Search found 49 matches

by Thorn
08 Jan 2015 20:09
Forum: Financial Planning and Building Portfolios
Topic: Differentiating between Accumulation and Withdrawal phases
Replies: 22
Views: 1219

Re: Differentiating between Accumulation and Withdrawal phas

I am often confused by descriptions of "withdrawal" scenarios (e.g. 4% a year is OK) that seem to assume the individual needs to consume savings capital to survive.

In a number of posts above this does not appear to be the case. We may have someone who:
(1) Does not require any income or capital from their financial securities to meet ongoing expenses,
(2) Needs some varying degree of income from securities to supplement other income such as pensions, and
(3) Needs all of the income and perhaps some capital to survive each year.

It seems that the particular case might lead to very different approaches to investing and financial planning in general, and various levels of ongoing anxiety about a person's financial situation.
by Thorn
11 Jan 2014 23:44
Forum: Retirement, Pensions and Peace of Mind
Topic: Estate planning – gifting money
Replies: 12
Views: 2512

Re: Estate planning – gifting money

Intergenerational joint accounts (e.g. parent and child) Please don't forget that there have been two Supreme Court decisions in the past five years instructing that balances in the accounts must be included in the estate accounting unless the parent has specified in writing (prior to death of course) that the joint person(s) are to receive all the monies in the account(s).

In some ways, it is better to stick with a power of attorney, so the waters don't get muddy.
by Thorn
08 Oct 2013 14:17
Forum: Financial Planning and Building Portfolios
Topic: Wills, Estate Planning, Life Insurance
Replies: 406
Views: 63048

Re: Wills, Estate Planning, Life Insurance

Another wrinkle to consider - when the deceased has inter-generational joint accounts with the executor or a child.

Two Supreme Court decisions in recent years have ruled that joint account contents be reported in the will execution as estate assets, specifically if most or all of the account funds were provided by the deceased.

In recent years I have overheard bank employees tell someone that "the account is theirs" once the (say) parent co-owner is deceased. Just goes to show that many people working in banking don't keep up with the rules.
by Thorn
06 Oct 2013 17:32
Forum: Financial Planning and Building Portfolios
Topic: Advice for beginners - in as few words as possible
Replies: 104
Views: 5918

Re: Advice for beginners - in as few words as possible

My family's finances were a mess for 30+ years until I got fed up and started to track income, expenses, assets and liabilities, then periodically produce an income statement and balance sheet to see if we were winning or losing. In some cases we would look at an expense category total like Dining and our hair would stand on end, leading to a thought "maybe some room there for more saving". Despite this attention to detail we have never followed up with a 'budget' Based on our experience, I conclude that the largest obstacle is that financial planning is a test of character for an individual and a test of relationship for a couple. In many cases people treat their finances like a tiger in the room - if they keep doing what they wa...
by Thorn
05 Oct 2013 22:41
Forum: Financial Planning and Building Portfolios
Topic: Leveraged investing
Replies: 51
Views: 4283

Re: Leveraged investing

Two observations on borrowing to invest:
(1) In many cases the funds come as a demand loan, with the potential for an unwelcome phone call in a down market, possible wiping out the loan capital and some of your savings.
(2) For the new investor this is sold as a "way to make more money", i.e. a speculation, since we know that the invetor may
make money or may lose money - neither the salesperson nor the client know the future.
by Thorn
09 Jun 2013 23:27
Forum: Financial Planning and Building Portfolios
Topic: Re: My Portfolio Seeking advice, please help 2013-14
Replies: 165
Views: 7656

Re: Portfolio Help

Hi folks, sorry I am so late in joining this discussion.

Two points, based on my experience since retiring:

(1) I believe it is very important for you to be debt-free when you retire. I know you have a long way to go, but it is easy to go way off track over the years.

(2) My wife and I downsized in Alberta in 2008 (pre-crash) from an older house to a newer condo - the result was nearly a wash in terms of capital gain. My advice - don't assume you will be able to 'clean up' when you downsize.
by Thorn
19 Mar 2013 10:51
Forum: Retirement, Pensions and Peace of Mind
Topic: RRSP withdraw strategy for early retirees
Replies: 217
Views: 33745

Re: RRSP withdraw strategy for early retirees

brucecohen mentioned the book "Your Retirement Income Blueprint". I have read it and encountered many good ideas, from an author who has been in the fee-only financial planning business for years. For example:

1. Where future income in retirement may increase (inheritance, etc.), top up your early min RRIF withdrawls in your present bracket so you pay the minimum tax possible, and move some or all of the proceeds to TFSAs, then unsheltered accounts.

