How much income do you need in Retirement?

How much income do you need in Retirement?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The following is an excerpt that describes how much income you need in retirement -   “You’ve been retired for a while. How much income do we actually need in retirement, Uncle Wayne?”  How Much Income Do You Need in Retirement? Uncle Wayne got up, walked to the counter, and poured another glass of orange juice. “I like to break it down into day-to-day expenses, which are your normal daily living expenses and what I call ‘do what you want when you want’ spending, which is really your fun money. This could be travel, bird watching, writing a novel, and perhaps your bucket list items. For this spending, I’d suggest you plan to do that in your first ten to fifteen years of retirement when you’re healthy. “Other costs to consider would be replacement costs for things such as a new roof, furnace, or car. Also, you have contingencies that may occur,...
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How do you Develop a Diversified Portfolio?

How do you Develop a Diversified Portfolio?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® How do you Develop a Diversified Portfolio? “So how do you actually develop a diversified portfolio?” asked Sally. “I understand the basics between bonds and equities, and clearly I haven’t been doing as much research and reading as Alice. How do we put it all together?” “From my experience,” Uncle Wayne continued, “there are six key factors to developing a globally diversified portfolio, and they are:  strategic asset allocation tactical asset allocation specific Investments and/or money managers risk management  fees  taxes “Whole books have been written about this subject; however, I will attempt to simplify this. Strategic asset allocation is basically what we have reviewed, and it’s your long-term allocation between bonds and equities. This also includes how much you would invest in Canada, the US, and internationally for both bonds and stocks.” Alice commented. “Is one of the reasons that we should invest outside of Canada because different country’s economies and companies do well...
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What are the Retirement Income Planning Options?

What are the Retirement Income Planning Options?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® Retirement Income Planning Options “There are five main options to achieve the cash flow you desire from your own assets: income only investingincome focused investing.guaranteed income: life income annuity/guaranteed income productstotal return investing: diversified portfoliocombination of the above “Let’s start with income only investing first,” Uncle Wayne continued. “With this option, you would only invest in bonds or GICs, and the income they provide is what you use for spending. This is often the starting point in creating a retirement income and cash-flow plan. The challenge with this approach is that with the current low yield environment, the income earned may not be enough to fund your cash flow needs annually. Over time, the asset growth may not allow you to keep up with inflation, as your cash flow needs increase.” “So,” Alice asked, “low yield means low interest rates, and with the current interest rates so low, it could be...
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What are the tax and withdrawal strategies for Retirement Income?

What are the tax and withdrawal strategies for Retirement Income?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The following is an excerpt that describes retirement tax strategies. Tax and Withdrawal Strategies “This all sounds very complicated,” Mark commented. “How do you review the various tax strategies?” “First of all, you need a great accountant and CFP, and there are some great financial planning software packages that good financial planners can use to model the different options.” Uncle Wayne then added, “Many retirees like me will develop a plan where they may utilize a combination of the above options to create their lifelong income and cash-flow plan. For example, retirees may decide to cover some of their essential expenses with an annuity or a guaranteed income product and then invest the balance in a total return portfolio, perhaps using a bucketing approach. “A key part of this approach is the coordination from a timing, sequencing, and tax standpoint, as retirees may have numerous income sources, such as: Old Age Security and...
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What are the Risks to Retirement Income Planning?

What are the Risks to Retirement Income Planning?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The following is an excerpt that describes some of the risks to retirement income planning. “That’s a great analogy, Uncle Wayne. I can see how it’s important to make sure you have a great plan as you transition to retirement, but what are some of the key risks to retirement income planning that are different than saving for retirement?” Mark asked.       Risks to Retirement Income Planning “Good question, Mark. A key risk is that you really don’t know how long you must plan for, which is called longevity risk. People are living longer today and don’t want to out-live their investments.” Uncle Wayne explained. “I was reading some stats the other day, and for a couple today who at age sixty-five, there’s a 50% chance one will live to ninety, and a 25% chance that one will live to ninety-five,” I added. “Wow,” Sally said. “Mark, if you ever get a new...
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What is the difference between Saving for Retirement and Creating a Cash-flow for Retirement?

