Tag Archives: retirement plan

Jennifer Jacobs – The Steady Increase in Cost for Long-Term Care Insurance

In this video, I speak to Jennifer Jacobs, President of LTCI Consulting Inc. to chat about the expectation of changes of living benefits / life insurance, in terms of what we see in the market place and what we can do to take advantage on what is available today.

IRONSHIELD Financial Planning’s “Fly On The Wall” update call.
These calls are recorded by Scott Plaskett and allow you to get a behind-the-scenes look at one of his professional update calls. Watch and listen as a “fly on the wall” and get some of the most valuable information you will find on the Internet.

The Canada Pension Plan—When Is the Right Time for You?

When it comes to the Canada Pension Plan (CPP), it really is a matter of deciding when to take it. While there is no rule of thumb, there is a specific answer for each person. In today’s blog post, I will give a quick overview of what the Canada Pension Plan is, and show you how to find the right time to collect this retirement pension.

What is the Canada Pension Plan and who is eligible?

The Canada Pension Plan is a retirement pension that provides a monthly taxable benefit to retired contributors.

To be eligible for the CPP, there are three qualifications:

1. You must have worked in Canada
2. You must have made at least one contribution to the CPP
3. You must be at least 60 years of age



When can you begin to receive your Canada Pension Plan?

The earliest you can begin to receive your CPP is at the age of 60. However, the standard age to start is 65, and there are definite advantages if you choose to defer collecting your pension. From 2012 to 2016, new rules in the Canadian government state that the early pension reduction will gradually be increased from 0.5% to 0.6% per month if you take it before the age of 65. This means that by 2016, if you are at the age of 60 and decide to collect your pension, you will be penalized and your pension amount would be 36% less overall than it would have been if you had taken it at the age of 65.

If you choose to delay receiving your CPP, the latest you can defer taking it is at the age of 70. Under the new rules, for every month you elect to wait past the age of 65, you will receive an enhancement of 0.7% per month. This means that if you choose to collect your CPP at the age of 70, you will receive an overall enhancement of 42% enhancement to your pension.

Tips

1) Get an estimate of what your pension is going to be.

If you are approaching retirement, it is important to obtain an estimate for your pension. Try using the Canada Retirement Income Calculator to help you get started.

2) Consider all the factors before deciding to take your pension.

  1. Are you still working and contributing to the CPP? Continued contributions will enhance your CPP when you decide to collect.
  2. How long have you contributed for? The longer you contribute, the more you will receive.
  3. What are your other sources of retirement income? CPP income is taxable income. By collecting your pension early, this means that adding more income to your plan could push you into a higher tax bracket. If you don’t need the extra income, avoid this step.

3) Recognize that your health may play a role in helping you decide to collect your CPP.

If your health is poor, you may want to start collecting early to ensure you receive as much benefits throughout your lifetime as possible. Remember that the earliest you can start to receive your CPP is at the age of 60. Sometimes, this may be a better option for you.

4) Be very, very clear on what your retirement plans are.

Ask yourself: do I want to retire? Do I need to retire? Just because there is money available to you, it doesn’t mean you have to accept it. You can wait and defer it until you are 70. Knowing what your retirement plans are is very important because it will help you get a better idea of when the right time to collect is for you.

5) Find out if it is better or worse for you if you delay receiving your pension.

If you stop working at the age of 60, but defer collecting your pension until 65, you must take into account the extra five years of no income. In essence, you are lowering your average wage over the life of the plan by including these zero income years, which will likely reduce your overall CPP benefit.

As I said in the beginning, there is no rule of thumb when it comes to knowing when to apply for your Canada Pension Plan, but there is a right answer for you. You can begin by collecting your CPP only when you need to, and not before, but the most important thing to remember is to always assess your situation in conjunction with your overall financial plan. Financial planning is key because it allows you to work with a CFP and come up with a comprehensive plan that will show you how the different scenarios in life could affect your finances in the future. For example, if you are wondering what would happen if you start collecting your CPP at the age of 65, your CFP could model that out for you so that it becomes clearer.

Financial planning is so critical to your future and a key component to making good decisions. Head over to our website to check out the different tools and resources we have to offer, including your report on the 12 Key Questions You Must Ask a Financial Planner before You Hire One, and work with your financial planner today to talk about your Canada Pension Plan.

