Download - Retirement Income and Rock Music Trivia
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Retirement Incomeand
Rock Music Trivia
Daryl Diamond CFP CLU CHFC
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The Maritime Life Assurance Company
StructuralPlan
InvestmentPortfolio
Health RiskManagement
Wealth Transfer
The Four Planning Channels
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The Maritime Life Assurance Company
The Structural Plan
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The Maritime Life Assurance Company
Planning Considerations
Point of “Consolidation” “Optimum Health”
People don’t need same income all the way through
The difference between life expectancy and years of good health
… Let’s go on a vacation
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The Maritime Life Assurance Company
The Prime Approach To Your Retirement Years
That period of time between
when you commence “retirement”
and
the moment that one of you needs care or passes away
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The Maritime Life Assurance Company
Time Hub Priorities
• Love • Purpose/fulfillment• Recreation• Security• Health• Accommodation
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The Maritime Life Assurance Company
Money Hub Priorities
• Income security• Highest possible income today• Coping with inflation• Wealth transfer• Using capital assets• Health risk management• Tax Reduction
Rank the following in terms of their importance to you
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The Maritime Life Assurance Company
Stages In Retirement
• Initial retirement age• The years of prime health• Change in health of family or friends• Children leave - house or move away• Arrival of grandchildren• Loss or disability of a partner• Accommodating adult children• Dealing with aging parents• Becoming a caregiver• Losing your own health
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The Maritime Life Assurance Company
Varying Attitudes
Boomers• Change the world• Never die/never grow old• Many jobs and employers• Possessions, credit, debt• Enjoy now, pay later• Reluctant to save• Afraid of not keeping up
Parents• Respect authority/conform• You go when you are called• Loyalty to the company• Modesty, avoid debt• This one’s good enough• Reluctant to spend• Afraid of loss
Time Money
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The Maritime Life Assurance Company
The Limbo Bar on Net Income
• Net income over the first Federal Bracket $35,595
• Being sensitive to the Age Credit ($3,979)- $29,619 - $56,146
• Keeping below OAS “repayment”- $60,806 - $98,660
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The Maritime Life Assurance Company
Keeping Below The Limbo Bar
Make use of non-registered income streams• Use of cash value insurance• Unrealized capital gains• Mutual fund corporations• Prescribed annuity contracts• Gifting strategies • Income splitting strategies
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The Maritime Life Assurance Company
Using Spousal Loans
• Documentation needed- Agreement for demand loan- Payment
• Prescribed rate stays intact• No time limit on term of loan• Interest payment taxable to lender, deductible by
borrower (ie: effectively receive OAS on a non-taxable basis)
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The Maritime Life Assurance Company
Order Of Income Structure
• Government Benefits• Pension / Locked-In Assets• Taxable Non-RRSP Distributions• RRSP / RRIF Income• Tax-favored Income• Non - Registered Capital
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The Maritime Life Assurance Company
Investment Portfolio
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The Maritime Life Assurance Company
Accumulation vs Withdrawal
WithdrawalAt 7% = $21,000 / year (1,750/m)$182,614 Breakeven - neverCapital exhausts – 14.5 yrsTarget return – 11.5%Adjust income - $12,091 (1,007/m)Per month - $743 less!
Accumulation
No contributions
$241,307
Breakeven - 3 yrs 3 mths
$300,000 @ - 7% for three consecutive yearsPositive returns of 7% from then on
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The Maritime Life Assurance Company
Investment Dilemma For Retirees
• Capital preservation is critical• From paycheque to drawing from assets• Interest rates at 50 year lows• High taxation rates• Seeing losses in current assets• Recently, the worst markets since the 30’s
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The Maritime Life Assurance Company
Exploring the Efficient Frontier
HighVolatility
LowReturn
LowVolatility
HighReturn
You are not here !
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The Maritime Life Assurance Company
Wants and Needs
What the investor profile tells us and what the plan actually needs:
• If the plan requires 7.5% rate of return and profile suggests 6% result; what needs to change?