2. Look carefully at 4 key tax strategies - deduct, divide, defer and discount.

3. Layer annual income to extract full value.

Also, if you are gung-ho about taxes, read a book like "101 Tax Secrets for Canadians" Cestnick/Wiley.
by Thorn
02 Mar 2013 00:00
Forum: Taxing Situations
Topic: Keeping track of ACB for mutual funds in taxable accounts
Replies: 24
Views: 2989

Re: Keeping track of ACB for mutual funds in taxable account

I don't wish to derail this discussion, but may I ask a related question?

In case of the death of the owner of mutual funds or segregated funds, how does the executor determine the ACB and possible capital gains/losses for the final return?

What differences if the fund is not in a jointly held account or is a joint parent/child account?
by Thorn
28 Feb 2013 00:01
Forum: Retirement, Pensions and Peace of Mind
Topic: Bequest for nieces and nephews
Replies: 42
Views: 2897

Re: Bequest for nieces and nephews

Given sufficient funds and time, I favor the experimental approach. Starting soon, give them each (say) $10K a year and see what they do with it, perhaps for 2 or 3 years. If they seem to be clueless, a little discussion about future gifts might be in order.

If you have an excess of income each year without touching your capital, this allows you to avoid the complications of probate. In fact if you have the luxury of realizing that death is close, liquidating assets and writing checks to avoid government interference and family in-fighting over a large estate might be a good way to go.

Obviously the larger the estate the more need for a tax accountant to provide specific advice.
by Thorn
04 Jan 2013 15:43
Forum: Financial Planning and Building Portfolios
Topic: Does a young investor need bonds?
Replies: 56
Views: 3539

Re: Does a young investor need bonds?

For any investor, the following might apply, remembering that no investment decision is risk-free: (1) Cash - has appeared in your investment accounts through a sale, maturity, dividend or interest payment, etc. Let it sit for a while if you don't like anything you are hearing or seeing at present. If you want a small safe return while waiting, GoC T-bills are liquid and other money market instruments are available. In short, no need to rush to invest when you have some cash. (2) Fixed Income - protection of capital (government and corporate A,AA,AAA) with a return acceptable to you, notably in excess of anticipated inflation. Nice to have in tax-sheltered accounts, and laddered if possible. The bond market in general will be a mess until t...
by Thorn
23 Nov 2012 01:10
Forum: Financial Planning and Building Portfolios
Topic: Investing in a Taxable Account is a Gift to the CRA
Replies: 87
Views: 2872

Re: Investing in a Taxable Account is a Gift to the CRA

There are annual limits on amounts that can be contributed to RRSPs and TFSAs, so you need an unsheltered account unless you wish to leave any remaining cash on the sidelines. Also, for folks in lower tax brackets coming into retirement, it is good to consider unwinding RRIF withdrawals faster than the minimum contribution required, by "topping up to bracket", in order to pay the least tax possible when moving to unsheltered money. It's OK to "consider" preferred shares as fixed income but they do not have a maturity date and do not guarantee a return on capital, although in practice the price varies a small amount from the base, say $25 a share. Finally, considering any security, it would be nice to see that the annual ...
by Thorn
23 Oct 2012 13:34
Forum: Retirement, Pensions and Peace of Mind
Topic: Division of assets on separation - Contingency tax rates
Replies: 16
Views: 4532

Re: Division of assets on separation - Contingency tax rates

I just read the Nov 2012 issue of MoneySense "What's His, What's Hers".

After seeing the comment above, I Googled "pension splitting after divorce canada" and got a lot of hits. One I looked at was http://www.pension.ca/Dividing%20a%20pension.htm.

In brief this seems to be a complex, murky topic with many ways to go wrong. It seems to depend on the specific pension contract, provincial law and the speed with which both parties want to be done with the divorce.

Sorry if I over-simplified the situation.
by Thorn
18 Oct 2012 18:11
Forum: Retirement, Pensions and Peace of Mind
Topic: Division of assets on separation - Contingency tax rates
Replies: 16
Views: 4532

Re: Division of assets on separation - Contingency tax rates

In a slightly different vein, it is important to get a financial planner involved, as many lawyers only consider the immediate division and not the long-term implications of that division.

There are CDFAs in Canada (Certified Divorce Financial Analysts) essentially CFP or equivalent with additional exposure to separation/divorce financial issues and long-term implications of division of assets.

