Exploring the Benefits of Segregated Funds: 6 Key Questions Answered

Wondering if segregated funds can meet your savings needs? Here are 6 answers to questions you may have.

1. What is a segregated fund?

A segregated fund is an insurance product exclusively distributed by insurance companies. It is similar to a mutual fund but provides, among other features, protection against market downturns, by potentially ensuring 75% to 100% of the invested amount at maturity or death.

2. Why choose segregated funds over mutual funds?

In addition to possible capital protection at maturity and/or at death, segregated funds can offer many unique advantages, including:

• No probate fees for estate settlement

• Protection against creditors in case of bankruptcy or lawsuits

• Protection for gains, thanks to resets

• Simplified tax returns for investments

• Quick estate settlement thanks to beneficiary designation

Some fund series also offer the possibility of guaranteed income for life.

3. Who are segregated funds for?

Segregated funds are for people of all ages. However, they can be a particularly interesting option for:

• People approaching retirement who want to protect their retirement savings

• People who want to simplify the transfer of their estate to their heirs

• Self-employed workers or small business owners who want protection in case of bankruptcy or lawsuits

• Anyone looking for financial peace of mind

4. Do segregated funds offer good potential for capital growth?

Yes! As with mutual funds, the growth potential depends on the funds you invest in, based on your investor profile.

In any case, to optimize your growth potential, the most important things you can do are:

• Get good advice and invest based on your investor profile

• Invest in well-managed funds

• Diversify your investments

5. Is it possible to avoid certain fees by investing in segregated funds?

Yes. The advantage of designating a beneficiary means that you may not have to pay certain fees related to estate settlement (such as probate fees, professional fees and legal fees) when transferring money out of a segregated fund.

Based on your province of residence, these fees can add up to a significant amount and make a big difference in the amount of inheritance left to your loved ones.

6. What is the management fee breakdown for segregated funds?

The management fee breakdown is exactly the same as for mutual funds (management fees, advisory service, taxes, etc.). The only difference is regarding fees for the exclusive benefits that segregated funds provide. This portion of the fee varies based on the type of fund and the series (guarantee) chosen.

You may also be able to take advantage of reduced fees thanks to preferential pricing that applies once your assets reach the threshold for eligibility

If you have more questions about segregated funds or how they apply to your unique financial situation, don't hesitate to reach out to book a complimentary Discovery Call with Jen today.

Reference: https://ia.ca/advice-zone/finances/segregated-funds

Disclaimer:

The information provided in this blog post is for general informational purposes only and should not be considered as professional financial advice. The content of this blog post may not be suitable for every individual's financial situation or goals. It is important to consult with a qualified financial professional or advisor, like Jen at Thaker Financial, before making any financial decisions or investments.

While the author strives to provide accurate and up-to-date information, she cannot guarantee the completeness or accuracy of the content. Financial markets and regulations are constantly evolving, and readers should independently verify any information presented here and consider it in conjunction with their own research and analysis.

The author and Thaker Financial shall not be held responsible for any losses, damages, or liabilities that may arise from the use or reliance on the information provided in this blog post. Readers are solely responsible for their own financial decisions and should exercise caution and due diligence before taking any actions based on the content presented here.

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