Tuesday, March 1, 2016

Planning Your Retirement Lifestyle

Have you thought about the time when you will no longer work to create income? 

  • When will you retire from full time work and what will you do then?
  • How much income will you need to live the lifestyle you want? 
  • How big a nest egg do you need to create that income? 
  • What is the most cost-effective way for you to grow your financial assets
  • Are you on track to achieve your financial and lifestyle goals?  
  • What will your sources of income be when you no longer work full time?
  • How much can you expect from government pension plans and when?  
  • Will you continue to work in retirement?  If so, for how long?
  • What are the best ways to convert your financial, business, and real estate assets into passive income that will last for the rest of your life? 
  • Are you financially prepared if your career ends prematurely?
  • How much life, illness, disability or long-term care insurance do you really need? 
  • How can you protect your family financially, and minimize taxes and administration for your spouse and children when you pass away?  

These are questions that I am uniquely qualified to help you answer

As an individual who has experienced marriage, divorce, single parenthood, corporate life, job loss, career change, business ownership, teaching, launching children, loss of friends and loved ones, moving to a new city, and creating financial independence for myself, I have developed a wealth of knowledge and experience that enables me to mentor individuals who are serious about planning for semi-retirement or retirement 

Here is how one client sums it up 

"I have had the privilege of serving Tim as business solutions provider for many years and now enjoy the wisdom of all his collective years in business and in life, particularly on how to achieve true financial freedom. Tim has provided me with the opportunity to learn what true professionalism looks like in action. His guidance has been invaluable and is rooted in him being an exemplar of what he teaches and advises, first. His disciplined and practical approach to finance and life has created immense trust between us where I am now confident to continue on a path that will ensure the continued financial stability and freedom I now enjoy. If you are serious and passionate about your life and your financial well-being then look no further than Tim. He is, without reservation, a true Master and incredible Guide. I feel very blessed to have Tim in my corner!"  

June 8, 2016 Greg Magennis, Founder & CEO Axiom HRD 

As an independent practitioner, I am not compelled to recommend proprietary products from any bank, insurance, fund company or portfolio manager. I don’t have “sales quotas” and can therefore offer objective, unbiased financial advice. 

I believe in focusing my attention on those areas where my experience and training can help you most.  I refer you to legal, accounting, mortgage, banking, and portfolio management specialists when your situation merits it.  

How much does it cost? 

All initial consultations are free.  At our initial meeting we find out about each other, whether I would be a good fit for you and vice versa, and have a discussion of what you hope to accomplishOnce I begin to work on your case, I bill at a rate of $150 per hour starting with an appropriate retainer fee depending on the estimated amount of time it will take me to do the work.  If you choose to continue to work with me after the initial work is complete, periodic reviews of your financial progress are also charged by the hour. If you choose to purchase a solution for which I am compensated through a referral fee I disclose this to you and refund your retainer.  There is no obligation to purchase any product through me. 

Why is there a retainer fee if I can get this advice "free" at my bank or financial institution?

Most Canadians do not realize that there are fees built into almost every product they purchase, and many of those fees are exorbitantly high.  The average Canadian pays about $233,000 in fees to financial institutions over his or her lifetime.  This creates a tremendous incentive for financial advisors to "sell" you a higher fee product that makes them better off, but which is not necessarily the best for you. I can help you minimize or avoid those fees. 

In fact, you are likely to pay far less in fees even in the first year we work together by having the type of professional advice I offer, compared to purchasing products with built in fees from "fee-based" financial advisors.  And over your lifetime, you are virtually certain to pay less in fees by paying a fee-only personal financial consultant.  

Here is a fee calculator that will help you determine what you are already paying in investment fees.   

Saturday, April 19, 2014

Dollar cost averaging or investing a lump sum all at once: which performs better?

What is dollar-cost averaging?

Dollar-cost averaging (DCA) — buying a set dollar amount of a security at regular intervals — can help promote disciplined investing.  It is a form of paying yourself first.  While you’re building your wealth, the rate of saving is generally more important than the rate of return.
By committing yourself to invest a set amount regularly (say, $1,000 once a month), regardless of whether the market is up or down, you end up buying more when the market is down and an investment is cheaper, and less when it’s up and an investment is more expensive.
For Mal Spooner, corporate finance professor at Humber College in Toronto and author of A Maverick Investor’s Guidebook, dollar cost averaging is a hedge against the common tendency among investors to buy high and sell low, robbing themselves of profits. “Everybody wants to invest aggressively when markets are going up,” Spooner says. “DCA forces you to buy when markets are bad as well as good.”

So how does the performance of dollar cost averaging compare to lump-sum investing?  