• Profiles created during accumulation period need to be redone to match new profile
• Late 90s vs today??• Incredibly aggressive vs incredibly timid
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The Maritime Life Assurance Company
Loss Of Capital $300,000 and Income @ 7%
Full 7% -.50 -.75 -1.00 -1.25
5 300,000 283,688 279,827 275,986 272,293
10 300,000 261,338 252,488 243,850 235,418
15 300,000 230,718 215,483 200,844 186,783
20 300,000 188,765 165,374 143,293 122,461
25 300,000 131,287 97,523 66,277 37,395
$21,000 / Annual Income
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The Maritime Life Assurance Company
Variable Investment Math
1 2 3 4 5 6 7 8 9 10 Ann Ret
7 7 7 7 7 7 7 7 7 7
9.4 14 13 23 -4 10 -1 21 -4 -7
7%
7%
7%-7 -4 21 -1 10 -4 23 13 14 9.4
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The Maritime Life Assurance Company
Accumulation Math$100,000 Deposit
1 2 3 4 5 6 7 8 9 10 Value
7 7 7 7 7 7 7 7 7 7
9.4 14 13 23 -4 10 -1 21 -4 -7
$196,715
-7 -4 21 -1 10 -4 23 13 14 9.4
$196,715
$196,715
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The Maritime Life Assurance Company
Withdrawal Math$100,000 Deposit $7,000 Withdrawn Annually
1 2 3 4 5 6 7 8 9 10 Value
7 7 7 7 7 7 7 7 7 7
9.4 14 13 23 -4 10 -1 21 -4 -7
$100,000
-7 -4 21 -1 10 -4 23 13 14 9.4
$117,986
$ 83,150
$34,836 42%
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The Maritime Life Assurance Company
Investment SelectionTHE CASH WEDGE
Initial Value $352,000
$60,000
$60,000
$18,000
$60,500
$60,000
$60,000 $17,000
$17,500
Fund G
Fund F
Fund E2 Yr GIC
1 Yr GIC
Money Market
Fund BFund A
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The Maritime Life Assurance Company
An Income Delivery Process
• Allocate to profile / meet plan objectives• Expect certain positions to be flat or negative• Replenish cash wedge / pool with profits• Direct other profits to lagging positions• Facilitate this through IPS
Hold and Buy
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The Maritime Life Assurance Company
Taxable Income <$35,595 >$35,594
Interest $745 $690
Dividends $917 $841
Capital Gains $874 $844
What You Keep On Your InvestmentsFor each $1,000 taxable
Ontario marginal rates
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The Maritime Life Assurance Company
The Difficulty With Dividends
• Advantageous if there is no other income• Gross up occurs before calculation of net
income• Credit is applied after calculation of net income
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The Maritime Life Assurance Company
Tax Credits 2005
• Personal Exemption 8,148• The Age Amount 3,979 = 12,127• The Spousal Amount 6,803• Pension Credit 1,000• Disability Credit 6,596• The Caregiver Amount 3,848• Infirm Dependents 18+ 3,848
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The Maritime Life Assurance Company
Clawback Zones 2005
• Personal Exemption N / A• The Age Amount 29,619 56,146• The Spousal Amount 692 7,611• The Caregiver Amount 12,921 16,705*• Infirm Dependents 18+ 5,368 9,152*
* dependent's net income
• OAS 60,806 98,660
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The Maritime Life Assurance Company
What Is The Most Efficient Way To Create The Next $1.00 to spend?
• Income split• Tax free zone - top up to bracket• Meet income goal while keeping taxable income
low• Mix of taxable, tax favored and non-taxed• Results in less stress on assets
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The Maritime Life Assurance Company
Health Risk Management
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The Maritime Life Assurance Company
Years Of Good Health At Age 65
Male Female
Life Expectancy 16.1 20.0
Good Health 12.9 13.8
Difference 3.2 6.2
Source: Statistics Canada 1996
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The Maritime Life Assurance Company
We Need To Communicate
• What is and what is not covered by government programs
• Health risk issues do not only involve dying. It applies to the living and their caregivers.
• The costs of coverage are far less than the cost of care - annual tax-free vs. daily benefit
• These tools provide choice and independence• Remember the health care system 15 years ago
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The Maritime Life Assurance Company
Wealth Transfer
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The Maritime Life Assurance Company
Benefits of Consolidating
• Better planning, no conflicting advice, less confusion• More control over amounts and sources of income• More efficient asset allocation / better portfolios• More opportunity for tax-efficiency / savings• Less administration - reporting, number of cheques• More orderly, expedient and less costly wealth
transfer – easier for beneficiaries and estate• More efficiency, better control, simplified
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The Maritime Life Assurance Company
• Define their objectives• Establish an income and investment process• Cover off health-risk contingencies• Plan and implement wealth transfer strategies• Create freedom by creating structure• Help them to get the most out of their best
retirement years - The Prime Approach
Comprehensive Income Planning