All posts by Adrian Mastracci

RRSP Strategies for 2018

“When you retire, think and act as if you were stil working. When you’re still working, think and act a bit as if you were already retired.”
— Author Unknown

First, a few words about my overall approach: “I recommend growing the RRSP wisely and sensibly over the long haul. It delivers very well during the decades of retirement income needs. My 2018 strategies offer vital RRSP planning ideas for everyone.”

RRSPs have grown substantially, many exceeding values of $500,000 to $1,000,000 for a family unit. Also consider that various investors own the RRSP’s financial cousin, a flavour of the Locked-In Retirement Account (LIRA). Such a plan is typically created when the commuted value of an employer pension is transferred to a locked-in account. LIRA values can easily range from $200,000 to $400,000. Although, RRSP deposits cannot be made to a LIRA, the account needs to be invested alongside the rest of the nest egg.

Clear understanding of the RRSP regime is essential to guide the multi-year planning marathon.

RRSPs really fit two camps of investors like a glove: those without employer pension plans and the self-employed.

Some investors still shun RRSP deposits. However, my top reason for pursuing the RRSP continues to be long-term, tax-deferred investment growth. It means no income tax is paid until draws are made from the RRSP. This allows the plan to grow for years, often decades.

Stay focused on how the RRSP fits into your total game plan. The power of tax-deferred compounding really delivers. Keep your RRSP mission simple and treat it as a building block. Take every step that improves the money outlasting the family requirements.

I summarize the vital RRSP planning areas:

1.) Closing 2017

Your 2017 RRSP limit is 18% of your 2016 “earned income”, to a maximum of $26,010. This sum is reduced by your pension adjustment from the 2016 employment slip. The allowable RRSP contribution room includes carry-forwards from previous years.

RRSP deposits made by March 01, 2018 can be deducted in your 2017 income tax filing. There is no reason to wait until the last minute where funds are available. Your 2016 Canada Revenue notice of assessment (NOA) outlines the 2017 RRSP room. Continue Reading…

Saving to Retire

I see too much pessimism on whether it’s possible to achieve a comfortable retirement.

Hence, I highlight three observations on saving for retirement:

  • Surveys frequently remind investors that they don’t save enough for retirement.
  • Investors are keen to know what it takes financially to achieve a comfortable retirement.
  • This is a good time to start the optimistic retirement math discussion.

The number often mentioned is rounding up financial assets of $1,000,000 by age 65. However, accumulating that sum of money may be a tall order for some.

It can be done, but it is not always easy. So, I propose meeting halfway, say at $500,000.

Typical sources of income and capital are the registered accounts, saving accounts, stocks and bonds. Perhaps, income real estate, employer pensions and a family business also fit.

Adding regular savings to your investing plan is simply a must to reach retirement goals. Your degree of financial success has a lifetime of implications.

Assume you begin saving at age 30, 40 or 50 and have no other retirement assets. Here are some annual saving targets to reach $500,000 by age 65 (figures rounded):

Annual Returns to Age 65 Your annual saving targets starting at:
Age 30 Age 40 Age 50
8% $2,900 $6,800 $18,400
7% $3,600 $7,900 $19,900
6% $4,500 $9,100 $21,500
5% $5,600 $10,500 $23,200
4% $6,800 $12,000 $25,000

Say you are age 40, you will need to save $10,500/year to age 65 with 5% returns. That saving target reduces to $7,900/year to your age 65 with 7% returns.

If your aim is to accumulate $250,000, divide the above annual saving targets by two. For the $1,000,000 goal, multiply the above saving targets by two. Continue Reading…

5 sensible steps to improve your 2018 game plan

“Your future depends on many things, but mostly on you.”
—Frank Tyger (1929–2011), cartoonist, columnist and humourist

Designing the investment plan for the long haul requires much serious thought. Unfortunately, investors shortchange themselves on two fronts. Firstly, they spend far too much time selecting investments. Secondly, and more important, they spend too little time researching and establishing their investment policies and strategies. The ones that the plans should put into effect to reach personal goals.

In my experience, few investors actually have a sensible game plan that is being followed. Too often, this results in a collection of “flavour of the day” investment selections. Designing the appropriate investment plan is essential, particularly the asset mix targets.

“Understanding the major investment risk factors brings perspective to the plan. The ability, willingness and need to take risks are your top three.”

Happily, this situation is easy to rectify. A new year is about to make its grand entrance. Let us take a breather to contemplate a few improvements.

Stewarding the finances is truly a long journey. If you were my client, I would start with this question, “What is important about investing to your family in 2018 and beyond?

My observation is that many investors opt for preservation of capital. Others focus on portfolio growth. The rest concentrate on the retirement income stream. Lifestyle needs are also high on the pecking order.

