tag:blogger.com,1999:blog-45259853306982948172024-02-06T21:52:47.447-08:00Your Financial GuruMusings of a MadmanI need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.comBlogger83125tag:blogger.com,1999:blog-4525985330698294817.post-56803293863505442392009-08-24T01:00:00.000-07:002009-08-24T06:01:32.071-07:00Sorry But I'm Taking A Break<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1WHThjiRp-zPslZD340Tkxxp0PJjtI48r-O_EGww1jF6T2N4XG0wIn0Tfp8Rldn1Hu6E9R3asDjh-zj7R7D9dYvlIPpzPxeRbSQNs9Vs8aAyYf0QW2gjQiDx5tVm5pk9P207WX5hpYpM/s1600-h/Sorry.bmp"><img id="BLOGGER_PHOTO_ID_5373514036959868898" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 421px; CURSOR: hand; HEIGHT: 329px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg1WHThjiRp-zPslZD340Tkxxp0PJjtI48r-O_EGww1jF6T2N4XG0wIn0Tfp8Rldn1Hu6E9R3asDjh-zj7R7D9dYvlIPpzPxeRbSQNs9Vs8aAyYf0QW2gjQiDx5tVm5pk9P207WX5hpYpM/s400/Sorry.bmp" border="0" /></a><br /><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5liRxryIz7VtrGzGkP5d4RHeBR5_kwYGkLkfcL7B74fy8yCSdmPm8BW3vlpAGuJ5cVLmJF86ZA8ODjlM_rmrFh5bsrYr2Nkb6P1vMFZFszGwUiqn4Bx2_8iFD_-1RCdCARsct74sJAj0/s1600-h/Sorry.bmp"></a><br /><br /><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div></div><div>As we approach the end of a "brief" summer, I am planning on taking a couple (few) weeks off to refresh and renew. See you in the fall...</div><div></div><div><strong>Stay Well and Pay It Forward.</strong></div></div>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-70079423007543655642009-08-21T01:00:00.000-07:002009-08-21T01:00:02.478-07:00Financial Independence (FI)<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRzlIqm29kiTvR0ZkWLlGnqUWwx3fCEcDrScP0tXMmFyUvOYJLKaAolfBNKqBqwGvSrdiCxqzDUwGvQ1qq2sgdHgHzRm2iIz7yy8xnkF1PbgzCCdmu5890tQAtqEMOXLDwCHgBhdf1kRA/s1600-h/financial-independence.jpg"><img id="BLOGGER_PHOTO_ID_5365757203480393362" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 226px; CURSOR: hand; HEIGHT: 113px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRzlIqm29kiTvR0ZkWLlGnqUWwx3fCEcDrScP0tXMmFyUvOYJLKaAolfBNKqBqwGvSrdiCxqzDUwGvQ1qq2sgdHgHzRm2iIz7yy8xnkF1PbgzCCdmu5890tQAtqEMOXLDwCHgBhdf1kRA/s200/financial-independence.jpg" border="0" /></a>Every person on this planet will have their own definition of financial independence. To many people in North America, it means a nice home, nice cars, fancy "stuff" and trips. To someone from the African interior, it could be defined as 3 square meals a day. Yet one constant remains - the most important things for those dreaming of financial independence (FI) is manage your cashflow. In the beginning people often get too bogged down in worries about if they have invested right or tax considerations or how much money they need, when in reality managing your cashflow is much more important.<br /><br /><strong><span style="color:#ff0000;">You see in the beginning you likely have a small amount of investments so optimization of your investments and related taxes is a minor issue. A 1% lower rate of return on $50,000 is a mere $500 a year or equal to about $42/month. So you could either do a ton of research and self learning on taxes and investments to get that extra 1% return or just stop buying a coffee everyday on the way to work. Guess which one is much easier to do?</span></strong><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8Cl9A_aJ2zBIbw2mdBPxQLE6CyDCjJIHfgpgsyTabyXke8a6wctQDel0QTidyzY0wM_23pkcXAIu81rmJHrTB47TLhUO_ny_HEf8OvoY5MCj7U-vjmLCnHEKTJbKnjo8pHhgeSYVqWnc/s1600-h/frugal.jpg"><img id="BLOGGER_PHOTO_ID_5365757036344077298" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 223px; CURSOR: hand; HEIGHT: 193px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8Cl9A_aJ2zBIbw2mdBPxQLE6CyDCjJIHfgpgsyTabyXke8a6wctQDel0QTidyzY0wM_23pkcXAIu81rmJHrTB47TLhUO_ny_HEf8OvoY5MCj7U-vjmLCnHEKTJbKnjo8pHhgeSYVqWnc/s200/frugal.jpg" border="0" /></a>So that’s why I’m suggesting don’t worry about everything else in the beginning. Your first priority is to start using frugal ideas and reduce your spending to increase your amount of money for debt repayment and future savings. You start with the big stuff of paying off your credit card debt and work you way down to $2/month savings here and $5/month there. Every dollar counts so look at everything and ask yourself, "does this make me happy for the dollars I’m spending on it or do I require this". Not “would like” or "kinda enjoy it" but rather "I love doing this" and "I need to eat something to keep breathing" kind of thing.<br /><br />In the beginning you will likely go over kill and cut back too much. That is fine, once you find those areas you really miss spending on go back and put some cashflow back in. After all<br />FI is a nice goal, but no one should be miserable on the way to getting there. Life is a once through processes so you might as well enjoy the ride.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyn9wbzpnbRH4ybrmpgamNxoLCstEoi7oXQhk4-KTM8bqTu63z-b8BcCBf6vgrkepvQ5QPYxP8ZqI1hwigewD6g5iPU0UWI-jPZ9lUnDQvQXvf2DrRko05KMLTZj_d6JPSySQD3nPaBXg/s1600-h/03152009_spending_money_1.jpg"><img id="BLOGGER_PHOTO_ID_5365757766446688386" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 128px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhyn9wbzpnbRH4ybrmpgamNxoLCstEoi7oXQhk4-KTM8bqTu63z-b8BcCBf6vgrkepvQ5QPYxP8ZqI1hwigewD6g5iPU0UWI-jPZ9lUnDQvQXvf2DrRko05KMLTZj_d6JPSySQD3nPaBXg/s200/03152009_spending_money_1.jpg" border="0" /></a>In the end you will find out how much you really need to spend to make you happy which then you can use to build a real estimate of how much you need to get to FI. Also after this much time you would have likely had some time to slowly learn a bit more about investments and taxes so now you can go back and investigate doing better there. Just don’t try to take on too much all at once, it is recipe to fail to get anything done.<br /><br />Read books, talk to successful people (make sure they really are successful and not living on time/credit), watch shows and educate yourself. Most people tend to learn from their parents - whether that advice is good or bad does not matter. Ask around and find out what others are doing. That doesn't mean you need to become an expert. Many people do fine as do-it-yourself investors. They don't need an advisor to hold their hands and seem to come out ahead. If you don't see your self in this category, then stick to the basics:<br /><br /><ul><li>Pay cash whenever and wherever possible</li><li>Save 10% of your income for emergencies, retirement, child's education</li><li>Pay your bills and live within your means</li><li>Decide on whether an item is a need or want</li><li>Do a budget and stick to it</li></ul><p><strong>Stay Well and Pay It Foward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-72513533330695135402009-08-18T01:00:00.000-07:002009-08-18T01:00:02.689-07:00Retirement Income - The Right MixHere is one of those great things you find on the net - it will help investors "approximate" how much of their investment holdings should be invested in equities and bonds.<br /><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQLf3yFlDJ8lxhL34DoFRaEqzeIhARouEAW5uH7SnIKGuCHa9J09OO3MD5qHUrDkJfxv2-HJ7aM-Qy-mQBvUUSswTQK5gVMFZi1aKY5IN3A0epkL8dNbtlq3JRAvrNGfuhGIMry0feaOU/s1600-h/Rule+of+thumb.jpg"><img id="BLOGGER_PHOTO_ID_5365746465184863794" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 132px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQLf3yFlDJ8lxhL34DoFRaEqzeIhARouEAW5uH7SnIKGuCHa9J09OO3MD5qHUrDkJfxv2-HJ7aM-Qy-mQBvUUSswTQK5gVMFZi1aKY5IN3A0epkL8dNbtlq3JRAvrNGfuhGIMry0feaOU/s200/Rule+of+thumb.jpg" border="0" /></a>The theory that you should ratchet back on risk as you age is generally a good one. A popular rule of thumb was to subtract your age from 100, the difference being the percentage of stocks you should keep in your portfolio. Then people started living longer, and the target number to subtract from became 110. For example, if you’re age 40, 70 per cent (110 minus 40) of your portfolio should consist of stocks when you're building towards retirement.<br /><br />Even when you're done working, you'll still likely need to have at least some of your retirement portfolio in stocks to provide inflation-beating growth, however. In fact, some advisors believe the stock allocation shouldn't drop below 50% for many retirees. </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidFuxRCNl8AvRsqWLDUzKCtwBdl3KG0yfCx3zVe0CvKQGeKWctyJuPEQ02lBh44wOxrrTQTISfV-FEWcMsnrQCPAM7lBr38IV0CfY_-mfxqv1wj8ldKtPQUUsN3u3SypQCXofnrZ6fXnk/s1600-h/retirement+happy+beach.bmp"><img id="BLOGGER_PHOTO_ID_5365745978899214466" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 216px; CURSOR: hand; HEIGHT: 128px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidFuxRCNl8AvRsqWLDUzKCtwBdl3KG0yfCx3zVe0CvKQGeKWctyJuPEQ02lBh44wOxrrTQTISfV-FEWcMsnrQCPAM7lBr38IV0CfY_-mfxqv1wj8ldKtPQUUsN3u3SypQCXofnrZ6fXnk/s320/retirement+happy+beach.bmp" border="0" /></a>But it’s important to realize that close to two thirds of your investment earnings may actually come from post-retirement returns, says Russell Investments Canada. Good news, considering that most investors haven’t been having much luck recently making money before they retire.<br /><br /></p><p>Based on Russell’s 10/30/60 ratio, the pattern of your investment earnings during retirement will likely be derived something like this:<br /><br />- 10% from money you saved during your working years<br />- 30% from the growth of your savings before you retire<br />- 60% from growth that occurs once you retire </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTCmhjrZ1Cl-jc6FuaEuNCgWTM-GcmjoJBwdiHE4NKOE4LLJY66CiHmLb4-FKKXdjhFp0Cfll3bbz7gjL3w2rCHeYnztz1pgu2xlNk04shekGHLwIF45AilEpIMOjBU7LnBlraJmYd1SY/s1600-h/Nest+egg+2.jpg"><img id="BLOGGER_PHOTO_ID_5365745705531412370" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 125px; CURSOR: hand; HEIGHT: 99px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiTCmhjrZ1Cl-jc6FuaEuNCgWTM-GcmjoJBwdiHE4NKOE4LLJY66CiHmLb4-FKKXdjhFp0Cfll3bbz7gjL3w2rCHeYnztz1pgu2xlNk04shekGHLwIF45AilEpIMOjBU7LnBlraJmYd1SY/s320/Nest+egg+2.jpg" border="0" /></a>Because the scheduled withdrawals go up relentlessly every year, they take an increasing bite out of your nest egg. Withstanding that ever-growing bite requires stability, which means minimizing volatility and negative returns like those we’ve seen lately.<br /><br />The key, therefore, is having the right portfolio mix in place during retirement – one that balances the stability of bonds with the continued growth potential of stocks. What’s the optimal mix? A relatively conservative blend of 35% stocks and 65% bonds, Russell suggests.<br /><br />How does your portfolio match up?<br /><br /><strong>Stay Well and Pay It Forward</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-62909949949671073342009-08-14T01:00:00.000-07:002009-08-14T05:29:14.223-07:00Will CPP/OAS Be There When You Retire?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx5uuBhEZJ0eCMSPepzLvOT2CUEos7xYJ43lRd027nFhUxmstdEY2F8qJrr1hsDMPCrsIzbZQIB9gfuYUM5npKXzlpyQLT96n_-wrK4bBSPteNTCkXO2bI2KGV4x9nmcnQArxXWaKJde4/s1600-h/CPP_e.gif"><img id="BLOGGER_PHOTO_ID_5358818268541052258" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 70px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjx5uuBhEZJ0eCMSPepzLvOT2CUEos7xYJ43lRd027nFhUxmstdEY2F8qJrr1hsDMPCrsIzbZQIB9gfuYUM5npKXzlpyQLT96n_-wrK4bBSPteNTCkXO2bI2KGV4x9nmcnQArxXWaKJde4/s200/CPP_e.gif" border="0" /></a>I often hear this question when talking to people. For some reason, the younger the person, the more it is assumed that there will be no Canada Pension Plan or Old Age Security. However, it is also interesting to see how many older people assume that it is their <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">inherent</span> right to receive OAS benefits. As you are about to see, they may both be very wrong.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs_Qeq92te46RFrr_D5ruquJalA206XP7IiLWBLhv02gOboNe5d0oVbgEKRZ1yMjjwBUf0aptE5AvMs8W9BEM5IBSfEg-X9oVK_ucybWpPrJY6hU6BQ5eVXAMNUNzcjnGodhCLfVsQ9eQ/s1600-h/interest-rate-cut.jpg"><img id="BLOGGER_PHOTO_ID_5358818806450168194" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 133px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgs_Qeq92te46RFrr_D5ruquJalA206XP7IiLWBLhv02gOboNe5d0oVbgEKRZ1yMjjwBUf0aptE5AvMs8W9BEM5IBSfEg-X9oVK_ucybWpPrJY6hU6BQ5eVXAMNUNzcjnGodhCLfVsQ9eQ/s200/interest-rate-cut.jpg" border="0" /></a>While the information I am about to show you is old, rest assured it will explain the problem/crisis we face in the future. These numbers are from the 2003-2004 fiscal tax year. During that year, the federal government brought in $186B in revenue. The largest single expense that year? Interest payments on Canada’s federal debt (money borrowed by previous federal governments, which has not been repaid). These payments – to institutions and individuals who hold federal bonds, Treasury bills and other forms of the debt – cost $35.8 billion. This represents 19% of all tax revenue.<br /><br />Transfer Payments are cash payments that go directly to individuals, to provincial and territorial governments, and to other organizations. Overall, these three categories of transfers combined make up just over half of all federal spending, or almost 51 cents of each tax dollar. Of this group, the biggest transfer category was <strong>Major Transfers to Persons</strong>. Altogether, these payments cost almost <span style="color:#ff0000;"><strong>23 cents of every tax dollar</strong></span>. These transfers included payments to <span style="color:#ff0000;"><strong><em>eligible elderly Canadians through Old Age Security payments, the Guaranteed Income Supplement and the Spouses Allowance.</em></strong></span><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9XfGcaEec78JvJhKONBJ2fYL_ikCOKNKkr-P7cbBEn9jgxp0faA54QgdG3kgH3Inb2NVdGxAT-CqUY4-hHcBdreG_8rc6O99wFiDMdh3JPGptrb0ntO6paRJ-u8bxSyQe_smGKozl-hA/s1600-h/Cdn+dollar.png"><img id="BLOGGER_PHOTO_ID_5358821629515551026" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 191px; CURSOR: hand; HEIGHT: 171px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9XfGcaEec78JvJhKONBJ2fYL_ikCOKNKkr-P7cbBEn9jgxp0faA54QgdG3kgH3Inb2NVdGxAT-CqUY4-hHcBdreG_8rc6O99wFiDMdh3JPGptrb0ntO6paRJ-u8bxSyQe_smGKozl-hA/s200/Cdn+dollar.png" border="0" /></a>Here is a simple point - for every dollar the government brings in, 42 cents goes to pay the debt and provide OAS and related benefits. Now here is the crisis part - what happens when the first wave of baby boomers turn 65. This will lead to lower tax revenues and higher transfer payments. Over the past several years, the federal government has been paying down the deficit at the rate of about $10B per year. The past 12 months changed everything and it is expected to put us back where we began. The federal debt level was still substantial at $467 billion in 2006-07. expect to see a number in the $550 billion range next by 2010.<br /><br />If you think we have it bad, the US is in much deeper trouble. I found this best illustrated their problems going forward.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7CDMLnMGulsGmZrvB35CODhZirTvrVNV_vJYyf5gLh_gwmu_sQ5vALylnvlvcJyec9vrsiTlLCrYuYmhQW8l1P-Zm6sx3p3n4GqUfULNdaNzs6oIbX3Vlt2t8Z3bfRcGbuS-cBz9olck/s1600-h/61281575aa7ba69571877aacddd1e5fb.jpg"><img id="BLOGGER_PHOTO_ID_5358822389599517490" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 483px; CURSOR: hand; HEIGHT: 235px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh7CDMLnMGulsGmZrvB35CODhZirTvrVNV_vJYyf5gLh_gwmu_sQ5vALylnvlvcJyec9vrsiTlLCrYuYmhQW8l1P-Zm6sx3p3n4GqUfULNdaNzs6oIbX3Vlt2t8Z3bfRcGbuS-cBz9olck/s400/61281575aa7ba69571877aacddd1e5fb.jpg" border="0" /></a><br /><br /><br /><br /><p><br /><p><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5xIQReVIGyCK8NAxf3-kmsdINyohSF5jJcVB1VUm2n362-_Wnkd6o-2hEMHck-_zSxzuuzsKGdSxjdAYshnqD1HJujVzY-PJ40ZgMSM50WDNb5AscPD6Pg-V6P-m-EZB1AIeB7CqLIRc/s1600-h/graph_planif_lrrq.jpg"></a></p><p></p><p><br /></p><p></p><p></p><p></p><p></p><p></p><p></p><p>Let's turn to the state of the Canada Pension Plan. Canadians currently receiving their CPP benefits have no cause for concern. The plans has a total (March 2009) of $105.5 billion in it's portfolio. In fact, it will be another 11 years before a small portion of the CPP Fund’s investment income will be needed to help pay pensions. Beyond that time, the CPP Fund will continue to grow for decades to come. The $105.5 billion CPP Fund is broadly diversified and structured to help secure Canadians’ CPP pensions over the long-term and the funding structure of the CPP means that it is able to weather an extended market downturn.<br /><br />CPP contribution levels have increased dramatically over the past 15 years to their current levels of 9.9%. The reason for this was to preserve future benefits. According to the Office of the Chief Actuary of Canada, the CPP fund needs a real rate of return – that’s return after inflation – of 4.2 per cent, <span style="color:#006600;"><strong><em>over the 75-year projection period in his report</em></strong></span>, to sustain the plan at the current contribution rate. Over this long time frame we expect that there will be periods where returns are above or below this threshold. In the ten years since the CPP Investment Board began investing, returns for the CPP Fund in all four-year periods prior to fiscal 2009 exceeded the 4.2 per cent real rate of return. </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQS4UrB_Xy09bljMeVBSPUwPFZGbSrr5gecteoHHyMpWTvIXjJIQ1xyDJYcdKkXX_1SiCDNZ1uvj99pq2HpTCu89kH5AWc2feekkL4a75B_RNDdgBDVK0H8XaQQxET0Ogn1TsDDFxCCBg/s1600-h/CPP+Investments.gif"><img id="BLOGGER_PHOTO_ID_5358825562057942930" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 284px; CURSOR: hand; HEIGHT: 160px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgQS4UrB_Xy09bljMeVBSPUwPFZGbSrr5gecteoHHyMpWTvIXjJIQ1xyDJYcdKkXX_1SiCDNZ1uvj99pq2HpTCu89kH5AWc2feekkL4a75B_RNDdgBDVK0H8XaQQxET0Ogn1TsDDFxCCBg/s320/CPP+Investments.gif" border="0" /></a>Public equities make up 44.0 per cent of the CPP Fund. The current asset mix is as follows:<br />Public equities: 44.0%<br />Fixed Income: 27.9%<br />Private equities: 13.4%<br />Inflation-sensitive assets: 14.7%</p>Interestingly, only 45% of the portfolio is actually invested within Canada. Don't think that makes sense? Here is a response from the CPP Investment Board to that question.<br /><br /><p><span style="color:#993399;"><em>Our mandate is to contribute to the financial strength of the CPP by investing in the best interests of 17 million CPP contributors and beneficiaries and by maximizing returns without undue risk of loss.With approximately 45.5% of our portfolio (or $48.0 billion) invested in Canada, we will always have a large part of the fund invested here but we do not want to be overly dependent on the strength of the Canadian economy and so are systematically looking for opportunities to diversify internationally. But portfolio diversification by asset class and by geography is a fundamental part of the CPP Investment Board’s long-term investment strategy to manage the growing complexity of the fund. On its own, Canada does not provide sufficient diversification opportunities. Canada’s stock market is small, representing less than 2% of the world market capitalization, and it is heavily concentrated in a few sectors. The flow of contributions to the CPP varies directly with the health of the Canadian economy. By reducing the fund’s reliance on the Canadian economy, global diversification offers a source of returns for periods of weak performance by the Canadian economy.</em></span></p><strong><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8bFXDG5CUa1nIu_SbheS4ypbnaWINuQYRQxrkaPk34NROTV5nRvTL0-JoLBWHFLQEpS5OekWlp-efRZ1av0eV_NZ6TFWA9lykxFuPhxVPJiyfKQuO5rG5lk85VaQtPeThH5z_d6D22Jw/s1600-h/Snake%20Eyes%20Dice.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqtFt5_AXOQrUcoSCoKjwyWJuUOvJcLFGL706dt4m9NoVzr1IxPVg4-AnLmP27XfYZ3-9AXZtytL5bf1370QRfbufF9fufcV1TMwaInQRtKsF6Dp3bS6xZvRqH547UTpJbRPpv25XLiAo/s1600-h/Snake%20Eyes%20Dice.jpg"><img id="BLOGGER_PHOTO_ID_5358837477367946418" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 150px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqtFt5_AXOQrUcoSCoKjwyWJuUOvJcLFGL706dt4m9NoVzr1IxPVg4-AnLmP27XfYZ3-9AXZtytL5bf1370QRfbufF9fufcV1TMwaInQRtKsF6Dp3bS6xZvRqH547UTpJbRPpv25XLiAo/s200/Snake%2520Eyes%2520Dice.jpg" border="0" /></a>Summary</strong><br />Since the Canada Pension Plan is funded by contributions from it's "members", there are fewer issues of affordability. Nonetheless, <a href="http://yourfinancialguru.blogspot.com/2009/05/cpp-proposed-changes.html">as explained in a previous blog, there are changes pending to the plan </a>and the amount of benefits people can/will receive. Expect lower benefits in the future, as well as possible increases in costs. If I were a gambling man, I would bet on CPP being around for 50-100 years. As to the Old Age Security (OAS) program? I think that the future definitely holds some snake eyes.<br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-88572601505683558362009-08-11T01:00:00.001-07:002009-08-11T01:00:03.168-07:00The Pendulum Never Stops In The Middle<span style="color:#990000;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0D9BRGAsDGBJAwVke5vnJMCT7rr3u-hStDvIHcEOtYGRwhMjEMaVsV8-j_Bbs_WnjMJq0S7soURpsdIBpNQkOALJvqA6UyOd0YQAxGULiCc7K9Dz2s1h7Yen-ldn32LlWdSqSd4KWUhI/s1600-h/dan+richards.jpg"><strong><em><img id="BLOGGER_PHOTO_ID_5360302512226112754" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 165px; CURSOR: hand; HEIGHT: 131px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0D9BRGAsDGBJAwVke5vnJMCT7rr3u-hStDvIHcEOtYGRwhMjEMaVsV8-j_Bbs_WnjMJq0S7soURpsdIBpNQkOALJvqA6UyOd0YQAxGULiCc7K9Dz2s1h7Yen-ldn32LlWdSqSd4KWUhI/s320/dan+richards.jpg" border="0" /></em></strong></a><strong><em> Every now and then I like to "steal/borrow" from some very intelligent people. This blog was taken in its entirety from a piece by Dan Richards, </em></strong></span><strong><em><span style="color:#990000;">Founder and President of Strategic Imperatives, Dan Richards ranks among today’s leading authorities on strategies for financial institutions and financial advisors to attract high net worth clients and build deeper client relationships. </span></em></strong><br /><br /><p><span style="color:#990000;"></span></p><p><span style="color:#990000;"></p></span><p>Occasionally, words of wisdom stay with us and remain relevant decades later. When I was in business school in the 1970s, my finance professor used a phrase that I find useful in markets like the one we're in today: "The pendulum never stops in the middle."<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgm90_sRbHAwojRA70p6YT2wFibRftrqPaMDk3mMebOlJqCpX5RYR9R6oT6ZYPvMtXEowTPwsO1911K9PdaokjHXiPNVKORrOrbFfcbEbIXcQkE93wjimr_9D5PqGxRDHjIj_T357qcoFw/s1600-h/newton-pendulum3d.jpg"><img id="BLOGGER_PHOTO_ID_5360302832426001106" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 229px; CURSOR: hand; HEIGHT: 230px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgm90_sRbHAwojRA70p6YT2wFibRftrqPaMDk3mMebOlJqCpX5RYR9R6oT6ZYPvMtXEowTPwsO1911K9PdaokjHXiPNVKORrOrbFfcbEbIXcQkE93wjimr_9D5PqGxRDHjIj_T357qcoFw/s200/newton-pendulum3d.jpg" border="0" /></a>He was talking about market valuations and investor sentiment, and the reality that markets inevitably swing from one extreme to another - from periods of outlandishly elevated valuations to ridiculously beaten-down levels, from periods of unquestioning euphoria to absolute pessimism. The adage applies in lots of other cases as well. Look at the market's and the media's attitude to risk and leverage. Not long ago, companies that were fiscally conservative and didn't borrow to the hilt to boost profits were criticized for failing to maximize shareholder value; you may recall some of the commentary about the failure of Canadian will when foreign companies were outbidding our domestic competitors for acquisitions. Many articles were written about how Canadian banks had fallen behind in global rankings, as they limited themselves to careful, small-scale acquisitions and rejected large bold moves.