Tag Archives: Retirement

The Danger Of Market Timing The Sale Of Your Business

By: Scott Plaskett & John Warrillow

The other day I was speaking with a successful CEO in his fifties who runs a heating and air conditioning company generating eight million dollars in revenue and over one million dollars in profit before tax.

Even though he was tired and nearing burnout, he was planning to wait another five to seven years before selling his business because he “wanted to sell at the peak of the next economic cycle.”

On the surface, his rationale seems to make sense. If you speak with mergers and acquisitions professionals, they’ll tell you that an economic cycle can impact valuations by up to “two turns,” which means that a business selling for five times earnings at the peak of an economic cycle may go for as low as three times earnings at a low point in the economy.

The problem is, when you sell your business, you have to do something with the money you receive, which usually means buying into another asset class that is being affected by the same economy.

Let’s say, for example, you had a business generating $100,000 in pre-tax profit in an industry that trades between three times earnings and five times earnings, depending on the point in the economic cycle.

Furthermore, let’s imagine you sat stealthy on the sideline until the economy reached the absolute peak and sold your business for $500,000 (five times your pre-tax profit) in October 2007. You took your $500,000 and bought into a Dow Jones index fund when it was trading above 14,000.  Eighteen months later  – after the Dow Jones had dropped to 6,547.05– you’d be left with less than half of your money.

Even though you cleverly waited till the economic peak, by March 9, 2009, you would have effectively sold your business for less than 2.5 times earnings.

The inverse is also true. Let’s say you waited “too long” and sold the same business in March 2009. And because you were at the lowest possible point in the economic cycle, you only got three times earnings: $300,000. Notice that’s 20% more than if you’d sold at the peak and bought an index fund at the top of the market.

Just like when you sell your house in a good real estate market, unless you’re downsizing, you usually buy into an equally frothy market. Which is why timing the sale of your business on external economic cycles is usually a waste of energy.

External vs. internal economic cycles

Instead, I’d recommend timing the sale of your business when internal economic factors are all pointing in the right direction: employees are happy, revenue and profits are on an upward trend, and there is still lots of market share for an acquirer to capture.

When internal economic factors are pointing up, you’ll fetch a price at the top end of what the market is paying for businesses like yours right now, which means that – for good or bad – you get to use your newfound cash and buy into the same economic market you’re selling out of.

Wondering if you have a sellable business? The Sellability Score is a quantitative tool designed to analyze how sellable your business is.  After completing the questionnaire, you will immediately receive a Sellability Score out of 100 along with instructions for interpreting your results. Take the test here: The Business Sellability Audit

KEY006 | Long-Term Care Insurance and why you can’t stay home without it.

Long-Term Care Insurance and why you can’t stay home without it.

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In This Episode

In this edition of The Key To Retirement, we’re going to discuss Long-Term Care Insurance and why you can’t stay home without it.

Bonus Segment

In today’s bonus segment we’ll tell you about a “Virtual Shoebox” to help you keep track of all of your personal and family documents.  In an emergency, all of your important “stuff” is itemized and in one place.  And, this “shoebox” is free!

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting. One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process.  Visit us online, at ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

Links to things mentioned in this episode:

 

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Episode Transcript

Scott:
In today’s feature segment, I have a real treat for everyone.

The research I’ve done over the past few years into the world of Long-Term Care Insurance has brought me in touch with some very talented people.  And one in particular is a true “specialist” when it comes to long-term care insurance.

As a company, we have not only embraced the need to include long-term care insurance as part of an overall, comprehensive living benefits plan, we’ve actually partnered with Canada’s top long-term care specialist and are pleased to include her in our Top Guns Network.

So, in today’s episode I speak with Jennifer Jacobs about Long-Term Care Insurance.  She not only dispels the most common myths surrounding this type of coverage, she does a complete overview of what is good (and what is not-so-good) about the various plans available in the marketplace today.

If you live in Canada and you don’t have this type of coverage and you are above the age of 30, you absolutely need to listen to this entire episode.

So, here’s the call…

Bonus Segment

Cathy:

In today’s Bonus Segment I’m going to provide you with a free tool that will give you peace of mind in knowing that if anything were to happen to you, there is a document that has a record of everything that someone might need to know about you to assist with your personal affairs.