I was shocked to read yesterday that Ontario is the only province in which a pension division can be taken as a future cash flow. At present, in all other cases, the spouse must take a lump sum, with attendant serious consequences on both persons future expected retirement income from that pension capital.
by Thorn
19 Sep 2012 19:44
Forum: Retirement, Pensions and Peace of Mind
Topic: Determining Minimum Withdrawals from a RRIF....
Replies: 7
Views: 1341

Re: Determining Minimum Withdrawals from a RRIF....

On a slightly different tack, RRIF withdrawals are taxed at your marginal rate.

If you have significant capital in the RRIF and you have room in your current tax bracket, you could consider taking more than the minimum.

If you withdraw an amount to "top up to bracket" you will pay a lower marginal rate than you might in the future. You can re-invest the excess in equities delivering dividends and/or capital gains, for a more beneficial tax rate when making future withdrawals.
by Thorn
30 Aug 2012 00:52
Forum: Financial Planning and Building Portfolios
Topic: Fixed Income - Bonds, Real Return Bonds, Laddered?
Replies: 99
Views: 7581

Re: Fixed Income - Bonds, Real Return Bonds, Laddered?

My apologies if I have offended some participants by not responding to criticisms of my comments. I seem to see a wide variety of opinions here. I try to consider each and work it into my overall view of the subject. Since I am very new to forums, perhaps I should read more and write less in the future. However, two more comments: (1) Once I have purchased some Canadian corporate bonds that satisfy my criteria, I pay no attention to their current price, which may change often based on new issues of comparable Govt of Canada bonds. What I know is that I will receive the par price at maturity. (2) Since the topic has become "fixed-income like" vehicles, preferred shares of equities for large, well-established corporations can provid...
by Thorn
28 Aug 2012 23:26
Forum: Financial Planning and Building Portfolios
Topic: Fixed Income - Bonds, Real Return Bonds, Laddered?
Replies: 99
Views: 7581

Re: Fixed Income - Bonds, Real Return Bonds, Laddered?

I am retired, married, 68. A few observations on the discussion so far: (1) Fixed income (bonds, which are liquid, as opposed to GICs which are not) are intended to preserve capital and deliver some interest income. Bond funds are equities, not fixed income: they do not provide any level of guarantee of return of capital, they do not mature on a specified date and they do not guarantee the percentage return (coupon) for the period you hold them. (2) Fixed income ladders demand that you shop around for an acceptable coupon when one set matures each year. One would hope the return would exceed inflation + tax by some amount you find reasonable. Even so, the overall expectation is about a 3.5% return for medium-term investment grade corporate ...
by Thorn
28 Aug 2012 13:46
Forum: Retirement, Pensions and Peace of Mind
Topic: So you are going to buy an annuity. With what?
Replies: 145
Views: 13352

Re: So you are going to buy an annuity. With what?

Great comments from all the folks above.

I am 68 with sufficient pension income, so I will be handling my own investment capital for the foreseeable future.

Before getting lost in the annuity yes/no details, the starting point should be a set of retirement goals, hopefully more than one (e.g. "leave the kids a truckload of money") to provide a little challenge in prioritizing your needs, wants and total budget for the years to come. These are very specific to each of us, individuals or couples.

Next a retirement income plan which outlines how to fund those goals.

Finally, considerations on how to best allocate income and assets to be most tax-efficient.
by Thorn
26 Aug 2012 23:06
Forum: Taxing Situations
Topic: 2012 and on dividend tax credit changes
Replies: 40
Views: 3641

Re: 2012 and on dividend tax credit changes

I second "like-to-retire" - once retired, we need some portion of our portfolio in fixed income, to provide both income and capital preservation. If you are 100% equities, sooner or later you will make a poor decision and place both capital and possibly dividends at risk. Once retired, we generally have neither the time nor the energy to significantly increase our income streams, to recover from poor decisions. It is important to keep an eye on your tax bracket, as the dividend gross-up inflates the taxable income, possibly placing you in a higher bracket. Also, if you have an RRIF in place or in mind, you might take a careful look at future (forced) income flows. In some cases it is better to take additional money sooner, pay tax...
by Thorn
29 Jul 2012 23:26
Forum: Taxing Situations
Topic: Itchy to Collapse RRSPs
Replies: 27
Views: 3084

Re: Itchy to Collapse RRSPs

joeclarke, for those preparing to retire or already retired, Daryl Diamond's (Canadian) book "Your Retirement Income Blueprint" helps you plan your future income streams, and as well as bringing up a zillion other issues, explains why moving money from registered to non-registered holdings may make sense as you move into and through retirement.
by Thorn
27 Jul 2012 18:15
Forum: Retirement, Pensions and Peace of Mind
Topic: Retirement Debt
Replies: 24
Views: 1744

Re: Retirement Debt

Inquisitive's reply concening deferral of property taxes reminds us once again that some of us are fortunate enough to be able to meet all our bills each month/year, while others need to be more creative in order to have sufficient income to live for the foreseeable future.