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj31Fp5-FQA7wGj71YraaiSYcQhcKPBtC1RUnStQkc2RTPE6pgMhudn3Ap0Hs1RqW-326equptLIjQrVnvpnV-RZKjxOa383Gxo2mss2_vrMl9yAeluJCbIW3nzkX8k7hssIQvOJCxmK4g/s1600-h/resourcestocks.jpg"><img id="BLOGGER_PHOTO_ID_5360303383389534994" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 143px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj31Fp5-FQA7wGj71YraaiSYcQhcKPBtC1RUnStQkc2RTPE6pgMhudn3Ap0Hs1RqW-326equptLIjQrVnvpnV-RZKjxOa383Gxo2mss2_vrMl9yAeluJCbIW3nzkX8k7hssIQvOJCxmK4g/s200/resourcestocks.jpg" border="0" /></a>By contrast, in today's environment, even prudent risk has become a dirty word. Just a few weeks ago, the most popular article in the online New York Times portrayed Canadian banks as the model for the global banking system - a notion that six months ago would have been absurd. <strong><span style="color:#009900;">From pitied to paragon is common when the pendulum swings.</span> </strong>Consider investors' attitudes to owning resource stocks. Not long ago loading up on these was all that many investors wanted to discuss. Today, those same investors don't want to hear about owning resources. This is also reflected in expectations on oil prices. A year ago, the "peak oil" theory held sway and demand from China and India was going to push oil to $200 (U.S.) by year-end. Today, we've begun to hear about the "peak demand theory," the view that demand for oil peaked last year and we'll never see demand at that level again. With the benefit of hindsight, the first forecast is now clearly absurd - as, almost certainly, the second will prove to be.<br /><br />Finally, think about the wild swing in consumer sentiment on appropriate spending that's taken place in the span of just a few months - from the norm of lavish expenditure to "the new frugality." While the stock market may be efficient and rational in the mid and long term, in the near term the "swinging of the pendulum" creates opportunities for companies and investors who maintain perspective. That was true 30 years ago, and it's true today. That's because the notion of the pendulum of market sentiment swinging from one extreme to the other captures two of the most important and widely recognized truths about investing.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxRZM_3PPRR3TmdErVXzF8LPDfCPW4coB5SUqLnc0Z7vzdx6bW2-UkZjx3VgkxqfLl88O9CGiRLK1ld50DLoDhi6WSlsG1oEAOXmXQRk1_Byx_RvUate4rz24_YRQhN_MqTo5J_v4gaBQ/s1600-h/greed$.bmp"><img id="BLOGGER_PHOTO_ID_5360303756385777442" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 169px; CURSOR: hand; HEIGHT: 148px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgxRZM_3PPRR3TmdErVXzF8LPDfCPW4coB5SUqLnc0Z7vzdx6bW2-UkZjx3VgkxqfLl88O9CGiRLK1ld50DLoDhi6WSlsG1oEAOXmXQRk1_Byx_RvUate4rz24_YRQhN_MqTo5J_v4gaBQ/s200/greed$.bmp" border="0" /></a>The first truth is that what really drives markets at their extremes are the twin emotions of greed on the upside and fear on the downside. Both can be costly - and it takes real discipline and resolve to withstand the forces of those emotions as the pendulum moves through its arc.<br /><br /><span style="color:#ff0000;"><strong>The second truth is that the costliest advice for investors is "it's different this time."</strong></span> Seasoned investors know it's never different. Investors who listened to market prophets saying that the historical rules didn't apply to tech stocks in 2000 and resource stocks a year ago ended up paying a huge price. Chances are that those investors taking counsel from the most extreme voices of doom today will pay a similar price in wrong-headed investment strategies and missed opportunities. It would be foolish to deny that the global economy and stock markets are facing formidable challenges. That said, open markets, the spirit of innovation and the entrepreneurial ethic have demonstrated remarkable resilience in the past in working through periods that seemed at the time as dark as the one we're in today.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2a4ctVZHm7-df9Awn0FmE7wm4ZdlbS2wz-oNT5faOqK0gEuf6S3eI427v86vO0_ak_X6CZ8iTcbn9nh0NQHAFOgPods_phmH-o3M26_rzV5tEV5ubOZMncxlmgpLSbQJ1_qnZg2WrKgY/s1600-h/despair.bmp"><img id="BLOGGER_PHOTO_ID_5360304260532809058" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 157px; CURSOR: hand; HEIGHT: 91px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2a4ctVZHm7-df9Awn0FmE7wm4ZdlbS2wz-oNT5faOqK0gEuf6S3eI427v86vO0_ak_X6CZ8iTcbn9nh0NQHAFOgPods_phmH-o3M26_rzV5tEV5ubOZMncxlmgpLSbQJ1_qnZg2WrKgY/s200/despair.bmp" border="0" /></a>We may not be all the way to the extreme of despair and pessimism, but we are almost certainly well past the midpoint - and into an area we may remember more fondly years from now. We'll see that the drastic shift in sentiment has created significant value for those disciplined and bold enough to look past the swinging of the pendulum. </p><p>Back in June, <a href="http://watch.bnn.ca/the-close/june-2009/the-close-june-29-2009/#clip188622">Dan appeared on BNN and discussed the best way to approach finding a new advisor.</a> This is definitely worth watching.<strong></p></strong><strong><p>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-92205833343050344182009-08-07T01:00:00.001-07:002009-08-07T11:29:38.983-07:00Choosing Your Advisor<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZg9hCosLjxO-vMP-wmWAQo925p5pOwBL9QdJkbbYLrv8b1Aw9nWIEQiGJfF5CZdW8mFGkTGRSZebzOmraAnzvTKs0Yp3jHVNu0tk_BhezgV3vgSQIkhRe0FIKwr4_OaKiVVUSLsr8Zgs/s1600-h/symbol_pr.jpg"><img id="BLOGGER_PHOTO_ID_5358858148951574274" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 164px; CURSOR: hand; HEIGHT: 230px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZg9hCosLjxO-vMP-wmWAQo925p5pOwBL9QdJkbbYLrv8b1Aw9nWIEQiGJfF5CZdW8mFGkTGRSZebzOmraAnzvTKs0Yp3jHVNu0tk_BhezgV3vgSQIkhRe0FIKwr4_OaKiVVUSLsr8Zgs/s320/symbol_pr.jpg" border="0" /></a> On April 12, 1959 in a speech in Indianapolis, John F. Kennedy made the following statement:<br /><br /><span style="color:#cc0000;"><strong><em>"The Chinese use two brush strokes to write the word 'crisis'. One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger - but recognize the opportunity."</em></strong></span><br /><br />The basic idea is that a moment of crisis presents two possible outcomes: either growth and positive change or regression and failure. Sounds like some pretty deep ancient wisdom, right?<br /><br />Far be it from me to criticize someone like JFK, but many native Chinese speakers don’t see it that way (though some do), saying it’s only coincidental that “crisis” (<span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">wei</span></span> <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">ji</span></span>) contains parts of the terms for “danger” (<span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">wei</span></span> <span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">xian</span></span>) and “opportunity” (<span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">ji</span></span> <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">huay</span></span>). But then “<span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">wei</span></span>” and “<span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_7">ji</span></span>” each have a range of meanings that suggest “crisis” really is a combination of the two ideas, whether the wisdom we attach to the term was intended or not. And <span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_8">isn</span></span>’t that even deeper?<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikcN8BH657_3X7UOwVRMMM5SKn7-XJbm5Hq9GmXXqyNm-fubYNNmyAgYq6W_xykcRKQpmSt6xIf8N2cQKTaN1hwQqXNPdTlVS7GeoRnYdnVRhkT8V6osRYn5g7tbBpFyt1mNpvHsW2lEY/s1600-h/cycle-of-market-emotions-1.jpg"><img id="BLOGGER_PHOTO_ID_5358862928070467554" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 465px; CURSOR: hand; HEIGHT: 290px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEikcN8BH657_3X7UOwVRMMM5SKn7-XJbm5Hq9GmXXqyNm-fubYNNmyAgYq6W_xykcRKQpmSt6xIf8N2cQKTaN1hwQqXNPdTlVS7GeoRnYdnVRhkT8V6osRYn5g7tbBpFyt1mNpvHsW2lEY/s400/cycle-of-market-emotions-1.jpg" border="0" /></a><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAqpohFYYSy608RhMXcdJDR7Y0pb784fWDeqTFBJfBUb540ik7zqd4L2AlCDAPC4qCrM7hlLrLv1KJRsYHZQdelCEWrIZ4wvsGlu92EX3TFhsQiCogQlYCB-0c12YmCOtVfmF9Gyt3vX8/s1600-h/cycle-of-market-emotions-1.jpg"></a><br /><br />So where are we on the "investment cycle" now? The only person who can answer that question is the one who looks at you in the mirror each morning. I would like to think that the denial, fear, desperation and panic stages are well past us. Capitulation, despondency and depression are now in our rear view mirrors too. Are we approaching hope, relief and optimism? Maybe over the coming months.<br /><br />Markets are cyclical in nature (see 10 different blog postings in the past year) and so are the emotions of investors. The best investors (Warren <span class="blsp-spelling-error" id="SPELLING_ERROR_9"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">Buffett</span></span> and his ilk), liken a financial crisis to an 80% off sale at your favourite boutique which you can not, or will not normally shop in. Billions and perhaps trillions of dollars were there for the making if you were bold enough to buy at the bottom.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiD8PVkEFa_-XayAbT3Kd6xLWSNAUhzMOwvPwt9_wiTppFgGUyPQcwjhAfohnUkNgHgVI5fWSHGI4Yv1e2Mg3cI6sc9q_QVmd1vZNzM51MGlJrn22zMJ4Y8TKiyZNiZbxVMLrt_v8sErwY/s1600-h/asset-allocation3.gif"><img id="BLOGGER_PHOTO_ID_5358869037574122530" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 215px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiD8PVkEFa_-XayAbT3Kd6xLWSNAUhzMOwvPwt9_wiTppFgGUyPQcwjhAfohnUkNgHgVI5fWSHGI4Yv1e2Mg3cI6sc9q_QVmd1vZNzM51MGlJrn22zMJ4Y8TKiyZNiZbxVMLrt_v8sErwY/s320/asset-allocation3.gif" border="0" /></a>For the average investor, the chances of getting rich or losing it all are remote. When it comes to investing, 8% of your returns are determined by which fund and when you bought it. The other 92% of returns are determined by the types of funds and where the monies are invested. As I have often said, one of the most important roles for an advisor is to simply ensure you are invested according to your risk tolerance. People don't worry about the markets when things are going well - but when they head in the other direction, <span class="blsp-spelling-error" id="SPELLING_ERROR_10"><span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">advisers</span></span> change from providing advice to holding hands and acting as babysitters. I apologize if that analogy offends anyone. Perhaps the best analogy I ever heard was from a successful advisor at a conference in the US. He stated very plainly:<br /><br /><strong><em><span style="color:#6600cc;">I manage investments portfolios and protect clients from themselves. </span></em></strong><br /><br /><p><span style="color:#000000;"></span></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhP7iZ2kJ14-rtO0Xi-zCBHl8u_IE3oa6UCIsgkOtLMU62wBR9XYcGCl-AoDDS2oNHfhpjJgd2p4QsypSlRbbrMG7ZHwV778tn5BbHCRqlnie6xRv-d21UGbFym9t57WqU4oaLXHFXuaPo/s1600-h/panic.jpg"><img id="BLOGGER_PHOTO_ID_5358872156059776850" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 123px; CURSOR: hand; HEIGHT: 138px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhP7iZ2kJ14-rtO0Xi-zCBHl8u_IE3oa6UCIsgkOtLMU62wBR9XYcGCl-AoDDS2oNHfhpjJgd2p4QsypSlRbbrMG7ZHwV778tn5BbHCRqlnie6xRv-d21UGbFym9t57WqU4oaLXHFXuaPo/s200/panic.jpg" border="0" /></a><span class="blsp-spelling-error" id="SPELLING_ERROR_11"><span class="blsp-spelling-corrected" id="SPELLING_ERROR_11">Advisers</span></span> cannot afford the luxury of panicking. In uncertain times, people become <span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">frightened</span> about the viability of their "commodities" - the things they buy and the jobs that they hold. The best <span class="blsp-spelling-error" id="SPELLING_ERROR_13"><span class="blsp-spelling-corrected" id="SPELLING_ERROR_12">advisers</span></span> tend to disregard their own "commodity". They don't try to "sell"you something - people at the best of times hate getting sold something. What people want at all times is value creation - solutions that help them eliminate their dangers, capture their opportunities and reinforce their strengths. </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7q9eJTIEY-1sFbjmPB0PZzXIMZBOmkWcm7gsZP7YmvOSQj1f-dJC9uO-9ZuV7OANNQShoRvrfz-h-8Q1y_8xOo3_XdFuIljOPP6aJMu7CKG44soObGkLd24oOqyWO4A5qEQ7iYhV5zJo/s1600-h/trust.jpg"><img id="BLOGGER_PHOTO_ID_5358874555845530498" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 225px; CURSOR: hand; HEIGHT: 155px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg7q9eJTIEY-1sFbjmPB0PZzXIMZBOmkWcm7gsZP7YmvOSQj1f-dJC9uO-9ZuV7OANNQShoRvrfz-h-8Q1y_8xOo3_XdFuIljOPP6aJMu7CKG44soObGkLd24oOqyWO4A5qEQ7iYhV5zJo/s200/trust.jpg" border="0" /></a>The best analogy of a good trusted advisor? They act as the Chief Financial Officer (CFO) for their clients in their personal and/or corporate lives. Their work provides their clients the time to focus on what is truly important to them, both now and in the future. </p><p>The trusted advisor is usually busy, but always seems to be available to help a client no matter how trivial the matter. They have a plan for the future and share it with their clients. <span style="color:#009900;"><strong><em>They are also honest with their clients - even at the risk of losing that client.</em></strong></span> Having a YES man/woman for an advisor is a ticket to financial ruin for many people. When you find that advisor, hold onto them with all of your strength. While the work they do for you adds a little something to their own bottom line, their effects on you and your family can be rewarding. I can put a price on many things - how do you put a price on confidence, satisfaction and piece of mind. What do I mean by that? Read this...</p><p><em><span style="color:#666600;">When we first met our advisor, we were living in a two bedroom apartment with our son and daughter, and sleeping on a pull out couch. We had high interest rate credit cards, car payments, all the usual debts. Our advisor started us on the right track, contributing to <span class="blsp-spelling-error" id="SPELLING_ERROR_14"><span class="blsp-spelling-error" id="SPELLING_ERROR_13">RRSP's</span></span>, taking out life insurance and insurance for disability which we didn't think we needed. Within a couple years we bought our first home.</span></em></p><p><em><span style="color:#666600;">Whenever we needed him, he was there, guiding us along, even when it didn't pertain to his job. He helped our children get started with their homes, and gave us piece of mind. Last year, my husband had to take an early retirement due to a work related disability, and with the benefits of the disability insurance and the savings, we are now mortgage free and living in our dream home in New Brunswick. </span></em></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLdiJKV-rt5uVvhaFYwOwwoRb-r7SA_uBPQAJmF2XfmYPB5jVkFu810CkgTjXoWoaI-mpvQmEqwdfj-flvKmcCs29CCVkgHaMO5H0RX2SlS63IL9MLkTTKQiTWNAPPQ_A0riPyxLDmFq8/s1600-h/Advisor+Bending+Over+Backwards.jpg"><img id="BLOGGER_PHOTO_ID_5360298057369077906" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 195px; CURSOR: hand; HEIGHT: 188px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLdiJKV-rt5uVvhaFYwOwwoRb-r7SA_uBPQAJmF2XfmYPB5jVkFu810CkgTjXoWoaI-mpvQmEqwdfj-flvKmcCs29CCVkgHaMO5H0RX2SlS63IL9MLkTTKQiTWNAPPQ_A0riPyxLDmFq8/s320/Advisor+Bending+Over+Backwards.jpg" border="0" /></a>Even in the face of chaotic markets and disappointing performance over the past nine months, most investors are hanging in with their financial advisers. In a recent <span class="blsp-spelling-error" id="SPELLING_ERROR_15"><span class="blsp-spelling-error" id="SPELLING_ERROR_14">Ipsos</span></span> Reid survey, 87 per cent of Canadians said their current adviser will be their primary adviser a year from now. Most recognize that even the best managers didn't foresee last fall's financial meltdown and that almost everyone is in the same boat.<br /></p><br /><p>Of course, that's not universal. Some investors are rethinking the relationship with their adviser, while others are responding to invitations to a “second opinion” on their portfolio. Some investors are questioning whether they want to work with an adviser at all and are considering switching to a discount broker.<br /></p><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivlrDxfzNoADvWB-k5QfU4oUTXUVoycVK92uhqhsQJ08TrvcRrUeR6EF1QBM-y5DIkjbosov1HTTfaLeE0i-3buBdsUTEtMlOuRE2dWz2mfoiaIHmPVH8088bGmhz2zPe7FW8qp4znDqg/s1600-h/Nightmare_by_blutspender.jpg"><img id="BLOGGER_PHOTO_ID_5360298940827330610" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEivlrDxfzNoADvWB-k5QfU4oUTXUVoycVK92uhqhsQJ08TrvcRrUeR6EF1QBM-y5DIkjbosov1HTTfaLeE0i-3buBdsUTEtMlOuRE2dWz2mfoiaIHmPVH8088bGmhz2zPe7FW8qp4znDqg/s200/Nightmare_by_blutspender.jpg" border="0" /></a>Working with the right adviser can have a huge effect on achieving your long-term financial goal. <span style="color:#ff0000;"><strong>The wrong one can result in you looking like our friend at the left.</strong></span> It's a decision that shouldn't be rushed. Some investors select the first adviser they speak to or make a decision based on an adviser's glitzy office – and later regretted the choice. When looking for an adviser, most investors begin by asking people they know for suggestions. While a referral from someone you trust increases the odds things will work out, just because an adviser is a good fit for a friend doesn't mean he or she will be right for you.<br /></p><p>Selecting an adviser is like any important decision. First impressions matter, but to tilt the odds of getting this right, you need to first identify the key things you're looking for (ideally in writing) and compare what you hear with that list before deciding. There's nothing wrong with telling an adviser you'd like to sit down for a couple of in-depth discussions before making a decision. </p><p>During these meetings, you have two goals. The first is to get a sense of whether this a good fit. For example, here are some questions focusing on the past 12 months: How did you suggest positioning portfolios like mine going into the beginning of last year? What kinds of changes have you recommended to clients in my situation since last fall? What kind of advice are you providing to clients like me today? How are you managing risk amid recent uncertainty? In general terms, would you share what you held in your own portfolio going into last fall and what your portfolio looks like today? What are the most important lessons you've learned from the past year's events? </p><p>The second component in making the decision is getting a reading on chemistry. Are you comfortable talking to this financial adviser? Does he really listen to your answers and appear truly interested in your situation? <strong><span style="color:#ff0000;">Does he talk in plain English?</span></strong> Do you like him as a person and feel you could be absolutely open with him? Do you feel that you would have confidence in his advice? </p><p>Remember, it's not only you making an assessment; in these initial meetings discerning advisers are also evaluating you and often have tough questions of their own. Today, it's not only investors who have choices as to who to work with: <strong><em><span style="color:#009900;">The best advisers can pick and choose their clients. Don't believe it? <a href="http://watch.bnn.ca/#clip188623"><span style="color:#ff0000;">This video should be required viewing for all investors.</span></a></span></em></strong></p><p><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-14436250940935789412009-08-04T01:00:00.000-07:002009-08-04T05:12:00.120-07:00Random Thoughts<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_Hvf54in_L9wS9JGMmmfWMeZ95fwcy0dNTR5ZuGKPD0ZKzqrsNBPo17d67OzYRoc1d5uCZt1dfN1lRjZZZZZBMN41-hv9Mm4aeGYko876cmtUcSoxFpkqrWg4OP-UvE_lBJ8wFz88MlQ/s1600-h/BAY_UP_SMALL_rdax_120x86.jpg"><span style="color:#000066;"><img id="BLOGGER_PHOTO_ID_5365749213057418258" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 126px; CURSOR: hand; HEIGHT: 92px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh_Hvf54in_L9wS9JGMmmfWMeZ95fwcy0dNTR5ZuGKPD0ZKzqrsNBPo17d67OzYRoc1d5uCZt1dfN1lRjZZZZZBMN41-hv9Mm4aeGYko876cmtUcSoxFpkqrWg4OP-UvE_lBJ8wFz88MlQ/s320/BAY_UP_SMALL_rdax_120x86.jpg" border="0" /></span></a><span style="color:#000066;">The past month provided some very interesting changes. Stock markets continued their upward ascent, posting their fifth monthly gain in a row. The reason? Better-than-expected GDP data in the U.S. and corporate earnings in the second quarter that have largely beat expectations.<br /><br />The Dow Jones industrial average gained 7 per cent on the month, making it the best July since 2002 for the index. The S&P 500 rose 6.95 per cent in July. In Canada, the economy contracted by 0.5 per cent in May, worse than consensus estimates of 0.3 per cent. Still, the S&P/TSX rose 4 per cent in July.<br /></span><br /><p><a href="http://www.bnn.ca/news/11148.html"><span style="color:#000066;">Recessionary forces are still prevalent in Canada</span></a><span style="color:#000066;">, but the effects are easing. As most experts had predicted, the third quarter is looking very promising. In the past year, the Canadian economy shrunk 3.5%, most of that in goods production which shrank 9.9% </span></p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6IOBOcr-3AYphRdFbGAHZC13Ps6RAvVrpyawJy866fo7xH0fbnFEUztfvJ8NEfyAyuR9MmBkGWG2pjCMFYv7PxetCrFNQztYaoosDlnXKh0PY6foIKG4Cphb0_9aadwtlmSAw7q66Yzw/s1600-h/panic.jpg"><img id="BLOGGER_PHOTO_ID_5365750508173900386" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 157px; CURSOR: hand; HEIGHT: 115px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6IOBOcr-3AYphRdFbGAHZC13Ps6RAvVrpyawJy866fo7xH0fbnFEUztfvJ8NEfyAyuR9MmBkGWG2pjCMFYv7PxetCrFNQztYaoosDlnXKh0PY6foIKG4Cphb0_9aadwtlmSAw7q66Yzw/s200/panic.jpg" border="0" /></a><span style="color:#000066;">Does this mean we can pack away the panic button? Not yet. Unemployment remains at 15 year highs, and eventually interest rates will climb pushing those who racked up "bad debt" to the brink. Personal and corporate bankruptcies will continue. Nonetheless, as mentioned previously, there is light at the end of the tunnel (and it no longer says AMTRAK on the side).<br /><br />What are the best lessons from the past year? Looking at things from the bottom up, consumers need to better heed the want/need approach to life. I would love a new 52 inch flat screen and blue ray player. Do I need them? No - I simply want them. Would I be better served spending my money replacing a perfectly good TV with a newer flashier model or paying off a debt. How about a blue ray with great picture quality versus saving for retirement or a child's education. If you can afford to go out and buy these types of items and pay cash, please feel free to do so. If no one spends money, the economy will never turn around. That being said, it is frightening how many people know so little about finances. They run amok and spend without regard to their futures. I'm not a fan of CSI Miami, but the other night they had an episode where a young "couple" attempt to commit suicide. The reason? A credit card company that preyed on students by offering them credit they could not afford or qualify for. Sounds suspiciously like the US banking and housing crisis doesn't it.<br /></span><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgycga-39p2u17PZQNP3bFNcLiyy1igYUta9sohjTK1fYtMKRnJqidZHDcRkl7CGAVZf_ZNr4K8UzUreU3PsTtB_ca_vPRUuDQw3-83w6TPDpTbdnXc91XeiPHCAR9QEnrJFfGpGs0e4eM/s1600-h/Gail_Vaz-Oxlade_022009.jpg"><img id="BLOGGER_PHOTO_ID_5365753472617059074" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 147px; CURSOR: hand; HEIGHT: 168px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgycga-39p2u17PZQNP3bFNcLiyy1igYUta9sohjTK1fYtMKRnJqidZHDcRkl7CGAVZf_ZNr4K8UzUreU3PsTtB_ca_vPRUuDQw3-83w6TPDpTbdnXc91XeiPHCAR9QEnrJFfGpGs0e4eM/s200/Gail_Vaz-Oxlade_022009.jpg" border="0" /></a><span style="color:#000066;">Gail Vax-Oxlade has a television show where she works with people with poor finances. In her recent blog, she states:</span><br /><br /><span style="color:#009900;">"I’m not sure what this comes from… this don’t-much-care attitude toward our money and the role it plays in our lives. It could be that we want to distance ourselves from the “money-grubbing,” “money means everything,” “money is what counts” attitudes some people display. We don’t want to be those people so we throw out the baby with the bath water. We spend years ignoring the most basic rules of money and then, if by chance we convert to Money Maniacs, we spend years trying to make up for what we’ve missed by becoming rampant Frugalistas. Or we come to believe that nothing can ever be different and that we might as well just blow it all now and have a great time. </span><br /><br /><span style="color:#009900;">Fact is people, money is the tool that gets us the things we need and the things we want. And since we work so hard for our money, we should be willing to work equally as hard making it do what we want. No control doesn’t mean you’re free, it means you’re stupid! And over-control means you become a slave to the tool. Balance is the key. <span style="color:#ff0000;"><strong>We must balance today’s needs and wants with tomorrow’s dreams</strong></span>, while taking care of any mistakes we’ve made in the past. Balance is how we get to have money AND a life. </span><br /><br /><span style="color:#009900;">So how do you get through to your young person just how important it is that they save something of what they earn and that they put it to work early? How do you convince them that just because they’re making more money doesn’t mean they have to spend it all? <strong><span style="color:#ff0000;">How, in a society where credit is as common as air, do you convince the young-and-wanting that they should NOT use credit?