The purpose of this interactive tool is to help you to keep track of your important personal and family documents – everything from insurance policies, bank accounts, investments and mortgages to health records and will and estate information.

So many of us have a “file it and forget it” mentality. Some of us have even been known to stuff bills, receipts and similar important pieces of paper into a filing cabinet, or even a shoebox, until tax time. In a way we should be grateful for this annual clear-out because there isn’t enough storage in the world for all of us if we were to go on storing information like this forever.
But tax time is not the only critical period in our lives. There are many others. A spouse or companion dies. You become separated or divorced. You lose your independence through a physical or mental infirmity.  What happens to all your various files and pieces of paper?

Someone else has to step in and sort it all out.

Enter the Virtual Shoebox.

The Canadian Life and Health Insurance Association has put together an interactive document that will allow you to record the details of all of your personal records in one place.  This Virtual Shoebox will walk you through the data gathering process to make sure it is complete.

KEY005 | The Four Mistakes Retirees Need To Avoid When Creating A Retirement Income Plan

The Four Mistakes Retirees Need To Avoid When Creating A Retirement Income Plan.

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WELCOME TO THE KEY TO RETIREMENT™ PODCAST!

To subscribe to the podcast, please use the links below:

If you have a chance, please leave me an honest rating and review on iTunes by clicking here. It will help the show and its ranking in iTunes immensely! I appreciate it! Enjoy the show!

In This Episode

In this edition of The Key To Retirement, we’re going to discuss the 4 mistakes retirees need to avoid when creating a retirement income plan.

Bonus Segment

In today’s bonus segment we’re going to show you a trick to listen to your information in half the time it usually takes.

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting. One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process.  Visit us online, at ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

Links to things mentioned in this episode:

 

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Episode Transcript

Scott:

In today’s feature segment, we are going to talk about the four mistakes retirees need to avoid when creating a retirement income plan.

And these mistakes are:

  1. Not factoring in inflation
  2. Not factoring in income taxes
  3. Poorly structuring investment management fees, and finally
  4. The myth that you need to match your fixed income exposure to your age

So, let’s start with the mistake of not factoring inflation in to your projected retirement income needs.  How long your money lasts is a direct result of how much it’s going to cost you each year to live your life.

So, let’s say you determine that “life” is going to cost you $5,000/month.  As time goes on, inflation begins to eat away at the purchasing power of that $5000.  “Things” – those things you eat, you wear, you drive – get more and more expensive.  Don’t get fooled into thinking that your costs today are going to match your costs tomorrow.  They won’t.

Need proof?  In 1962, it cost 5 cents to mail a letter in the US.  30 years later it was 29 cents.  19 years later it costs 44 cents.  That’s an average inflation rate of 4.53%.  Did your income grow by more than 4.53%/year?

During your working years, it is easier to anticipate inflation and most salaries at least keep pace with the general increase in prices, but it becomes a real problem when you’re on a fixed income.  And that’s when your standard of living can be affected, if you haven’t planned properly.

Let’s get back to the example of $5000/month that you need to cover your expenses in retirement.  You’ve calculated that in today’s dollars.  But your retirement is likely to last 20+ years.

Over the last 20 years in Canada, inflation has averaged about 2% a year.  It doesn’t sound like much, and of course how deeply you feel the increase in prices depends upon the actual goods and services you buy compared to the “basket” of goods tracked by the Consumer Price Index or “CPI”.  Regardless of that though, if your expenses increase by 2% a year, in 20 years it will cost you $7430/month to live that same life.

Inflation is what I call the silent “killer” of financial plans.  If you don’t factor inflation in, you may as well not even bother writing the financial plan.

To put it another way, a $1,000,000 portfolio growing at 8% a year with a monthly withdrawal of $5,000 will be worth $2,165,788 in 25 years.

However, if you adjust the $5,000/month to keep pace with inflation, and we’ll use the 2% inflation rate we just talked about, the account will have a value of $1,408,173 in 25 years – a difference of $757,615!

Ok, so now we know the effects of inflation.

But, mistake #2 would be not factoring in income taxes.

If you need $5,000/month to cover your living expenses, you will need to withdraw more than $5,000/month to have enough to pay the income tax bill and still have enough left to cover your living expenses.