Some of us are able to meet our obligations with pensions alone.

Others depend on some deferral of expenses or investment income to supplement their budget. This directly affects investment strategy and related risk management.

We need to think for ourselves and look past trite formulas often touted in the media.
by Thorn
26 Jul 2012 00:43
Forum: Retirement, Pensions and Peace of Mind
Topic: Retirement Debt
Replies: 24
Views: 1744

Re: Retirement Debt

I voted "No Debt" as well, with some clarification needed. We retired 10 years ago with no long-term debt - mortgage- and loan- free. Now, for short-term debt: We do use an LOC cheque occasionally but only if we can clear the balance when the cheque clears - sometimes that requires a little planning and perhaps delay in spending. We do invest but we never borrow to invest. If we see something new we like and have insufficient investment cash, we look to sell some current holdings and use the resulting cash to purchase our new opportunity. We do use bank credit cards regularly but always pay the bill in full when it comes in. All of us in the forum have ongoing property and income tax liabilities - these should be paid in full on t...
by Thorn
29 Jun 2012 23:21
Forum: Financial Planning and Building Portfolios
Topic: TFSA: What Asset Allocation?
Replies: 59
Views: 4838

Re: TFSA: What Asset Allocation?

I, like many of your here, have three accounts - unsheltered, RRSP/RRIF and TFSA. Three comments: 1. I think your asset allocation needs to first be worked out for your entire portfolio (cash, fixed income, equities), then decisions made about allocating funds to each account. Certainly tax-inefficient income like interest should be in sheltered accounts as much as possible. 2. It is important for persons working over a long period of time and contributing regularly to their RRSP to consider the possibility that too much money ends up there, and you are forced to take unacceptable payouts during your RRIF schedule, affecting OAS etc clawbacks. 3. Don't forget a fully taxable account - many of us will receive inheritances in coming years whi...
by Thorn
24 Jun 2012 20:43
Forum: Financial Planning and Building Portfolios
Topic: Thou shalt not split 60/40
Replies: 31
Views: 2546

Re: Thou shalt not split 60/40

As a retired defensive investor, I have found that a careful reading of many structured products places all the advantages in the seller's hands and none in the investor's.

For me, anything beyond corporate bonds, common shares and selected ETFs (broad, passive, non-leveraged, low-fee) entails unacceptable risk as I am unwilling to spend the time needed to understand the products, especially when seasoned professionals often indicate that they can't understand them either.
by Thorn
19 May 2012 11:17
Forum: Financial Planning and Building Portfolios
Topic: Risk = ??
Replies: 491
Views: 108572

Re: Risk = ??

In most investing topics, it is best not to get too caught up in the extensive math and stats literature. The models fall far short of the real-world complexities in the money, fixed-income and equity markets. For me, "risk" is the probability that I won't achieve the promised or expected returns on one investment or on my entire portfolio. In each case I try to consider how I might manage the risk. I tend to consider 5 items: (1) Currency - is there a non-CDN currency component to this investment? If I am unwilling to take chances on fluctuations in the global currency market which could undermine my returns, then I will stay with CDN or CDN-hedged securities. (2) Inflation - invisible but insidious over investing time horizons -...
by Thorn
26 Apr 2012 00:17
Forum: Financial Planning and Building Portfolios
Topic: Portfolio Theory: GICs vs. Bonds
Replies: 10
Views: 1750

Re: Portfolio Theory: GICs vs. Bonds

Great comments, folks! Thanks for straightening me out about some ETF payouts - they sound a lot like income trust payours, which I find a little annoying, since each return of capital means I need to re-calculate my adjusted cost base. A few more observations: (1) The Canadian bond market trading volume is about $25-26B daily, as opposed to $5-6B for the TSX equity market, and of course the daily money market is much larger (8x?) than the bond market. (2) The bond market is not transparent - the agent will quote a price which you may take or refuse. In many cases the agent will not disclose the markups related to the operations of their wholesale, retail and agency bond desks. However, the market is quite competitive (you can get quotes fr...