Related Links
Choosing a Financial Planner
https://www.ironshield.ca/landing/how-to-choose-and-work-with-a-financial-planner-you-can-trust/

Mistakes in Retirement Planning
https://www.ironshield.ca/articles/four-mistakes-to-avoid-when-creating-a-retirement-income-plan/

Canada Pension Plan—Changes to the Rules
http://www.servicecanada.gc.ca/eng/services/pensions/cpp/retirement/age.shtml

Four Mistakes to Avoid When Creating a Retirement Income Plan

Today, I want to talk about the four common mistakes that retirees should avoid making when creating a retirement income plan. These are:

  1. Not factoring in inflation

  2. Not factoring in income taxes

  3. Poor structure of investment management fees

  4. Believing in the myth that your fixed income exposure needs to match your age

First, let’s begin with the mistake of not factoring inflation into your proposed retirement income needs. It is extremely important to consider inflation because how long your money lasts is a direct result of how much it is going to cost you to live your life each year.

For example, you determined that life is going to cost you $5,000 each month. This amount will be used towards food, clothes, etc. But don’t be fooled into thinking that this is the same amount of money that you will need in the future. Things will get increasingly expensive, and your cost today is not going to match your cost tomorrow.

During your working years, it is much easier to anticipate inflation, and most salaries keep pace with the general increase in prices. However, inflation can become a real problem when you are on a fixed income, and your standard of living can be affected if you haven’t properly planned for it. If we factor a Canadian average inflation of 2% a year into the above example of $5,000, it will cost you $7,430 a month to live the same life in the future.

In addition to the effects of inflation, mistake number two is not factoring in income taxes. If you need $5,000 a month to cover living expenses, you will need to withdraw more than that amount in order to have enough to pay the income tax bill as well. Failing to factor income taxes into the retirement plan could exhaust your portfolio before expected.

The third mistake to avoid when creating a retirement income plan is to make sure you are not poorly structuring the investment management fees that are paid to your investment management team. Chances are you’re investing in mutual funds, and will need to pay a fee to the mutual fund company for their services. On average, you would pay 2.5% for this fee. What this means is that if your portfolio generates an 8% gross return, you would only see 5.5% instead.

There is a little trick that I would recommend to reduce the impact of the management fee without changing your portfolio. Instead of having the MER paid before you see your distributions, you can ask your advisor to have the fee unbundled. This means that they will first pay the full 8% gross return generated, and then subsequently charge the management fee. By separating the two, you will be able to earn a tax deduction for the amount that you paid for investment counselling as dictated by the CRA.

Lastly, the final mistake to avoid is thinking that you need to match the percentage of your portfolio allocated to fixed income to your age. For example, it might seem logical to have the majority of your portfolio in bonds at an elder age. However, you will be setting yourself up for a major drop in income due to the low return expectations on fixed income, making it more difficult to counter the combined effects of fees, inflation and taxes that I mentioned earlier.

No matter your age, a sound asset allocation program starts with one’s net worth, expected income needs and risk tolerance. Everyone’s circumstances are different and believing in the myth could lead to underperformance and interfere with you achieving your financial goals.

I strongly invite you all to make sure that you account for these four variables when creating a retirement income plan. Contact your investment advisor to adjust the way you pay your portfolio’s management fee. Make smart choices when planning for your future.

Charles Wilton – Why Buy Everest Reinsurance

Charles WiltonIn today’s episode, I chat with Charles Wilton, Portfolio Manager with the Private Investment Management Group at Raymond James.  We talk about the recent changes in his portfolio and why he decided to buy Everest Reinsurance.

IRONSHIELD Financial Planning’s “Fly On The Wall” update call.
These calls are recorded by Scott Plaskett and allow you to get a behind-the-scenes look at one of his professional update calls. Watch and listen as a “fly on the wall” and get some of the most valuable information you will find on the Internet.

9 Things You Need To Know Before You Can Retire Comfortably

For many people, long gone are the days when you can retire from your job with the pension that your employer provides. Today it is important to have your own plan. It is all about taking control of your financial future and there a few steps you should take to help you achieve your retirement goals.

Here are nine things I think you need to know before you can retire comfortably.