</span></strong> And is the old saying, “take care of the pennies and the dollars will take care of themselves” really going to have an impact on our next generation?</span><br /><span style="color:#009900;"></span><br /><span style="color:#000000;"><span style="color:#000066;">Wow! Could not have said it better myself.</span> </span><br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-87225080471611033972009-07-28T01:00:00.000-07:002009-07-28T01:00:00.378-07:00The Recession Is Over !!!<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbJQbkDHu2rz0-IId2H5_GQcmBZr193AJW_mffN2_qKfnh2nYdLmLr0kujDiZnt_KlrQl7SESQ4AX0qKghQkUx_Vh88_5RJju3AVq72W1RDfJoyyuhzAvlIQ2chy64pI3OgAAv_4jvMYA/s1600-h/recession_ends_139005gm-f.jpg"><img id="BLOGGER_PHOTO_ID_5361992115543800690" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 453px; CURSOR: hand; HEIGHT: 245px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbJQbkDHu2rz0-IId2H5_GQcmBZr193AJW_mffN2_qKfnh2nYdLmLr0kujDiZnt_KlrQl7SESQ4AX0qKghQkUx_Vh88_5RJju3AVq72W1RDfJoyyuhzAvlIQ2chy64pI3OgAAv_4jvMYA/s400/recession_ends_139005gm-f.jpg" border="0" /></a><br /><br /><br /><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvHU94zIKQc7XSqmRAIyaJaErJDJqaVTIDo6TM8pLX-FnU4njZnHI0CQWg_uPFyL1AR0LlgpYvdApddbIH3Ch_kCeA7bYSFLhGyk8g013kRFt9pxjp6972zvOvSr-L7WiVZcT7Ge52RRQ/s1600-h/recession_ends_139005gm-f.jpg"></a><br /><br />The recession is over, but not the pain. Canada's central bank predicted Thursday that the economy would expand this quarter, suggesting the economic contraction lasted for about nine months, considerably shorter than the previous two recessions in the early 1990s and the early 1980s. The Bank of Canada's reassessment of the state of the economy is perhaps the clearest signal yet that the worst of the recession is over. </div><br /><div></div><div></div><div>Does that mean that unemployment rates will magically drop back to the 5-6% range overnight - of course not. Does that mean that your investment losses will be undone as quickly as they occurred? Also a very big no. Bank of Canada Governor Mark Carney stopped short of celebration, saying it will take more than a year to replace the wealth destroyed by the financial crisis. He also stressed that the rebound is fragile, sustained by low interest rates and massive government spending. Business investment is weak, and Canada's exporters are dependent on global demand rebounding as the Bank of Canada assumes it will.<br />“There are still risks to the recovery,” Mr. Carney said. “The point we really want to underscore is that this recovery is the product of policy and where policy is.” </div><br /><div></div><div></div><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9FL0LD_sbqZRIExOQYJSzbfzLdHi6pohRhWAD0rVTScZCWcw0mzC0W-HQpjMi6pTchVmgRhSWu1QT4g6ooLf5xV4Z4u1208TL4aI5RY6o7ieCL8irk92a9RRn4M3dbwB6S7buj8B37OA/s1600-h/did_know.jpg"><img id="BLOGGER_PHOTO_ID_5361996872895218690" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 216px; CURSOR: hand; HEIGHT: 104px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9FL0LD_sbqZRIExOQYJSzbfzLdHi6pohRhWAD0rVTScZCWcw0mzC0W-HQpjMi6pTchVmgRhSWu1QT4g6ooLf5xV4Z4u1208TL4aI5RY6o7ieCL8irk92a9RRn4M3dbwB6S7buj8B37OA/s200/did_know.jpg" border="0" /></a>Due to the nature of our economy (as a massive producer of raw materials), everyone kept saying how Canada would not be as affected by the downturn as other countries. Stephen Harper (not an endorsement) stated that we would slump but we would not stop. Here is an amazing stat - China's GDP (Gross Domestic Product - cost of all goods and services produced in a country during a year) is still growing albeit at a slower rate. That rate? <span style="color:#ff0000;"><strong>It dropped from the 10-11% range down to 7-8%.</strong></span> I did a little research and Canada has not had a GDP over 7% since - well the research didn't go back that far. <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9zqc9nn3zx1V4R_j9QIdSzP9ilAgUiehDWeZZwo2UoSeue8SdY_rYKSnIiBAuE9BHOEx-LDFrlEGr-hC8TQ3-6dDB7PmKalcXzUEdGjUpBUg-_olfbuj4pS_QjJP8911nb99-rXfxqb8/s1600-h/Tattoo+of+the+year.bmp"><img id="BLOGGER_PHOTO_ID_5361997213019580690" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 245px; CURSOR: hand; HEIGHT: 247px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9zqc9nn3zx1V4R_j9QIdSzP9ilAgUiehDWeZZwo2UoSeue8SdY_rYKSnIiBAuE9BHOEx-LDFrlEGr-hC8TQ3-6dDB7PmKalcXzUEdGjUpBUg-_olfbuj4pS_QjJP8911nb99-rXfxqb8/s320/Tattoo+of+the+year.bmp" border="0" /></a>Let's just say that the last time the GDP of Canada was where China "dropped to", I still had a full head of hair. </div><br /><div></div><div></div><br /><div>Now before we start singing and dancing in the streets (promo for the Caribana festival), let's be mindful of something else I have pointed out several times over the past few months. While recessions always end, they don't end on a Friday and we go back to stupidity on Monday. There is a slow upward economic curve as companies slowly begin the process of hiring new (or old) employees back. Those employees then start paying down the damages. They don't run out and buy a new car - this behaviour is what caused much of the current damage. The next issue is how the various <a href="http://www.theglobeandmail.com/blogs/markets/so-long-quantitative-easing/article1228765/">"banking leaders" adjust going forward.</a> The phrase quantitative easing will be heard more in the next 12 months than "gas is too expensive". The Bank of Canada and it's global counterparts need to ensure that they don't suddenly increase interest rates to fight inflation, or we head back into the same predicament. As governments around the globe printed money to spend their way out of the problem, the resulting inflationary pressures could have equally devastating results.<br /><br /><strong>Stay Well and Pay It Forward.</strong></div>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-27340383093859467262009-07-24T01:00:00.000-07:002009-07-24T04:33:38.833-07:00Is Your Mortgage Really Insured?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhY-V-jG3doP6oBxcgXWNOmKZ4hcAFilrTOf7Q7HgylLNzDF5RH3Du9X15KI2jWsd5SM4dmjdKWziNBK2lr6S9Cw3rYym0UjrM5rN3qMlREi6_67ToIWt5ODQ-BSlM3WHWPcuFdeSWef4/s1600-h/More+than+house+is+worth.jpg"><img id="BLOGGER_PHOTO_ID_5356865494342410754" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 169px; CURSOR: hand; HEIGHT: 124px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhY-V-jG3doP6oBxcgXWNOmKZ4hcAFilrTOf7Q7HgylLNzDF5RH3Du9X15KI2jWsd5SM4dmjdKWziNBK2lr6S9Cw3rYym0UjrM5rN3qMlREi6_67ToIWt5ODQ-BSlM3WHWPcuFdeSWef4/s200/More+than+house+is+worth.jpg" border="0" /></a> It baffles me how many people can be sucked into one of the truly great scams of this century (and the last one too). You have just finalized the purchase on your first home with all of the assoicated problems (getting approved, finding the perfect home, negotiating the price etc). Now the time comes to sign on the dotted line for the priviledge of a financial institution allowing you to stay in one of their "homes" in return for the largest part of your paycheque. Just before signing, the loans officer asks you whether you want to "insure the mortgage". You're spending $1400 per month in mortgage payments; what's another $50 per month. You quickly sign the paperwork and file it with the rest of the mortgage documents and forget about it.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibTZ6HBKaXS5emHPiLiUIBsAsTWQ9VL4dz4cP7PCDK3zucmK_qelaxE6f0EYJkAv8owwDF_6wuxyATq6ZhVYXrGmP5lHnqwkDnUl_Jpr7wTvCoiTk5j4rYbUXunNmGZrL_Fl3MTxMBZcY/s1600-h/sucker_300.gif"><img id="BLOGGER_PHOTO_ID_5356868266110054114" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 103px; CURSOR: hand; HEIGHT: 116px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEibTZ6HBKaXS5emHPiLiUIBsAsTWQ9VL4dz4cP7PCDK3zucmK_qelaxE6f0EYJkAv8owwDF_6wuxyATq6ZhVYXrGmP5lHnqwkDnUl_Jpr7wTvCoiTk5j4rYbUXunNmGZrL_Fl3MTxMBZcY/s200/sucker_300.gif" border="0" /></a>Well, I hate to be the one to tell you this, but you are now offically a (see picture at left). Why you may ask? Well the old saying that if it sounds too good to be true comes into play here. When you arrange for mortgage insurance at the "bank", in fact you are purchasing "group creditor life insurance". Coverage with a lending institution, is part of a group policy owned by the lender, and you, the borrower, have no control. What if you decide to buy your own policy.<br /><br />With your own policy, your premium is guaranteed and fixed in advance, but group policy premiums may be subject to fluctuations if the lender raises charges for the whole group.<br /><span style="color:#009900;">Your own policy is for any amount of coverage you want</span>. If you already have insurance, you can add the mortgage amount to your existing policy. Insurance with a lender, however, is for the outstanding amount of the mortgage loan, and reduces as the loan balance declines.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Y8iaFg2TeXVFITDiLRNUGZAhZhcfgVLAQzcAoIYg6XbKz5NwqXEESvFDeWoFXdKVo64D4FxCXBPP6eBD06Jbw49aeOXHMtTo5t6pvjtCt9V2USw7NRGzUWj1hP4EWSM0svoG_C0NUwk/s1600-h/insurance3.jpg"><img id="BLOGGER_PHOTO_ID_5356872591778273042" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 149px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi8Y8iaFg2TeXVFITDiLRNUGZAhZhcfgVLAQzcAoIYg6XbKz5NwqXEESvFDeWoFXdKVo64D4FxCXBPP6eBD06Jbw49aeOXHMtTo5t6pvjtCt9V2USw7NRGzUWj1hP4EWSM0svoG_C0NUwk/s200/insurance3.jpg" border="0" /></a>An insurance company cannot cancel or refuse to renew your own policy, but a policy married to your mortgage can be cancelled by the lender or the issuing company. Bank employees are not licensed or trained to look at the borrower's overall need for life insurance. Independent insurance agents and brokers examine the client's total insurance needs, and not just the payment of the mortgage.<br /><br />One of the most important benefits of owning your own policy is the ability to switch lenders when the mortgage matures. If your policy is linked to the mortgage, it terminates if you refinance or pay off the mortgage. If you switch lenders but have become uninsurable for health reasons during the original mortgage term, your old coverage terminates. What if you move? Under some group creditor plans, you may need to requalify for coverage. An individual plan faces no such problems.<br /><br />Well at least the plan from the "bank" is cheaper than an insurance company right? Think again. Depending on whether you smoke or not, the insurance company could be significantly cheaper - as much as 30%. You are not penalized for paying down your mortgage quickly as you are under a "group plan". If you want an entire list of the pros of an individual plan over a "group creditor" plan, it would take 45 minutes of reading.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIrEQYl_EAihAeK75sQXfS2CM1sQBOGuUxJvhmvXgCecwe-FymdYuM8vo-etkJeFvsOjcjV4GOzBrSmuoeVSCf8Ikx0y9JlpVxNEddzQRofzGlv2wuQMgfezSKmM8w8GpHzRko8IzfVf4/s1600-h/frightened.jpg"><img id="BLOGGER_PHOTO_ID_5356873649696347970" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 89px; CURSOR: hand; HEIGHT: 125px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIrEQYl_EAihAeK75sQXfS2CM1sQBOGuUxJvhmvXgCecwe-FymdYuM8vo-etkJeFvsOjcjV4GOzBrSmuoeVSCf8Ikx0y9JlpVxNEddzQRofzGlv2wuQMgfezSKmM8w8GpHzRko8IzfVf4/s200/frightened.jpg" border="0" /></a>Last year, <a href="http://www.cbc.ca/marketplace/in_denial/">CBC broadcast a segment on their "Marketplace" show on the perils of "group creditor" insurance for mortgages</a>. The only issue I had with the broadcast was that they pointed the finger at the insurance companies for not paying claims.<br /><span style="color:#ff0000;"><strong>The issue presented in the show is not with the insurer or the lendor but specifically with the product and the way it is marketed. </strong></span><span style="color:#000000;">Check out the link and watch the video. They presented it in an interesting way and it certainly shocked many people who watched it judging by the "comments" on their website.</span><br /><br />So why would people intentionally buy an obviously problematic plan, with numerous issues attached, at a price that may be no bargain you may ask? I have only come up with three possible reasons.<br /><br /><ol><br /><li>The lendor indicates that you must purchase the plan from them. They may also suggest that you cannot get the mortgage without it. This sort of coercive or tied-selling is illegal and should be reported to the bank's ombudsman. In fact, the plan is cancellable at any time by simply sending a letter to the insurer.</li><li>The process is simple. They ask a few simple questions and you "qualify". Buying from an insurer means you may need to go through a medical exam/blood/urine tests/ doctors reports and see if they would be willing to insure you.<strong><span style="color:#009900;"> INSURERS TEST YOU UP FRONT.</span></strong> We buy insurance to protect things. We don't want problems. Group creditor coverage works in a different fashion - investigating you when you have a claim. If you made a small "mistake" on the application, your claim could be denied. <strong><span style="color:#ff0000;"></span></strong></li><li><span style="color:#ff0000;"><strong>Ignorance. </strong></span><span style="color:#000066;">I firmly believe that this is the biggest reason. Ask some of your friends or co-workers if they insured their mortgage? Then ask if they did it with their lendor? For these people, send them a link to this blog and help them avoid a possible catastrophe.</span></li></ol><p><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-50525104923155391142009-07-21T01:00:00.000-07:002009-07-21T03:31:15.299-07:00Their Schooling Will Cost How Much?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOIGLJ_Pl7w6BxpPOUknvXmDV1rOAAz2iq3gDFEv25C9ZpTKoOWGQvR0RwLYXDxynhLibL2I9TPKA2eNtCDdU92Jeg-jeReRz-fTDRnl_7xonl8oq4y0-_6kYUFax8YBJXqGHEJGO2jpc/s1600-h/resp+basket.jpg"><img id="BLOGGER_PHOTO_ID_5346562780813213426" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 230px; CURSOR: hand; HEIGHT: 170px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOIGLJ_Pl7w6BxpPOUknvXmDV1rOAAz2iq3gDFEv25C9ZpTKoOWGQvR0RwLYXDxynhLibL2I9TPKA2eNtCDdU92Jeg-jeReRz-fTDRnl_7xonl8oq4y0-_6kYUFax8YBJXqGHEJGO2jpc/s200/resp+basket.jpg" border="0" /></a> <span style="color:#000066;">Nothing warms the cockles of my heart than seeing the complete shock on the face of a new parent when they find out the cost of their child's "post secondary" schooling. Just be grateful you don't live south of the 49<span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">th</span></span> parallel where costs are often</span> <strong><span style="color:#ff0000;">five to ten times as much.</span></strong><br /><strong><span style="color:#ff0000;"></span></strong><br /><a href="http://www.canadianbusiness.com/my_money/planning/education/university_cost/tool.jsp"><strong><span style="color:#000066;">Canadian Business </span></strong></a><a href="http://www.canadianbusiness.com/my_money/planning/education/university_cost/tool.jsp"><span style="color:#000066;"><strong>magazine has an interesting calculator</strong> </span></a><span style="color:#000066;">that shows the costs associated with most <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">universities</span> in Canada. You simply decide where Johnny or Susie is going to school, whether they will be a doctor, lawyer or engineer and it does the rest.<br /><br />The only problem is that it shows the current costs for an education and that is a huge problem for people with younger children. Here's the solution - take the results of the <span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Cdn</span></span> Biz site and then plug the "real numbers" into<strong> </strong></span><a href="http://www.mackenziefinancial.com/en/pub/tools/calculators/index.shtml"><strong><span style="color:#000066;">Mackenzie Investments RESP calculator</span></strong></a><span style="color:#000066;">. You can input the number of children, where they will go to school, the costs, and inflation and come up with a very real (and terrifying number). Consider a 4 and 7 year old. Four years at school, while living at home, and with no "extras" like textbooks, school fees, sports etc and the costs are over $80,000. A law program at U of T? Double or triple that number.<br /></span><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieU0xITnBjBhsP6QNwZmEoIVSt7FWLRF6Y3p-qhdELVuTgYsFjYrsWFiEQhSsKHwcdRRlRY8zHa5eh1xBLjyIr6UaY10OUDvsVyDq2eUkSFIi-RCVoopZYaKjhMFjN2yL9qfQF6cuLtqw/s1600-h/scared.jpg"><img id="BLOGGER_PHOTO_ID_5356220903791398050" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 144px; CURSOR: hand; HEIGHT: 98px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEieU0xITnBjBhsP6QNwZmEoIVSt7FWLRF6Y3p-qhdELVuTgYsFjYrsWFiEQhSsKHwcdRRlRY8zHa5eh1xBLjyIr6UaY10OUDvsVyDq2eUkSFIi-RCVoopZYaKjhMFjN2yL9qfQF6cuLtqw/s200/scared.jpg" border="0" /></a><span style="color:#000066;">If those numbers scare you, then let me point out something truly petrifying - those costs pale in comparison with the costs of not doing anything. In the first example, a child graduating from University with a $40,000 debt load can expect to pay an additional</span> <span style="color:#ff0000;"><strong>$20-$40,000 IN INTEREST ON THEIR DEBTS.</strong><span style="color:#000000;"> </span></span><span style="color:#000066;">I once made a statement that some people found to be quite prophetic (and others said it was pathetic so what do I know).<br /></span><br /><p><strong><span style="color:#009900;"><em>People who do not plan for their child's education costs are teaching them the merits of debt financing and <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">establishing</span> the groundwork for future financial misfortune.</em></span></strong></p><p><span style="color:#000066;">In the above example, if mom and dad had set aside roughly $100-$110 per month in an individual RESP <strong><a href="http://www.investored.ca/investments/registered-education-savings-plans-resp/Pages/what-do-i-need-to-know-about-scholarship-plan-resps.aspx">(not one of those scholarship type plans - that is a full blog in itself)</a></strong> from birth, it would have paid for the education in full. Don't even get me started on what happens when you wait. Simply waiting for 3-4 years means you need to contribute 20-30% more money. Contributions are not tax deductible, and the grant and growth is taxable but in the hands of the beneficiary. Since your child will likely <span class="blsp-spelling-corrected" id="SPELLING_ERROR_2">not</span> have sufficient income to pay taxes, essentially it's a tax free strategy. If you want to learn more about the types of RESP plans, </span><a href="http://www.investored.ca/investments/registered-education-savings-plans-resp/Pages/what-resp-choices-do-i-have.aspx"><strong><span style="color:#000066;">then click on this link.</span></strong></a></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF5t3RxkPJVqh09PoUd0PJ8N5O4ENIMjEUi4t8dEvjUxG2zE1U-hef52s_CDwv8MZnctMDDAm4XJy2_ZBbP2Cg6U0iFS6KY77d_5zmOAGI7tndv-oD4lY6SiL7vjH5kGFuTAA60akC27w/s1600-h/resp3.jpg"><img id="BLOGGER_PHOTO_ID_5356861366532789442" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 162px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF5t3RxkPJVqh09PoUd0PJ8N5O4ENIMjEUi4t8dEvjUxG2zE1U-hef52s_CDwv8MZnctMDDAm4XJy2_ZBbP2Cg6U0iFS6KY77d_5zmOAGI7tndv-oD4lY6SiL7vjH5kGFuTAA60akC27w/s200/resp3.jpg" border="0" /></a><span style="color:#000066;">The biggest bang for the buck within an RESP is the grant monies. Essentially for every <span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">loonie</span></span> you put into the plan, the government kicks in 20 cents. If your net family income is below $37,178, you get an extra $100 on the first $500 you save for each child. If your income is between $37,178 and $74,357, then they provide an extra $50 on the first $500 you save for each child. That really begins to add up. Here's an example:</span></p><p><span style="color:#000066;">Let’s say you save $650 a year for 15 years. Now let’s say your invested money will grow by 5% each year. The numbers below show you how much faster your savings would grow with the grant added in. With no grant money, after 15 years you would accumulate $15,656. With the various grant monies available, you contribute the same amount but end up with $18,790. In this case, you could get more than $3,000 for free.</span></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCRESV5zTi1TGRulmaNe8msR_7Dik3sZucsvAexG45IRnsGei-HmlJfAfm5WE8FMRPp8cEFlzFMb7CGlKoUtpBvQ4WyYGQTVlEvhyphenhypheneVvcimo1G-vmqmIfUXBJHL50OoRbD2G3scZ0ORTU/s1600-h/tax08_tease.jpg"><img id="BLOGGER_PHOTO_ID_5356862795010073058" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 77px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCRESV5zTi1TGRulmaNe8msR_7Dik3sZucsvAexG45IRnsGei-HmlJfAfm5WE8FMRPp8cEFlzFMb7CGlKoUtpBvQ4WyYGQTVlEvhyphenhypheneVvcimo1G-vmqmIfUXBJHL50OoRbD2G3scZ0ORTU/s200/tax08_tease.jpg" border="0" /></a><span style="color:#000066;">There are several myths <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">associated</span> with <span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">RESP's</span></span>. If my child doesn't go to school, I lose all of my money is the one I hear the most. In an individual plan, that is not true. You lose the grant money. As well, if you have more than one child on the plan (a family plan), then the money can be used by any of the children. Another popular myth is that you have to pay a lot of taxes on <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">RESP's</span></span>. In fact, only the grant and growth portion of the plan is taxable, and is taxed in the hands of the child. As long as their income is below $10,230 (and that is after all deductions <span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">including</span> <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9">tuition</span> costs etc), then they pay no taxes on the money.</span></p><p><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com2tag:blogger.com,1999:blog-4525985330698294817.post-46641814711345055282009-07-17T01:00:00.000-07:002009-07-17T01:00:03.533-07:00Did You Look At Your Investment Statements?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyuIwryfBbYu5OlvROC0TvES_IP2JERHtTVKraeJyCnMLHnvndLZMiry_B1DQftOK-WzjN5dKbxX-u1l5JHZGtdTDw8DRw3-9YJaYu56V_dx17BFWXrrn2UWOnovY9fpiyx5SVPf1kv1Q/s1600-h/4-hate-to-say.gif"><img id="BLOGGER_PHOTO_ID_5358839732759443058" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 188px; CURSOR: hand; HEIGHT: 169px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjyuIwryfBbYu5OlvROC0TvES_IP2JERHtTVKraeJyCnMLHnvndLZMiry_B1DQftOK-WzjN5dKbxX-u1l5JHZGtdTDw8DRw3-9YJaYu56V_dx17BFWXrrn2UWOnovY9fpiyx5SVPf1kv1Q/s200/4-hate-to-say.gif" border="0" /></a>Back in January, the general consensus seemed to be resignation and panic. Many people told me they simply refused to open their investment statement. Others mentioned that they literally shredded them or ignored them. The brave souls who actually opened them spent the next month trying to comprehend what went wrong.<br /><br />Well six months have passed, markets have begun to return to some form of normalcy and now comes your statement. Should you open it? Is there another whammy inside? What would a smart person do?