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Hundreds of thousands of Canadians rely on mutual funds to help them save money for their retirement. While mutual funds are an important tool in one’s portfolio, some just can’t stomach the ups and downs and potential of loosing capital.

Good alternatives are Principal Protected Linked Notes or Guaranteed Market Return GICs. These are designed to guarantee the investor’s principal as well as provide growth potential. They are innovative financial product that combines key investment characteristics of both stocks and conventional bonds. The key distinguishing feature of these investments is that the principal amount – your original investment – is 100% protected provided you hold the Note to maturity usually 3 to 7 years depending on the note.  Some also guarantee the first year interests. These notes are not locked-in like a GIC.

The return of principal at maturity makes them similar to bonds. A conventional bond also repays the full principal amount at maturity, but earns a return through periodic pre-determined coupon payments over the term of the bond. Although linked Notes may pay pre-determined periodic coupons, it has the potential to earn a variable return based on the performance of the underlying stocks over the term of the Note, paid sometimes periodically but generally at maturity.

Benefit at a glance

• Guaranteed principal. Add equity exposure with no risk to principal by holding the Notes to maturity.
• Excellent opportunity for diversification. Linked Notes offer access to investments in markets that investors may find difficult to access through conventional means.
• Management fees. Most Linked Notes do not charge annual management fees, making them a cost-effective alternative to managed products.
• Flexibility. Because you’re not “locked in,” the Notes may be sold prior to maturity at the prevailing market price. Our favourite notes are issued by CIBC World Markets.  *They currently maintain a secondary market, but reserves the right not to do so in the future at its sole discretion without providing prior notice to investors.
• Tax-efficient. Outside of registered plans, investors generally do not have to include the interest income for tax purposes until it is received. If the Note is sold before maturity, you may be entitled to treat any gain as a capital gain for income tax purposes.

Are Principal Protected Notes right for you? They may be suitable for investors who:

• Prefer the safety of conventional bonds and GICs, but seek higher returns than those typically associated with such investments.
• Wish to participate in the potential growth of the equity markets, but do not want to risk losing principal investment.
• Want the flexibility to sell prior to maturity if necessary.
• Would like to include fixed-term investments as part of their portfolios.
• Are seeking cost-effective investment alternatives.

Not all Linked Notes are created equal. We can help you select an appropriate note and determine whether or not these investments are suitable to your situation.  A series of new notes are coming available this week.  Please let us know if you want to look at some of these issues.

Are you considering taking an early retirement package?  Make sure to consider all aspects before making one of the biggest decisions of your life.  Here are a few question we would go over together to assess whether this makes sense for you at this time.

1.  What are the tax consequences of the package?

2.  Does the package include a lump sum severance payment? If so, will your client be able to roll this payment over into his or her RRSP as a retiring allowance?

3.  Does the package provide for continued extended health care or group life insurance? If not, what are the cost implications for obtaining private insurance?

4.  How do the benefits compare to the benefits that you would have received at normal retirement age?

5.  If the employer usually provides for a payout of unused sick-time upon retirement, is this still available?

6.  If you are a member of an Registered Pension Plan, does the package eliminate or reduce early retirement penalties, or will your pension be reduced for life?

7.  How will early retirement affect your retirement income? How soon can you begin receiving CPP and OAS benefits?

8.  What is likely to happen if you do not accept the package?

9.  What are the possibilities for obtaining another job, or consulting? Is this somethingyou even wants to consider?

10.  Are youpsychologically or emotionally ready for retirement? Have you considered what you are going to do to fill the time?

There are many things to consider. Make sure to visit us.  We can help you make an informed decision.

Yes!  If you retire between age 50 to 60, you are likely to live for another 40 years.  Are you ready financially and psychologically?

Take the test now.

Are you ready Financially?

Retirement Fund needed to produce $5000 net per month until at least age 90*

Age 50 $ 1,400,200

Age 55 $ 1,302,454

Age 60 $ 1,188,911

Age 65 $ 1,057,018

* using a 6% rate of return and a 3% inflation rate

As you can see above, depending on a number of factor, those without a private pension plan will need at least $1,000,000 to produce this kind of income.

Are you saving enough?  Regular studies show that Canadians do not save nearly enough.

With recovering markets, there is no better time to make a lump sum investment now or increase your monthly contribution to your RRSP, TFSA or non-registered account.  You may even consider an investment loan.

If you come to our annual review meeting, we will have prepared a personalized retirement analysis for you or call us anytime to further discuss your plan.

Are you on target and ready for the best 40 years of your life?  No one plans to fail, however, some fail to plan.  Make sure to visit us once a year for your financial check-up!