All posts by Adrian Mastracci

Reverse engineering your Retirement

I started my university days happily pursuing engineering studies. Then, in my third year, I discovered my new passion and began moving to finance and business.

It turns out that engineering has allowed me to assist clients in managing their nest eggs. Mixing engineering concepts with wealth strategies pays off, so let’s look closer.

What is reverse engineering?

Reverse engineering usually involves taking an object apart and analyzing it in detail: something that engineers are skilled at.

I specifically refer to reverse engineering of retirement goals: working backwards from the desired end results to design a prudent plan for each family.

Reverse engineering retirement consists of two main components:

  1. Estimating the size of nest egg that represents the retirement goal.
  2. Ballparking the investment rate of return to achieve or maintain that goal.

Let’s consider this sample situation:

Assume the nest egg to be accumulated is $1,500,000. Say there are 10 years to go until retirement and today’s portfolio value is $700,000. That implies an annual return of over 7.9% to get there. Perhaps optimistic for today’s low-return environment. Continue Reading…

Contrarian investing near market tops

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is.” —Warren Buffett, the Oracle of Omaha

Well, this is a pleasant surprise. Many stock market indices are hovering either at or near all time highs.

Successful investing near or at market tops is a skill worth having. Is it time to revisit your approach?

Most stock markets get their wings clipped periodically. Suddenly, interest in stocks has soared to lofty heights not seen before.

The question becomes “how does one invest in stocks now that most people are interested?” My view is that contrarian strategy delivers rewards in the long run.

Contrarian investors are very patient investors. They are not afraid to happily ‘zig’ when others want to ‘zag.’

Contrarians know that bulls and bears can swap chairs abruptly with little or no warning. Contrarians are content with either market direction.

Continue Reading…

TFSA Primer 2017

“Many investors are wondering whether to pursue a TFSA or RRSP strategy. Quite simply, the TFSA, which started in 2009, compliments both the RRSP and RRIF.”

It need not be an either/or approach.
Wise investors embrace the Tax-free Savings Account (TFSA) in pursuit of long term goals, like retirement.

 

I summarize my 2017 TFSA primer:

1.) How TFSAs work

Eligibility:

• Canadian residents, age 18 or older, who have a Social Insurance Number can open a TFSA.

• One TFSA account per individual should suffice most cases. Be aware of plan fees if you own more than one.

Contributions:

• There is no deadline for making TFSA contributions as the unused contribution room is carried forward.

• A withdrawal in any calendar year increases the TFSA room in the following year.

• TFSA contributions can be made in cash or “in kind” based on the calendar year.

• Deemed disposition rules for “in kind” contributions are the same as those for RRSPs.

Your maximum TFSA deposits are as follows:
Continue Reading…

My RRSP playbook for 2017: Ready for prime time

Welcome to 2017.

The annual 2-month RRSP “season of madness” has arrived. I made my list, checked it twice so ready-set-go.

Understanding the RRSP regime makes it easier to stickhandle your planning marathon.
This workhorse has delivered on retirements since its intro in 1957, now a 60-year old boomer.

The RRSP has transformed over the years. For example, RRSP room carry forward was introduced in 1991. RRSPs really fit two groups of investors like a glove: those without employer pension plans and the self-employed.

Some investors still shun RRSP deposits. I see three solid reasons to pursue RRSP accumulations:

  • Long-term, tax-deferred investment growth.
  • Future withdrawals ideally at lower tax rates.
  • Contributions provide immediate tax savings.

Stay focused on how the RRSP dovetails into your total game plan. The power of tax-deferred compounding really delivers.

Your RRSP mission is three-fold:

  • Keep it simple.
  • Treat it as a building block.
  • The journey lasts a long time.

My updated RRSP playbook summarizes these seven vital planning areas:
Continue Reading…

‘Tis the season of merry debts

depositphotos_36811637_s-2015“It’s that renowned time when much debt is racked up during the spree of merry.”

The season of joyful giving hovers in our merry midst once again.

Some finances get stressed and stretched to the max — like credit cards creeping past their safe outer limits. The reasons don’t matter, it’s the outcomes that really count.

Easy credit is everywhere. It seems so painless at first. Just sign those tempting card offerings that sail through email and mail slots. Voila, it’s done. I receive at least a couple new flavours every month.

People love to be generous during these merry times. Yet good intentions can lead to frightful finances. A frosty thought that may cost dearly. Possibly, even a brush with financial ruin.

For example, making the minimum monthly payment on credit cards is akin to a slow financial death. With interest rates in the 20% ballpark, it takes a lifetime to pay off balances.

Good Samaritans wanted

Let’s reflect a little on the season that incurs those merry debts. Individuals who spend more than they can afford usually don’t do it intentionally. As we know, stuff happens: all in the spirit of giving.

Continue Reading…