1. What is your net worth today?
This is really the foundation of all financial planning. You need to understand your net worth in order to move forward. I suggest you make a list on one page everything you own; houses, cars, investment accounts, retirement accounts and education plans. Then take a look at your expenses or your liabilities; what do you owe? Now take your assets and subtract your liabilities and that gives you your net worth.

2. Where is all your money going to come from?
I want you to make another list here of where your retirement income is going to come from; retirement accounts, pension plans, government pensions and inheritances. We don’t need to know what the income is going to be only what the sources are.

3. What are your retirement expenses going to be?
You want to get very clear about what your expenses are now and what they are going to be moving forward.

4. What is your debt management plan?
So if you’re going into retirement and you’re going to be carrying debts, you really want to get a clear plan in place to get rid of those debts.

5. What does your base plan look like?
A base plan is a plan that lays out all of your information (your assets, your liabilities, your retirement income, your retirement expenses) and puts it into a system so you can get a clear picture of where you are today. This step helps answer the most important question can I retire with the lifestyle I’ve become used to?

6. What if scenarios.
I want you to think about and prepare for all eventualities in this step. For example, what if I really don’t like my job and I really want to retire five years earlier? Or what if we decide to downsize and maybe buy a summer home somewhere? All of these variables need to be worked into the plan.

7. What kind of planning are you doing?
There are two types of planning to consider here; goals based planning or cash flow based planning. Goals based planning provide you a clear idea of what you need to do to retire at a certain age within a certain level of income. Cash flow based plans do a much better job of mimicking your actual retirement income and the taxes associated the cash from your plan.

8. What about risk management?
This is important because when you are talking about financial planning there are three eventualities to consider. The first is you’re going to live a long healthy life. The second eventuality is you are going to live a long, unhealthy life. The third is you are going to die prematurely. We want to make sure all of our plans can sustain the level of income we will need to deal with all the eventualities.

9. Estate Planning
So what is going to happen to your family’s wealth when you die? What happens if both spouses die? Are you planning on leaving your wealth and assets to your children? We really want to be focusing on the efficient transfer of wealth from one generation to the next. If you want more information on estate planning, check out my recent post Keeping Your Cottage In The Family – Mistakes To Avoid.

Being able to retire comfortably takes planning. There is no doubt there is a lot to think about. A good financial planner can help you go through the steps so you can get clear on what you need to do to retire the way you want to. For more information on planning your retirement, check out my post Make Retirement The Time of Your Life: Ask Yourself Three Questions

If you are not sure where to turn, the team at IRONSHIELD Financial Planning can help. And of course take a look at this comprehensive and free Consumer Awareness Guide I wrote How to Choose and Work With a Financial Planner You Can Trust.

Do you know your CUF:CAC ratio?

Republished with permission from Built to Sell Inc.

The most powerful metrics in any business are ratios that express your performance on metric A as it relates to metric B. For example, knowing what your revenue was last year is interesting; but knowing what your revenue per employee was will give you a sense of how efficient your business is at leveraging your investment in people.

If you’re a retailer, knowing what your sales were last year is far less useful than knowing what your sales per square foot were, as this measures your effectiveness at leveraging your investment in retail space.

One of the most important ratios to keep an eye on is your ratio of CUF:CAC. CUF stands for Cash Up Front, and it is the amount of money you get from a customer when they decide to buy. CAC stands for Customer Acquisition Cost, and it is the amount of money you need to invest in sales and marketing to win a new customer.

Improving your CUF:CAC ratio can ensure that you have the cash to grow your business without having to rely heavily on outside sources of capital.

HubSpot

To understand the CUF:CAC ratio, let’s first look at HubSpot.com. HubSpot is a software business that provides a platform for businesses to manage all of their marketing. HubSpot allows businesses to build a website, set up a blog, manage their social media accounts, create email marketing campaigns, and analyze it all through a single dashboard. It’s an all-in-one marketing platform for businesses, and HubSpot’s typical customer is a small to mid-sized company that needs to present a professional online image but doesn’t have the necessary internal resources or the budget to hire a team of designers.

According to a recent article in Forbes, HubSpot invested an average of $6,793 to win a new customer in Q2 2012. Their average customer paid $577 per month for access to the software, so if HubSpot had charged its customer just the monthly subscription fee, their CUF:CAC ratio would have been an abysmal .084:1.