I touch on a handful of key steps in designing your game plan:

1.) Retirement prospects

Determine the family’s desired retirement income goal in today’s dollars. Calculate the size of portfolio to reach and sustain the goal. This provides portfolio direction and purpose. Estimate the personal rate of return required to achieve the retirement nest egg ballpark. Then treat that rate of return as the “investment benchmark” for the game plan.

Once the personal rate of return is identified, there is likely no need to incur higher investment risk than necessary. This is especially important to retired investors. Consider all the investment accounts owned as part of the big picture, not in isolation. Revisiting your “asset location” best practices helps fine tune the game plan.

2.) Investor profile

Analyze which type of investor profile suits and feels best. The most familiar ones are labeled as preservation, income, balanced, growth and aggressive. In my experience, investor profiles change infrequently.

The majority of investors are comfortable within 40% to 60% allocated to stocks and the remainder to cash and bond selections. For example, a balanced profile typically allocates about 50% to stocks, 40% to bonds and 10% to cash instruments.

3.) Asset mix 

Asset mix decisions have the greatest impact on portfolio outcomes than any other factor. Studies show that these decisions explain a substantial amount of variations in total portfolio returns. Continue Reading…

How to prepare for market corrections and advances

“Motivation is what gets you started. Habit is what keeps you going.” —Jim Ryun, Olympic runner

We’re working our way through the fourth quarter 2017. Many stock indices have been hovering near their tops and often keep making new highs. Daily headlines are typically a mixed bag of fears and optimism. They are often interpreted as indications of possible changes in market direction.

Some themes really stand out. For example, NAFTA talks are topics du jour in the US, Mexico and Canada. The United Kingdom is wrestling with Brexit implications. German politics are entertaining altering the seating arrangements.

Many stock indices hover near their tops and keep making new highs.

China faces pressures from increasing debt levels. US tax cut battles keep marching along. Several faces will soon change at the US Federal Reserve. Rising interest rate discussions send chills down the spines of borrowers. These few points alone are forceful enough to create trepidation in investor minds. You will have no difficulty finding headlines for every investment neighbourhood.

As a result, investors develop itchy fingers that want to migrate to the safety of the sidelines, whether it’s beneficial or not. Of course, these investors that have the need for action will make the crucial timing calls on what to buy or sell. Everyone should know by now that timing the markets is a low percentage approach, fraught with many dangers.

My Observation

This brings me to one important observation. Wise investors are in the habit of investigating what it takes to be well prepared for both market corrections and advances. They have at least sketched out a rough game plan for each case on the back of the napkin. Something to get started, aiming for the right path. I encourage you to become conversant with what you would likely do with stocks and bonds during bullish and bearish markets.

Most investors that think in this fashion prefer to have some framework of how to approach the uncertainties that come their way. Just some simple ideas are required to get started. The best news is that today’s planning is being conducted while stock prices are high.

Finding the motivation to be informed is a welcome initial step. Perhaps, discussions with your investment professional will shine more light on what actions are in your best interests. Reconfirming your family risk profile is also time well spent. Hopefully, these efforts lead to more disciplined planning for the precious nest egg. The main mission is to reach and deliver your retirement objectives.

Seasoned investors are well aware that diversification and rebalancing strategies are part and parcel of this logical planning approach. I cannot emphasize that enough as nobody knows where the markets are headed or when a directional turn comes around the curve. Bells do not ring when the time is ripe to make portfolio changes. Neither at the top, nor at the bottom.

My Recommendation

I suggest mulling over these situations in preparation for your exercise: Continue Reading…

Two notable investment books to build your long-term Wealth

“Books are the bees which carry the quickening pollen from one to another mind.” — James Russell Lowell, poet and author

Last week I highlighted two books that help manage your family’s retirement aspirations. This week I turn my sights onto two books that shape investment success over the long run: all about taking charge of investing in your self-education through quality reading.

I’ve selected two books that provide great insights into stewarding your long-term wealth. The authors are well known in the wealth management profession.

The books emphasise simple, yet fundamental recipes of investing: something for everyone’s investment toolbox when the bulls and bears make their presence known.

The Elements of Investing

Burton G. Malkeil and Charles D. Ellis







My initial pick is a gem written by two leading, seasoned authors of many books. Both have contributed heavily to the profession of managing wealth. The investing process is condensed into five short chapters, all in layman’s language.

The authors make the point that everything starts with savings. It is their position that each of us can make sound investing decisions. The process does not have to be complicated.

Rather, it is a highly disciplined approach to investing. All the rules you need to know and implement are explained. I visualise the book as a clear, concise and practical guide for the long road ahead.

The easygoing writing style emphasises keeping the approach to investing as simple as possible. My perspective concurs with the view that the book is a prudent, logical road map.

Continue Reading…