Using the previous assumptions, but now taxing that $5000/month at a 30% tax bracket, you will have exhausted your portfolio by the 19th year.

Cathy:   

Reminds me of the old saying, “Nothing is certain but death and taxes”!

Scott:

You can say that again.

Now, once you’ve taken into account inflation and taxes, you’re still not done.

Mistake #3 is poorly structuring the investment management fees paid to your investment management team.  Another common mistake.

Now, chances are you’re investing in mutual funds.  And, if you are, then you are paying a fee to the mutual fund company to manage your money.  On average, you would be paying approximately 2.5% for this.

What this means is that if your portfolio generated an 8% gross return, you would only see 5.5% as you paid 2.5% to the manager to manage the account.

Now, here’s a little trick to reduce the impact of the management fee – without changing your portfolio.

Contact your advisor and say that you want to change the way the management fee is charged to your portfolio.  Instead of having the MER paid before you see your distributions, ask to have the fee “unbundled”.

What this means is that they will pay to your portfolio the full return generated (in this example it was 8%).  Then, they will charge your portfolio the management fee (in this example, 2.5%).  By separating the fee from the return, you’ve earned yourself a tax deduction of this amount on any non-registered investment accounts you have.

CRA’s bulletin IT-238R2, states that you can deduct from your taxable income, any amount you paid for investment counseling on your taxable accounts.  Therefore, at a 30% tax bracket, a 2.5% management fee turns into a net management fee of 1.75%.

You know I find it amazing how people often look to improve performance by adding more risk to a portfolio, when sometimes simple tax deductions will do the trick for you.

If you want more information on this, visit www.freefinancialplanningvideos.com to watch the free video that explains exactly how to do this.

And finally, let’s dispel the myth that you base your asset allocation on your age.

The theory is that you match the percentage of your portfolio allocated to fixed income to your age.  Now, on the surface this sounds pretty logical.  I mean if you are 80 years old, doesn’t it make sense to have 80% of your portfolio in bonds?  But, if you follow this approach, you will be setting yourself up for a major drop in income.

With interest rates as low as they are today, bonds are paying next to nothing and the upside is limited with the threat of rising interest rates.

I spoke with Mike Flux, VP of Connor, Clark & Lunn Private Capital – one of the largest investment counseling firms in Canada – and their analysis shows that the return expectation on fixed income is running between 2-5%, before fees and taxes and inflation.

Such a heavy weighting in that type of security will make it very difficult to counter the combined effects of inflation and taxes that we’ve talked about today.  Stocks, or the equity securities in your portfolio are better suited to at least keeping pace with inflation over the long run, as companies’ revenues increase and you share in those earnings through either dividends or capital appreciation.

So, the old adage of match your fixed income exposure to your age may lead you straight to under performance.  Like so many other investment rules of thumb, it oversimplifies complex issues.

No matter how old a person is, a sound asset-allocation program starts with one’s net worth, expected income needs and risk tolerance.

Everyone’s circumstances are different. The age-allocation adage makes little sense for most people and may just interfere with you achieving your goals.

If you’re interested in finding out what other options are available to help bolster returns in your portfolio, please visit the show notes.  I will post a link to an exclusive presentation called “A trifecta investment solution designed to enhance performance, reduce volatility and provide a tax-efficient income”.

So, go now and re-crunch your retirement income numbers – making sure you have accounted for all of these variables.  Contact your investment advisor to change how your portfolio’s management fee is paid so you can capture a new tax deduction known to very few Canadians.

And, visit www.freefinancialplanningvideos.com to get immediate access to The Six Mistakes Retirees Make With Their Finances FREE Video Series and find a certified financial planner who you can work with.

KEY004 | The Retirement Trick

The Retirement Trick.

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WELCOME TO THE KEY TO RETIREMENT™ PODCAST!

To subscribe to the podcast, please use the links below:

If you have a chance, please leave me an honest rating and review on iTunes by clicking here. It will help the show and its ranking in iTunes immensely! I appreciate it! Enjoy the show!

In This Episode

In this edition of The Key To Retirement, we’re going to talk about The Retirement Trick.

Bonus Segment

In today’s bonus segment we’re going to give you a tool to use to Trick yourself into a fun and comfortable retirement.