<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixVD4S56Q26vg0H2z6NNpZyFxfv5LnI5LHRriOxawkfk8ZD7NdrGmDK9u5RkCuRojm5oCaE6vzrQeBPa9kaM0a8HEfmARb5RG_ccpK_gktcwbC5G6C9r8kyAYhRnRz7O-ZTtnK_kZuQ28/s1600-h/Salt%20Lake%20Marathon%20start.jpg"><img id="BLOGGER_PHOTO_ID_5358841744314439026" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 177px; CURSOR: hand; HEIGHT: 134px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixVD4S56Q26vg0H2z6NNpZyFxfv5LnI5LHRriOxawkfk8ZD7NdrGmDK9u5RkCuRojm5oCaE6vzrQeBPa9kaM0a8HEfmARb5RG_ccpK_gktcwbC5G6C9r8kyAYhRnRz7O-ZTtnK_kZuQ28/s200/Salt%2520Lake%2520Marathon%2520start.jpg" border="0" /></a>Simple. Remember that investing is a marathon and not the 100 metres. Your December 2008 statement represented a stumble - a fatal issue in the 100 metres but hardly a concern in a race of 26 miles (42 kilometres). Grab a beverage, sit down in a comfy chair, clear your mind of all negative thoughts and then open the statement. Did you survive?<br /><br />Of course you survived and the reason I know this is very simple. With the exception of certain specific market segments and foreign investments, most markets returned a somewhat modest 5-10% return over the past six months. <a href="http://www.theglobeandmail.com/blogs/markets/">Some of the biggest naysayers before this whole mess are now starting to backtrack and are predicting an end to the recession is near.</a> Within the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">actual</span> stock markets, some did better than others - include the Toronto Stock Exchange (15%) and the <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Nasdaq</span> (16%) in that group. Want a more telling indication that we are slowly leaving the drama of the past 10 months behinds us?<br /><br />The <a href="http://www.conference-board.org/">Conference Board</a> in the US analyzes tons of economic data to come up with (among other things) three monthly indexes that claim to provide insight for business leaders to use in planning what to do next.<br /><strong><span style="color:#ff0000;">The leading economic index</span></strong> (LEI) is made up of items generally judged to show changes ahead of the general economy. To gauge the future direction of the economy, you’d look at the LEI.<br /><strong><span style="color:#000099;">The coincident economic index</span></strong> (<span class="blsp-spelling-error" id="SPELLING_ERROR_2">CEI</span>) is made up of items generally judged to track (coincide) with current economic conditions. To take the current temperature of the economy, you’d look at the <span class="blsp-spelling-error" id="SPELLING_ERROR_3">CEI</span>.<br /><strong>The lagging economic index (LAG)</strong> is made up of items generally judged to lag behind the general economy. To confirm where the economy came from, you’d look at the LAG.<br /><strong><span style="color:#ff0000;">Here is a historical chart of the Conference Board’s LEI and <span class="blsp-spelling-error" id="SPELLING_ERROR_4">CEI</span></span><br /></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-U46bjoGQ8BU8pfaQw70wyqCCFJvR4QAnWzQYr2B3riHx3sGunNI8ClWGveh9mgbWerubjTucF50lFcMvN2B9ukQNhEVQhSHe5cV3O4ihdhSbuP5BnNvj2QBs7GGDXh5sgjh5dsVpY5Y/s1600-h/CB-May-LEI.jpg"><img id="BLOGGER_PHOTO_ID_5358850917780408354" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 447px; CURSOR: hand; HEIGHT: 280px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-U46bjoGQ8BU8pfaQw70wyqCCFJvR4QAnWzQYr2B3riHx3sGunNI8ClWGveh9mgbWerubjTucF50lFcMvN2B9ukQNhEVQhSHe5cV3O4ihdhSbuP5BnNvj2QBs7GGDXh5sgjh5dsVpY5Y/s400/CB-May-LEI.jpg" border="0" /></a><br /><br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0NDkME9GPYqajk5S3bk2mqPgW-JMSNYA6qrTHFPnskyxL546gsFJGAkxwmCXDBazvDM9hH7Kc_3UW31qPkPQgbwICpHLA8XkLgYZOBpi0exMoD65p10KMHZMwqXXPL9BIi7tRNmxjUMI/s1600-h/yoyo.jpg"><img id="BLOGGER_PHOTO_ID_5358852655610908050" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 132px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0NDkME9GPYqajk5S3bk2mqPgW-JMSNYA6qrTHFPnskyxL546gsFJGAkxwmCXDBazvDM9hH7Kc_3UW31qPkPQgbwICpHLA8XkLgYZOBpi0exMoD65p10KMHZMwqXXPL9BIi7tRNmxjUMI/s200/yoyo.jpg" border="0" /></a>Do you notice that the blue line is continuing a downward trend but seems to be "flattening"? This line represents current economic conditions. Look at the red line - this is the leading indicator for the future of the economy. Notice the dramatic uptick over the past 3 months? On March 9<span class="blsp-spelling-error" id="SPELLING_ERROR_5">th</span>, stock markets bottomed out and since then have been rising and falling but on an upward trend. My best explanation is this - take a Yo-Yo and get on an escalator going up. Start playing with the Yo-Yo. Even though the yo-yo is going up and down, the general direction for the yo-yo relative to your starting position is upward.<br /><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0QcaA0y371Q2B8YUaLk7dF51kLuCCl5lzN_EnwwKI55wp5HPDgjOIOA0KR2X1hZujcrBQnRDxnBiRtnKo8W-TPGisRl53GDehlcDhJb-k6mLnrwe5mjOb0EsC2x5IGV83iXloL4AhTTw/s1600-h/drunken+sailor.jpg"><img id="BLOGGER_PHOTO_ID_5358854262727803362" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 168px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh0QcaA0y371Q2B8YUaLk7dF51kLuCCl5lzN_EnwwKI55wp5HPDgjOIOA0KR2X1hZujcrBQnRDxnBiRtnKo8W-TPGisRl53GDehlcDhJb-k6mLnrwe5mjOb0EsC2x5IGV83iXloL4AhTTw/s200/drunken+sailor.jpg" border="0" /></a>Does this mean everything is fine and we can go back to spending like drunker sailors? Of course not. The coming months will show that there are still areas of the economy in bad shape. One of my biggest hopes is that this economic downturn will make more people realize the importance of proper planning for the future. Having an emergency fund instead of using a credit card to solve those unexpected problems. Paying for things with cold hard cash instead of putting it on time. The days of running a deficit will hopefully be contained to governments who have the option to do so.<br /><br />As always, <strong>Stay Well and Pay It Forward.</strong><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAhRJ_r8m10qGZk4g2PIktx0Envm6WxgUIWe2EVrx-JxGgWX1WNx2ohIDjkaHRV2L-Vq0i3trQg6h7Hp1nINwpJQpSczwADLs3ZnFOOX_VziIG217PZonuzvDU8ExfF8VdXgMYKjcqulY/s1600-h/CB-May-LEI.jpg"></a>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-406861810151120322009-07-14T01:00:00.000-07:002009-07-14T01:00:01.991-07:00How Safe Are Your Benefits?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd5qGdbPV_6H3j5IN-xLH2D2Z7cYFTQNqF9KZnYN95FOq6PTaWpG5KyqGIgIVhnyCjQs7imz6keHPd9kBDhwA6dNGxqAZ2SGBrVd7qpe4mCHQDOCQf_c7FEJEq2Nuj01O1_aA3VM052Q/s1600-h/benefitsbuzz.jpg"><img id="BLOGGER_PHOTO_ID_5356117882052556354" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 161px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSd5qGdbPV_6H3j5IN-xLH2D2Z7cYFTQNqF9KZnYN95FOq6PTaWpG5KyqGIgIVhnyCjQs7imz6keHPd9kBDhwA6dNGxqAZ2SGBrVd7qpe4mCHQDOCQf_c7FEJEq2Nuj01O1_aA3VM052Q/s200/benefitsbuzz.jpg" border="0" /></a>For people who worked for a company with an employee benefits program twenty years ago, the concept of "paying" for some of their benefits would have been considered ridiculous. Well as I have stated many times before, the times they are "a changin".<br />Nowadays, pension plans are in "deficit" positions and employees wonder what else could happen. Last week, a <strong><span style="color:#000099;">VERY BIG SHOE</span></strong> dropped. I'm sure that most people didn't even notice this headline, but for some people, it will dramatically affect their future.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRR8yB-cLp8qrGGanGYEsraFrsLda0tMzXQQjY2ZzvgbSl-zC_AO2ZuRbupyXri4D_jnz0rm5pYzVW5o99n0LNY-yCeoSaeKT31HfY8t_sP8taDYRhSv_LnmSC_frCXxcgMR66aARmRuA/s1600-h/Disabled.jpg"><img id="BLOGGER_PHOTO_ID_5356121484490097938" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 192px; CURSOR: hand; HEIGHT: 213px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhRR8yB-cLp8qrGGanGYEsraFrsLda0tMzXQQjY2ZzvgbSl-zC_AO2ZuRbupyXri4D_jnz0rm5pYzVW5o99n0LNY-yCeoSaeKT31HfY8t_sP8taDYRhSv_LnmSC_frCXxcgMR66aARmRuA/s200/Disabled.jpg" border="0" /></a>Many years ago this major company, who spent money in questionable terms, whose stock market rise enabled a few people to get rich, and many times that number of people made poor, announced that <a href="http://www.financialpost.com/news-sectors/story.html?id=1769469">their "disability program" was in jeopardy</a>. The company which shall remain nameless (I don't feel like taking on their lawyers although I imagine they cannot afford them anymore), was a major global player in the fibre optics field and the largest company on the Toronto Stock Exchange 10 years ago. In a National Post article on July 8th, it was explained that the company's disability benefits program was not a true insurance program. Rather the company had created an <strong><span style="color:#ff0000;">administrative services only(ASO)</span></strong> plan and was "self insured".<br /><br />Of late I have seen some excellent articles on why we "insure" things (our home, car, life, ability to earn an income). I will provide some more information in a coming blog that better explain the benefits. The problem here is that the company stopped "insuring" their employees through an insurance company. The company decided to take on the risk themselves to save money. Now they are going through bankruptcy and the employees who are currently on disability may be left out in the cold along with other "creditors". How could this happen you ask? Could it happen to you?<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT3V2ivhtNQY7hRSXfVQ_8Bnk53dX81D5yQtUTL8-m-WlLOOOAfVgu4d2o7QZX02PaUSkqyyDEdxcJJW-f_VOMQ7Yekjgps3oTJmc4Jl9IWNuEPxIK0WEk6eXFEdcOwfs-PANDfamF-OQ/s1600-h/Benefits.jpg"><img id="BLOGGER_PHOTO_ID_5356126795888316466" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 153px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhT3V2ivhtNQY7hRSXfVQ_8Bnk53dX81D5yQtUTL8-m-WlLOOOAfVgu4d2o7QZX02PaUSkqyyDEdxcJJW-f_VOMQ7Yekjgps3oTJmc4Jl9IWNuEPxIK0WEk6eXFEdcOwfs-PANDfamF-OQ/s200/Benefits.jpg" border="0" /></a>Benefits are offered by companies as a way to attract and retain employees. They are a tax- effective form of compensation for the company and many people consider "benefits" after income as primary reasons for choosing an employer. When times are good, benefits attract employees; when times are tough, they remain a principal reason for the downfall of companies. General Motors was a good example - it is not the wages they pay their staff that hurt, it was the cost of the "benefits" that drove them into bankruptcy. Benefits are made up of but not limited to the following:<br /><br /><ul><br /><li>life insurance and disability insurance</li><li>health and dental insurance</li><li>retirement benefits</li></ul><p>In previous blogs I have discussed the problems facing some types of pensions (defined benefit plans). Life insurance is almost always a component of a benefits plan - if you have a sufficient number of employees, everyone can have some basic coverage without a medical. Once you cross a threshold, then medical requirements are needed. Disability insurance works in a similar fashion. Health and dental coverage provides reimbursement of covered expenses to maximums under the plan. Most employer go through an insurance company to insure their plans, especially smaller companies. The reason is simple - insurers have thousands or even millions of people insured which spreads out the risk. They take a percentage of the premiums paid to cover the administrative costs and profits.</p><p>What happens in an <strong><span style="color:#ff0000;">administrative services only(ASO)</span></strong> plan? Essentially, the employer takes on the risks associated with the plan and simply hires an insurer to "administer" the plans. Rather than buying insurance to cover employee benefits, companies can create their own trusts to provide benefits directly to employees, and use insurance companies to simply administer those benefits. But while ASO arrangements offer some tax and premium savings to employers, <span style="color:#006600;"><strong>they put employees at risk when the company hits rough waters</strong></span>. </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgd_WWxJz8Wp7NkByTRfKr9YA7KbiJgvhFHYhxgzE4yNENgufle901q85llWpc14JmetC1-jtvAGJPecL8XknmlypyaX_7dvTYsnAeug93X9QNmaK8UhFjod2GQpLo2ypuT1qD1Gbh-z3U/s1600-h/ins.jpg"><img id="BLOGGER_PHOTO_ID_5356129835957802466" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 193px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgd_WWxJz8Wp7NkByTRfKr9YA7KbiJgvhFHYhxgzE4yNENgufle901q85llWpc14JmetC1-jtvAGJPecL8XknmlypyaX_7dvTYsnAeug93X9QNmaK8UhFjod2GQpLo2ypuT1qD1Gbh-z3U/s200/ins.jpg" border="0" /></a>"It's not insurance; there's no insurance guarantee," says Frank Zinatelli, vice-president of legal services for the Canadian Life and Health Insurance Association (CLHIA).<br />There are more than a million Canadians whose LTD are covered by ASO arrangements, and whose coverage may be in jeopardy if their companies go under. If an insurance company goes bankrupt, its policyholders would continue to receive their LTD payments from Assuris, a non-profit company set up to deliver payments. </p><p>This type of arrangement <strong><span style="color:#33cc00;">can</span></strong> make very good sense for both the company and employee to cover dental benefits or perhaps even covering the health insurance portion of their plans. The disability or life insurance portion of the plan? Not in my eyes. As we have already seen with this company, people already on disability may now be in jeopardy as to their future income benefits.</p>The next time the discussion of "benefits" comes up, remember this blog entry. If you have a question about your plan, ask an advisor but not the one that sold the plan. An answer from a disinterested third party may open your eyes.<br /><p>As always, <strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com1tag:blogger.com,1999:blog-4525985330698294817.post-29501193689949041152009-07-10T02:00:00.000-07:002009-07-10T02:00:00.673-07:00How Is Your Business Doing Financially?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUq1agdFcr-joSOCpLkK7xbpzhCwbiLTdiEIzH-d0S-uylB5kYRgzDrlaphpaUDCMBik6Xdee7P-ZGqj5Ohxeub12jQc5MK85NQFi4DgDGAz3NY9knkJBLR3t_qOv-D9sY1mdhoe6vHr0/s1600-h/Budget2.gif"><img id="BLOGGER_PHOTO_ID_5351365712305159842" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 177px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUq1agdFcr-joSOCpLkK7xbpzhCwbiLTdiEIzH-d0S-uylB5kYRgzDrlaphpaUDCMBik6Xdee7P-ZGqj5Ohxeub12jQc5MK85NQFi4DgDGAz3NY9knkJBLR3t_qOv-D9sY1mdhoe6vHr0/s200/Budget2.gif" border="0" /></a>I wonder how many people will read the title of this blog entry, then not bother reading any further. You know what they say when you assume. Oh well - it will definitely be there loss. When I talk about your business, people automatically assume I am referring to a physical "business". Even if you have a regular job, whether you realize it or not, you have an important business - your personal finances are just like a small business. If you run a company and don't watch what you spend, you get in financial trouble. There are literally dozens of similarities.<br /><br />Do you have a budget? I'm not talking about that basic set of numbers you sketched out on a napkin one day at Timmie's. I am referring to a physical document where you actually track your expenses and see how much you take in and put out financially. Have one? Great. Follow it? Not often? Then it's not a budget - just some guidelines.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_Y-ghXFsDeslECwBFffb15GpUjc2q2qjM_VhRMgDmOj41t-qICwugVFnZDJuQTKpYjB3zCwv2sY9UzW514yU5fXxyX160NkNZa2GTvnrVOxSNpj2pylQkJAUaDudqbp_ZV3VInC8kxi0/s1600-h/Budget.jpg"><img id="BLOGGER_PHOTO_ID_5351367587511656722" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 172px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj_Y-ghXFsDeslECwBFffb15GpUjc2q2qjM_VhRMgDmOj41t-qICwugVFnZDJuQTKpYjB3zCwv2sY9UzW514yU5fXxyX160NkNZa2GTvnrVOxSNpj2pylQkJAUaDudqbp_ZV3VInC8kxi0/s200/Budget.jpg" border="0" /></a>One of the biggest things I have been doing of late is sitting down with people and actually constructing a budget based on their income and expenses. It can be somewhat intimidating as some people have found out. One couple wondered where all of their money went until they did their budget and realized that their expenses exceeded their income by $500 per month. Some small changes and now they are in a plus position, but can you imagine the damage that would have happened if they had not done a budget. Do you have to spend months poring over bank statements to come up with something? Not at all - a simple little excel spreadsheet is more than sufficient. It will provide the basic guide for most people to manage their household finances.<br /><br />I took a look for something fairly generic that most people could work with. This will link you to a <a href="http://office.microsoft.com/en-us/templates/TC010233411033.aspx?pid=CT101172321033">simple excel spreadsheet from Microsoft.</a> You just download it then start filling in the blanks. You may have expenses not listed - simply delete something else and then add what you do need. One simple tip - make sure you list your income first. When you start seeing a bunch of red numbers, that should be a warning flag that your "business" is bleeding.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7baaahufQk1WPzf1pTg_K_vySui9zddxnmffvXyLtVOCkmE-gXQLjEMtXLQAXG2TbQoJI5yRc54DSGbOmnMuxHKOyIgbrzDl_Ut8pcGAR8H3UfOGgWasM1IThgSRSfLlMHfpj2nmirrk/s1600-h/expenses-fr.gif"><img id="BLOGGER_PHOTO_ID_5351375918600379538" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 192px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7baaahufQk1WPzf1pTg_K_vySui9zddxnmffvXyLtVOCkmE-gXQLjEMtXLQAXG2TbQoJI5yRc54DSGbOmnMuxHKOyIgbrzDl_Ut8pcGAR8H3UfOGgWasM1IThgSRSfLlMHfpj2nmirrk/s200/expenses-fr.gif" border="0" /></a>How do you come up with your expenses. Don't take shortcuts and estimate things. If you want to get good results then remember this - garbage in equals garbage out. Take your time and come as close as possible to the real numbers. The automatic payments from your account are fairly simple, but for other things you will need to do a little digging. If you can get it from the internet, or if you kept copies, get 4-6 months worth of bank statements. These will really help. They will also show you where you spend your money wisely or otherwise. The magic of debit cards is that you often spend money you cannot account for. Let me also say that these issues affect many people - don't assume that someone who makes a lot of money does not have budget issues. If history has taught me anything it's that many people face this problem - the bigger the income, the bigger the potential problems.<br /><br />At the end of doing your budget you have some "issues" and debts to be paid off <a href="http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp">then click on this link to help</a>. This simple program will show you how long it will take to get out of debt. One simple rule to remember - it usually takes 2 to 3 times longer to get out of debt than it took to get into debt.<br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-15984427785125571712009-07-07T01:00:00.000-07:002009-07-13T06:56:34.219-07:00Who Will Care In The Future?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqe-79BGa36XJOLVC9tktWMT0lgg1XmRnB43uH9vK-RJpjv3I90LfIVW0heEqpXiI4gN9Wkubdm3-2xWQxIyLmHhHHQjILdGN77AxdPlw49z4Em7IGfSExeCBMuLXH7ygpHjKw8vW5tU8/s1600-h/long_term_care.jpg"><img id="BLOGGER_PHOTO_ID_5346564696203031922" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 229px; CURSOR: hand; HEIGHT: 205px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqe-79BGa36XJOLVC9tktWMT0lgg1XmRnB43uH9vK-RJpjv3I90LfIVW0heEqpXiI4gN9Wkubdm3-2xWQxIyLmHhHHQjILdGN77AxdPlw49z4Em7IGfSExeCBMuLXH7ygpHjKw8vW5tU8/s320/long_term_care.jpg" border="0" /></a>I have a great idea. Let's do our income taxes, buy some life insurance, spend 45 minutes on hold with a company telling you they value you as a client, then go arrange for a will and power of attorney, and just for fun, let's put mom into a seniors home. Sounds like a fun day, doesn't it.<br /><br />It seems like life is filled with things we hate to do. Thankfully we don't need to do these things too often (imagine if we could stop doing and paying our income taxes). However, it never ceases to amaze me that people don't think they need a will and power of attorney. As I love to point out to these same people...<br /><br /><strong><em><span style="color:#ff0000;">YOU SPEND MORE ON CABLE IN A YEAR THAN A WILL AND POWER OF ATTORNEY COST FOR A COUPLE. </span></em></strong><br /><strong><em><span style="color:#ff0000;"></span></em></strong><br /><span style="color:#000066;">Having</span> a properly designed will and power of attorney is important if you meet the following criteria:<br /><br />1. Age 18 or over<br />2.<br />3.<br />4.<br />5.<br /><br />No, I did not delete the rest of the list. Personally, if you are over age 18 and of sound mind, then I believe a will and powers of attorney are important things to arrange. Have minor children? That just raises the "importance" bar several notches. Why you may ask? Let me ask a simple question? If you were to become incapacitated due to a medical issue, who would you want to oversee your personal affairs? Without a properly designed power of attorney, a family member or friend must apply for the right to look after things for you. I certainly hope that whomever they appoint sees things the same way you do. They then have a measure of control over your finances, your health etc. Think it's not true? Here's the link to the <a href="http://www.attorneygeneral.jus.gov.on.ca/english/family/pgt/livingwillqa.pdf">Office of the Public Guardian </a>info on the topic. There have been <a href="http://www.canada.com/power+power+attorney/1620962/story.html">horror stories where the Public Trustee's office stepped in </a>and whamo - say bye bye to some of your money.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipT4IvqBzyAYx5lwelJcKwQ909YP-aeTONu_0WpeZjTKO_t5UEMQ7IPiHoxaH4G5xwipJ-gikPSWQBrcVvAjTqvx8KUmlLHv_Rtachh_UmGr3SyJtQ_rN8ILHpu6tKZ0r7PaTpNrQ0Dyg/s1600-h/Will4.jpg"><img id="BLOGGER_PHOTO_ID_5348747374306883298" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 246px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEipT4IvqBzyAYx5lwelJcKwQ909YP-aeTONu_0WpeZjTKO_t5UEMQ7IPiHoxaH4G5xwipJ-gikPSWQBrcVvAjTqvx8KUmlLHv_Rtachh_UmGr3SyJtQ_rN8ILHpu6tKZ0r7PaTpNrQ0Dyg/s200/Will4.jpg" border="0" /></a>Sounds easy then right? Arrange a power of attorney and will and all is fine. One other little problem. As most of you know, society as a whole is aging. What used to kill people, now leaves them disabled. The miracles of modern medicine now prolong life, but at what cost. Most of you will have a memory of a relative in some "retirement home" or hospice. <span style="color:#ff0000;"><strong>One of my strongest memories of these places was the antiseptic smell.</strong></span> Those are the "affordable" places. In this case, the phrase affordable has a somewhat hollow ring to it. <a href="http://www.health.gov.on.ca/english/public/program/ltc/15_facilities.html#3">Check out the costs of provincially-run institutions on this link. </a>The really nice ones are more like country clubs or hotels than a medical facility. These nice places also cost an insane amount of money. How much? Would you believe $4,000-$7,000 per month and up. What are the alternatives?<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXXygElEUzncfjFup7LZNhy1zlUOBsNzuXf3AUghBQf0gkqV6k5lZz-dSjohpi_WP3d9qHBZHbSTtFHQpxt4l9ykxEI4lshPf3NF-X7k1z2BDMtFYp0yW4vd9qbIYyTdvMZtIympT5axc/s1600-h/LTC+visit.jpg"><img id="BLOGGER_PHOTO_ID_5346568942681653346" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 229px; CURSOR: hand; HEIGHT: 246px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiXXygElEUzncfjFup7LZNhy1zlUOBsNzuXf3AUghBQf0gkqV6k5lZz-dSjohpi_WP3d9qHBZHbSTtFHQpxt4l9ykxEI4lshPf3NF-X7k1z2BDMtFYp0yW4vd9qbIYyTdvMZtIympT5axc/s320/LTC+visit.jpg" border="0" /></a>Here's the good news. You can always move back in with one of your kids. <em><span style="color:#009900;"><strong>They won't mind - after all you raised them and now it's simply a matter of returning the same favour</strong></span></em>. They may not see things in the same light (see my opening comments), and wonder where to put you. They may still be raising their own children and I am sure you'll feel very comfortable sleeping in the room next to your grandchild who has a habit of only wearing black clothes, listening to strange music, spends an inordinate amount of time on computers and is still finding him/herself.