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Should you give your children their inheritance now?

Morningstar – Personal Finance Article By Gail Bebee

The baby boomers, that great swell of Canadians born in the first …

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This couple face ‘significant risks’ if they carry debt into retirement

September 1st, 2017

The Globe and Mail – Financial Facelift by Dianne Maley

“Can I retire at age 65?” Arlo asks in an e-mail, echoing a question posed by so many people in their fifties. Arlo is 57, his wife, Alice, is 53. They are both self-employed professionals, bringing in a combined $265,000 a year before tax. They have RRSP savings but no work pension plans.

Their main asset by far is their $3.6-million Vancouver-area house. “I will work to age 70 if I have to,” Arlo writes. “I want to know if we have to sell our home and downsize, which would be okay.”

They have also been saving to help their three boys, ages 11, 13 and 18, with postsecondary education.

When they retire, Alice and Arlo plan to spend $120,000 a year – less than they are spending now. But if they hang up their hats when Arlo is 65, they will still have a mortgage to carry.

We asked Ngoc Day, a financial planner at Macdonald Shymko & Co. Ltd. in Vancouver, to look at the couple’s situation. Ms. Day holds the certified financial planner (CFP) and registered financial planner (RFP) designations, among others. Macdonald Shymko is a fee-only financial planning and portfolio management firm.

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What do the rich worry about? Surprisingly, it’s money

August 14th, 2017

The Globe and Mail – Diane Jermyn

Most older people worry about whether they will have enough money to carry them through retirement. The wealthy are lucky they need not bear the same concerns, right?

Not entirely true – even the very rich worry about outliving their money. According to a 2017 survey by the Illinois-based Spectrem Group, a financial research firm, 20 per cent of ultra-high-net-worth investors, defined as those with a net worth between $5-million and $25-million, are concerned about having enough cash to last throughout retirement.

While rising health-care costs, taxes and low interest rates on investments were cited as general concerns in the U.S. study, wealthy Canadians typically share similar financial fears, experts say. So what do Canadian high-net-worth clients worry about?

People feel angst about running out of money in retirement whether they have $1-million, $10-million or $50-million, says Gordon Stockman, a fee-only financial planner and principal of Efficient Wealth Management Inc. in Mississauga.

They are all trying to estimate whether they will have enough income to support their current lifestyle, he says. “Most of us wish to go into retirement maintaining whatever lifestyle we’ve become accustomed to having. High-net-worth people spend lots of money. It’s the same equation, just bigger numbers.”

Once they achieve a certain standard of living, it’s difficult to dial it back, says Ian Black, a fee-only financial advisor at Macdonald, Shymko & Co. Ltd. in Vancouver.

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Should couple focus on paying off their mortgage or saving for retirement?

June 23rd, 2017

The Globe and Mail – Financial Facelift by Dianne Maley

It has taken time, but Jerry has built his consulting business up to the point where he is grossing $112,000 a year. That’s up from $45,000 in 2014 “and much less before,” Jerry writes in an e-mail. For the past decade, his wife Janice kept the family finances on an even keel thanks to her teacher’s salary.

Jerry is age 47, Janice is 45. They have two children, ages 5 and 8.

They have some savings and Janice will be entitled to an indexed defined-benefit pension when she retires. Their only debt is the mortgage on their B.C. home. Now that they have some spare cash, they wonder whether they should focus on paying off the mortgage or saving for retirement. They wonder, too, whether Jerry should take out disability insurance and whether his corporation might offer some tax-planning strategies.

Longer term, Janice wants to retire at age 58, while Jerry plans on shifting gradually from full-time to part-time work starting at age 60. Their retirement spending goal is $84,000 a year after tax.

We asked Brinsley Saleken, a financial planner and portfolio manager at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Jerry and Janice’s situation. Macdonald Shymko is a fee-only financial planning firm.

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PROTECT CLIENTS FROM RISKY SYNDICATED MORTGAGES

May 16th, 2017

ADVISOR.CA – Simon Doyle and Katie Keir

Larry Jacobson, a fee-only advisor with Macdonald, Shymko & Company in Vancouver, receives many pitches to sell syndicated mortgage deals to his clients.

These lucrative, private debt agreements for real estate projects often promise attractive annual returns of 8% or higher. Most, Jacobson says, come with risky backing or excessive commissions, and he throws them in the bin.

It’s the solid-looking offers he takes seriously, scrutinizing their details, the project’s prospects and the quality of the underwriting. He visits the land for a literal sniff test.

“I drive to the site. I drive the area. I look at competing properties. I look at the cars and apartment buildings across the street. I get down on my hands and knees and smell the dirt,” says Jacobson, who’s been with MS&C since the mid-’70s. “We really do a thorough job of inspection.”

This may be what’s needed to properly scrutinize syndicated mortgage offers amid surging property valuations and housing sector risks in Toronto and Vancouver.  While real estate booms mean more investment, more construction, big commissions and nice returns, they can also mean sky-high valuations and riskier deals.

While syndicated mortgage offers can be great investments, experienced advisors are warning their colleagues to not be tempted by nice-looking commissions or pushy investors who want into real estate. “We find that most of the syndicated mortgages around today are garbage,” Jacobson says. “The underwriting process is really critical in these deals.”

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HOUSE RICH, CASH-FLOW POOR – AND SHE WANTS TO RETIRE EARLY

April 21st, 2017

Financial Facelift Revisited: Special to The Globe and Mail – By Dianne Maley

Bethany bought her first house two years ago with a big mortgage. It has risen substantially in value since then. Today, at age 56, she is house rich and cash-flow poor but happy. “Sort of.”

Her house (in the Greater Vancouver Area) was recently assessed at $330,000 over the purchase price, Bethany writes in an e-mail. She brings in $88,130 a year from her government job plus $680 a month in rental income from a basement apartment. Her defined benefit pension plan will pay about $3,300 a month at age 65.

Bethany is tired of her job and really wants to retire in four years at age 60. “I want to travel extensively,” she writes. She is striving to pay off a line of credit taken to pay for a new roof, to upgrade the basement suite, “and for all the extras that come with purchasing a home, things that I was not aware of or prepared for,” Bethany writes.

“I am putting every extra cent toward paying off this debt, and I am living more frugally than I ever have.” She is also repaying money borrowed from her RRSP under the federal Home Buyers’ Plan.

Her questions: Can she retire in four years and perhaps work part time in some other job? Will she be able to take at least two big trips a year? “Do I have to sell my home in retirement?”

We asked Ngoc Day, a financial planner at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Bethany’s situation. Ms. Day holds the certified financial planner (CFP) and registered financial planner (RFP) designations. Macdonald Shymko is a fee-only financial planning and portfolio management firm.

What the expert says

Ms. Day prepared two forecasts, one where Bethany quits at age 60 and another where she continues working to age 65.

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