But obviously HubSpot is in the subscription business, so they get $577 per month, and their average customer stays with HubSpot for more than three years, so they clearly recover the cost of acquisition over the lifetime of the customer. However, if they hadn’t had a strategy to improve their initial CUF:CAC, they would have required a boatload of money from outside investors.

To improve their CUF:CAC, HubSpot sells an “Inbound Marketing Success Training” package and charges new customers $2,000 to recover some of the costs of getting them set up. By charging $2000 upfront for the training package, their CUF:CAC ratio goes up to a much more respectable .37:1.

Forrester Research

To understand a company with an excellent CUF:CAC ratio, take a look at Cambridge, Massachusetts-based Forrester Research. Forrester’s primary business is selling syndicated market research on a subscription basis to billion-dollar companies. Founded in 1983, today Forrester generates roughly $300 million dollars in revenue from 2,451 customers, including 38 percent of the Fortune 1000.

Their core product is called “RoleView,” and for around $30,000 per year, Chief Information Officers (CIOs) and Chief Marketing Officers (CMOs) can get research insights delivered to them based on their functional role within their company. Each RoleView subscription typically includes access to research, membership in a Forrester leadership board where peers discuss issues they have in common, phone and email access to the analysts who perform the research, unlimited participation in Forrester Webinars, and the right to attend one live event.

Unlike HubSpot that primarily charges by the month, Forrester RoleView subscriptions are mostly charged annually, upfront. Subscribers get an entire year’s worth of their customer’s money in advance, giving them a positive CUF:CAC ratio. George F. Colony, CEO and Chairman of Forrester, revealed the benefit of charging upfront for subscriptions in his letter to shareholders in early 2013. He concluded: “Forrester’s business model yields healthy levels of free cash flow. We typically carry between 50 and 100 million dollars in cash.”

Your CUF:CAC ratio is all about improving the cash flow in your business, which is one of the eight key drivers of Sellability.

Why not find out now if your business is sellable?

This free online tool is the only no-risk step you can take to determine if your business is ready to get full value. Fast-track your analysis by taking advantage of this free, no-obligation free online tool.

This Sellability Score you instantly receive is a critical component to any business owner’s complete financial plan and is something that, until now, we have only made available to existing clients.

However, we recognized that there is value in knowing in advance of working with a financial planner whether or not your largest asset is ready to be exchanged for your retirement nest egg. Our view is that you are better to learn more about your businesses sellability today and find out how your business scores on the eight key attributes so that you can ensure you obtain full value.

If your business part of your retirement plan, finding out your sellability score will be the best 10 min. you could ever spend working “on” your business.

Take the Quiz here: The Business Sellability Audit

Sellability ScoreFor more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

Growth vs. Value: not all revenue is created equally

Republished with permission from Built to Sell Inc.

When you look ahead to next year, will your growth come from selling more to your existing customers or finding new customers for your existing products and services?

The answer may have a profound impact on the value of your business.

Take a look at the research coming from a recent analysis of owners who completed their Sellability Score questionnaire. We looked at 5,364 businesses and found that the average company that had received an overture from an acquirer was offered 3.5 times their pre-tax profit.  When we isolated just the businesses that had a historical growth rate of 20 percent or greater, the multiple offered improved to 4.3 times pre-tax profit, or about 20 percent more than their slower growth counterparts.

However, the real bump in multiple came when we isolated just those companies that claim to have a unique product or service for which they have a virtual monopoly. The niche companies enjoyed average offers of 5.4 times pre-tax profit, or roughly 50 percent more than the average companies, and fully 20 percent more than the fastest growth companies.

Nurture your niche

Chasing “bad” revenue by offering a wide array of products and services is common among growth companies. The easiest way to grow is to sell more things to your existing customers, so you just keep adding adjacent product and service lines. But when a strategic acquirer buys your business, they are buying something they cannot easily replicate on their own.

A large company will place less value on the revenue derived from products and services that you have in common. They will argue that their economies of scale put them in a better position to sell the things that you both offer today.

Likewise, they will pay the largest premium to get access to a new product or service they can sell to their customers. Big, mature companies have customers and systems, but they sometimes lack innovation; and many choose a strategy of acquisition as a way to buy their innovation.

Focusing on your niche is one of many areas where the long-term value of your business is at odds with short-term profit. For example, if you wanted to maximize your short-term profit, you might avoid investing in new technology or hiring a head of sales, arguing that both investments would hinder short-term profit. The truly valuable company finds a way to deliver profit in the short term while simultaneously focusing their strategy on what drives up the value of the business.