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting.  One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process.  Visit us online, at ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

Links to things mentioned in this episode:

  • The Retirement Trick Worksheet (I must give credit where credit is due.  This worksheet was inspired by a tool developed by Dan Sullivan of The Strategic Coach.  In his coaching program (of which I am a faithful student) we are presented with The “Retirement” Trick worksheet to assist us with the idea of ‘retiring’ from everything we don’t like doing and expanding what we love to do.  I recognized the power of this tool and developed my own version to assist clients with their thinking about what things they would like to spend more of their time on while retired.

 

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Episode Transcript

Scott:   As a financial planner, if I do my job right, then you will retire at the age and with the money that you desire.  Now, call me crazy, but I want more for my clients than that.

Cathy: You mean more money?

Scott:   (Chuckle) Likely that would be appreciated, but no.  It’s not just about the money.

I’ve seen many people retire.  Some successfully and some not so successfully.  And, it’s been my experience in helping clients achieve their financial goals for retirement, that the traditional idea of retirement is flawed.

Let me explain.  You see, my clients are probably a lot like the people who are listening to this podcast – hard working and busy.  They’re executives, they’re professionals, they’re self-employed…  And, they’re all getting closer and closer to retirement.

They value the advice of a CFP because they don’t have the time or the expertise to do the financial planning themselves.  And they want it done right.  They want to make sure they’re not making mistakes with their money, that they’re on track for a comfortable retirement and that they’re doing things in the most tax efficient manner.

But just getting there is not enough.  Despite the demands on their time, my clients – after 40+ years in the workforce – are just not ready to change gears and spend the next however many years, sitting on a beach.  Though they may not realize that yet.

Cathy: You know the idea of sitting on a beach really appeals right now.  And I suppose for the first couple of weeks I would enjoy not having to get out of bed in the morning.  Kind of like one Sunday after another.  But soon I’d be looking for a reason to get out of bed again.  Because I actually do thrive on projects and deadlines – the sense of accomplishment when you get the job done.  I must say, I get a lot of satisfaction out of that – though I would prefer a less hectic pace!

Scott:   Exactly!  That’s what I’ve found with the majority of my clients who’ve successfully retired over the years.  And it’s led me to change the way I think about retirement – both mine and my clients’.

I no longer refer to a retirement date as the date that you’ll retire from work.  I like to refer to it as a “financial freedom” date – the date that you will retire from those things that you don’t want to work at any longer.  And the things you do want to work at, well that becomes the basis for your new lifestyle, the one you will enjoy through your retirement years…

Which reminds me of something…  Remember a few years ago we attended a New Year’s Eve party where one of the guests posed a very interesting question?  The question was: “If you didn’t have to work for money, what job or career would you choose”?  A fascinating question!  After we each digested it, we took turns – digging deep – to come up with the thing or things that we would do, even if we weren’t getting paid to do so – our passion.

I must say – after we each began to share our thoughts – I came to realize that I’d really only known some of these people in a superficial way, and, I truly believe that by expressing ourselves the way we did, we came to know ourselves better too.

It got me to thinking that, that job, that career, that “pursuit” that you would do even if you weren’t paid to do it – whatever it is – no longer has to be the path not taken.  I believe retirement, if planned properly, provides the freedom to focus on the things you love and enjoy doing.

Cathy:

You know, Scott, I think you’ve hit on something important here, something that’s missing from the dollars and cents of a financial plan.  If you don’t put some time now into thinking about what you’ll do with your time later, you may be missing an opportunity to maximize your enjoyment of those retirement years.  Transitions aren’t always easy to make.

Being newly retired – even with financial resources – can leave people feeling a little lost.  I’ve seen it happen.  And it would be a shame to think that your quality of life might actually decline in retirement – solely because there’s not enough going on that’s stimulating and rewarding.  Is there a way we can help clients through this pre-retirement stage?

Scott:

Absolutely!  And, to go one better, there’s no reason why everyone can’t start on their “retirement” TODAY!

Now, that doesn’t mean that you need to retire today in order to begin to enjoy those passions.  It means that you need to look at your “idea” of retirement a little differently.