<br /><br />A second option are the aforementioned facilities run by the province. For far too many Canadian seniors, nursing home care is inaccessible or unaffordable. In some provinces, wait lists for nursing home beds are excruciatingly long — up to two years. Most beds become available only when residents die.<br />Private nursing home care can cost between $40,000 and $70,000 a year, depending on the community. This is clearly not a viable option for most seniors. In the patchwork system that has evolved, it is apparent that public and non-profit nursing home care provides the most affordable solution. But even this option is becoming unaffordable for many seniors as these facilities struggle to fill the funding gap left by government funding cuts.<br /><br />Option number three is to sell your home and move into something "easier" to deal with. That approach always sounds good to the kids. Whether that means a condo or "seniors residence", it also means losing some of your independence, and for seniors, a loss of independence is "the next step towards complete dependence".<br /><br /><p>The fourth option is to spend your money on in home care. This remains a viable option for people with the financial wherewithal to stay home and have home-care people assist with the "Activities of Daily Living". Private nursing home care can cost between $40,000 and $70,000 a year, depending on the community. This is clearly not a viable option for most seniors.</p><p>The other problem may surprise you. Your children are getting concerned about "mom and dad". Many of them are already at that crossroad. Middle-aged couples are wondering how to approach their parents about their "declining years". Aging parents are wondering what their options are. Will the problem stay the same? Not likely. Currently, 17% of adults are over age 65. The number of Canadians aged 80 and over will double in the next 20 years - and triple in the next 40 years. The number of seniors in Canada has increased by one million in the last decade. <span style="color:#ff0000;"><strong>By 2020, there will be as many seniors as children!</strong></span> These issues will further complicate the problems we already face. </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxoVLC3-rWTMWVIglqnMCyDK32CNsdd0aQct0mzqWN0Vhd5LeZeNP_PwatQ-gInKRvo3vPhmdZSS_SL7ClwEgQlbPd_bg1NXHmc_Zdpwsjsg5SM5Uhh1xie2cKYV_lBkIs3oNMCMyPLN8/s1600-h/LTC.bmp"><img id="BLOGGER_PHOTO_ID_5346568837606271426" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 186px; CURSOR: hand; HEIGHT: 185px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxoVLC3-rWTMWVIglqnMCyDK32CNsdd0aQct0mzqWN0Vhd5LeZeNP_PwatQ-gInKRvo3vPhmdZSS_SL7ClwEgQlbPd_bg1NXHmc_Zdpwsjsg5SM5Uhh1xie2cKYV_lBkIs3oNMCMyPLN8/s200/LTC.bmp" border="0" /></a>Long term care insurance goes a long way to solving the problem. It provides a way for older family members to solve their finance issues. It allows them to maintain their dignity, while choosing whether they need to move to a facility-care residence, or simply need some help with meals and housework. One of the best things I have ever seen on the topic originates in Ottawa. <a href="http://www.coaottawa.ca/library/publications/LTC-Insurance_Oct2008.pdf">The Council on Aging of Ottawa publishes and updates a lengthy handbook on the topic.</a> It addresses almost every possible concern and as a "disinterested" party, you can count on the contents not being a sales pitch for some company.</p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQV4eDXmUFV8vOCNY7ytReDXS6aYPd3Z0s89_4gnvUsO_SfevSoccwJfVZJf7sUVHFlMrOHd0Kaw_towklCFoJJsP8lEqucgqPEm_NAuqifLDMerLSmSFATdGKGtMrUsdOzd1TibdDIDk/s1600-h/2009-04_p106_400.jpg"><img id="BLOGGER_PHOTO_ID_5348758782305237618" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 190px; CURSOR: hand; HEIGHT: 253px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQV4eDXmUFV8vOCNY7ytReDXS6aYPd3Z0s89_4gnvUsO_SfevSoccwJfVZJf7sUVHFlMrOHd0Kaw_towklCFoJJsP8lEqucgqPEm_NAuqifLDMerLSmSFATdGKGtMrUsdOzd1TibdDIDk/s320/2009-04_p106_400.jpg" border="0" /></a>Let me close with this thought for you. The three greatest expenses for the Canadian federal government are:</p><ol><li>Paying interest and principal on our deficit</li><li>Health care expenses</li><li>OAS (Old age security) program</li></ol><p>As the population ages, tax revenues will decrease, health care expenses and OAS payments will increase. Do you really believe the government will suddenly have a lot of extra money to fund new "seniors homes"? You may find a nice private home, but at what cost? Think about your options before the choice is made for you.</p><p><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-44874195676333635942009-07-03T02:00:00.000-07:002009-07-03T02:00:18.157-07:00I Think I'll Have A Henson...<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9uptgqwtxJ5qxYcf2VS2dGOYpYs9DzZsW1h0iTeFezWw3E7XHxxJca7D98VNuFS6zebaJC_TjMkBwLzBuT62OYp9bbGXenY1D4aPLyfi2rGN0A3Cer4ti0NJDNCMSBZbgOKAQ8Telijc/s1600-h/beer-bottle-neck-uid-1180101.jpg"><img id="BLOGGER_PHOTO_ID_5348823357903508434" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 181px; CURSOR: hand; HEIGHT: 183px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi9uptgqwtxJ5qxYcf2VS2dGOYpYs9DzZsW1h0iTeFezWw3E7XHxxJca7D98VNuFS6zebaJC_TjMkBwLzBuT62OYp9bbGXenY1D4aPLyfi2rGN0A3Cer4ti0NJDNCMSBZbgOKAQ8Telijc/s200/beer-bottle-neck-uid-1180101.jpg" border="0" /></a>You want a what? The first time I heard the above expression, I wondered if Molson's or Labatt's had some new competition in the Canadian beer market. My next thought (having young girls) was that it must be some new (and therefore annoying) band. I seem to recall three brothers who...boy am I old. My daughter informed me that "Hanson" was so yesterday. I wonder what she thinks of the Beatles -that was so biblical? I could not have been farther from the truth as to what a Henson was.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEHM9KYnFUonBp3LmwLtXMZi7l07gXm_azMO_fCvhjlL3J4p0AKY4isSEXn8u0gWUZShb92u7XRXfwAoaGBcNE9Dg4BsEZVYpmpgRPwy3W74X1hk0oVDagLjfpaCgBryBSZPR4HIhdEIw/s1600-h/Wikipedia-logo-en-big.png"><img id="BLOGGER_PHOTO_ID_5348825000447199650" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 173px; CURSOR: hand; HEIGHT: 217px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEHM9KYnFUonBp3LmwLtXMZi7l07gXm_azMO_fCvhjlL3J4p0AKY4isSEXn8u0gWUZShb92u7XRXfwAoaGBcNE9Dg4BsEZVYpmpgRPwy3W74X1hk0oVDagLjfpaCgBryBSZPR4HIhdEIw/s200/Wikipedia-logo-en-big.png" border="0" /></a>Wikipedia defines a Henson Trust as:<br /><br />Henson trust (sometimes called an absolute discretionary trust), in Canadian law, is a type of trust designed to benefit disabled persons. Specifically, it protects the assets (typically an inheritance) of the disabled person, as well as the right to collect government benefits and entitlements. The key provision of a Henson trust is that the trustee has "absolute discretion" in determining whether to use the trust assets to provide assistance to the beneficiary, and in what quantity. This provision means that the assets do not vest with the beneficiary and thus cannot be used to deny means-tested government benefits.<br />In addition, the trust may provide income tax relief by being taxed at a lower marginal rate than if the beneficiary's total assets were considered. It can also be used to shield assets from matrimonial division in case of divorce of the beneficiary. In most cases, the trust assets are immune from claims by creditors of the beneficiary. The Henson trust was first used in Ontario in the late 1980s. It became of wider interest when the Supreme Court of Ontario ruled in 1989 that the trust assets were not vested in the beneficiary and thus could not be used to terminate government benefit programs. A Henson trust can be established as either a living trust, or a testamentary trust.<br /><br />When a Guelph man by the name of Leonard Henson died, he left his money — in trust — to his disabled daughter Audrey. In order to prevent the trust from negating Audrey's government benefits, it was set up in such a way that the trustee had "absolute discretion" over the assets (meaning they would be paid out as the trustee saw fit, not according to the wishes of the beneficiary). This meant that Audrey did not actually own the assets, and could therefore go on collecting both the government benefits as well as receiving payments from her father’s trust. At Audrey's death, the assets would go to charity. In 1987, the Ontario Ministry of Community and Social Services took the matter to court and attempted to prove that Audrey did indeed enjoy beneficial ownership. The government, however, lost the case and the "Henson trust" was born — an absolute discretionary trust that allows the beneficiary to collect government benefits while at the same time receiving private income, without any restrictions on how that income is to be used.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEAqyRtRG6QzzJWjeIgaFb4HOCzB6-9BJmnlLvbUnR6SMo56POv-hLXkQ6kZPhVPZBRnvpWBcQq9DZDFlULIaZDSz-3yKNHJf8DJwjK5tMStSULxPTgXGU43J3APFH762cjwmUhPSeDGA/s1600-h/Template_translation_manager.jpg"><img id="BLOGGER_PHOTO_ID_5348826127590081394" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 156px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiEAqyRtRG6QzzJWjeIgaFb4HOCzB6-9BJmnlLvbUnR6SMo56POv-hLXkQ6kZPhVPZBRnvpWBcQq9DZDFlULIaZDSz-3yKNHJf8DJwjK5tMStSULxPTgXGU43J3APFH762cjwmUhPSeDGA/s200/Template_translation_manager.jpg" border="0" /></a>Now for the English translation of the above explanations. When someone who suffers from a qualifying disability in the province of Ontario, they may be eligible for benefits from the government. This is affectionately known as ODSP (Ontario Disability Support Program). The program comes in two forms - income support (money for people who qualify) and employment support (help finding work for people who qualify). The government does not like handing over funds to people who don't need money. If the person has too many "assets", they may be ineligible to receive support (income). For a single person, the maximum asset value is $5,000. Some assets are "exempt". Here are some examples of exempt assets:<br /><br /><br /><br /><ul><li>The home you own and live in.</li><li>Your primary vehicle (the one you use the most, if you have more than one).</li><li>Trust funds derived from an inheritance or life insurance policy, up to allowable limits.</li><li>Necessary household and personal items, such as furniture and clothing.</li><li>Pre-paid funerals.</li><li>Registered Education Savings Plans (RESP).</li><li>Registered Disability Savings Plans (RDSP).</li><li>Cash surrender value of life insurance policies, up to allowable limits. </li></ul><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQC-MqO2HKyvLppi9nBadZa4VxheQ_6Iy0D8bB10zW-LPBjcUZojKA6B6beRuGboa9RHGqgbSMyxGXv7SNlX4aN1JvOQFueqH7keNyOLIHWA8dTJU_bS1OtCb041mMakBuBsVA4AHrc0Y/s1600-h/ins.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcV3kIuJyYeE1AovUjArVA_f1qVGrFLbAkfBKzdNIsZh4n-NuUKf9tH1Jjo5hJeLhhRatrE8MKM0YiCa7pCOVdDfLscjBPjbYuW9CoaFzt6Jj7-Kx8a0ccUTfAZF-QBHBpjrSvuA8q-Jc/s1600-h/ins.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitswCgCiyZQWCfO6Ux974xC8CbPIn0xwm8PoNm4baepW_SoDmt8iu6-Ics9ROcrsFnpyRQj-aSoghYaPOHuqvLxyiPKClm_p64w0wCuVxybhB908FpBlwApf0mPP483Ud2Q2qkXckbMqE/s1600-h/ins.jpg"><img id="BLOGGER_PHOTO_ID_5348832761643877778" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 180px; CURSOR: hand; HEIGHT: 188px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitswCgCiyZQWCfO6Ux974xC8CbPIn0xwm8PoNm4baepW_SoDmt8iu6-Ics9ROcrsFnpyRQj-aSoghYaPOHuqvLxyiPKClm_p64w0wCuVxybhB908FpBlwApf0mPP483Ud2Q2qkXckbMqE/s200/ins.jpg" border="0" /></a>What I find very interesting is this - what defines a "life insurance policy". For you and each family member, up to $100,000 of the cash surrender value of a life insurance policy is exempt as an asset under the Ontario Disability Support Program. This means it does not affect your eligibility for Income Support. Under the Ontario Disability Support Program, life insurance includes: </p><ul><li>Annuities</li><li>Deferred annuities </li><li>Segregated funds </li></ul><p>Segregated funds are the insurance industry answer to mutual funds. They work in a similar fashion, and hold similar types of investments. The fees are typically higher than with mutual funds, but they offer guarantees at both maturity and death. What I find most interesting is that someone who is receiving ODSP benefits could hold $80,000 in a segregated fund without penalty, but having $8,000 in a similar mutual fund would result in lower income benefits.</p><a href="http://yourfinancialguru.blogspot.com/2009/01/anyone-heard-of-rdsp.html"><img id="BLOGGER_PHOTO_ID_5348834203210663554" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 173px; CURSOR: hand; HEIGHT: 162px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhHlug2KMkPBedckHe7yAoo6sxqaJlvXC93Sxc3GD2y5zKfhLtwTXintpP_v_sXJGo0ltzYQtrtDDHQrunJVEp5_Cqkb5_xlQYZ_I8i3Z6KFTKYUzC8BsMhbhQfd1Aim_nsIOG-hzX7fB8/s200/Disabled.jpg" border="0" />As you may already know from a previous blog</a>, last year the federal government introduced the RDSP (Registered Disability Savings Plan). It is a savings plan designed specifically for people with disabilities in Canada. The first of its kind in the world, this new <strong><span style="color:#ff0000;">tax-deferred savings vehicle </span></strong>will assist families in planning for the long - term financial security of their relatives with disabilities. Contributions to the plan can earn grant money as well as a bond each year. Anyone can contribute to the plan, but only one plan is allowed per person. The RDSP does not replace the Henson Trust but rather works in concert with it.<br /><br /><em><span style="color:#006600;">The remaining problem for the Henson Trust is how best to arrange for funding. There are a variety of resources within the reach of most families which can be used to fund the trust. They are:<br /><br /><strong>Savings.</strong> The establishment of a regular savings program may be able to provide adequate funds to Henson Trust.<br /><br /><strong>Parent's Estate</strong>. Provided that the parent's estate is sufficiently large, it could provide for their own needs in their elder years, as well as having enough left over to fund the trust.<br /><br /><strong>Family Members.</strong> Siblings, Aunts and Uncle's, Grandparents could be willing and able to provide money to fund the trust.<br /><br /><strong>Life Insurance. </strong>For the average family, life insurance may be the only way that they can leave a large lump sum to the trust by making small monthly payments. It is also possibly the only way of funding a trust that is guaranteed. The other resources mentioned above may not always be available but a paid-up life insurance policy can guarantee future funds.<br /><br />Families of people with disabilities should examine the benefits and pitfalls of each of the funding methods mentioned here. A review of these resources with an Estate Planning Professional who specializes in planning for people with disabilities would be an excellent starting point.</span></em><br /><br /><br /><em><span style="color:#006600;"><strong>Info above courtesy of:</strong><br />The "Special Needs" Planning Group is an organization that is made up entirely of parents of people with disabilities. We feel that this is important since we believe that no one can simply read a book and truly understand the feelings and concerns that parents have with respect to the needs of their sons or daughters with disabilities. We are experienced, knowledgeable professionals who understand the issues because we are living those issues. We use a team approach to planning using Planners, Lawyers and Accountants, all of whom are specialists in planning for people with disabilities. In addition, we provide solutions which include much more than just a will and a trust account. </span></em><br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-32945230055041780452009-06-30T02:00:00.000-07:002009-06-30T02:00:03.536-07:00Tax Planning Strategies for Retirees<p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx1vklN-XAPetjWFvUbN475sTr_jspANnXgkf6cOunD9m7LzA37RK8Tp9V1GSYCxU2btVKEHnB_M6g47vzOj0iCO5mkR3_UKhw_RZ0ulNNMFFUX8OU77bYJrRX-fqHKL9bkIzNBaiIxyU/s1600-h/tax+cuts.jpg"><img id="BLOGGER_PHOTO_ID_5346561430607310466" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 203px; CURSOR: hand; HEIGHT: 139px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx1vklN-XAPetjWFvUbN475sTr_jspANnXgkf6cOunD9m7LzA37RK8Tp9V1GSYCxU2btVKEHnB_M6g47vzOj0iCO5mkR3_UKhw_RZ0ulNNMFFUX8OU77bYJrRX-fqHKL9bkIzNBaiIxyU/s320/tax+cuts.jpg" border="0" /></a>It sucks getting old. Not that I would know. However, my children seem to delight in reminding me (and my wife) of how <span style="color:#990000;"><strong>OLD</strong></span> we are. It reminds me of a couple bumper stickers you see on cars belonging to "older perople".</p><p><strong><em><span style="color:#000099;">I'm spending my children's inheritance.</span></em></strong></p><p><strong><em><span style="color:#000099;">Live long enough to spoil your grandchildren.</span></em></strong> </p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhX8jdcYoUtfNvn3u2FvzrT0_6IBlxdvTwhqn6ioWn9tdJaDIIZOtMRgcGhyphenhyphen-BBgRADKNf-xQTX9AIBNAf3uJHHBeERVS0gLJ_hFuW-PF-S84Am6srHai0TysZaxDagGrdvMxSbynsSug4/s1600-h/golden_years_08x.jpg"><img id="BLOGGER_PHOTO_ID_5348817727126318562" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 227px; CURSOR: hand; HEIGHT: 189px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhX8jdcYoUtfNvn3u2FvzrT0_6IBlxdvTwhqn6ioWn9tdJaDIIZOtMRgcGhyphenhyphen-BBgRADKNf-xQTX9AIBNAf3uJHHBeERVS0gLJ_hFuW-PF-S84Am6srHai0TysZaxDagGrdvMxSbynsSug4/s200/golden_years_08x.jpg" border="0" /></a>Gratefully, the federal government has taken leave of its senses over the past few years. Tax rates have been reduced for the population as a whole, but no segment of society has benefitted as dramatically as those who have reached the <span style="color:#ffcc00;"><strong>Golden Years. </strong></span>You may not be fully aware of the impact but here goes.<br /><br />In addition to the Canada Pension Plan (CPP) and Old Age Security (OAS) programs, the government has taken steps to ensure that senior incomes are taxed at lower and lower rates. Here is a brief rundown on some of those steps:<br /><br /></p><br /><li><span style="color:#000000;">Age credit at 65 - for 2009, everyone gets the basic personal exemption of $10,320 but once you reach age 65, you can earn an additional $6,408 before you pay any taxes.</span><br /></li><li><span style="color:#000000;">Pension income tax credit. The first $2,000 of pension income is tax free after age 65. For those with qualifying pension income, the fiirst $2,000 is tax free before age 65. Even if you don't need the money, this is beneficial. You could recontribute the money back into your RRSP or move it into a TFSA (tax free savings account).</span><br /></li><li>You are able to allocate up to one-half of your income that qualifies for the existing pension income tax credit to your resident spouse/common-law partner. This will usually result in greater after tax income from your retirement plans.<br /></li><li>Age tax credit. If the recipient does not need all of the age 65 tax credit in order to reduce his or her tax payable to zero, the unused portion can be transferred to a supporting spouse.<br /></li><li>Disability tax credit. The disability tax credit can be transferred to any supporting relative. The strange fact is that many seniors may qualify for the Disability credit but don't know it. Something as simple as pronounced hearing loss may save you thousands of dollars.<br /></li><li>Buy a GIC from a life insurance company. <strong><span style="color:#ff0000;">If you do not have any qualifying pension income, are age 65 or over, and do not want to draw down your registered assets at this time, simply purchase a GIC through a life insurance company because the interest is considered eligible pension income.</span></strong> </li><p>In additon, there are several other ways to reduce taxable income once you retire. For RRIF's:</p><ul><li>If your spouse is younger than you are, you can base your RRIS withdrawals on your spouse’s age, thus reducing your minimum annual withdrawal.<br /></li><li>If the RRIF has been set up prior to December 31, consider postponing the first withdrawal to the subsequent calendar year, thereby deferring income to the following year. </li><br /><li>In the case of a spousal RRSP being converted to a RRIF, ensure withdrawals do not exceed the minimum required for the first three years. This should serve to avoid attribution back to the contributing spouse. </li></ul><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLvwrr-ZW8MWWevxJzI9lvP_SnSQi9YdyKy0rMmsBdeyqqsouBMRRtyzJcPlQmeeLjHMyOddfrTl4BJK0Is8nNbgGGV5haQtVBSyGYdHCUbU_VfWmetEeCku1GjCZPIO3Xp3cSpXuTrqQ/s1600-h/retired+worker.bmp"><img id="BLOGGER_PHOTO_ID_5348808497266409730" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 222px; CURSOR: hand; HEIGHT: 236px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgLvwrr-ZW8MWWevxJzI9lvP_SnSQi9YdyKy0rMmsBdeyqqsouBMRRtyzJcPlQmeeLjHMyOddfrTl4BJK0Is8nNbgGGV5haQtVBSyGYdHCUbU_VfWmetEeCku1GjCZPIO3Xp3cSpXuTrqQ/s200/retired+worker.bmp" border="0" /></a></p><p>Another thing you can do revives a product that is not mentioned that much anymore. With the current low interest environment, people who rely on interest income are finding it difficult to manage. <strong><span style="color:#006600;">Why not an insured annuity strategy.</span></strong> An Insured Single Life Annuity is the unique concept of purchasing a single premium prescribed life annuity with little or no guarantee period to generate income for a person's lifetime. This kind of annuity on its own <span style="color:#000000;">does not provide any estate benefit but it produces the largest amount of monthly income of all the forms of life annuities.</span> For estate purposes, the annuitant uses some of the income from the annuity to purchase a permanent life insurance policy, normally for the amount of the annuity. The insured single life prescribed annuity ensures the annuitant a high after-tax income during his/her lifetime and the insurance protects the annuitant's capital while providing an estate benefit for his/her spouse or children. <strong><em><span style="color:#ff0000;">Compared with traditional income-generating investments, insured annuities offer distinct advantages even when compared with the most conservative of investment vehicles. The payments from the annuity are not fully taxable (assuming the annuity was purchased with cash), and the "effective rate of return" for these plans is often 7% to 8%.</span></em></strong></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgc7hu0MjOgSBuGVxeuUa27f9QkFgGENAxqifKACnDOlMtyl8WbDbckrhM1GbPOkuFiNKE7aRIG_fRNVY6x2Zcm3-GnQnlseNDhzXcUgF5RRWt10EZRN5_1TwXPelxtjh6lmQ848HTzDwo/s1600-h/Loans.jpg"><img id="BLOGGER_PHOTO_ID_5348819753310717586" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 192px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgc7hu0MjOgSBuGVxeuUa27f9QkFgGENAxqifKACnDOlMtyl8WbDbckrhM1GbPOkuFiNKE7aRIG_fRNVY6x2Zcm3-GnQnlseNDhzXcUgF5RRWt10EZRN5_1TwXPelxtjh6lmQ848HTzDwo/s200/Loans.jpg" border="0" /></a>Another way to save on taxes (assuming you have excess cash) is by lending money to family members. Providing you charge interest on the loan at the rate prescribed by the CRA — or at the current commercial rate (whichever is lower) — you can avoid attribution back to you for income earned on the money lent. This interest must be paid to you by January 30 of the year following the year the loan was made and will be taxed as your income. The family member will be taxed on the investment income but can deduct the interest paid on the loan. <span style="color:#006600;"><strong>This is an especially attractive option right now due to the low interest rate environment. The loan rate is set once and remains there forever. As of April 30 2009, the prescribed rate was an astronomically low 1%.</strong></span></p><p>A more complicated and risky venture is to "melt down" your RRSP's and/or RRIF's. This is a very aggressive strategy and it is not suitable for all investors. Before considering such a strategy, discuss it with the qualified financial professional that normally assists you with your financial planning.