Archive for 2017

This couple wonder if early retirement makes sense with a high net worth

December 29th, 2017

The Globe and Mail – By Dianne Maley


Marv and Maddy hope to leave their high-paying jobs and retire in 2020. Though neither has a company pension, they have substantial savings. He is 57, she is 56. They have a daughter, 21, who is living at home.

Marv will be walking away from $175,000 a year as a self-employed professional in the health-care field. Maddy brings in $180,000 a year from her management job. Maddy and Marv’s Alberta condo is valued at $1.5-million, and they have a cottage in British Columbia worth $200,000.

Despite their high net worth, the couple still wonder whether retiring early is feasible. Their retirement spending goal is $120,000 a year after tax.

We asked Keith Copping, a fee-only financial planner at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Marv and Maddy’s situation.

Marv expects to get $127,200, paid over four years, when he sells his business to an associate in 2020 and hangs up his hat, Mr. Copping says. Based on their current earnings and cash outlays of $180,804 a year, they have surplus cash flow of $46,416 a year.

Subtracting savings and debt repayment from spending leaves them with lifestyle expenses of $106,884 a year, which better reflects what they would need when they retire, the planner says. This is below their $120,000 spending target.

In preparing his plan, Mr. Copping made the following assumptions. Maddy and Marv will earn an average rate of return of 4.5 per cent on their investments; inflation will average 2 per cent a year; Marv will live to be 94 and Maddy, 97; both will start collecting Canada Pension Plan and Old Age Security benefits at the age of 65 or later, with both getting the maximum CPP benefit.

They will pay off their $75,000 line of credit before they retire. The calculations exclude the value of their home and cottage, which will form part of their estate.

Based on these assumptions, the couple will have after-tax income of $107,000 a year when they retire, Mr. Copping says.  Click here to read the rest of the article.

Is it time for this 70-year-old to sell her billboard rental business?

September 8th, 2017

The Globe and Mail – Financial Facelift by Dianne Maley

At the age of 70, Yvonne feels she is at a fork in the road and in need of “a professional, disinterested perspective.”

She is single again with three grown children and a clutch of grandchildren, none of whom is looking to her for an inheritance. At the same time, she does not want to be a burden on them.

“That really is my overriding concern,” Yvonne writes in an e-mail, “how best to look after myself financially so I reduce the chances of needing to turn to family for financial help in the future.” She has some savings and a waterfront lot back home. She collects Canada Pension Plan and Old Age Security benefits. But her main income comes from the rental of billboard signs along a highway in New York State.

 Last year “was a good year,” Yvonne writes. “I had all seven signs rented.” Gross rental income translated into $65,510 (Canadian). “After taxes and billboard-related expenses, I live well on what’s left,” she adds.

Then one morning “out of the blue” a former advertiser called and asked if she would sell just one of the signs. She suggested the company buy all seven because she didn’t want to sell piece by piece. “They are thinking and I am thinking,” Yvonne writes. However it turns out, she wants to understand what the income stream from the billboard business is worth. “What is the least I can reasonably take for this business?” she asks.

 “I would like to sell but I do not know if I can afford to. What level of frugality would I be embracing over the next 20 years if I sold now?” If she sells, Yvonne wonders whether it would be a good idea to use part of the sale proceeds to top up her registered retirement savings plan.

We asked Ian Black, a registered financial planner (RFP) at Macdonald Shymko & Co. Ltd. in Vancouver, to look at Yvonne’s situation. Macdonald Shymko is a fee-only financial planning and portfolio management firm.

Click here to read the rest of this article

What the rich can teach us in these turbulent times

September 6th, 2017

The Globe and Mail – Kira Vermond

Between President Donald Trump threatening to “shut down” the United States government, the war of words with North Korea and global stocks taking more dives (and rebounds) than a desperate soccer player, the average investor has probably been a tad rattled lately. But how have Canada’s wealthy fared?

These top advisors for high-net-worth investors weigh in on what they’re hearing from their richest clients – and what we can all learn from them.

Paul Harris, partner and portfolio manager at Avenue Investment Management, Toronto

“I think the general feeling is of nervousness because the market has gone up so much. People are also unsettled by the political situation in the United States. They feel there is something that’s going to blow up and cause the equity market to blow up with it. They don’t believe that this individual who runs the country is not going to blow up something along the way.

“Everybody also feels there should be a market pullback. There hasn’t been one in a while. But when everybody wants a pullback, it never happens. It’s Murphy’s Law. The market continues to go up.”

Susan Latremoille, wealth advisor and director of wealth management at the Latremoille Group, Richardson GMP Ltd., Toronto

“They have fear, but I think it’s connected primarily to what’s going on in the world.

“Ultimately, the mindset of wealthy people has more to do with capital preservation than taking a lot of risk. Most of the wealthy people we work with say, ‘Don’t lose my money. I’d rather just hold onto it than take a lot of risk, but I’m also looking for a return better than just leaving my money in the bank.’

“So there’s no need to shoot the lights out, it’s about protecting the money and increasing the value over time.”

Tony Maiorino, vice-president and head of RBC Wealth Management Services, Toronto

“Here’s an analogy for you: You’re flying from Ottawa to Toronto and there’s 30 minutes of turbulence in that 45-minute flight. When somebody asks what the flight was like, you’re going to say, ‘It was a horrible flight!’ You’re focused on the short term. But if you’re taking a 12-hour flight to Hong Kong and you have that same 30 minutes of turbulence, unless it comes right before you’re going to land, you’ve forgotten all about it.

“These clients have been through this before. They’ve seen it and understand it’s short-term in nature. They’re not overly concerned by what they’re seeing. They’re frequent fliers, if you will.”

Nancy Grouni, certified financial planner, Objective Financial Partners Inc.,Markham, Ont.

“There isn’t one particular mindset that wealthy people have when it comes to the stock market. I work with very wealthy people who are enormously risk tolerant and others who are enormously risk averse. I see both ends of the spectrum.

“It depends more on how they acquired their money. Those who inherit money are less likely to have a lot of experience with the stock market. So they’re more likely to be risk averse.

“But we also work with a lot of people who have become wealthy due to investing in their own corporations. Because it’s part and parcel of what they do for a living, I find those people are more risk tolerant and more likely to have a higher component of their portfolio in the stock market.”

Glen Brown, head of investments, Manulife Private Wealth, Toronto

“When Brexit came out the first thought was, ‘Well, how is this going to affect my portfolio? What should we be doing?’ Well, you shouldn’t be doing anything because they just voted for something, and we have no clue how this is going to unfold.

“If you’re doing a properly diversified global portfolio, as the high-net-worth people do, they tend to not overweight Canada – which is a propensity many of us have. I think that is something that protects them.

“I think if you’re looking for something for the long term, you don’t care what a politician has said – no matter who that politician is. Quite honestly, you will be riding this out and dealing with your money after that politician has retired.”

Ian Black, fee-only financial advisor at Macdonald, Shymko & Co. Ltd., Vancouver

“Our clients aren’t necessarily concerned with what’s happening day to day in the market. That’s because we teach them that diversification is your friend. If you’re happy with all parts of your portfolio at one time, you’re probably not diversified enough.

Click here to read the rest of this article

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.

Click here to read the rest of this article



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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