What’s stopping us from taking mini-retirements now?  Turn your vacations into “mini-retirements” and give yourself permission to try new things – a new hobby, activity, or even a new business opportunity.  You’ll also want to ask yourself what     activities you enjoy and want to do more of.  Think about the ways in which your creativity can be channeled.  You may stay on your existing career path, but perhaps in a modified     way.  And maybe you can begin a subtle shift – offloading some aspects of what you do now, that don’t energize you – to focus on those that do.  And when the aspects of work that you do enjoy outweigh those that you don’t enjoy, suddenly retirement doesn’t have to mean the end of work altogether.

We’re talking now in fairly broad strokes about the process we go through with clients,     but when you actually get down to it – when you ask and answer these questions – the     results are quite astounding.  Often, there’s the realization that these “changes” that you’re contemplating for your retirement years – a date that may “financially” still be 5 or more years away – are in many ways do-able now.  You may find that you can begin to make some progress, make some changes now.  And that goes a     long way to improving your quality of life now, as well as creating the framework for an active, creative and fulfilling retirement.

Cathy:

It’s said if you can “see” it, you can believe it.  A retirement you can visualize is one that would be far easier to plan for.  Can you put it into a step-by-step?

Scott:

Absolutely!  I call it The Retirement Trick and it’s easier than you might think.  Here’s how it works:

Answer these questions…

  1. If you were retired today, what activities would you immediately stop doing?  Why?
  2. If you were retired today, what activities would you continue or start doing?  Why?

Now that you have a list of each:

  1. Review each item that you would immediately stop doing.  Are there changes you can make today to stop any of these activities?  List them.
  2. Beside each item in the list of changes you just created, write down in bullet-point form, what the benefits are that you would receive in 12 months if you made this change?
  3. Now that you have a list of the benefits from each change, in the next column, write down some of the biggest obstacles that exist today, that are holding you back from receiving these benefits in the next year.  Be specific.
  4. Now, here’s the amazing part about how our minds are wired.  When we see obstacles, our minds begin to work on solutions to overcome those obstacles.  List all of the ideas and strategies that come to you.  Now that you are clear on what is, or what may be, standing in your way, you can begin to work on solving these problems.  Write these solutions down.

Keep this list close to you.  And update it, as more ideas come to you.  As time goes by, more solutions will come.  Keeping this list handy will provide you with a place to record the solutions.  Review this document at the beginning of each week.  You’ll be amazed at how quickly some of these obstacles begin to disappear.  All because you “tricked” yourself into becoming clear on what was standing in your way.  This was the missing link.

Repeat this process with the list of activities that you would continue or start doing.

Now, in the show notes, I will put a download-able version of this tool that you can use.  So, go there now, and take the 15 minutes that is required to trick yourself into laying the foundation for a successful retirement.
Bonus Segment

On today’s bonus segment, we’re giving you The Retirement Trick tool and user guide to use to help you lay the foundation for a successful retirement.

Visit www.keytoretirement.ca and click on the Podcast link.  There, you will look for Podcast Episode 4, where you will find our free, down-loadable tool, called The Retirement Trick.  Simply re-listen to the section of the podcast where we walked you through how to use the tool successfully.

 

Canada Pension Plan New Rules

Have you been wondering how the new Canada Pension Plan rules are going to effect you?

Well, today I had an interesting conversation with a journalist from The Toronto Star newspaper on this exact topic.  So, I decided to put a brief summary together of some of the main points we discussed today.

If you are planning to retire soon, then you need to know what the new Canada Pension Plan rules are.

1. REMOVAL OF THE STOP WORKING RULE.

This one is a bit of a no brainer and it just makes sense to remove it all together.  The rule states that you must have stopped working for two months prior to starting to collect your CPP.  You must also be at least 60 years of age.  The new rules will eliminate this requirement.

2. IF YOU WANT TO COLLECT CPP PRIOR TO AGE 65, YOU WILL BE PENALIZED MORE THAN BEFORE.

The new rules state that if you begin to collect your CPP benefit prior to age 65, for each month prior to your 65th birthday, you will be penalized 0.6%.  The old rule was a penalty of 0.5%.  In other words, if you begin to collect your CPP at age 60, you will receive 36% less than if you waited until age 65.  This amount increased from the old rule which had a maximum reduction of 30%.