</p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsrdQPJEcJB4RupJB4xoaiVaUC5IEedLuUaWhQkxUG94gqDaxpjmISvNULieqLRP9UcvmsuuT0BZgkoQZ9cH-pflQJXY-Az7fkfbXwiF61XA8uvJUxSvgF6j3E8cF0wuSfUgqFPEpDRuc/s1600-h/glacier-melting.jpg"><img id="BLOGGER_PHOTO_ID_5348814527325031682" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 289px; CURSOR: hand; HEIGHT: 292px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsrdQPJEcJB4RupJB4xoaiVaUC5IEedLuUaWhQkxUG94gqDaxpjmISvNULieqLRP9UcvmsuuT0BZgkoQZ9cH-pflQJXY-Az7fkfbXwiF61XA8uvJUxSvgF6j3E8cF0wuSfUgqFPEpDRuc/s320/glacier-melting.jpg" border="0" /></a>Here's the strategy: Borrow a bunch of money, say $100,000, and invest it in stocks or mutual funds in a non-registered savings plan, to yield you a stream of capital gains into the future. That will cost you about $4,000-$6,000 a year in interest, at today's low rates. Now, to pay that interest, remove the same amount of money from your RRSP or RRIF. The withdrawal is subject to tax, of course, but meanwhile the $5,000 in interest on your investment loan is 100% deductible from you taxable income. This means you face a $5,000 taxable withdrawal but enjoy a $5,000 taxable income deduction -- for no net tax. The consequence is that you establish a $100,000 investment portfolio outside of your RRSP to give you low-taxed capital gains, while financing this from your RRSP or RRIF. This is a worthy strategy for those <strong><span style="color:#006600;">with too much inside a registered plan</span></strong>, or for seniors who hate giving up half their RRIF payments to Mr. Flaherty. </p>As always, <strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-91236169567528031682009-06-26T01:00:00.000-07:002009-06-26T04:15:02.950-07:00Employment Versus Self Employment<strong><span style="color:#006600;"><em>Every now and then I try to pass on information from "other sources". This entry was stolen from a great article I ran into on the net. More people are now "self employed" than at any point in history and the trend does not appear to be about to change. This explains some of the pros and cons of such a relationship.</em></span></strong><br /><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuR7JF43KBuf8m0Pv9CRl31eqdSoWCHtl0dPYY4CGtNOh-a-EiqV_uoHNcadm-7F4DMNaG7TZUxTB6SlwnS2SyVlm3WlmzI1urIti3kvlEozJdbp1qaW8_ucpeDvJ58loYmCOVONxv6vc/s1600-h/plumber.jpg"><img id="BLOGGER_PHOTO_ID_5350907572276989602" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 194px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuR7JF43KBuf8m0Pv9CRl31eqdSoWCHtl0dPYY4CGtNOh-a-EiqV_uoHNcadm-7F4DMNaG7TZUxTB6SlwnS2SyVlm3WlmzI1urIti3kvlEozJdbp1qaW8_ucpeDvJ58loYmCOVONxv6vc/s200/plumber.jpg" border="0" /></a>Alex recently lost his job with a local plumbing company. After several weeks off, he was approached by a competing firm, Charlie's Plumbing Agency, with an offer for his services. The offer was an interesting one — Alex could choose to work as part of a contract of service, or he could enter into a contract for services. In other words, Alex was given the opportunity to become an employee of the firm, or he could choose to offer his services as a self-employed contractor. </p><p>Alex considered the following pros and cons to self-employment (and by self-employment we're referring to a sole proprietorship as opposed to an incorporated business):<br /><strong></strong><br /><strong>Pros</strong></p><ul><li>broader range of deductible expenses business losses are deductible against any form of taxable income, including investment income </li><li>business income is not subject to withholding tax </li><li>no requirement to pay employment insurance (EI) premiums </li><li>flexibility in work schedule<br /><strong></strong></li></ul><p><strong>Cons<br /></p></strong><br /><ul><li>ineligible for employment insurance benefits </li><li>normally required to collect and remit GST/PST/HST/QST </li><li>quarterly tax payments are generally required </li><li>double CPP/QPP premiums required; Employees pay roughly $2,100 in CPP premiums each year. Self-employed individuals must pay roughly $4,200 </li></ul><p>Alex found the offer intriguing. He has friends who are self-employed and regularly hears about the broader range of deductible expenses and the ability to offset other forms of taxable income with business losses realized from time to time. To Alex, the offer seemed to be the perfect one — he could realize the benefits of self-employment, but would take on little to no risk, as the firm was willing to provide all required tools and equipment, and would assume the risk associated with the work performed. In return, Alex would be restricted to working only for Charlie's, and his hours would be defined and monitored by the company.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcO28ALrRGrmOAZEE0R0CqYaw-Mcc3dLckrODWKU-PuiS0LT1xVNHRWOtbYEnAXBL03Zh2B0aVXy9cJ4rZm4f1RbSoVOujxVJfYxI9z7UaC4BoFXyO5zp4a3PUiRavh-k3bab8ezROTOM/s1600-h/CRA.jpg"><img id="BLOGGER_PHOTO_ID_5350910259101597842" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 320px; CURSOR: hand; HEIGHT: 176px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhcO28ALrRGrmOAZEE0R0CqYaw-Mcc3dLckrODWKU-PuiS0LT1xVNHRWOtbYEnAXBL03Zh2B0aVXy9cJ4rZm4f1RbSoVOujxVJfYxI9z7UaC4BoFXyO5zp4a3PUiRavh-k3bab8ezROTOM/s320/CRA.jpg" border="0" /></a>Alex accepted the contract for services, and with agreement from Charlie's, was classified as self-employed. Two years later, his status was challenged by Canada Revenue Agency (CRA), his tax returns for the previous two years were reassessed (resulting in interest and penalties for denied tax deductions), and Charlie's Plumbing Agency was required to pay two years' worth of employment insurance premiums (and interest) based on Alex's employment. What went wrong? </p>The CRA has stated that workers and payers can set up their affairs as they see fit; that is, the question of employment or self-employment is up to the worker and payer to decide. There is a caveat, though — the worker and payer must ensure the status they have chosen is reflected in the actual terms and conditions of the employment. As attractive as self-employment might seem for those with the potential to deduct work-related expenses, adopting this status in the absence of supporting working conditions can lead to interest, penalties and time lost through a CRA audit. When assessing a worker's employment status, the CRA asks questions to verify whether the intention of the parties is reflected in the facts. The questions generally relate to the following:<br /><br /><ul><li>the level of control the payer has over the worker </li><li>whether or not the worker provides tools and equipment to do the job </li><li>whether the worker can subcontract the work or hire assistants <li>the degree of financial risk taken by the worker <li>the worker's opportunity for profit </li></ul><p>Answers to these questions help define whether there is a contract of service (employer-employee relationship) or contract for services (self-employment relationship). These points are further explained below.<br /><strong></strong><br /><strong><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiq8GbD5I9srre7imLATALdVtRzHK3xLyxbwUUQQTZiFUmZnzksB9-w9Uy16iRYVsJMZNkxS9B7Z7WYvGA4q1SOKbm2w9LShVvyD2GdVhlCSnzUmWbGJ9S4D-QqRCMx_x77mFTdwnDOidU/s1600-h/btc-controlfreak-mug-2.jpg"><img id="BLOGGER_PHOTO_ID_5350911220929807554" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 172px; CURSOR: hand; HEIGHT: 194px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiq8GbD5I9srre7imLATALdVtRzHK3xLyxbwUUQQTZiFUmZnzksB9-w9Uy16iRYVsJMZNkxS9B7Z7WYvGA4q1SOKbm2w9LShVvyD2GdVhlCSnzUmWbGJ9S4D-QqRCMx_x77mFTdwnDOidU/s200/btc-controlfreak-mug-2.jpg" border="0" /></a>Control<br /></strong>Control is the ability, authority or right of a payer to exercise control over a worker regarding how work will be done. Because Alex's hours were defined for him, and because he was restricted to working only for Charlie's Plumbing Agency (i.e., he could not acquire and work on multiple contracts at the same time), his relationship with Charlie's suggested one of subordination. In a self-employed situation, contractors generally work with little supervision, are free to define their own hours, and can provide services to different payers at the same time.<br /><strong></strong><br /><strong>Tools and equipment</strong><br />The investment in tools and equipment is significant in determining employment status. A worker who has invested in tools and equipment is likely to retain a right over the use of these assets, diminishing the payer's control over how the work is performed. Self-employed individuals normally provide their own tools and equipment, whereas employees are generally provided with these assets. Because Charlie's provided Alex with the tools needed to do his job, an employer-employee relationship was implied.<br /><strong></strong><br /><strong>Subcontracting work or hiring assistants</strong><br />Where a worker has the ability to subcontract work or hire assistants, his or her chance of profit is impacted and there is a risk of financial loss — a situation typically associated with self-employment. Employees are generally restricted from hiring replacement workers. In his employment contract, Alex was required to perform all services himself and was not permitted to hire assistants. This implied an employer-employee relationship.<br /><br /><strong><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzPVnJyqP5FBCozBSLBN4Hi1p0pIl90oR1D7fiN585J1sSUcPzIRPyepleEAmHgj8hyphenhyphenoa0Juy96VnWPMY3u7dGLfk2dAncfgEqOH0k3zeRWjp7PgH9UJtrcOGbOEGHIK1oUQNA9462pAE/s1600-h/financialRisk.jpg"><img id="BLOGGER_PHOTO_ID_5350911079143346194" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 187px; CURSOR: hand; HEIGHT: 140px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzPVnJyqP5FBCozBSLBN4Hi1p0pIl90oR1D7fiN585J1sSUcPzIRPyepleEAmHgj8hyphenhyphenoa0Juy96VnWPMY3u7dGLfk2dAncfgEqOH0k3zeRWjp7PgH9UJtrcOGbOEGHIK1oUQNA9462pAE/s200/financialRisk.jpg" border="0" /></a>Financial risk<br /></strong>Employees generally do not incur financial risk. Self-employed individuals can incur losses through expenses such as tools, equipment, office space, advertising and unfulfilled contract obligations. Unlike employees, self-employed individuals are not normally reimbursed for these expenses. Alex's contract was a simple one: he was to be reimbursed for any expenses incurred, and his contract had no end date. In other words, his relationship with Charlie's Plumbing Agency was to be one of an ongoing nature, saving him the costs of advertising. Also, any liability resulting from the work performed would be a liability of Charlie's Plumbing Agency and not a direct liability to Alex. Again, an implied employer-employee relationship.<br /><br /><strong>Opportunity for profit<br /></strong>The opportunity to realize a profit or incur a loss indicates that a worker controls the business aspects of the services rendered and that a business/self-employment relationship likely exists. The extent to which a worker can control his or her remuneration for work performed, and increase or decrease expenses, speaks to that individual's ability to manage profits. Employee revenues are generally defined in advance and there is often little opportunity to share in the profits of the business. This latter situation defined Alex's relationship with Charlie's.<br /><br />So what does all of this mean for advisors? Many clients face employment offers similar to Alex's without a complete understanding of related implications. Small business owners also face challenges in this area — in an effort to maximize profit and decrease employment-related expenses, the hiring of contractors as opposed to employees is often considered.<br /><br />If you have clients in these predicaments, communicate the differences between employment and self-employment. If the terms and conditions of the work contract do not support the selected employment status, both worker and payer can face costly fees in respect of denied tax deductions, and/or unpaid CPP and EI premiums.<br /><br />Although Alex and Charlie's Plumbing Agency agreed that he would be treated as self-employed, characteristics of his work arrangement did not support this status. The inability to define his own work hours and work on multiple contracts at the same time, and his release of financial risk for the work performed, all pointed to an employer-employee relationship. Charlie's provision of tools and equipment required to do the job also suggested that Alex was working as an employee as opposed to being self-employed.<br /><br />If a worker or payer is not sure of the worker's employment status, either party can request a ruling from the CRA using form CPT1, Request for a Ruling as to the Status of a Worker Under the Canada Pension Plan and/or the Employment Insurance Act. In working with your clients, note that each case is unique, and the facts of each case must be analyzed to determine the most appropriate result.<br /><br /><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com1tag:blogger.com,1999:blog-4525985330698294817.post-44234241666540124742009-06-23T02:00:00.000-07:002009-06-23T03:36:08.380-07:00High Interest Savings ???<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNPcwvo7ufzEi7czrOZ5nhfeBOHulHU17t9isizV9rENRxr5DN_h0CO1o9_kuKkBZ0Zzpd1mq9fLgTmyc5Tv1uraRB3Y2T597WjiJQFXsirIAZBFvIJ8vhIJHZlimv0JLIWxzprlE9Juk/s1600-h/magnet_lrg.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJi15z1fJrL0P4nkgA-xYNH-njSHBgTooF5P3UnMy4N49l9z7vyjXjck0761v6Ur-kPmBwBe1s52ZK3SukHN9W2yXOKfS-DY-rnjxW5bYUaUStVNj5AkYFcpZ7e1K2AqabS8oWQ7mZU1I/s1600-h/magnet_lrg.jpg"><img id="BLOGGER_PHOTO_ID_5344671127605233250" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 208px; CURSOR: hand; HEIGHT: 171px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJi15z1fJrL0P4nkgA-xYNH-njSHBgTooF5P3UnMy4N49l9z7vyjXjck0761v6Ur-kPmBwBe1s52ZK3SukHN9W2yXOKfS-DY-rnjxW5bYUaUStVNj5AkYFcpZ7e1K2AqabS8oWQ7mZU1I/s400/magnet_lrg.jpg" border="0" /></a><span style="color:#000066;">The oxymoron above has become truly funny over the past few months. As the man on TV likes to say,</span> <span style="color:#ff6600;"><strong>"Save Your Money". </strong></span><span style="color:#000000;"><span style="color:#000066;">Nowadays, trying to actually earn some interest is becoming more and more difficult. As of June 7, 2009, the average savings account pays .83% interest per year. To put that in perspective, if you invested $10,000 for one year, you would earn roughly $7 per month</span> <span style="color:#ff0000;"><strong>BEFORE TAX.</strong></span> </span><span style="color:#000066;">On an after tax basis, the average Canadian would earn $60 for the year on a $10,000 investment.<br /></span><span style="color:#006600;"><span style="color:#000000;"><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJcEAlT2po-R_l7UT6RptBFA2beIeUJP2_VWv1qIOgYNhg4qrSz4SL0RamFogDoE3hgnJibk20ghaNMHVQ9-TWt6a67FHmoBzrW2eiXnjXgQJjSSbXe8E2BaI8aSfcMaRK7WFCA0b1ug0/s1600-h/breakglass1.jpg"><img id="BLOGGER_PHOTO_ID_5344673001050486770" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 234px; CURSOR: hand; HEIGHT: 199px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJcEAlT2po-R_l7UT6RptBFA2beIeUJP2_VWv1qIOgYNhg4qrSz4SL0RamFogDoE3hgnJibk20ghaNMHVQ9-TWt6a67FHmoBzrW2eiXnjXgQJjSSbXe8E2BaI8aSfcMaRK7WFCA0b1ug0/s320/breakglass1.jpg" border="0" /></a><span style="color:#000066;">Does that mean you should stop saving money - of course not. What it does imply is that people really need to be smart about the ways they save their money right now. Experts agree that people should have an emergency fund of between one and three months income. But where should you put those funds? In the past, we always looked at traditional savings plans (savings accounts, GIC's or Canada/Ontario Savings Bonds). Posted GIC rates are notoriously inaccurate, </span><a href="http://fiscalagents.com/bestGICrates.shtml"><span style="color:#000066;">but based on current numbers</span></a></span></span><span style="color:#000066;">, you don't want to lock up your money for long periods of time. Even so, most one year GIC's only pay a slightly higher return than a savings account. Government Savings Bonds offer similar returns to GIC's but have the flexibility of being cashable. However, they are usually only available for purchase during specific times during the year.<br /></span><br /><span style="color:#006600;"><span style="color:#000000;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhy3hWS8liOCS0YdIUWkgc3J-1T9AsFP0RZ0b_RZjnolimiWLvuj88rHdMFZi2bxhqopvAe4rS-QvWpttpvOcB_Ab_AxJo89U58eCkNoroYjtHC7vY-d7SuHd8utXG5MgHoya1W-Xp7Y58/s1600-h/building-an-emergency-fund-vital-part-of-financial-planning-0.jpg"><img id="BLOGGER_PHOTO_ID_5344675430299006914" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 246px; CURSOR: hand; HEIGHT: 195px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhy3hWS8liOCS0YdIUWkgc3J-1T9AsFP0RZ0b_RZjnolimiWLvuj88rHdMFZi2bxhqopvAe4rS-QvWpttpvOcB_Ab_AxJo89U58eCkNoroYjtHC7vY-d7SuHd8utXG5MgHoya1W-Xp7Y58/s320/building-an-emergency-fund-vital-part-of-financial-planning-0.jpg" border="0" /></a></span></span><span style="color:#000066;">The advent of the Tax Free Savings Account in 2009, offers perhaps the best way to have that "rainy-day" account. With similar interest rates to "savings" accounts, but no taxes to pay, they offer flexibility and the benefits of keeping all of the interest. With a married couple, they could each set aside $5,000 which would be a sufficient amount for most people for an emergency.</span><br /><br /><span style="color:#000066;">Is there something smarter to do? It depends upon your situation. I run into people who have money set aside for an emergency, and they owe $10,000 to $20,000 on their line of credit or credit cards. The interest on these debts is not tax deductible and often runs as high as 28%. Here's some perspective from the above example. A couple owe $10,000 on a credit card with an interest rate of 18%. The interest is effectively $1,800 per year or $150 per month. Why have the "emergency fund" at a cost of $150 per month. Pay down your debt, and then save the $150 per month in a TFSA to create an emergency fund. What do you do if you have an emergency? Use the credit card but</span> <span style="color:#ff0000;"><strong>ONLY FOR AN EMERGENCY.</strong></span><br /><br /><span style="color:#000000;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJCRI0V0-abJpRz6hpS7CJ6xcSQizc8oM5K6ofvu75X9mCawyDe_cIImIacLVUsRorSwriR1ZsqUzwHFo5OdCrtWvCr6rGB4lBkyrC8rf4aQQdaUWLgcidshmS_2-6lyJJObbAfjPsVIY/s1600-h/Bank+of+Canada.gif"><img id="BLOGGER_PHOTO_ID_5344678619142485282" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgJCRI0V0-abJpRz6hpS7CJ6xcSQizc8oM5K6ofvu75X9mCawyDe_cIImIacLVUsRorSwriR1ZsqUzwHFo5OdCrtWvCr6rGB4lBkyrC8rf4aQQdaUWLgcidshmS_2-6lyJJObbAfjPsVIY/s320/Bank+of+Canada.gif" border="0" /></a></span><span style="color:#000066;">Other suggestions - pay down debts, put the money towards an RRSP (which gives the average Canadian a 31% refund), or pay down your mortgage. The only thing that is High Interest in the savings market nowadays is the fact that people actually pay attention to what they earn. The harsh reality is that with the Bank of Canada planning on maintaining a low interest rate environment to stimulate the economy, expect these rates to remain low well into 2010. We need to be smart about saving our money and paying our bills. Nowadays, it doesn't seem to matter where you save your money - it won't earn that much anyway.<br /><br /></span>As always, <strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-2785255348816032382009-06-19T02:00:00.000-07:002009-06-19T02:01:13.341-07:00Pat, I'll Take the Letter V.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOXxtPBH5ZgqanQvvVDhh3gEQxEr63OuFHG7Ux_tm6vRvDX2zQ7aPVACj2do1MMxYXrS_tdmws9sZG14HJSvHN_K3iAFgADnhkMwYnbyi-QeFok3NS31yBPdGxYbUC-fZnmB15qdDppPs/s1600-h/Wheel+of+fortune.jpg"><img id="BLOGGER_PHOTO_ID_5345692781532392194" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 150px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOXxtPBH5ZgqanQvvVDhh3gEQxEr63OuFHG7Ux_tm6vRvDX2zQ7aPVACj2do1MMxYXrS_tdmws9sZG14HJSvHN_K3iAFgADnhkMwYnbyi-QeFok3NS31yBPdGxYbUC-fZnmB15qdDppPs/s200/Wheel+of+fortune.jpg" border="0" /></a>Okay, you may be wondering why I suddenly fell in love with Wheel of Fortune. That's simply not the case here. Game shows are a part of American culture as is "lack of reality" shows and soap operas. To each his own. As will be explained in the coming paragraphs, you and I would definitely prefer the letter V to the letters U or L.<br /><br />Thoroughly confused - please don't be. The above is a simple analogy that many "finance geeks" use to describe a market turnaround. Last fall, many of the experts called for a letter L - in other words a sharp downturn followed by a long and pronounced bottoming. As we moved into Jan-Feb 2009, these same people began changing their tunes and predicting more of a U - a sharp downturn, a flattening market followed by a rapid increase.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglfD-qWU1AVJxbWHWiILzEksGn1qjfwvDl1YhnKuMS3sTQH04GCcpkqyhawPmO0Vm018XtUE_7abz1r6NvvT1Xytc3K9xJtm2EHl574A6pHWaN594CmVwlNrU_SOG_6V2SGgeQtc-Lpos/s1600-h/V.bmp"><img id="BLOGGER_PHOTO_ID_5345697019825430658" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 225px; CURSOR: hand; HEIGHT: 156px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEglfD-qWU1AVJxbWHWiILzEksGn1qjfwvDl1YhnKuMS3sTQH04GCcpkqyhawPmO0Vm018XtUE_7abz1r6NvvT1Xytc3K9xJtm2EHl574A6pHWaN594CmVwlNrU_SOG_6V2SGgeQtc-Lpos/s200/V.bmp" border="0" /></a>Over the last three weeks, there has been a sudden uptick in the number of financial analysts who are calling for a V shaped recovery. In this scenario, markets experience a sharp decline, but there is little bottoming out. They essentially "bounce" off the bottom and begin an almost equally rapid ascent. Since March 9th, global stock markets have gone up between 20%-30%. That is not to say we are out of this mess yet. On <a href="http://watch.bnn.ca/#clip181512">BNN on June 10th</a>, Gerry Brockelsby, partner, Marquest Asset Management provided one of the best explanations of the different "letters" of market recovery. He expects a "snap back" of the recovery in the short term (next 6-24 months). The longer term presents another set of problems (mentioned in a <a href="http://yourfinancialguru.blogspot.com/2009/01/inflation-our-next-battle.html">previous blog</a> or two) as <strong><span style="color:#ff0000;">inflation raises its very ugly head.</span></strong><br /><br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiObdaq_swQ97MnP96_phSeBJb0tSulkJgW0UQZx9RgQMOCiUROwgpXkzk061Y2zDbboOZCnKUzbR7QNWf4WT-tbfX5ZkfMamY4h8TPGkP5i0dzqyLXiLXsa6_PMxiH2CYyLyzGMR-t2ng/s1600-h/inflation[1].jpg"><img id="BLOGGER_PHOTO_ID_5345706476764953474" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 239px; CURSOR: hand; HEIGHT: 219px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiObdaq_swQ97MnP96_phSeBJb0tSulkJgW0UQZx9RgQMOCiUROwgpXkzk061Y2zDbboOZCnKUzbR7QNWf4WT-tbfX5ZkfMamY4h8TPGkP5i0dzqyLXiLXsa6_PMxiH2CYyLyzGMR-t2ng/s320/inflation%5B1%5D.jpg" border="0" /></a>The longer term recovery of markets is threatened by the excess liquidity in the system. This eventually creates traction in the economy and as he states, we are already seeing the benefits of the low interest rates and stimulus packages introduced globally. Inflation is not a problem now. You cannot have an inflation issue until you have an economic recovery. Once the recovery takes hold, then the various economic powers need to be begin the complicated process of "withdrawing liquidity" from the system. If you take the funds out too slowly, it leads to rapid inflation. If you remove the funds too quickly, then we face an interest rate problem. Either one of these issues could lead to another significant market decline. Let's hope that the economic "leaders" get it right this time, or we could go back down through a similar market trough.</p><p>As always, <strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-83745595891433604342009-06-16T02:00:00.000-07:002009-06-16T02:00:01.156-07:00Defined Demise - Is This The End for Old Style Pensions?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh54A-1Z9OuX3bMQcZ1Be1Zjjvq8eo8CNQO2W1qdGJWuz17VMMtf1yX15ctWoaDkynzYii7s-9STbRMKWAy1djEaP6tdL-29yUn_QiOx-W7UuI5VepL3eZpYKHddP8WBsfhCPO_XrZ4gIg/s1600-h/pensionPic.gif"><img id="BLOGGER_PHOTO_ID_5344691007958381442" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 265px; CURSOR: hand; HEIGHT: 263px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh54A-1Z9OuX3bMQcZ1Be1Zjjvq8eo8CNQO2W1qdGJWuz17VMMtf1yX15ctWoaDkynzYii7s-9STbRMKWAy1djEaP6tdL-29yUn_QiOx-W7UuI5VepL3eZpYKHddP8WBsfhCPO_XrZ4gIg/s320/pensionPic.gif" border="0" /></a>A long time ago, in a galaxy far, far away, someone created the first defined benefit pension plan. They were probably a well paid actuary and wanted to ensure they had a comfortable retirement.