Why not find out now if your business is sellable?

This free online tool is the only no-risk step you can take to determine if your business is ready to get full value. Fast-track your analysis by taking advantage of this free, no-obligation free online tool.

This Sellability Score you instantly receive is a critical component to any business owner’s complete financial plan and is something that, until now, we have only made available to existing clients.

However, we recognized that there is value in knowing in advance of working with a financial planner whether or not your largest asset is ready to be exchanged for your retirement nest egg. Our view is that you are better to learn more about your businesses sellability today and find out how your business scores on the eight key attributes so that you can ensure you obtain full value.

If your business part of your retirement plan, finding out your sellability score will be the best 10 min. you could ever spend working “on” your business.

Take the Quiz here: The Business Sellability Audit

Sellability ScoreFor more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.

The hidden goal of the smartest business owners

Republished with permission from Built to Sell Inc.

What are your business goals for the year? If you’re like most owners, you have a profit goal you want to hit. You may also have a top line revenue number that’s important to you. While those goals are important, there is another objective that may have an even bigger payoff: building a sellable business.

But what if you don’t want to sell? That’s irrelevant. Here are five reasons why building a sellable business should be your most important goal, regardless of when you plan to push the eject button:

1. Sellability means freedom

One of the fundamental tenants of sellability is how well your company would perform if you were unable to work for a while. As long as your business is dependent on you personally, there’s not much to sell. Making your company less dependent on you by building a management team and creating just-add-water systems for employees to follow means you have the ability to spend time away from your business. Think of the world of possibilities that would open up if you could choose not to go into the office tomorrow….

2. Sellable businesses are more fun

Running a business would be fun if you were able to spend your days on strategic thinking and big picture ideas. Instead, most business owners spend the majority of their day on the minutia: the government forms, the employee performance reviews, bank reconciliations, customer issues, auditing expenses. The boring details of company ownership suck the enjoyment out of owning a business—and it is exactly these tasks you need to get into someone else’s job description if you’re ever going to sell.

3. Sellability is financial freedom

Each month you open your brokerage statement to see how your portfolio is doing. Not because you want to sell your portfolio, but because you want to know where you stand on the journey to financial freedom. Creating a sellable business also allows you peace of mind, knowing that you’re building something that—just like your stock portfolio—has value you could choose to make liquid one day.

4. Sellability is a gift

Imagine that your first-born graduates from college and as a gift you give him your prized 1967 Shelby Ford Mustang. Your heavily indebted child takes it on the road, but after a few miles, the engine starts smoking. The mechanic takes one look under the hood and declares that the engine needs a rebuild.

You thought you were giving your child an incredible asset, but instead it’s an expensive liability he can’t afford to keep, and nor can he sell it without feeling guilty.

You may be planning to pass your business on to your kids or let your young managers buy into your company over time. These are both admirable exit options, but if your business is too dependent on you, and it hasn’t been tuned up to run without you, you may be passing along a jalopy.

5. Nine women can’t make a baby in one month

There are some things in life that take time, no matter how much you want to rush them. Making your business sellable often requires significant changes; and a prospective buyer is going to want to see how your business has performed for the three years after you have made the changes required to make your business sellable. Therefore, if you want to sell in five years, you need to start making your business sellable now so the changes have time to gestate.

Why not find out now if your business is sellable?

This free online tool is the only no-risk step you can take to determine if your business is ready to get full value. Fast-track your analysis by taking advantage of this free, no-obligation free online tool.

This Sellability Score you instantly receive is a critical component to any business owner’s complete financial plan and is something that, until now, we have only made available to existing clients.

However, we recognized that there is value in knowing in advance of working with a financial planner whether or not your largest asset is ready to be exchanged for your retirement nest egg. Our view is that you are better to learn more about your businesses sellability today and find out how your business scores on the eight key attributes so that you can ensure you obtain full value.

If your business part of your retirement plan, finding out your sellability score will be the best 10 min. you could ever spend working “on” your business.

Take the Quiz here: The Business Sellability Audit

Sellability ScoreFor more free information on Creating A Business Owner’s Dream Financial Plan, you can listen to a free, eight part series we did exclusively for business owners. The show is also available to subscribe to for free via iTunes.