3. IF YOU WAIT TO COLLECT YOUR CPP, YOU WILL RECEIVE AN ENHANCED AMOUNT.

For every month you wait beyond age 65 to collect your CPP, you will be rewarded more than you used to be.

The maximum enhancement is received if you begin to collect your CPP at age 70.  You will receive 42% more than if you began to collect at age 65.  In other words, for every month you wait, you will get an extra 0.7%.

4. IF YOU BEGIN COLLECTING YOUR CPP AND THEN GO BACK TO WORK, YOU WILL HAVE TO KEEP PAYING CPP TO AGE 70.

The old rules provided for a strategy for retirees to begin collecting their CPP and then go back to work and not be subject to CPP contributions.  The new rules eliminate this.  So, if you begin collecting CPP and then go back to work, expect to keep paying CPP up until age 65.  All contributions will enhance your monthly CPP benefit and after age 65, contribution will now be optional.

These are just some of the more important changes that Canadians need to be aware of.

The discussion then moved to one on what the best strategy is for Canadians.  As of 2012, these new rules will be in effect.  So, the real question then is “When should one collect their CPP benefits?”.

The question is an easy one to answer.  Especially when you have a comprehensive financial plan to turn to.

The answer is, “when you need the money or at age 70, whichever comes first”.

Check out this graphic that provides a great visual for what should be included in a comprehensive financial plan.

KEY003 | The 9 things you need to know before you can retire comfortably.

The 9 things you need to know before you can retire comfortably.

Podcast: Play in new window | Download

Subscribe: Apple Podcasts | RSS

WELCOME TO THE KEY TO RETIREMENT™ PODCAST!

To subscribe to the podcast, please use the links below:

If you have a chance, please leave me an honest rating and review on iTunes by clicking here. It will help the show and its ranking in iTunes immensely! I appreciate it! Enjoy the show!

In This Episode

In this edition of The Key To Retirement, we’re going to talk about the 9 things you need to know before you can retire comfortably.

Bonus Segment

In today’s bonus segment we’ll talk about the non-financial side of planning to retire comfortably – your health.

And if you’d like to get a jump start on finding the answers to your key financial planning questions, using our proven system, you can book your risk free, no-obligation initial meeting.  One of our specifically trained Certified Financial Planners will be pleased to walk you through The KAIZEN Financial Planning Process.  Visit us online, at ironshield.ca, to obtain our contact information, then simply call or email to book your free initial meeting.

Links to things mentioned in this episode:

 

  Subscribe via RSS (non-iTunes feed)

Episode Transcript

Episode Title: 9 things you need to know before you can retire comfortably.

1. Show me the money! (What is your net worth)

This is important why?

  • Important to have a clear picture of where you are financially, today.
  • Important to have a listing of everything you own and owe, not only so you know where things are but for executors also.

2. What are your retirement revenue sources

This is important why?

  • Get very clear about where all of your income in retirement is going to come from, how much you will receive and when (if at all) those sources will either last or when they will change in amount.
  • It’s important to map out your retirement income in a retirement income plan to ensure you are aware of how these income sources will be affected by taxes and potential claw backs.

3. What are your retirement expenses

This is important why?

  • Outlining all of your retirement expenses, how long they will last and when they will change will provide you with some comfort in knowing what your obligations are throughout retirement.

4. What is your debt management plan?

This is important why?

  • If you are going in to retirement with debts, it is important to develop a debt management plan to get these debts paid off as quickly as possible.

5. What does your base plan look like

This is important why?

  • By developing a “base plan” (which is a financial plan which simply maps out your current financial position right now, you will become very clear about whether or not what you are trying to accomplish financially is even doable.
  • Also, this step answers your most important question: “Can I retire with the lifestyle I have become used to?”

6. What if??? (What if discussions – to build confidence)

  • Is your plan Goals based or Cash Flow based?
  • This is important why?

Goals based financial planning provides you with a clear idea of what you need to do to retire at a certain age with a certain level of income.  However, it is less precise because of how the assumptions are set up.  Discuss tax component.

Cash flow based financial plans do a much better job of mimmicking your actual retirement income and the taxes associated with the cash flow received from your plans.