<br /><br />This may or may not represent the origin of the DB pension plan, but you can almost guarantee that recent developments are foretelling the beginning of the end. If you want to understand the whys you need to know the what's first. <a href="http://yourfinancialguru.blogspot.com/2009/05/pension-plans-what-is-difference.html">As mentioned in a previous blog</a>, the defined benefit pension <strong><span style="color:#ffcc00;">(gold-plated)</span></strong> is just as it sounds. The payout, when it comes time to collect, is fixed to a certain formula. The formula is typically a combination of years of service multiplied by a percentage of your average salary over the last several years of service. For example, someone working for the federal government for 35 years, will collect roughly 70% of their "average" income during their retirement years. The average usually reflects an average of the best 5 out of the last 8 years worked. Suppose the final average income was $60,000. That means the person would receive $42,000 per year. The amount is often indexed to inflation. So what does this cost. Let's look at an example.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB3BJBEl7S0rJ2mPDcMEINX-Y1vfbTQ6LjYBgvOk0f4pTpPiIkWTLkuAvt6ESprA__v1YHSbda2ja-f7UICmIhngDXeQlTvhi6X5CwcmDUfL9qgXhhPFOPQkF7pBVfq1CbCSaT1x6mCd4/s1600-h/Retirement%20Nest%20Egg.jpg"><img id="BLOGGER_PHOTO_ID_5344695256439323762" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 218px; CURSOR: hand; HEIGHT: 153px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB3BJBEl7S0rJ2mPDcMEINX-Y1vfbTQ6LjYBgvOk0f4pTpPiIkWTLkuAvt6ESprA__v1YHSbda2ja-f7UICmIhngDXeQlTvhi6X5CwcmDUfL9qgXhhPFOPQkF7pBVfq1CbCSaT1x6mCd4/s200/Retirement%2520Nest%2520Egg.jpg" border="0" /></a>We have a married woman age 60. Her husband also is age 60. The pension amount she is entitled to is for $3500 per month, indexed at 2% per annum. If she passes away, the survivor benefit of $2100 per month is payable for life to the husband. In any case, a minimum of 10 years payments will be made either to the wife, her husband or a beneficiary. The cost for such a plan? <strong><em><span style="color:#ffcc00;">Would you believe slightly over $750,000.</span></em></strong> That is the amount that the government and the employee would need to set aside over her career to fund her pension.<br /><br />The interesting thing as we are finding out of late, is that all of the risk falls within the hands of the "employer". If there is insufficient funds in the plan, all the employer can do is put more money into the pension. They can ask the employee to contribute more, but usually that means dealing with union headaches. <a href="http://www.thestar.com/article/471472">In the case of GM Canada</a>, their pension plan is so badly underfunded, it is estimated that for the roughly 43,000 employees past and present, the plan only has enough money to pay 56.5% of the pensions. The scariest part is this - these numbers were based upon estimates from November 2006. Can you imagine the shortfall with the market declines of late 2008. Are they below 50%?<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-SAbjJfeNODaYTqfHWUMHp8mLS-PtaEQQbqd67i2cQ3iYyE2sHrDYXl5OD3lgcF8j714mISx5PjqHUkQM4bWBQKTrAfTvyzHDjFFoFB4JEp6A98tKWAwVF74-DDXZcXiBmsv7jMFYmq4/s1600-h/Buzz.jpg"><img id="BLOGGER_PHOTO_ID_5344697888850814722" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 232px; CURSOR: hand; HEIGHT: 179px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-SAbjJfeNODaYTqfHWUMHp8mLS-PtaEQQbqd67i2cQ3iYyE2sHrDYXl5OD3lgcF8j714mISx5PjqHUkQM4bWBQKTrAfTvyzHDjFFoFB4JEp6A98tKWAwVF74-DDXZcXiBmsv7jMFYmq4/s200/Buzz.jpg" border="0" /></a>Former CAW head Buzz Hargrove (right) must wonder what he was thinking last August. Hargrove and GM executives insisted pension fears were unwarranted. A worst-case scenario that would trigger pension reductions is <span style="color:#006600;"><strong>"so remote a possibility it's not worth speculating on," said Hargrove.</strong></span> As we have seen over the past 10 months, the situation is far worse than old "Buzz" ever believed or acknowledged. The actual dollar figure they are short by? GM Canada's defined-benefit plan for hourly workers was underfunded by $1.5-billion as of Nov. 30, 2007, the last filed valuation.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJHs4fNDg7gK1MWGHQQvlREqNed-HbVzCTCt9G8c3YiblvARDjaOUPID0LqxGUSvbbu-2GLErnm-wZ4iNIJFJsLWnob6evFL1pumDTro1hXFKKBLJCAk5JxtGzHiONNGqRUo1A6mzzRew/s1600-h/Leaking+water.jpg"><img id="BLOGGER_PHOTO_ID_5344704956337368050" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 246px; CURSOR: hand; HEIGHT: 231px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiJHs4fNDg7gK1MWGHQQvlREqNed-HbVzCTCt9G8c3YiblvARDjaOUPID0LqxGUSvbbu-2GLErnm-wZ4iNIJFJsLWnob6evFL1pumDTro1hXFKKBLJCAk5JxtGzHiONNGqRUo1A6mzzRew/s320/Leaking+water.jpg" border="0" /></a>Published reports suggested the shortfall was as high as $7-billion. For a provincially regulated pension plan like GM Canada's, the government sets aside funds to ensure that pensioners are not left penniless. The problem? There is not enough money in Ontario's pension plan safety net to support GM pensioners if the company goes bankrupt, Premier Dalton McGuinty warned.<br /><br />"The money available in that is very, very modest," McGuinty said, noting the Pension Benefits Guarantee Fund totals about $100 million – not nearly enough to cover the billions of dollars involved in the automaker's pensions.<br /><br />So let's summarize - the plans are fantastic if you are the person in the plan. For everyone else they are expensive to run, dangerous for the employer due to unpredictable costs and uncontrollable markets. With more and more Canadians working for themselves and for "smaller" companies, most pensions offered today are "Defined Contribution plans". In these plans, the risk is with the employee, the costs are known ahead of time, and the general public will never be expected to bail them out. In looking at many pension plans, <a href="http://www.advisor.ca/advisors/news/industrynews/article.jsp?content=20090609_134313_8712">a recent study</a> found that the aggregate deficit exceeded a <span style="color:#ff0000;"><strong>staggering $250 billion.<br /></strong></span><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8iesHNB9kf8xlUKWiLkNrUIBK-FCb15-pfrgxZa95v8tqsFeekWKoFGEOdCB9wqVY_hpiFDHML7YGoct2dJymEknMbGQtPwoDyV3ZHezaYRmapKccpuhzztUBZVNi5i2pZEEuBlcciFo/s1600-h/534568901_baad5d8ae3.jpg"><img id="BLOGGER_PHOTO_ID_5344701117969502770" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 255px; CURSOR: hand; HEIGHT: 209px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh8iesHNB9kf8xlUKWiLkNrUIBK-FCb15-pfrgxZa95v8tqsFeekWKoFGEOdCB9wqVY_hpiFDHML7YGoct2dJymEknMbGQtPwoDyV3ZHezaYRmapKccpuhzztUBZVNi5i2pZEEuBlcciFo/s200/534568901_baad5d8ae3.jpg" border="0" /></a>The mere fact that defined benefit pension plans still exist is an affront to average Canadians. The federal government in both Canada and the US is "buying" an ownership position in car makers. They are doing it with your tax dollars. Do you want your tax monies spent to ensure that someone gets a fantastic no-risk pension? When will the government wake up and realize the astronomical costs associated with these plans. This is not likely as the government employees would be cutting their own throats. It will take the collective efforts of all Canadians to end the insanity that is the Defined Benefit pension plan. Will it happen? I don't expect it to occur in my lifetime. Too many vocal groups would be against it. Unions would be up in arms. Is there a solution? Sure there is - make the employees/unions and companies equally responsible for any shortfalls and have no government assistance program for companies who don't meet this criteria.<br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-63166999802671323152009-06-11T02:00:00.000-07:002009-06-11T06:54:11.500-07:00Random Thoughts For Month of May<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjv3mBknOyjY-3AIwzlc6f8jZWU8UWHyKyK5geNtOs0WtuArqA_QfDNn64aRscV5Jh9K9qgo0W4a2SJkG5yMCtkNeN9nzDgbBYb5Qm_UAi-VWGRFspigFbh7DCFvX_wHj4aWgtZ8o77gfM/s1600-h/4-hate-to-say.gif"><img id="BLOGGER_PHOTO_ID_5345341964423980226" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 163px; CURSOR: hand; HEIGHT: 148px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjv3mBknOyjY-3AIwzlc6f8jZWU8UWHyKyK5geNtOs0WtuArqA_QfDNn64aRscV5Jh9K9qgo0W4a2SJkG5yMCtkNeN9nzDgbBYb5Qm_UAi-VWGRFspigFbh7DCFvX_wHj4aWgtZ8o77gfM/s320/4-hate-to-say.gif" border="0" /></a>One of the newest features for this blog will be an "update" on what happened during the previous month. Sometimes the news will be positive, and sometimes it will be (see picture at right).<br /><br />Looking back at the month of May, you would be shocked to see the number of "records" and highs we set. Some of these include:<br /><br />- TSX had the highest one month % return since Dec/99<br />- S&P 500 had best 3 month return in 60 years - up 25%<br />- the Canadian dollar had biggest single-month rise since 1950<br /><span style="color:#ff0000;"><span style="color:#000000;">- </span><strong>highest level in a year and biggest monthly increase on record for the Canadian consumer confidence index.</strong><br /></span><span style="color:#000000;"></span><br /><span style="color:#000000;">World markets made substantial gains in the month and now are at or above the break-even point for the year. Canada's big five banks all reported better than expected earnings during the first quarter. Makes you wonder if we are in a recession or not. All of the pundits who suggested we were in a bear market rally are now beginning to "backtrack" on those statements. I am in the midst of a book on investing risk and came across a great quote that talks about those "experts". </span><br /><p><span style="color:#000000;"></span></p><p><em><span style="color:#009900;"><strong>“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” – Laurence J. Peter</strong></span></em></p><p><span style="color:#000000;">With the good news comes the "yucky" stuff. The TSX was buoyed by oil prices which have doubled since last fall. Oh the days of 70 cent per litre gas - where have you gone. GM formally announced what everyone already knew - </span><span style="color:#ff0000;"><strong>they are $80 Billion in the hole.</strong></span><span style="color:#000000;"> Canadian GDP for the first quarter was the worst in 18 years. As well, here is a scary number to ponder - <span style="color:#009900;"><strong>95% of the S&P/TSX gains in May came from a combination of the resource sectors (energy and materials) and the financial sector</strong></span>. Over half of the major US banks tested require more capital. The other half apparently want to repay TARP (Troubled Asset Recovery Program) funds so they can go back to the good old days. </span></p><p>Investors are feeling more confident and that is affecting the bond markets as well. Improved global economic data has had the effect of getting investors out of safe-haven investments (cash and bonds) and into equities/stocks. Since early March, an estimated $120 billion (US$) has flowed out of cash and likely into equities. This has fueled the rapid stock market increases.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWGZkIckgpj1x5wyEf8FvBSfzK2sLz0TTqz2y-Ikn_GxJudfRnPc0Op29sgK6b-A2S2nN0VJpWm9V1FFeP8B-1teGH96YwRVc7WgenKotfezN0iHyJMTkuvMi3Z5G3Uk-a8G-UXWfhE2Q/s1600-h/Bull+Market+2.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgp-9RH_s1RV0w_Z8dSztH_O1OH7Lp48cP8uFCSpvF9QVLJ-YKTt4f9yIfZfzOH6nlUBJqdn2XNnAMm49k6wrbSDXEpF8AS5YuIvjX5Xe_x8yXYfNYTqa64aq2E14mN6ElHH_plP0CFUzo/s1600-h/Bull+Market+2.jpg"><img id="BLOGGER_PHOTO_ID_5345352842472585506" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 136px; CURSOR: hand; HEIGHT: 211px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgp-9RH_s1RV0w_Z8dSztH_O1OH7Lp48cP8uFCSpvF9QVLJ-YKTt4f9yIfZfzOH6nlUBJqdn2XNnAMm49k6wrbSDXEpF8AS5YuIvjX5Xe_x8yXYfNYTqa64aq2E14mN6ElHH_plP0CFUzo/s320/Bull+Market+2.jpg" border="0" /></a>We have seen the deceleration of the downturn in the economy, and that is often an indicator to a more sustained economic recovery. Will this be the start of the next bull market? That may be presumptuous to assume now, but the patterns are similar to past bear/bull transitions. If you previously moved money out of the markets, you missed out on a significant increase over the past 3 months. If you stayed the course and were patient and maintained a long term view, the past 3 months and the coming months may signal a return to the "glory days" of the past. One last thing to remember - those who forget the past are condemned to repeat it.</p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-79573355076536544962009-06-05T02:00:00.000-07:002009-06-07T14:47:42.477-07:00How to Make 50% Returns In The Market - Update<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiw-dA5knBsxZoOMedNF8886vPwYR2JHhAV9rlD1wT9mHfDqFEAsZGmC0IL3BU1pDcgmIi3I63YDlfNxWI2mcenhEtohyphenhyphenKo3j14iYs-Xr6Kt5Udv-eLBN84nBZwOlF3vfxfYyLnsJErCIc/s1600-h/Flashback.bmp"><img id="BLOGGER_PHOTO_ID_5342029385345013346" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 254px; CURSOR: hand; HEIGHT: 212px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiw-dA5knBsxZoOMedNF8886vPwYR2JHhAV9rlD1wT9mHfDqFEAsZGmC0IL3BU1pDcgmIi3I63YDlfNxWI2mcenhEtohyphenhyphenKo3j14iYs-Xr6Kt5Udv-eLBN84nBZwOlF3vfxfYyLnsJErCIc/s200/Flashback.bmp" border="0" /></a>Every now and then, it's important to reflect back upon past stories and predictions. In looking back six months, I came across something of great interest.<br /><br />Let's flash back to Dec 4, 2008 in the pages of this blog.<br /><br /><em><span style="color:#ff0000;">Obviously, <span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">yours</span></span> truly has suffered some form of a stroke or other mental disorder. The above statements tend to bring to mind the infomercials you see on <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">BNN</span></span> that show everyday investors how to time and beat the market. It always amazes me how many people get duped into buying these - makes you wonder why true professionals (fund managers/economists) ignore them.<br /></span></em><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgH5YBM2J1zHULjA-ViMVlIDQ7MBrs2pjR4m4nVIvmzawR3bd9J-hkgg0AM_MlARsIjpFZtiYCQeSczbs1YDODy0RxWb3r1mDtYuWefK0lMbY90x0SbcIWNx_SmSkGprJ3hGRSl10nCFg/s1600-h/Stocks+climbing.jpg"></a><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEid3L7tMoAwhfOQ-uhpUVVKG2nfnbm-J9iMfKhDJeuD9o3Cx9hPxsl6qjkluTJMjWmXBIsZ3o2MqHMK-ZN8xPU05MVlGo8epPPnoMwIUkneiVbx3v9q8z4JesHo6FjZg654lPct3l65Ya0/s1600-h/19359_UBS-Bank-segretoBancario.jpg"><img id="BLOGGER_PHOTO_ID_5342041242399664866" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 200px; CURSOR: hand; HEIGHT: 133px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEid3L7tMoAwhfOQ-uhpUVVKG2nfnbm-J9iMfKhDJeuD9o3Cx9hPxsl6qjkluTJMjWmXBIsZ3o2MqHMK-ZN8xPU05MVlGo8epPPnoMwIUkneiVbx3v9q8z4JesHo6FjZg654lPct3l65Ya0/s200/19359_UBS-Bank-segretoBancario.jpg" border="0" /></a><a href="http://watch.bnn.ca/#clip118157"><em><span style="color:#ff0000;">George <span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">Vasic</span></span>, strategist and chief economist at <span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">UBS</span></span></span></em></a><em><span style="color:#ff0000;"> believes that the Toronto Stock Market will hit 12,500 in 2009. That's a 54% increase over current values. Now, who the heck is George <span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">Vasic</span></span> you may ask. George <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">Vasic</span></span> is the Equity Strategist and Chief Economist for <span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">UBS</span></span> Securities Canada Inc. In this capacity he is responsible for the Canadian market and economic outlook, sector rotation and asset mix recommendations. He has consistently ranked in the top 5 in both the strategy and economics categories, has won several awards for forecast accuracy, is widely quoted in the media, and for five years was a contributing editor to Canadian Business magazine. </span></em><br /><span style="color:#ff0000;"><br /></span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKQf1JsxxkRGxrx0XXeyB2TihNJ6Ppqy-dmsVhHkaWlV5Pd1KrBDY0YrBoebC51yj2HmEfoSa3U_oPm_Io_qrjTyb713knkorraq5rOqHsccN7J5d8ze6pGLjxNqSHJPTn46ZmJzNwMg/s1600-h/DeepEnd.jpg"></a><span style="color:#ff0000;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioLjAWRDloxZz0PfupmgrcBEB20h_m0F3s-yJ21sULotNPp9repj-k6GFR85fTRyI1ZQ1zgympTV_Kv5Hn6PtnGwG1L72_qAylxxZ_ULQt3c6tYvqtIFIs8wETS9rPTScaPMXtUFLFuRE/s1600-h/50-off-sale-YELLOW.jpg"><em><img id="BLOGGER_PHOTO_ID_5342041304398847618" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 219px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioLjAWRDloxZz0PfupmgrcBEB20h_m0F3s-yJ21sULotNPp9repj-k6GFR85fTRyI1ZQ1zgympTV_Kv5Hn6PtnGwG1L72_qAylxxZ_ULQt3c6tYvqtIFIs8wETS9rPTScaPMXtUFLFuRE/s200/50-off-sale-YELLOW.jpg" border="0" /></em></a><em>Obviously, Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_7">Vasic</span></span> made this rather bold statement due to his lack of knowledge, or because he wants the entire business community to perceive him as having gone off the deep end. He wouldn't actually say something like that because of a deep-seated belief that things are ripe for a quick turnaround now would he? More and more people "in the know" are pointing to a bottoming for the market, and if you would <span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_8">harken</span></span> back to past blogs, you would see the date December 4, 2008 as a predicted market bottom from yours truly (courtesy of the work of very smart people). We will see how accurate these forecasts are over the coming weeks.<br /><br /></em><span style="color:#000000;">Has his opinion changed over the past six months - not really. In mid-May, </span><a href="http://www.financialpost.com/personal-finance/story.html?id=1602104"><span style="color:#006600;">he reduced his forecast slightly to 12,000 points</span></a></span><span style="color:#000000;">, but that still represents a 50% increase from where we were. How accurate was his prediction? Well over the past six months, the <span class="blsp-spelling-error" id="SPELLING_ERROR_9"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">TSX</span></span> has risen, fallen and risen again - to it's now lofty 10,470. How much is that you may ask? That change represents an increase of 29% so far. Could we actually expect to see another 21% increase over the coming 6 months? Remains to be seen, but so far, he has been right on target. </span><br /><br />Last December, most of the world was in a panic, watching their investment values tumble and hearing nothing but more bad news. When I originally penned this blog entry, I did so for one simple reason. <em><strong><span style="color:#000099;">I wanted people to realize that things would turn around and markets would recover. Markets are cyclical in nature. As has happened before, </span><span style="color:#ff0000;">and will happen again, </span><span style="color:#000099;">markets declined and then markets rose.</span></strong></em><br /><strong><em><span style="color:#000099;"></span></em></strong><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVBuanqXgJO96iHdAVuQSC15kKk-a8-vn7upk6NmpqzBdtUqNSy6EtKDzMslki1YvBo7G_DxoAyS7MalgeiAYHKiMAJXUAQjwWd57k_jb66SRC-m7dE1Axg5OkLTk0i9VsprioJ4QoOTY/s1600-h/Told+You+So.jpg"><img id="BLOGGER_PHOTO_ID_5342043766699302754" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 126px; CURSOR: hand; HEIGHT: 148px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiVBuanqXgJO96iHdAVuQSC15kKk-a8-vn7upk6NmpqzBdtUqNSy6EtKDzMslki1YvBo7G_DxoAyS7MalgeiAYHKiMAJXUAQjwWd57k_jb66SRC-m7dE1Axg5OkLTk0i9VsprioJ4QoOTY/s200/Told+You+So.jpg" border="0" /></a>As more companies complete the painful process of cutting and gutting, a new economy will begin to emerge. New alliances will be formed, big companies will continue to gobble up their smaller counterparts (making some people very rich), and eventually this will all come to an end. In that same December column, I asked whether people would change their investment patterns (<span class="blsp-spelling-error" id="SPELLING_ERROR_10"><span class="blsp-spelling-error" id="SPELLING_ERROR_10">RRSP</span></span>) for the future. Some said no, but several said yes. They were afraid because of what had happened without realizing that this was nothing new. Was a market recovery a great surprise to your truly? Not at all. I<em><span style="color:#009900;"><strong> not only knew it would happen but simply wondered when and how much. The when seems to have already been answered. The question of how much remains to be seen.<br /></strong></span></em><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-72555196747988285552009-06-02T06:00:00.000-07:002009-06-03T05:07:29.847-07:00Wow the markets really suck...Recent conversations with people have left me shaken. People were wondering whether the markets would ever recover. <span style="color:#ff0000;"><strong>HOW MUCH MORE MONEY HAVE I LOST. </strong></span><span style="color:#000000;">While I certainly <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">understand</span> that modern society no longer operates like "Leave it to Beaver", I am disappointed when I see people take so little interest in something so vitally important to themselves and their future. </span>The lack of "real" stories in the mainstream media baffles me. Let's talk about bailouts, deficits, and big <span class="blsp-spelling-error" id="SPELLING_ERROR_1">muckety</span> mucks getting handouts and big bonuses. Sticking to the basics is not "popular" and doesn't sell. I guess this explains the popularity of "lack of reality TV shows". However, it still shocks me to see that people have no idea where we are on the "financial recovery" roller coaster.<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhi98VdrRZRLNyPn7I2uSCjDSrxPl4K9-OOBtew6TPhf2asRDVhygL9gd-Gm_MCdm4pXEZHSqzm4Oo_qp7ojjaXcps5n7cYSFpuH3Zqj84JcZE2uV7WfmO91uUBOmEPz6sNNGwU1jtLXSE/s1600-h/InvestmentPhilosophy-cycles.bmp"><img id="BLOGGER_PHOTO_ID_5341709128103058370" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 450px; CURSOR: hand; HEIGHT: 224px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhi98VdrRZRLNyPn7I2uSCjDSrxPl4K9-OOBtew6TPhf2asRDVhygL9gd-Gm_MCdm4pXEZHSqzm4Oo_qp7ojjaXcps5n7cYSFpuH3Zqj84JcZE2uV7WfmO91uUBOmEPz6sNNGwU1jtLXSE/s400/InvestmentPhilosophy-cycles.bmp" border="0" /></a><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />The above chart demonstrates the various cycles of human emotion in relation to market performance, and to the same degree their personal finances. Last fall, around the end of September to early October, we reached the point of "despondency and depression". This coincides with the best buying opportunity of our generation. Where are we now? In speaking with people, they seem to be stuck in the same rut (literally). Is this reality? I think not.<br /><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioreMYaMoJPVjL3QOgA_Mo_9rHX6_7k37Gdwc-7K-X-MxEgfaMF9iskTfAFlELSzpX5jZcL-K0S3XZlVBsBoRmFc-zdV1PyueTUR5blYFQhj1Acne2CBc4OxtRCKQjayLjB-nYtzzOWJ0/s1600-h/TSX+past+3+months.bmp"></a></p><p></p><p></p><p></p><p></p><p></p><p></p><p><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuRMzkpfCWQYaSRoA0gBVe9ecyxzbDKeDwec4i7ts69z8N30LRnKj46ZNZXHOBlYXUKZ47qgKq3xNa_6RvhzCDFDKk7SCJzVl0S3tE5IrULJxmDDvAJthV6ChX3B58T46M4ZNeAJJfjp0/s1600-h/TSX+90+days.bmp"><img id="BLOGGER_PHOTO_ID_5341713548329583506" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 276px; CURSOR: hand; HEIGHT: 226px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuRMzkpfCWQYaSRoA0gBVe9ecyxzbDKeDwec4i7ts69z8N30LRnKj46ZNZXHOBlYXUKZ47qgKq3xNa_6RvhzCDFDKk7SCJzVl0S3tE5IrULJxmDDvAJthV6ChX3B58T46M4ZNeAJJfjp0/s400/TSX+90+days.bmp" border="0" /></a>As you can see , markets have recovered significantly. The chart on the left represents the performance of the Toronto Stock Market for the three months ending May 29, 2009. Do you notice a pattern emerging? Wow, does it actually look like the markets are going up? I keep waiting for the other shoe to fall, <strong><em><span style="color:#ff0000;">BUT IT FELL ALMOST THREE MONTHS AGO AND NO ONE NOTICED.