What is the difference between Saving for Retirement and Creating a Cash-flow for Retirement?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The following is an excerpt that describes the difference between saving for retirement and creating a cash flow in retirement. “The key thing is that once you retire, you’ll want to create a strategy to replace the monthly paycheque you’ve been receiving for the past thirty to forty years with the assets you’ve accumulated over your lifetime. The basics still apply; however, there is a slight change in approach. Do you remember when you were younger and we used to go to Blueberry Hill, climb up the rock cliff, pick the blueberries, and then climb down? Later, you took your own kids.” “Absolutely, but why to you mentioned that?” “When you took your own kids, did you let them go ahead of you on the way up to the top of the rock cliff?”  “Yes, we did.” “And then on the way down, were they allowed to go alone?” asked Uncle Wayne. “No,...
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The Estate Documents Conversation

The Estate Documents Conversation

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The current COVID -19 Pandemic has made more people review their estate plans and make sure they have what is required. A critical part of this review is to include an Estate Documents Conversation with their family.  The point is, why create a plan if no one knows about it? What is an Estate Documents Conversation? The estate documents conversation is a conversation you should have with your parents, children, executors, and powers of attorney to review and discuss the following key issues: With your parents: Find out who their powers of attorney and executors are.Obtain copies of their wills and powers of attorney (or the location of the documents).Meet your parents’ financial advisor(s).Obtain the listing of the location of their financial assets and the contacts for their bank, accountant, and lawyer.Have a frank discussion on what they would want to happen if they were unable to make financial decisions for themselves.Have...
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What is the  Eldercare Conversation?

What is the Eldercare Conversation?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The current COVID -19 Pandemic has highlighted the key issue of Eldercare in Canada and why everyone should include an Eldercare strategy in their financial plan. In my experience, this is an important conversation that clients are having with their parents when they reach their mid-70s in age, and clients who are in their mid-70s have with their children. What is the Eldercare Conversation? With your parents and/or children, have a conversation about the potential strategies if a physical or medical setback were to occur. Issues you may want to discuss could include: What would the strategy be if they/you needed some extra help to continue to live at home?How is this to be financed? Is it in the financial plan?Would is the strategy if they/you decided they needed to or simply wanted to move into a retirement home?Do they/you want or need to downsize their home?What is the strategy if only...
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Protecting Your Family – Insurance

Protecting Your Family – Insurance

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CPA® How much Life Insurance do we need? “ A common rule is the amount of life insurance you need is linked to the amount of capital it would take to: pay off all your debtsprovide for your children’s educationpay your final taxes, including capital gains taxesprovide enough income to comfortably sup­port your dependents when the remainder is invested; andcreate a legacy for your family and/or for a favourite cause or charity. What you have to remember is that you’re not really insuring a life, but rather the income that the life would have produced.” What was about capital gains taxes? “When someone dies, Revenue Canada assumes that he or she has sold all their assets at fair market value the day before the actual date of death. So, if an applicable non-registered asset has gone up in value from its purchase price, it is deemed to have produced a capital gain. Fifty...
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Why Do You Need A Will?

Why Do You Need A Will?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® The current COVID -19 Pandemic has resulted in many pausing to reflect on their estate and incapacity planning. The barrage of news headlines about the health crisis and forced time at home have understandably led individuals to consider the plans more thoughtfully they have in place or plans they would like to implement. Legal professionals throughout Canada have noticed an increased interest in estate planning. My recently released book, Preserving Wealth: The Next Generation discusses in detail how to develop an effective estate plan and can help with your planning process utilizing a narrative that takes place with a family over a summer at the family cottage. In the following excerpt from the book, the weekly topic was Wills with Uncle Wayne who leads the conversations. David and Alice were discussing that they didn’t have a Will, as they didn’t like to talk about this type of thing. Uncle...
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