Star Representative can put together a custom made portfolio which meets your investment horizon and risk tolerance.
An automatic monthly deposit reduces volatility and gives you the benefit of a dollar cost averaging.