All posts by Financial Independence Hub

Maximizing your Pension Tomorrow takes Planning Today

Posted By |
MattArdrey
Matthew Ardrey

By Matthew Ardrey

Special to the Financial Independence Hub

At last count, over 6 million Canadians are part of a registered pension plan. Unless you are one of the truly lucky few who have a defined benefit (DB) pension plan, you’re likely part of a defined contribution (DC) pension plan – which means you need to be a bit more proactive if you hope to reach your retirement goals.

A DB pension plan is what comes to mind when most people think of a pension. It pays you an income stream in retirement. A DC pension plan is more like an RRSP. You save to the plan, but do not know what the end result will be at retirement. Even though your plan may be a DC instead of a DB, with proper planning you can take advantage of this benefit and be a step ahead on the path to retirement.

Step One: Asset Mix

Your asset mix is the combination of equities, fixed income and cash that you hold in your account. What percentage you allocate to each area will have a significant impact on the long term performance of your portfolio and the volatility you experience while investing.

Generally speaking, when you are more than 10 years away from retirement, a growth mix of 75% equities and 25% fixed income is appropriate. Once you are closer than the 10-year mark, a shift to a balanced mix of 60% equities and 40% fixed income would be more suitable. In all cases, your equities should be diversified geographically with an equal allocation to Canada, the U.S. and international markets.

Continue Reading…

Three key investment strategies hidden in plain sight; #2 — Manage Market Risks

Posted By |
paul_2-1500x994
Paul Philip CLU, CFP

By Paul Philip CLU, CFP, Financial Wealth Builders Securities.

Special to the Financial Independence Hub

In our last piece, we described why most investors should ignore the never-ending onslaught of unpredictable financial news and tend to three strategies that can be much more readily managed – at least once you know they are there. Hidden in plain sight, these potent strategies include:

  1. Being there
  2. Managing for market risks
  3. Controlling costs

Plain-Sight Strategy #2: Managing for Market Risks

Don’t take on more risk than you must.

Chalkboard drawing - Measure of Risk and Reward

There’s no getting around the fact the market does not deliver rewarding returns without periodically punishing us with realized risks. That’s why it’s so challenging for most investors to “be there,” consistently capturing available returns by remaining invested over time. It’s also why it’s vital to avoid taking on more risk than you must in pursuit of your personal goals. For this, we have two powerful tools at our disposal, best used in tandem: Continue Reading…

Stop Doing #4: Stop Picking Active Money Managers

Posted By |
stevelowrie
Steve Lowrie

By Steve Lowrie, Lowrie Financial 

Special to the Financial Independence Hub

Last month, we explored Jim Collins’ “Good to Great” suggestion that we would be well served by having a STOP-Doing List to pair with our To-Do Lists.

For starters, we advised investors to STOP reacting to market noise and start heeding the long-term evidence. Another worthy addition to your financial STOP-Doing List is to stop picking active money managers (or hiring someone else to try to do this for you).

As a reminder, my definition of an active money manager is someone who is engaging in some form of forecasting, whether it be picking stocks, timing markets or a combination of both.

Predicting the Unknowable
In our personal and financial lives alike, we worry about so many things that we cannot control. One of the greatest of these things is the future. When speaking with investors about the dangers of trying to accurately forecast the market’s or a stock’s pricing moves, many can accept that it’s difficult to succeed on their own. But the next leap is harder to make. Most investors want to believe that, while they may not personally have the time, energy or expertise to beat the market, they can still turn to well-heeled professional managers to do the forecasting for them.

Financial Services Attracts the Best and Brightest

In most pursuits in life, more practice and more experience makes perfect. So if someone is really good at some occupation or trade, it’s a safe assumption to assume he or she will continue to be good at it in the future.

However, active money management is different. Continue Reading…

Ottawa starts consultations on voluntary CPP

Posted By |
jplaporte
Jean-Pierre Laporte

By Jean-Pierre Laporte

Special to the Financial Independence Hub

The Federal Government has started consultations on its newest retirement savings concept: allowing individuals to make voluntary contributions to the Canada Pension Plan.

While details are sketchy, it would appear that basic agreed-upon concepts mean contributions would be voluntary and that employers would not be forced to make or match contributions.

While the Federal Government made it clear that it would not let the Canada Revenue Agency be used by the Ontario Retirement Pension Plan proposed by Premier (Kathleen) Wynne, presumably a voluntary CPP would allow use of the existing machinery to collect these new savings.

The core design issue rests with the form of benefit that this voluntary plan would offer: defined benefit or defined contribution?

If the goal here is to create a supplement to the current CPP benefit, presumably contributions would have to be locked in, and without member investment directions.

The mechanism to convert the fixed defined contributions coming into the supplemental CPP account into defined benefits would have to rely on partial deferred annuities, or self-annuitization.

This would distinguish the Supplemental CPP from an RRSP or TFSA.

No fiduciary responsibilities for employers

Continue Reading…

Investor Toolkit: The right way to calculate your retirement income

Posted By |
1
Patrick McKeough, TSInetwork.ca

By Patrick McKeough, TSInetwork.ca

Special to the Financial Independence Hub

Tip of the week: “When you work out a plan for your retirement, make sure that you aren’t basing your future income on over-optimistic calculations that will end up leaving you short.”

Every year as RRSP season heats up, many investors are confident they are taking concrete steps toward a secure retirement. But are those steps based on realistic calculations?

Let’s say you’re 50 and you want to retire at 65. You have $200,000 in your RRSP, and you expect to add $15,000 in each of the next 15 years. To determine if this is enough to retire on, you need to make assumptions about investment returns and income needs.

• What you can expect

Long-term studies show that the stock market as a whole generally produces total pre-tax annual returns of 8% to 10%, or around 6% after inflation. For purposes of this retirement plan, we’ll assume a 6% yearly return, and disregard inflation. Continue Reading…