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.

MoneySense Feature on Rising Fraud: How Seniors and everyone else can minimize odds of being scammed

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MoneySense.ca has just published a feature article by me that looks at the rising tide of frauds directed at Canada’s seniors, and everyone else.

You can find the full piece by clicking on the highlighted headline here: Canadian Seniors, watch out for these scams.

This Saturday (June 15th) is World Elder Abuse Awareness Day.

Note that while the full 2500-word article at MoneySense is aimed at Seniors, it is not technically my  monthly Retired Money column, which is typically shorter.  And this short summary here at Findependence Hub is only a third as long: hopefully enough to entice readers to hop over to MoneySense for the full article.

So below, I offer only a small fraction of the full column and some of the major links. This is an important topic both for seniors and those who hope to be financially independent seniors one day, so do take the time to click on and read the full article at MoneySense.ca, linked above.

It was a bit of an eye opener researching and writing  this piece but it appears to be the unfortunate reality of the technological world we all now inhabit.  It’s overwhelming and the situation is unlikely to improve any time soon.

In the past MoneySense has covered such topics as getting scammed through e-transfers, phishing, crypto schemes, identity theft and more. There’s financial fraud in general that targets bank accounts, credit cards and potentially every other aspect of your financial life. My feature attempts an overview of most of them from a Canadian perspective, with a few new scams I hadn’t known about before researching this article. (Example: “smishing,” which is sort of phishing in the form of text messages on smartphones.)

A.I. is exacerbating the spread of Frauds on all platforms

As I note at the top of the full column, it’s a sad fact that the rise of Artificial Intelligence (A.I.) has exacerbated this problem. While anyone can be prey for technology-linked schemes to separate you from your money, seniors need to pay particular attention, seeing as they tend to have more money to lose and less time to recoup it.

According to Equifax, Fraud is the top crime perpetrated against older Canadians. Sadly, many seniors fail to report these crimes to the police because they feel shame or embarrassment about being duped by scamsters.

Identity Theft

 Identity theft is particularly worrisome for seniors, if not the rest of us. As Equifax puts it, “a scammer may try to get information such as a bank card or personal identity number, credit card number, health card number, or a driver’s license or Social Insurance number. They can then apply for credit cards, take out loans or withdraw funds in the person’s name.”

5 cyber scams targeting seniors

Elder Abuse Prevention Ontario (EAPO) lists 5 cyber scams that target seniors. These include Romance scams targeting the recently bereaved. Here are 5 red flags to watch for if you’re looking for love online. Continue Reading…

How the FIRE Movement can help folks live out their Cruise Ship Retirement Dreams

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Image from Unsplash

By Evan Kaur

(Special to Financial Independence Hub)

Imagine waking up to new horizons each day, with the promise of adventure and luxury at your fingertips. For many, retiring and spending their golden years exploring the world from the comfort of a cruise ship is the ultimate dream, and some are turning it into a reality.

Citing data from the Cruise Lines International Association, MoneyDigest highlights that 50% of the 20.4 million people who took a cruise in 2022 were over the age of 50, while 32% were over 60. However, it’s also important to note that this lifestyle is not attainable for everybody.

A poll conducted by the National Institute on Retirement Security finds that more than half of Americans (55%) are concerned that they cannot achieve financial security in retirement, much less afford to live on a cruise ship. That’s where the FIRE (Financial Independence, Retire Early) movement comes into play. In this article, we’ll explore why so many are drawn to retiring at sea and how the FIRE strategy can help folks achieve enough financial security to live out their cruise ship retirement dreams.

The Appeal of Cruise Ship Retirement

Image by Pexels

Retiring on a cruise ship is an attractive option for those who seek adventure, comfort, and a unique globetrotting lifestyle, but its biggest draw is that it can be more affordable than retired life on land.

According to an article from CNBC, the average annual cost to retire comfortably in the U.S. can be anywhere between US$55,074 and $121,228, depending on which state you choose to live in. These numbers factor in living costs, including groceries, healthcare, housing, utilities, and transportation.

Meanwhile, the 2021 national average for a private room in a nursing home was estimated to cost $108,405 per year. By contrast, Business Insider reports that cruise ship companies looking to capitalize on the retirees-at-sea trend now offer fully furnished homes aboard their ships for roughly US$43 a day or less. Continue Reading…

Retired Money: The LIRA-to-LIF deadline and more on the RRSP-to-RRIF deadline

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My latest MoneySense Retired Money column is the second part of an in-depth-look at the deadline those with RRSPs don’t want to miss once they turn 71. Part 1 appeared in March and can be found here.

The full new column can be found by clicking on the highlighted headline here: RRSP to RRIF, and LIRA to LIF: How it all gets done.

