Blog

Category Archives: Retirement Planning

Odette Morin

Fear Not, You Too Can Live The Dream

Most of us dream one day of having a leisure life and kissing goodbye to the grueling 5 days a week work schedule.  How nice will it feel to be able to sleep in, go for long walks, travel and live the good life.  This dream however is very costly.  You need a lot of money to fund retirement for 30-40 years. A 2016 study by RBC, shows that 56% of non-retired Canadians were worried that they would not be able to enjoy the lifestyle to which they were currently accustomed.

What’s the solution?  Face reality, get the facts on your situation and fear not.

A new Leger poll for Mackenzie Investments finds that 42% of Canadians currently have a financial advisor, while 57% do not. Older Canadians are significantly more likely to have an advisor, Leger says, which may account for their more positive sentiment towards RRSP season than those who are younger. Leger also found most Canadians (68%) say their mood for the approaching RRSP deadline is “indifferent.”
About a quarter of Canadians (26%) say they feel “confident” or “excited” heading into RRSP season. For Canadian respondents who use a financial advisor, that figure jumps to 40%. Leger surveyed 1,522 Canadians online between January 2 to 5, 2017.

So, get help to gain clarity on the future and save as much as you can to ensure a comfortable, stress free retirement!

Odette Morin
Odette Morin

How bright is the future really?

I walked by a bank the other day. In the window was a cheery poster of a boomer on the golf course. The headline asked if you were ready for retirement. A positive image, but so misleading.

The reality is that we’re living longer. That means your savings will have to carry you for 20, 30, even 40 years. For many, not having enough money to play golf will be the least of our concerns.

The outlook isn’t sunny, but it can be. Before I give you the good news though, we need to face facts. From a report, released last year by the Broadbent Institute:

  • Half of Canadian couples between the ages of 55 and 64 have no employer pension.
  • Of those, less than 20% of middle-income families have enough saved to adequately supplement government benefits and pension plans.
  • A large percentage of working Canadians are heading into retirement without adequate savings to keep them out of poverty.
  • Income trends suggest the percentage of Canadian seniors living in poverty will increase in the coming years, especially for single women who already face a higher than average rate.
  • The poverty rate for seniors will climb at the same time as a sharply rising number of Canadians hit retirement age in the next two decades; more than 20 per cent of the population will be older than 65 within 10 years.

What’s more, people over 40 years old are using credit to pay for exotic vacations, bigger homes and other non-essentials. Imagine being in your 40’s and working on your debt instead of your retirement saving?

The good news is that you have the power to change how your future unfolds and you don’t have to do it alone. See your financial advisor! Book regular planning meetings and take control over your future.

Did you know that 57% of Canadians don’t have a financial advisor? People take their cars to specialists, but they don’t think to bring their financial future to experts.  Mon Dieu!

Okay, okay, I’ll spare you my rant. But do let me leave you with this – if you don’t get expert help to spend efficiently, maximize your retirement savings and defer taxes – funding your golf hobby will be the least of your concerns. Retirement can be freeing or devastating. How you experience it, is up to you.

Odette Morin

OAS restored to age 65

Trudeau oas

 

Justin Trudeau announced yesterday that next week’s federal budget will restore eligibility for Old Age Security to age 65 from age 67.

“We are keeping the old retirement age at 65,” Mr. Trudeau told the room of journalists and businesspeople. “How we care for our most vulnerable in society is really important.”

He said his predecessor, Stephen Harper, was wrong to move the Old Age Security eligibility to 67 from 65. Mr. Harper raised the age in the 2012 budget, making it effective for 2023.

“We think that was a mistake,” Mr. Trudeau said.

We are delighted by this news for all our younger clients born after 1958. The benefit is currently $570 per month indexed quarterly.

We will have a summary of the 2016 budget highlights on Tuesday. Stay tuned!

 

Frank Mueller

Have You Paid Yourself Yet?

 

Bills. We all have them. Mortgage or rent. Cell phone. Internet. Cable. Car loan. The list goes on and on. Bills. They have to be paid, or we lose out on something important to us. Bills. Paying them provides us with the necessities of day-to-day life. Bills. They are seemingly always painful. They are inescapable.

Something else that’s inescapable – and heading toward you faster than you think – is retirement. To many of us, the concept of retirement is somewhat obscure, fuzzy, nebulous; sure, we have a basic idea of what retirement is: the time in our life where we no longer work, and can enjoy our golden years with a nice nest egg that pays us more than enough to cover our base needs, with a little extra so we can enjoy ourselves. But try to be specific. When do YOU plan to retire?

Now, a potentially obvious question you may have is, “How can I take this obscure concept of retirement and turn it into a specific plan”? As a client with us at YOU FIRST, creating this plan is a large part of what we do in your service. We work with you to create a plan that is manageable, is not intimidating, that allows for changes to your life, and that offers room for some rewards to yourself. It is a well-structured road-map, guiding you from today to your destination of retirement and beyond, while avoiding many of the pitfalls that you’ll happen upon along the way.

This brings us back to the beginning of this discussion. One very important “bill” that too few of us keep in mind when balancing our own bankbook is paying ourselves, making sure to follow our road-map and contribute to our RRSP. Consistently putting away money will ensure your nest egg continues to grow. Sure, it’s hard to make that RRSP contribution when you could use that money to do things you want to do today. But try thinking about it like this: every contribution you make into your RRSP is paying yourself at a later date.

It’s no more simple than that. Short-term pain for long-term gain. Of course, there are benefits to contributing to your RRSP: tax relief (and maybe a tax refund), a tax-sheltered haven to grow your money, and ultimately, the satisfaction of knowing you are working for your own benefit instead of just paying seemingly everyone else. So, as the 2015 RRSP Season ramps up toward the February 29th deadline, you may want to ask “Have you paid yourself yet”?

Anthony Sabti

RRSP vs. Mortgage – Where Should I Put My Money?

 

Clients often ask the following question: “Should I use my excess funds to pay down my mortgage, or to contribute to my RRSP?” It’s a great question, and as with most issues in financial planning, there is no definite answer.

Paying down the mortgage is the “risk-free” option. If $1,000 is applied towards the mortgage, there is a guaranteed savings of the mortgage interest on that amount.

Alternatively, if $1,000 is added to a retirement portfolio, there is no “guaranteed” return. Historically, the Canadian (TSX) and U.S. markets (S&P, Dow Jones) have returned around 8% in the long-run. We project about a 6-8% rate of return for our client’s long-term growth-oriented portfolios.

Mortgage rates are very low these days, somewhere around the 2.5% mark for a five-year fixed rate. This makes the “break-even” point for an investment portfolio to beat mortgage savings fairly low. Without talking about interest compounding or taxes, if the investments return more than 2.5%, then they beat out any mortgage savings strategy.

Our favourite strategy is a hybrid one. Invest long-term money in an RRSP and use the ensuing tax savings to pay down the mortgage. When families can maximize RRSP contributions, they can create significant tax savings which can supplement retirement income plans, as well as reduce mortgage debt. The tax savings created by an RRSP contribution can free up “new money” to be used to pay down mortgage debt. This quickly increases family net worth.

As we say, every situation is unique and depends on your mortgage interest rate and the anticipated return on your investment. Please call or e-mail us and we will be happy to work through the numbers to give you the best advice for your circumstances. We’re here to help you!