All posts by Adrian Mastracci

My RRSP playbook for 2017: Ready for prime time

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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:
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‘Tis the season of merry debts

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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.

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7 tips for investing in the Trump era

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Investors are inquiring how to invest their nest eggs after the U.S. election and the unexpected win by Donald Trump.” Let’s keep it very simple and explore a dose of reverse engineering. I highlight seven top tips for adoption:

USA presidential election donald trump, vector illustration, Editorial use only

1.) Ask where you want your nest egg to be in five, ten or twenty years.

2.) It’s imperative to always think and act logically, not emotionally.

3.) Accept that bond and stock market volatility is here to stay.

4.) Revisit your expectations as to goals, needs, objectives and plan of action.

5.) Implement, tweak and be patient with your long-term strategies.

6.) Cut to the chase and focus on managing your investing risks.

7.)  Keep cash available for buying opportunities during market sell-offs.

These straightforward, sensible tips can stickhandle your nest egg out of trouble most times.

AdrianAdrian Mastracci, MBA,  is president and portfolio manager for Vancouver-based KCM Wealth Management Inc., specializing in designing and stewarding retirement portfolios

Can your pension plan pay out for 30 years?

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Piggy bank sculpted in sand on sandy beach“Keep close watch on the financial health of your pension plan. The family retirement depends on it.”

A worthy nugget of information often lands within my purview: one that musters important implications for investors.

A recent US headline read “State pensions are awash in red ink.” The estimated shortfall ballpark was 1 trillion dollars. Ouch! Today various pension plans are underfunded, while others could easily be heading that way. Some pension income benefits may be reduced if the weaker funding levels don’t improve.

Say your family plans to retire around age 60 with a pension and at least one spouse lives to 90. Ask this critical question: “Can your pension pay expected benefits for 30 or more years?”

Anyone who is a member of a pension plan should take note of this unsettling situation: those who are still contributing, along with those now receiving pension benefits.

Pension plans rely on three sources of funding:

  • Employer contributions
  • Employee contributions
  • Investment returns

Ongoing low returns are devastating for many pension plans. Longer life expectancy places additional demands on pension payouts.

Some pension plans may incur problems in paying all the promised benefits. Every pensioner should assume all pensions can undergo changes – even CPP, OAS and Social Security.

Participating in pension plans may mean making some irreversible decisions.
Notable pension events occur when:

  • A choice is presented to join a pension plan, buy back past pension service or retire normally or early.
  • An early retiree is offered the option of staying with the pension plan or transferring the commuted value.
  • Accepting a commuted value shifts responsibility to provide in retirement to the employee’s hands.
  • Switching from defined benefit to defined contribution keeps the employee working longer.

Steady pension income has always been an important part of the retirement puzzle for many families.  Pension reductions can rattle some pillars and assumptions of retirement planning.

Consider what could happen to the retirement plan if the expected pension was reduced, say by 30%. Here are some key matters that arise:

• How would you make up the potential income shortfall?

• How much more investment capital would you require?

• Is there sufficient time to accumulate the additional funding?

Pension administrators typically provide an “annual pension summary.” Upon receiving the summary, every pension member should:

• Check the estimated funding level with the pension department.

• Review the most beneficial pension options to achieve family goals.

• Determine whether it’s more desirable to commence the pension early or later.

• Understand the implications of pension income splitting and $2,000 credit.

No doubt some retirement plans will face difficult choices. Hence, I favour starting this analysis at least five years before retirement. Long-term income goal adjustments may be necessary. There are no simple answers, even for pension plans that are rock solid today.

Be savvy and don’t assume that your pension remains iron clad forever. It may be called upon to deliver benefits for 30 years, perhaps more.

AdrianAdrian Mastracci, MBA,  is president and portfolio manager for Vancouver-based KCM Wealth Management Inc., specializing in designing and stewarding retirement portfolios

Is your investing style to preserve or perform?

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Many investors tell me they want the highest returns for the least risk. However, savvy investors know that to be a myth.

A periodic reassessment of the facts is time well spent for every investor. One where plenty of frankness prevails.

For example, step back and revisit your investor style. Even rethink if it truly fits the financial goals you seek.

My question helps:
“What drives your investing style: “preserve” or “perform” ?

Let’s define these two types:

1.) “Preserve” investors care first about risks they incur. They lean toward capital conservation.

2.) “Perform” investors seek high returns with less concern for risks. They prefer more exciting growth strategies.

Rightly or wrongly, my observation is that the majority are clearly driven and sold by performance. Their exuberance too often chases fleeting past performance, a mugs game at best.

Wise investors know that some portfolio preservation is desirable strategy. However, performance just has far more cachet and always will.

Every family needs to find their acceptable investing balance. That is, between becoming too conservative and throwing caution to the winds.

Establishing your profile

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