All posts by Adrian Mastracci

6 ways to ensure you won’t outlive your money

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“Retirement: World’s longest coffee break.” —Author Unknown

Over the years you’ve taken plenty of advice, saved and invested diligently. Now you and your family are knocking on retirement’s door or, perhaps, in its midst.

The good news is the family members will likely live longer than before. The flip side is that more money may be required to fully fund retirement lifestyle.

Let’s assume that retirement spans from age 60 to 90, often longer. Many worry that the money won’t last and runs out during retirement.

Analyze life expectancy of the immediate family members for both spouses or partners. Specifically, review the current ages of grandparents, parents, uncles, aunts and cousins.

Some are petrified at the mere thought of such a prospect becoming reality. The question becomes what you can do to at least contain this situation.

I summarize six essential ideas designed to ballpark your lifestyle needs and help your retirement money last:

1. Family life expectancy

Analyze life expectancy of the immediate family members for both spouses or partners. Specifically, review the current ages of grandparents, parents, uncles, aunts and cousins. Get familiar with the ages attained by family members that have passed away. Pay attention to patterns of critical illness and longevity.

Today, it is commonplace for many to live well into their 80s. It is wise planning for a family to expect that at least one spouse could easily live past age 90. Another expectation is that family longevity continues to increase. Updating the retirement projection refreshes the family’s capital needs for the desired lifestyle.

2. Becoming too conservative
Continue Reading…

Blend income splitting with retirement strategies

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My investing premise is straightforward: Splitting family income is very beneficial. Take full advantage of all provisions that apply.

Think of income splitting in the same breath as your retirement planning. In my view, the two camps ought to fit like a glove to deliver the best value. Families are keenly interested in paying the least income tax. There are a few low-cost activities left on the platter.

It’s never too early to get familiar with the menu. Let’s blend income splitting with your retirement strategies.

Ideally, a family pays less income tax where two spouses achieve similar income levels. Equalizing incomes allows each spouse use of the graduated tax scales from low to high.

Another beneficial goal is to equalize asset levels as much as possible. Retirees who reduce the “clawback” retain more of the OAS pension and, perhaps, the age credit.

A dozen tips for splitting income near retirement

Utilize these income splitting tips before and after retirement: Continue Reading…

Reverse engineering your Retirement

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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

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“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

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“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:
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