</span></em></strong></p><br /><p><span style="color:#000000;">Global stock markets have now enjoyed three consecutive months of strong growth. While jobs are still being lost, and companies continue to trim staff and make other cuts, these are a normal part of the recovery process. One of the best parts of a blog is being able to look back and see whether we were right or wrong.</span></p><p><span style="color:#009900;"><strong>Quote from my blog of November 25, 2008</strong></span></p><p><span style="color:#006600;"><em>Once again we have seen the evidence pointing out that history does tend to repeat itself - while the price of gas at the pumps looks nice, the corresponding drop in the Toronto Stock market makes people realize you cannot have your cake and eat it too. So this leads back to the obvious question as to where we are going to be in the future. <span style="color:#ff0000;"><strong>If you polled most economists, they would probably speculate as to another six-nine months of economic contraction. Markets tend to come out of a protracted drop sooner than the economy - does that mean we are near the end?</strong></span></em></span><span style="color:#ff0000;"><strong> </strong></span></p><p><span style="color:#000000;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2C3tbbsxU5rrbezDis-61PxJySS8dlDhFrYaBUm6bAQHRy-G3cfofbYhOMXljnvcnVu3oUvmbLIDkqMarPdILImme7vSrFI0Pq_EgCZXYm1yGzptdOrDoyf4A5J_tYFJ36jKibN-GVJw/s1600-h/gas-pump-prices.jpg"><img id="BLOGGER_PHOTO_ID_5341718363941678658" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 232px; CURSOR: hand; HEIGHT: 225px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2C3tbbsxU5rrbezDis-61PxJySS8dlDhFrYaBUm6bAQHRy-G3cfofbYhOMXljnvcnVu3oUvmbLIDkqMarPdILImme7vSrFI0Pq_EgCZXYm1yGzptdOrDoyf4A5J_tYFJ36jKibN-GVJw/s320/gas-pump-prices.jpg" border="0" /></a>Wow. The price of gas is back up to about a <span class="blsp-spelling-error" id="SPELLING_ERROR_2">loonie</span>, and markets have recovered significantly. I never would have seen this coming. Oops I guess I lied - not only did we say it was coming, you can still go back and read about it. <span class="blsp-spelling-error" id="SPELLING_ERROR_3">This</span> is not to imply we are out of the woods yet. The car industry faces major challenges still, interest rates have bottomed out (with no where to go but up and <strong><em><span style="color:#ff0000;">I MEAN UP</span></em></strong>). With almost every major government in the world running on fumes and deficit financing, you can likely expect interest rates to begin to rise later this year. What will a mortgage cost you in the future? <strong>How does a 5 year closed mortgage for 8% sound? </strong>My suggestion to everyone is the same - get your financial house in order. Pay your bills and save some for a rainy day. Governments want us to spend our way out of this recession; let someone else do the spending.</span></p><p><strong>Stay Well and Pay It Forward.</strong></p>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-33202185057734943832009-05-30T18:00:00.000-07:002009-05-30T18:21:51.813-07:00CPP Proposed Changes<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiN4y6u_mXWYyhP-Z61tw9iJ2TmoJ4U0qXFFnwHNlf2OcAAQW3MpRrXbV_cbRwhjsbH7uaa8R7rWl1qGfoqaF8_RClIwnS-9c996WFtQwGGarkKM9OIq8FM-Ht6Q1AaH5vZlK6IfpAuPIM/s1600-h/CPP_e.gif"><img id="BLOGGER_PHOTO_ID_5340678791975247874" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 280px; CURSOR: hand; HEIGHT: 99px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiN4y6u_mXWYyhP-Z61tw9iJ2TmoJ4U0qXFFnwHNlf2OcAAQW3MpRrXbV_cbRwhjsbH7uaa8R7rWl1qGfoqaF8_RClIwnS-9c996WFtQwGGarkKM9OIq8FM-Ht6Q1AaH5vZlK6IfpAuPIM/s320/CPP_e.gif" border="0" /></a>Many people are hurting financially in this recession, and the government has decided to help out with changes to the Canada Pension Plan (<span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">CPP</span></span>). This is the same kind of help you might get from a stranger who sees you need money badly and offers you ten bucks for your <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">iPod</span></span>.<br /><br />For anyone planning to retire and draw from the Canada Pension Plan over the next 5-10 years, this will affect you and may ultimately make you decide to either retire early or later. There are several proposals on board but there are three that can/will dramatically affect your pension benefits.<br /><br />Retirement pensions are paid monthly to all Canadians who have contributed to the Plan. The normal age of <span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_2">CPP</span></span> take up is 65, but reduced pensions are available starting at age 60. For those who delay take up beyond age 65, pensions are increased up to the age of 70. In 2009, the maximum monthly pension amount payable at age 65 is $908.75.<br /><br /><strong>Change #1</strong><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgR17jFMx2_1GD8VQhbmvnrvgz8_jaia-fYNl7chVr3ajQXa1bHANf9GWe2m7aUTJqNvoTSn5c5-veLu6adb3U3HBSY5WhQ0Y578uU14YG9FjW9K2GelGnpCjELnvnIHHjlStNy7nN4-CA/s1600-h/RetirementLane.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJCNafa2cw-ANyD6TVTXKf7FZ2GqXIBALkW-EPDeJrzOAKFQEG4RaIXH2QxWl1rf5nGOmQSEil-vcnDjgPLheJNgQpflUn0-S62t_H-8Vx-L6oH8PQVF7C-e8Qo1QzFpbHqnmKN3XF-WU/s1600-h/RetirementLane.jpg"><img id="BLOGGER_PHOTO_ID_5341212034560773618" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 154px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhJCNafa2cw-ANyD6TVTXKf7FZ2GqXIBALkW-EPDeJrzOAKFQEG4RaIXH2QxWl1rf5nGOmQSEil-vcnDjgPLheJNgQpflUn0-S62t_H-8Vx-L6oH8PQVF7C-e8Qo1QzFpbHqnmKN3XF-WU/s200/RetirementLane.jpg" border="0" /></a>Currently, if you were to retire early, <span class="blsp-spelling-error" id="SPELLING_ERROR_3"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">CPP</span></span> reduces your monthly benefit by .5% per month for every month you retire before age 65. If you retire at age 60, you lose 30% of your benefit. If you wait until after 65, they add .5% for each year (up to 70). The plan now is the change the early "penalty" to .6% per month. If you take your <span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_4">CPP</span></span> early, the reduction in pension amount is permanent. The pension will not go back up to the “normal” level at age 65. So, the extra .6% reduction will apply for the rest of your life.<br /><br />Say someone is eligible for a <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_5">CPP</span></span> benefit of $900 per month. They are age 60 and want to retire now. With the current rules, they would receive monthly income of $630 per month. ($900 - 30% or $270). Under the proposed changes, that income would be reduced to $576 per month. This would mean a loss of $54 per month. For a person living to age 85, <strong><span style="color:#ff0000;">they lose $16,200 and that doesn't take into account inflation related increases. That moves the figure closer to $25,000.</span></strong><br /><br /><span style="color:#000000;">On the other hand, with the proposed changes, if you wait to collect after age 65, you will receive a bonus of .7% per month. The same person retiring at age 70 would see their benefits increase to $1215 per month. The <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">trade off</span> is that they would only receive benefits until they die. If they were to live to age 85 (as above and ignoring inflation related pay increases), the 60 year old receives $172,800 and the 70 year old receives $218,700. If you were to factor in inflation of 3%, the numbers change. The 60 year old gets roughly $250,000 and the 70 year old gets roughly $271,000.</span><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjy4YURoTWat4NBRkmvsYFHPqmyOPZ8a4t9IehHelLrw16ZlY8_7bfUsdrRW1kHhdV9ebcFzEwL3XdInspAFaenWd0rwoA3EUzHOFhRqiSU6FwQR20-4-e5Wrv3kt6hHj6NF6ZMJeZl_sQ/s1600-h/low-ball-offers.jpg"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjE37AQqDDCCNuJID65YS0bOVKaWEV-8mqOG0jCj_CP4Xj8coI6Pv2RGwh-e3otkNcASYElyupEgplh5Cf8K5J00wEGw36VIjKzygd3Y0SVMl_h7OXAc_mYd9QSSEa94Rj0RNXdhXfpx7A/s1600-h/low-ball-offers.jpg"><img id="BLOGGER_PHOTO_ID_5341212253318803954" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 148px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjE37AQqDDCCNuJID65YS0bOVKaWEV-8mqOG0jCj_CP4Xj8coI6Pv2RGwh-e3otkNcASYElyupEgplh5Cf8K5J00wEGw36VIjKzygd3Y0SVMl_h7OXAc_mYd9QSSEa94Rj0RNXdhXfpx7A/s200/low-ball-offers.jpg" border="0" /></a>The combination of allowing people still working to draw early <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_6">CPP</span></span> along with being in a recession may cause many people to make the short-term decision to draw <span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_7">CPP</span></span> early. The government is right there to help them out with a <span class="blsp-spelling-corrected" id="SPELLING_ERROR_9" style="color:#009900;"><strong>low ball</strong></span> offer of 36% reduced <span class="blsp-spelling-error" id="SPELLING_ERROR_10"><span class="blsp-spelling-error" id="SPELLING_ERROR_8">CPP</span></span> payments. From an actuarial point of view, this increased early penalty makes little sense because people are living longer. The longer you live, the less enticing a reduced early pension becomes. From the point of view of taxpayers, this is a good move by the government. <span class="blsp-spelling-error" id="SPELLING_ERROR_11"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">CPP</span></span> payouts will increase somewhat in the short term, but over the long run, the total benefits paid out will be lower.<br /><br /><strong>Change #2</strong><br /><br />The <span class="blsp-spelling-error" id="SPELLING_ERROR_12"><span class="blsp-spelling-error" id="SPELLING_ERROR_10">CPP</span></span> retirement pension amount is based on the number of years a person has worked and contributed to the Plan, as well as the salary or wages he or she earned. Specifically, it is calculated as 25 percent of an individual’s “average career earnings”, starting at age 18 and ending at the age of <span class="blsp-spelling-error" id="SPELLING_ERROR_13"><span class="blsp-spelling-error" id="SPELLING_ERROR_11">CPP</span></span> take-up. If, for example, an individual takes the <span class="blsp-spelling-error" id="SPELLING_ERROR_14"><span class="blsp-spelling-error" id="SPELLING_ERROR_12">CPP</span></span> at age 65, the span of the career is considered to be 47 years. If, for example, the <span class="blsp-spelling-error" id="SPELLING_ERROR_15"><span class="blsp-spelling-error" id="SPELLING_ERROR_13">CPP</span></span> is taken at age 60, the span of the career is 42 years.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhh4ZgklXoPW79lFfEO7IThyV7sQvP-Mja1TEtNLra1jznFu5kxP1dUtSku_rY95xi8RxqHAaBA6VL2nZuqk0C92s60rkfZYRXKZzd4YJxrcUazfxRGKOAnrX4BW8jPknQJePLyGpg1OzE/s1600-h/Drop+out.jpg"><img id="BLOGGER_PHOTO_ID_5341212143291647810" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 134px; CURSOR: hand; HEIGHT: 200px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhh4ZgklXoPW79lFfEO7IThyV7sQvP-Mja1TEtNLra1jznFu5kxP1dUtSku_rY95xi8RxqHAaBA6VL2nZuqk0C92s60rkfZYRXKZzd4YJxrcUazfxRGKOAnrX4BW8jPknQJePLyGpg1OzE/s200/Drop+out.jpg" border="0" /></a>The average of earnings over the span of the career is calculated allowing for 15 percent of the years where earnings are low or nil for whatever reason (e.g., full-time post-secondary education attendance or spells of unemployment) <span style="color:#ff0000;"><strong>to be dropped</strong></span>. This provision is called the “general low earnings drop-out”. The 15 percent gives individuals who take their <span class="blsp-spelling-error" id="SPELLING_ERROR_16"><span class="blsp-spelling-error" id="SPELLING_ERROR_14">CPP</span></span> at age 65 almost 7 years of low or zero earnings years that can be dropped from the calculation of their average career earnings. <span style="color:#ff0000;"><strong>In addition, there are drop-out provisions specifically for child rearing and periods spent receiving a <span class="blsp-spelling-error" id="SPELLING_ERROR_17"><span class="blsp-spelling-error" id="SPELLING_ERROR_15">CPP</span></span> disability benefit. </strong></span><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_LhEiuvr1-vFHB3HoRW2eUS9iRLWnIr5DvXCN7IXpeQTNYrvXhyphenhyphenyio_mOnMrDbCG21kKn-DZIxi-PRQwgaOn9OZYGpK6LYFiaTyuXTlmtk8yhLANAez_W1fko5al0XWtdgztYssbv14E/s1600-h/Drop+out.jpg"></a>These drop-out provisions are intended to ensure that an individual’s average career earnings are not affected by a certain number of years of unusually low earnings that occur in most people’s career for various reasons. <span style="color:#009900;"><strong>Virtually everyone benefits from the <span class="blsp-spelling-error" id="SPELLING_ERROR_18"><span class="blsp-spelling-error" id="SPELLING_ERROR_16">CPP</span></span>’s drop-out provisions.</strong></span> Without these provisions, virtually everyone’s “basic” pension amounts – that is, the pension amount if the <span class="blsp-spelling-error" id="SPELLING_ERROR_19"><span class="blsp-spelling-error" id="SPELLING_ERROR_17">CPP</span></span> is taken-up at age 65 without any adjustments for early or late take-up – would be lower.<br /><br />Under the proposed changes, the 15 percent figure would increase to 16% then to 17%. This change would benefit virtually all <span class="blsp-spelling-error" id="SPELLING_ERROR_20"><span class="blsp-spelling-error" id="SPELLING_ERROR_18">CPP</span></span> contributors and improve their basic retirement pensions. It would also increase the average <span class="blsp-spelling-error" id="SPELLING_ERROR_21"><span class="blsp-spelling-error" id="SPELLING_ERROR_19">CPP</span></span> disability and survivor pensions, as the calculation of these benefits is based on the retirement benefit calculation. While the change would increase the average retirement benefit of virtually all contributors, it would be particularly helpful to those whose careers suffer more work interruptions for a variety of reasons. For instance, those who pursue post-secondary studies or other educational opportunities, those who reduce their participation in the labour force to provide care to a family member, or those who immigrate to Canada as adults are all more likely to find this measure especially helpful.<br /><br /><strong>Change #3</strong><br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmmfGEZbavqAOdVSReB4aWazRFOs1vV9yYSV9curNQmh8Fx4-WjJ8UGC_QPQ1NIriO9__0lknH3AW5f8GsxzG0MIudnZUikH9QD2aFHrh8kDpnmYHz6koCO2_XwCnNslZ2U_QnZ6-l7JE/s1600-h/retired+worker.bmp"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhggz_rihGUioTCknJa5jLx6nP29KudTxXCGa8s_S_qlA7WL6OkTu_HdOdD8r70kj7r_Qv78nX4RXkwqJMqL9kcWZ4rvrlhHXfvSaBdZyVzodMzL44eriNUj5uUQjaLUVNo8GN7TMKO1mk/s1600-h/retired+worker.bmp"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsuBQ-YBS6p14xlRx99Q9bVOrL7hk7LYc6GvzZfjCEZQpl5uulUpCbSO293z2W-vzcs9AFdXRifl9_QT_s1qgNArnxl1AoV2DatTDRa9_eZxP7jKuDIlfeZjP_m2B0G88vBWqNNmlvZ3w/s1600-h/retired+worker.bmp"><img id="BLOGGER_PHOTO_ID_5341212448741616482" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 200px; CURSOR: hand; HEIGHT: 182px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhsuBQ-YBS6p14xlRx99Q9bVOrL7hk7LYc6GvzZfjCEZQpl5uulUpCbSO293z2W-vzcs9AFdXRifl9_QT_s1qgNArnxl1AoV2DatTDRa9_eZxP7jKuDIlfeZjP_m2B0G88vBWqNNmlvZ3w/s200/retired+worker.bmp" border="0" /></a>You will be able to draw <span class="blsp-spelling-error" id="SPELLING_ERROR_22"><span class="blsp-spelling-error" id="SPELLING_ERROR_20">CPP</span></span> at age 60 while still working without taking two months off. This is welcome news for older workers who have been laid off and are having a hard time getting by on half as much pay at a new job. In other words, you don't have to "retire" and then go back to work later. This may be an attractive thing to someone forced out of an old job, who resumes one at a lower income.<br /><br /><a href="http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2009/05/28/the-actuaries-on-the-cpp-revamps.aspx">Jonathan <span class="blsp-spelling-error" id="SPELLING_ERROR_21">Chevreau</span> of the Financial Post</a> had 3 actuaries discuss the situation in greater detail. Don’t blame people who choose to take early <span class="blsp-spelling-error" id="SPELLING_ERROR_23"><span class="blsp-spelling-error" id="SPELLING_ERROR_22">CPP</span></span> despite the extra reduction. It’s possible that a person’s <strong><span style="color:#ff0000;">unique circumstances</span></strong> make this a wise choice. For years I have been telling single people that they should almost always take it as early as possible. Unlike someone with a spouse, if they die, their estate receives a cheque for $2500<span style="color:#ff0000;"><strong><em> AND THAT IS IT. </em></strong></span>At least with a couple, their is a monthly benefit paid <span class="blsp-spelling-error" id="SPELLING_ERROR_24">to a</span> surviving spouse. Unfortunately, people will often make choices based on their immediate needs. The one good thing about these proposals is that the changes will allow the government to maintain current funding levels. At least this means you don't need to pay more to get less.<br /><br />It’s good to know that when people are hurting, the government is right there to say “I’ll give you a hundred bucks for your car.”<br /><br /><strong>Stay Well and Pay It Forward.</strong>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0tag:blogger.com,1999:blog-4525985330698294817.post-23328563880626237732009-05-20T06:03:00.000-07:002009-05-30T12:43:51.899-07:00Mortgage Planning Going Forward<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF-mwOrljLrv4hQREZsDesmLYRZ6Iw8uZo0SyWoARuS93il1vu29X3zP8PZe7PBlc16NYfdBJPKS-9kI-XyosS8KnfuyaYQKXOuKkQA6i1pP2-NnAwFV6DmkFU34n66v4COvqkqqDpQl8/s1600-h/mortgage.jpg"><img id="BLOGGER_PHOTO_ID_5337512965203649954" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 246px; CURSOR: hand; HEIGHT: 214px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF-mwOrljLrv4hQREZsDesmLYRZ6Iw8uZo0SyWoARuS93il1vu29X3zP8PZe7PBlc16NYfdBJPKS-9kI-XyosS8KnfuyaYQKXOuKkQA6i1pP2-NnAwFV6DmkFU34n66v4COvqkqqDpQl8/s320/mortgage.jpg" border="0" /></a>So you currently have a mortgage and you're wondering what direction to go. When does it renew? Is it a variable or fixed rate mortgage? When will rates increase?<br /><br /><div><div>These questions are becoming very important in the eyes of homeowners in Canada. The following will attempt to explain the types of mortgages and provide some guidance on what to do over the coming months and years. The following summary of current market conditions was "borrowed" from a blog on mortgages. Here are the basics in the various types of mortgages.<br /><br /><strong>Popular Fixed Term</strong><br /><strong></strong><br />1-year fixed: With rates under 3%, they’re a good alternative to 5-year variables—which should hopefully be at prime by the time these puppies mature next May.<br /><br />2-year fixed: If convertible (mortgages with a convertible rate feature allow borrowers to move into a fixed rate at any time with no penalty - you generally need to choose a fixed rate term that is at least as long as the term you have remaining), then they’re another decent alternative to 5-year variables. You get an extra year of rate security for 0.20% more than the best one years.<br /><br />3-year fixed: A nice combination of risk and reward. Versus a 5-year, you’ll save significant interest the first three years. The <span class="blsp-spelling-corrected" id="SPELLING_ERROR_0">trade off</span> is more risk in years 4 and 5.<br /><br />4-year fixed: The ugly baby that no one wants. There’s no value here. Go 3 or 5 instead, unless you plan to break in four years and want to avoid a penalty.<br /><br />5-year fixed: Canadians love their 5-year terms. Now may be the time for the risk averse to grab one, with rates expected to jump later this year or next.<br /><br /><strong>Longer Fixed Term</strong><br /><br />7-year fixed: A rate near 5% <span class="blsp-spelling-error" id="SPELLING_ERROR_1">is not</span> as exciting as 3.79% for a 5-year, so 7-years don’t sell very well. If you’re that concerned about risk take a 10-year for the same price.<br /><br />10-year fixed: The decade mortgage is available under 5% for the first time in modern history. Nonetheless, you may pay thousands more in interest versus a 5-year.<br /><br /><strong>Variable Term<br /></strong>5-year closed variable: They say prime <span class="blsp-spelling-error" id="SPELLING_ERROR_2">is no</span>t going any lower. So why gamble with prime+ variables? Get a convertible 1 or 2-year and wait for prime- to return.<br /><br />5-year capped variable: You’ll get 3.25% today and never pay over 5.25%. Sounds good, but if you’re that worried, why not pay a little more for a fixed now?<br /><br />5-year open variable: Closed variables are portable and have just 3-month interest penalties. So, unless you’re going to terminate early, save 0.30% and go closed.<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4gyC7G7MvlDEFbtP8VeLE-FG2EkYP1ZUqtRsbYnrmkR6QcoPZTJapOE4-xP3yaTm_qGouOQ2M_f1-rffUQ0rtpNa57PQitPCiWRi4F9vCkmjVry3hmVSJlUiTbhpdpMFcaPPgadn06Kk/s1600-h/Home+in+hand.jpg"><img id="BLOGGER_PHOTO_ID_5337891781223146850" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 184px; CURSOR: hand; HEIGHT: 165px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh4gyC7G7MvlDEFbtP8VeLE-FG2EkYP1ZUqtRsbYnrmkR6QcoPZTJapOE4-xP3yaTm_qGouOQ2M_f1-rffUQ0rtpNa57PQitPCiWRi4F9vCkmjVry3hmVSJlUiTbhpdpMFcaPPgadn06Kk/s320/Home+in+hand.jpg" border="0" /></a>Several people have asked me over the past few weeks "what should we do"? Here is a simple answer. Look at your current mortgage.<br /><br />For old style "variable" rate mortgages, you are likely paying prime minus .4-.8 percent. Stay there for the time being. If you are concerned about long term rates, lock in once the five year rate starts to climb. For people in existing five year terms with 2-4 years left, the fee to get out of the mortgage is too high to make it worthwhile. Consider the idea of doing a blend and extend (for 5 years from now). It will reduce your rate <span style="color:#ff0000;"><strong>BUT WAIT FOR A WHILE TO DO THIS. </strong><span style="color:#000000;">Rates are expected to remain relatively low for the next 2-4 months and the prime rate is not expected to change for 6-12 months. The shorter time let in your 5 year term, the better. When your <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">lender</span> does the blend and extend, it will mean a slightly lower rate.</span><br /></span><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisHLTkK1R0DD3GHsrd7RZJx0mf3nVw92yIHBjQx2qwVmNX4pcimWWSQXTCj_kBuIeQtty2avA_EVLaC-2vRYiFP2HdwP194LixHRKX1_s6yu-YAha1u64MOe87FAPjHzfCfR4KxNS0n_k/s1600-h/mortgage-broker.jpg"><img id="BLOGGER_PHOTO_ID_5337892995525940994" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 320px; CURSOR: hand; HEIGHT: 271px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEisHLTkK1R0DD3GHsrd7RZJx0mf3nVw92yIHBjQx2qwVmNX4pcimWWSQXTCj_kBuIeQtty2avA_EVLaC-2vRYiFP2HdwP194LixHRKX1_s6yu-YAha1u64MOe87FAPjHzfCfR4KxNS0n_k/s320/mortgage-broker.jpg" border="0" /></a>Find a mortgage broker. They earn their incomes by placing mortgages with various <span class="blsp-spelling-corrected" id="SPELLING_ERROR_4">lenders</span>. If you were to go shopping around to various <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">lenders</span>, it will actually hurt you as it reduces your "beacon score" which is what creditors look at to consider your credit worthiness. Mortgage brokers apply once on your behalf to 20-30 different institutions. They do all of the work.</div><div></div><div><br />Lastly - we never can tell where mortgage rates will go. Current rates are at the lowest levels ever. Governments are flooding markets with cash. For anyone under 35, ask someone what it was like to pay 10-18% for a mortgage. Think it won't happen again? Unlikely, but let me ask this one simple question.</div><div> </div><div></div><div><span style="color:#ff0000;"><strong><em>If rates were to go to 8%, could you afford your current mortgage?</em></strong></span></div><div><strong><em><span style="color:#ff0000;"></span></em></strong> </div><div><strong><span style="color:#000000;">Stay Well and Pay It Forward.</span></strong></div></div>I need to lose weighthttp://www.blogger.com/profile/15467033299447939207noreply@blogger.com0