7. Does your paperboy qualify for the same investments you are investing in? (Investing in appropriate solutions that you qualify for)

  • This is important why?
    • All too often we see the investment solutions clients are using have not kept up with their level of wealth.  In other words, let’s make sure the investment solutions you are using are what you qualify for because if you qualify for a certain level of investment solution and are not using it, you are losing out on strategies and services that can make it a lot easier to generate the returns required to continue to accomplish your investment goals.
      • Mutual Funds
      • Pooled Managed Solutions (Al-in-one managed mutual funds)
      • Discretionary wholesale investment programs (eg: investment counsellors and portfolio managers).

 8. Help, I’ve fallen and I can’t get up. (Risk management)

  • This is important why?
  • We all have three eventualities
  1. Live long and healthy
  2. Live long and unhealthy
  3. Die pre-maturely
  • A look at how each eventuality could impact your financial plans ability to provide for your family will reveal to you where you are exposed to financial risks.

9. Estate Planning

  • This is important why?
  • A review of what happens to the families wealth on the death of the second spouse is quite alarming.  It is amazing how much CRA takes by way of taxes.
  • Review what this amount is expected to be
  • Put strategies in place to save against this tax erosion.
  • Discuss the 5 legal canadian tax shelters.

Action Steps: Here’s what you can now do with this information…

Once you have answered these questions and are very clear about the details, your confidence level will rise.  

Also, please go to the comments section and leave some feedback.  Are there other topics you would like discussed?  

Bonus Segment

In today’s bonus segment we’ll talk about the non-financial side of planning to retire comfortably – your health!  We’ve talked a lot today about the financial side of retiring comfortably, but let’s not forget your health.  Without your health, your financial planning may be all for naught.

If you haven’t had a physical in a while, maybe it’s time to book an appointment with your doctor.  Have that nagging ache or pain checked out, or any other symptoms you’ve been too busy to deal with.  And, remember, your emotional health is as important as physical health.  Symptoms of sadness, guilt or hopelessness, or a loss of interest in your usual activities may be signs of depression.  Depression is not a normal part of aging and can be treated.

Maybe it’s time to consider a comprehensive health assessment.  There are now private clinics that offer this complete analysis of your health.  Scott & I experienced first-hand the services of such a clinic – the Medcan Clinic in Toronto and found it was time and money well-spent.

Medcan’s flagship service is their Comprehensive Health Assessment which includes 12-15 sophisticated diagnostic tests, all performed at one location within a single 4 hour visit.  Medcan’s objectives are to not only pick up early signs of disease, but also to give you a strategy to improve your health.

Check them out at www.medcan.com.

City of Toronto Mayor, Rob Ford is proposing a once in a lifetime package offer for city of Toronto employees…

If you are a city of Toronto employee, you will be very interested in this post.  Because it could be a financial windfall for you.

The story goes like this:

Toronto City Hall is offering a buyout package to all permanent public service employees.  The offer will be three weeks pay for each year of service up to a maximum of 26 weeks pay (or 4 weeks for each year if your senior management).  All employees wishing to accept this offer are required to apply by September 9th, 2011 to then have their application reviewed.  They will then find out if their application has been accepted or denied by October 1st, 2011.

Here are my thoughts on this.

So far, after reading as many articles and notices I can get my hands on relating to this topic, not one of them has touched on the most important factor in helping people know whether this is a good deal for them or not.  The articles either touch on how bad it is for the city and how all of the “good” talent will be lost or how Rob Ford has reneged on his platform promises.  In my mind, the most important thing that needs to be looked at is how to we assist the tens of thousands of people in making the right decision?

I mean here is a group of people who have worked the majority of their lives for the city and who have relied upon “others” (unions, human resource departments, etc…) for all of their financial guidance.  And now, providing initially little to no information the City is telling these people that they will have to make their decision by September 9th as to whether or not they want to accept the package being offered to them.

Also, the articles and reports are currently paying lip service to the fact that a lot of these employees who are going to qualify for the full 26 week package (those who have worked almost nine years for the City) will also have to decide how to properly transfer their pension plan.  If you’re considering this package (and you should consider it), this one statement should bring a bead of sweat to your brow.

Why would you begin to sweat?