For convenience, here are some highlights:

The first column looked at the necessity of winding up RRSPs by the end of the year you  turn 71: a topic that becomes increasingly compelling as the deadline approaches. This followup column looks at two related topics: the similar deadline of LIRA-to-LIF conversions and the alternative of full or partial annuitization.

LIRAs are Locked-in Retirement Accounts and analogous to RRSPs, albeit with different rules. They usually originate from some employer pension to which you once contributed in a former job. To protect you from yourself you can’t extract funds in your younger years unless you qualify for a few needs-based exceptions. LIFs are Life Income Funds, in effect the annuities LIRAs are obliged to become, also at the end of your 71st year.

The full MoneySense column looks at our personal experience in converting my wife’s LIRA to a LIF, aided by Rona Birenbaum, founder of Caring for Clients. Note that the timing of the conversion is NOT affected by having a younger spouse: that only affects the annual minimum withdrawal calculus.

In my case, having turned 71 early this April, I have until the end of this year (2024) to convert my RRSP to a RRIF. The first required minimum withdrawal must occur in 2025: by the end of 2025 I must have withdrawn the annual minimum.

You can choose RRIF payment frequencies: usually monthly, quarterly, semi annually or once a year: you just have to specify which date. I imagine we’ll go monthly.

Currently, our retirement accounts are held at the discount brokerage unit of a Canadian bank, although we use a second discount broker for some non-registered holdings. While the LIRA will be the basis of an annuity provided by an insurer selected by Caring for Clients, most of our RRSPs will likely become RRIFs, probably by November of this year.  Our hope is that we will keep largely the same investments as are being held now and administer them ourselves, with an eye to maintaining enough cash to meet our monthly withdrawal targets.

Self-directed RRIFs

The new vehicle will bear a familiar name for those with self-directed RRSPs: it’s a Self-directed RRIF. At our bank, it was a simple matter of entering the RRSP and finding the link to convert it to a self-directed RRIF. Once there, you tick boxes on when you want the money, withdrawal frequency and (optionally) choose a tax withholding rate. You can also specify that your withdrawals will be based on your spouse’s age, assuming they are younger.

You can of course also go through a similar process with any financial institution’s full-service brokerage or investment advisor, ideally with at least one face-to-face meeting.  One thing Birenbaum says retirees often miss is specifying tax withholding, since there is no minimum withholding tax period required on the minimum withdrawal. I imagine we will ask to have 30% tax taken out at the time of each withdrawal: which is what we do with existing pension income. It’s on the high side to make up for the fact we also have taxable investment income (mostly dividends) that is NOT taxed at source.

             “I find the majority of retirees like having that withholding tax held at source so they don’t have to deal with installments and owing the CRA.” You can of course have more than 30% withheld.

            With a LIRA, you need to get the account liquid before the money is sent to the insurance company to annuitize. This means keeping tabs on the maturity dates of GICs or other fixed income.

            The paperwork is minimal: we provided a recent LIRA statement, then had an online meeting with one of Birenbaum’s insurance-licensed advisors to go through the application, then sign a transfer form to move the cash to the insurance company for a deferred annuity. The transfer takes a few weeks, with the actual annuity rate determined when the insurance company actually receives the money: registered transfers are recalculated at the point of purchase. There is a form T2033, which is an RRSP-to-RRIF transfer form that moves the money from the bank to the insurance company.

Having a mix of RRIF and annuities

Semi-retired actuary and author Fred Vettese says he has endorsed retirees buying a life annuity ever since the first edition of his book “Retirement Income for Life” back in 2018. “If you buy one, it should be a joint-and-survivor type, meaning it pays out a benefit to the survivor for life.” Continue Reading…

Mastering the Art of Podcast Production: A Director’s Guide

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Image courtesy Canada’s Podcast/unsplash royalty free

By Philip Bliss

Special to Financial Independence Hub

As a podcast Director, your role is pivotal in ensuring the seamless production of engaging and high-quality content.

With more than 750+ Podcasts Canada’s Podcast delivers Digital Multi-Channel Marketing the new influencer medium.

From planning and recording to editing and promotion, the success of your podcast hinges on a well-executed strategy.

In this comprehensive guide, we break down the essential tasks, timelines, and guest information you need to produce a podcast that captivates your audience.

 

Pre-production Planning

a) Define Your Podcast’s Concept (2 Weeks Before Recording):

Before diving into production, spend time refining your podcast’s concept. Define your target audience, choose a niche, and outline the overall theme of your show. This clarity will guide your content creation and resonate with your audience.

b) Identify Potential Guests (4 Weeks Before Recording):

If your podcast includes guest interviews, start identifying potential guests early. Research individuals who align with your podcast’s theme and have insights to share. Reach out to them, presenting your podcast concept and gauging their interest.

c) Develop Episode Outlines (3 Weeks Before Recording):

Work on detailed episode outlines for the first few episodes. This includes segment breakdowns, key talking points, and potential questions for guests. Share these outlines with your team to ensure everyone is on the same page.

