Decumulate & Downsize

Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.

Winning the Tax Game during Your Decumulation Years

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Tax Game Screenshot (800x496)We’re happy to present another Decumulation blog from the forward-thinking Doug Dahmer, which you can find below.

This instalment focuses on a very interesting web-based game that demonstrates how important tax planning is, particularly during your Decumulation years.

No doubt you’ll be shocked but not surprised to discover that the single biggest expense in Retirement will be income tax. Fortunately, there is more opportunity to take advantage of proper tax planning once you have begun to draw down on your nest egg. After you read Doug’s blog below, click on the links provided to view a 3-minute video on how to play the Retirement Tax Game. Then you’ll want to play the game yourself to see how well prepared you are for this daunting task. Note that you may be asked to download Microsoft Silverlight in order to play the game. — Jonathan Chevreau 

By Doug Dahmer,

Emeritus Retirement Income Specialists

Special to the Financial Independence Hub 

Many of our clients and friends still believe there’s  inherent fairness in government programs.

When I point out disparities in medical services, government contracts, municipal board decisions, welfare payments and the greatest of them all —  taxation —  I, sadly, waken them to the painful reality that lots of government programs just aren’t fair.

Too often in our first world, enlightened, democratic society it is still “What you know,” “Who you know” and “When you know.”

While I can’t help with many of the program disparities I can help in one and it’s the most important to you anyway: Taxation.

The greatest expense in retirement Continue Reading…

Life Annuities: What to Watch Out For When You Buy

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Chantal Marr

By Chantal Marr,

Special to the Financial Independence Hub

An annuity is a type of investment sold through insurance companies. You can think of a life annuity as a life insurance policy in reverse — you pay the insurance company a large lump sum of cash and in return the insurance company pays you monthly premiums for life.

This can act as a form of retirement income after you leave the work force. Although life annuities can be a great option, here is some advice on the things you should look out for when it comes to life annuities.

Know the Difference between Immediate and Deferred Annuities

You should understand and watch out for the language in an annuity agreement. There is language that will signal if the policy is an immediate or deferred annuity. As its name implies, an immediate annuity means that you will obtain your fixed payments right away. There will be no delay in receiving your money. A deferred annuity is different. Continue Reading…

Having retirement options means freedom

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Robb Engen, Boomer & Echo

By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Saving outside of my defined benefit pension plan will give me several options to consider when it comes to retirement.  To me, options mean freedom, even though I’ll be faced with some tough choices.  Here’s why:

According to my plan provider, I should be able to retire at 57 and receive an annual pension of roughly $64,800.  That will equal approximately 55 per cent of my average salary in my top five earning years.

(Note that I contribute nearly 12 per cent of my salary toward the pension plan each year, in case anyone believes these retirement benefits were conjured out of thin air).

I’ve also built up a decent sized RRSP portfolio – over $100,000 before my 35th birthday.  If left alone with no further contributions, and assuming an 8 per cent annual return, this portfolio will be worth $543,000 by the time I turn 57.

To stay in a 32 per cent tax bracket (22 per cent federal, 10 per cent provincial) I could withdraw up to $23,000 (in today’s dollars) from my RRSP to give me an annual salary of $87,800.

The RRSP Meltdown strategy Continue Reading…

On Retirement — early or never?

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Marie Engen (photo: Google Plus)

By Marie Engen, Boomer & Echo

Special to the Financial Independence Hub

Our current concept of retirement is relatively new. Past generations had no idea what it meant not to work. They stopped only when they physically had to.

Here’s an interesting tidbit – in 1890, nearly everyone died while still employed, and if they were healthy enough not to expire on the job, they retired at age 85.

Boomer parents were retirement pioneers.

The retirement age of 65 was first set in Germany in 1916, adopted by the U.S. in 1935, and in Canada shortly thereafter. It was probably the advent of CPP and OAS benefits that created the mindset to retire at age 65. Then came the lure of Freedom 55 and people were led to believe that 55 was a reasonable retirement age.

Related: How much do you need to save for retirement?

Presently the average age of first retirement is about 56 years, often followed by a return to work, at least part-time.

According to Statistics Canada, the retirement age is actually increasing. Continue Reading…

Why “Healthspan” trumps “Lifespan”

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Dan Richards (youtube.com)

By Dan Richards,

Special to the Financial Independence Hub

Advisors spend a great deal of their time with clients who ask, “Will I run out of money?” As a result, few issues get more attention than the sustainable withdrawal rate in today’s environment.

But new research shows that an equally pressing question is, “How can I enjoy life in my 60s, before health issues creep in?”

Remarkable growth in lifespans

A couple of years back, I wrote an article titled “Will I be able to pay for a hip replacement when I’m 85?,” highlighting the boomer focus on withstanding the ravages of age. In another article, I described boomers as not your parents’ retirees. Compared to their parents: Continue Reading…