Well, consider that a long standing employee who has worked for the city for many, many years has build up an entitlement to a defined benefit pension plan.  And, that same employee (who up until now has viewed that defined benefit pension plan as an amount of cash flow they will receive during their retirement – $3,000 a month, $4,000 a month, etc…) will now have to decide how to properly manage the pool of capital that has been accumulating for them that was to pay their annual pension income.  But now, they are going to be asked to take this with them and manage it themselves.  This could be a decision on a sum of money that most only dream about receiving – from say a lottery.  But now, they are being asked to make a decision on potentially millions of dollars – their nest egg – in a few weeks.

Nobody has provided any counsel on the options these employees are going  to be faced with.

Who do you call?  Call a Certified Financial Planner.  What is considered the “gold standard” when it comes to licensing in the financial planning field.  This group will assist in analyzing the options.

And, what are some of the options that should be considered:

  1. Transferring to another pension plan (either a new employer’s plan or an Individual Pension Plan)
  2. Transferring to a locked-in registered plan
  3. Transferring to an annuity
  4. Opting for a deferred pension.

Working through the options with a qualified compensation specialist will provide confidence and piece of mind that is hard to come by.  When a package like this is being offered, you really should analyze all of your options first, so you can make a knowledgeable decision.

Should you be interested in keeping abreast of your options via email, please register below and we will send you updates and comments as new information presents itself.


A once in a lifetime package offer for city of Toronto employees

LayoffIf you are a city of Toronto employee, you will be very interested in this post.  Because it could be a financial windfall for you.

The story goes like this:

Toronto City Hall is offering a buyout package to all permanent public service employees.  The offer will be three weeks pay for each year of service up to a maximum of 26 weeks pay (or 4 weeks for each year if your senior management).  All employees wishing to accept this offer are required to apply by September 9th, 2011 to then have their application reviewed.  They will then find out if their application has been accepted or denied by October 1st, 2011.

HERE ARE MY THOUGHTS ON THIS.

So far, after reading as many articles and notices I can get my hands on relating to this topic, not one of them has touched on the most important factor in helping people know whether this is a good deal for them or not.  The articles either touch on how bad it is for the city and how all of the “good” talent will be lost or how Rob Ford has reneged on his platform promises.  In my mind, the most important thing that needs to be looked at is how to we assist the tens of thousands of people in making the right decision?

I mean here is a group of people who have worked the majority of their lives for the city and who have relied upon “others” (unions, human resource departments, etc…) for all of their financial guidance.  And now, providing initially little to no information the City is telling these people that they will have to make their decision by September 9th as to whether or not they want to accept the package being offered to them.

Also, the articles and reports are currently paying lip service to the fact that a lot of these employees who are going to qualify for the full 26 week package (those who have worked almost nine years for the City) will also have to decide how to properly transfer their pension plan.  If you’re considering this package (and you should consider it), this one statement should bring a bead of sweat to your brow.

WHY WOULD YOU BEGIN TO SWEAT?

Well, consider that a long standing employee who has worked for the city for many, many years has build up an entitlement to a defined benefit pension plan.  And, that same employee (who up until now has viewed that defined benefit pension plan as an amount of cash flow they will receive during their retirement – $3,000 a month, $4,000 a month, etc…) will now have to decide how to properly manage the pool of capital that has been accumulating for them that was to pay their annual pension income.  But now, they are going to be asked to take this with them and manage it themselves.  This could be a decision on a sum of money that most only dream about receiving – from say a lottery.  But now, they are being asked to make a decision on potentially millions of dollars – their nest egg – in a few weeks.

Nobody has provided any counsel on the options these employees are going  to be faced with.

Who do you call?  Call a Certified Financial Planner.  What is considered the “gold standard” when it comes to licensing in the financial planning field.  This group will assist in analyzing the options.

AND, WHAT ARE SOME OF THE OPTIONS THAT SHOULD BE CONSIDERED:

  • Transferring to another pension plan (either a new employer’s plan or an Individual Pension Plan)
  • Transferring to a locked-in registered plan
  • Transferring to an annuity
  • Opting for a deferred pension.

Working through the options with a qualified compensation specialist will provide confidence and piece of mind that is hard to come by.  When a package like this is being offered, you really should analyze all of your options first, so you can make a knowledgeable decision.

Should you be interested in keeping abreast of your options via email, please register below and we will send you updates and comments as new information presents itself.