Guest Information and Coordination

a) Guest Invitations and Confirmations (3-4 Weeks Before Recording):

Reach out to potential guests with a formal invitation, explaining your podcast’s concept and the value their participation brings. Once confirmed, share detailed information about the recording process, timeline, and any technical requirements.

b) Coordinate Recording Schedule (2-3 Weeks Before Recording):

Work with guests to coordinate recording dates and times that align with everyone’s schedules. Use scheduling tools like Calendly or Doodle to streamline the process. Ensure guests are aware of any pre-recording preparations, such as technical checks.

c) Provide Information Package (1 Week Before Recording):

Send guests an information package a week before recording. Include details about the podcast, the recording platform you’ll use, technical requirements, and any specific guidelines or expectations. This ensures a smooth recording experience for both you and your guests.

Recording Process

a) Technical Checks (On Recording Day):

Conduct technical checks before each recording session to avoid last-minute hiccups. Ensure microphones, headphones, and recording software are functioning correctly. Confirm that your internet connection is stable, minimizing the risk of disruptions.

b) Set Up Recording Environment (On Recording Day):

Create a comfortable and quiet recording environment. Remind guests to choose a quiet space with minimal background noise. Encourage the use of headphones to enhance audio quality.

c) Conduct Interviews (During Recording):

During the recording, focus on creating a relaxed and conversational atmosphere. Stick to the episode outline but allow for spontaneity. Make guests feel comfortable, prompting them to share insightful and engaging stories.

Post-production Editing

a) Initial Editing Pass (1-2 Days After Recording):

Immediately after recording, perform an initial edit to address any major issues or glitches. This can include removing background noise, adjusting audio levels, and trimming unnecessary segments.

b) Final Editing and Enhancements (3-5 Days After Recording):

Take the time for a thorough final edit. Enhance audio quality, add music or sound effects if desired, and make any necessary adjustments. Ensure the episode flows smoothly and meets your podcast’s standards. Continue Reading…

Dividend ETFs: Finding Stability and Growth in Income Investments

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Discover the Keys to Identifying Dividend ETFs that offer Consistency, Quality, and Long-Term Growth

Image from Pexels/Anna Nekrashevich

Higher interest rates mean dividend-paying stocks must increasingly compete with fixed-income investments for investor interest. However, sustainable dividends still offer an
attractive and growing income stream for investors.

Companies that pay regular and growing dividends have performed very well over the long run when compared to the broad market indices. For example, a simple strategy such as selecting stocks with an extended history of uninterrupted dividend growth, such as represented by the S&P 500 Dividend Aristocrats, has added 11.5% per year over the past 30 years. This compares to the 10.0% annual gain for the S&P 500 Index. And not only did the dividend payers beat the overall market, but they were also less volatile.

The superior long-term performance of the dividend growth companies can be attributed to a combination of several factors: Companies with long histories of regular and growing dividend payments generally have sound competitive business models and growing profits; these are also companies with experienced managements that make disciplined capital allocation decisions, strive for lower debt levels, and operate firms more profitable than their peers.

Notably, though, the Dividend Aristocrats’ performance lagged over the past 5 years against the S&P 500 index.

Most of this underperformance came over the last year and a half, as higher interest rates made fixed-income investments, such as GICs, more attractive for income-seeking investors when compared to dividend-paying equities.

The dividend sweet spot

Income-seeking investors who decide to take on the risk of the stock markets are faced with a wide range of options including “yield enhanced” dividend-paying ETFs, moderate-yielding companies with average growth rates, and low-yielding but fast-growing companies. Then there is also the group of companies that have very high dividend yields and may seem attractive but, unfortunately, come with elevated risk.

In many cases, a high yield may be a warning sign that all is not well with a company and that future dividend payments are at risk of being cut.

As well, a dividend cut, or even an outright dividend suspension, is often accompanied by a steep decline in the share price, as income investors dump their former dividend favourites.

A 2016 study by a group of U.S.-based academics provides some statistical guidelines for sensible dividend-based investing.

In reviewing the performance of almost 4,000 U.S. companies over 50 years, they found that dividend-paying stocks beat non-dividend payers.

In particular, the middle group of dividend yielders (i.e., those with an average yield of 4.3%) surpassed both the low yielders and the high yielders in terms of total return. Equally important, this superior performance was achieved with lower risk, as measured by the standard deviation of returns.

Based on this long-term study, it makes sense to avoid the highest-yielding stocks and rather look for companies with moderate yields and sound growth prospects. This safety-first approach will result in a lower yield but likely provide a better total return (dividends plus capital) at lower risk.

How to spot dividend ETFs worth investing in

When investing in dividend-paying companies through an ETF, here are key factors to consider: Continue Reading…