Vanguard, the U.S. mutual fund company, published a study in July 2012 that highlighted an important flaw in the dollar-cost averaging strategy.
The study sought to answer a simple question: If you inherited $1 million, would you be better off investing it all at once or would your portfolio perform better if you were to invest the funds gradually over time (in other words, if you implemented a dollar-cost averaging strategy)?
Vanguard studied stock and bond returns in the U.S., U.K. and Australia. The research covered multiple stretches of time that featured widely varying market conditions, and investment holding periods ranging from one to 30 years. About two-thirds of the time, investors were better off with a lump-sum approach than they were a dollar-cost averaging strategy.

Does this mean dollar-cost averaging is a mistake?

It probably does, if you come into a large sum of money all at once, and you have a long enough time horizon before you need your money. This argument against dollar-cost averaging isn’t complicated. It merely (and correctly) identifies the likelihood that over time, your money will perform better if it is invested in the markets than it will if it is held in cash (either in a savings account or a low-interest earning cash instrument like a Guaranteed Investment Certificate). If someone hands you $1 million, it’s probably not in your best interest to invest $100,000 into a balanced portfolio and stuff the rest under your mattress to be invested piece by piece.

But for those not lucky enough to inherit a small fortune, dollar-cost averaging still makes sense. It helps make saving easier, and it prevents trying to time the market. Save the same amount every month, and the price of your selected securities will dictate whether you buy a lot (when prices are low) or a little (when prices are high).

Dollar-cost averaging is as much a saving strategy as it is an investment strategy.

For help building an investment plan that is tailored to your personal goals, risk tolerance and time horizon, email Tim Weichel at tim@retireonyourterms.ca or call 416-230-2703 or 705-798-0062

Saturday, April 12, 2014

Do you need mortgage insurance?

Your home is likely the biggest asset you’ll ever own. And if you’re one of the majority of Canadian homeowners who have a mortgage, you need to ensure your home is protected should something happen to you. The question is what’s the best way to do this?

Canadians held $855 billion in mortgages on their principal residences in 2011, according to the Canadian Association of Accredited Mortgage Professionals, and the Statistics Canada Survey of Household Spending reports 57% of Canadian homeowners have a mortgage.

To protect these mortgages, homeowners have options: mortgage insurance provided by a financial institution, or mortgage protection using life insurance and critical illness insurance provided by an insurance company.

Mortgage insurance: 

Works by paying off the outstanding principal balance of your mortgage should you die, have an accident or suffer a terminal illness, up to a specified maximum amount.

Mortgage protection:

Term life insurance: Covers you for a set period of time — such as five, 10, or 20 years — and can be suitable for homeowners looking for low-cost insurance.

Permanent life insurance: Can be more expensive initially, but provides coverage for life. Premiums can either be guaranteed or variable, depending on the type of plan you choose.

Critical illness insurance: Provides you with a lump-sum payment you can use for medical expenses or to pay off your mortgage should you be diagnosed with a serious illness that’s covered under the policy (and you meet the other policy conditions) — how you use the benefit is up to you.

Key differences between mortgage insurance and mortgage protection using life insurance and critical illness insurance

The main difference between mortgage insurance and mortgage protection using life insurance and critical illness insurance is that mortgage insurance pays the lender, and the coverage declines as your mortgage balance declines. 

On the other hand, critical illness insurance pays you a lump sum that can be used to pay your mortgage or other expenses as you choose. 

Life insurance pays a tax-free benefit to your chosen beneficiary when you die. The payment can cover more than just the mortgage, as the beneficiary may use the proceeds of the policy in any way you need to.

Beneficiary: In the case of mortgage insurance, the lender is the beneficiary. 

While with critical illness insurance, you’re the beneficiary and with life insurance, you can name the beneficiary.

Portability: If you change mortgage providers, your mortgage insurance doesn’t automatically move with you. If you move your mortgage to another lender, you will be required to submit evidence relating to your health, and will be subject to the current rate of the new mortgage provider. 

With life and critical illness insurance, you can take your policy with you if you transfer your mortgage to another company, with no need to re-apply or prove insurability.

Flexibility: With mortgage insurance through a lender, your needs may change over time, but you don’t have the flexibility to change your coverage. 

Term life insurance and term critical illness insurance plans can be converted into permanent plans at a later date.

Cost vs. coverage: With a lender-offered mortgage insurance plan, the benefit decreases as you pay down your mortgage, but the premiums remain the same. If you pay off your mortgage, you lose all your coverage. 

With life and critical illness insurance policies, the amount of coverage does not decrease over time (even if you repay your mortgage).

Call us for a comparison quote if you have, or are considering mortgage insurance.  Often individual term insurance is less costly than mortgage insurance for better coverage.  tim@retireonyourterms.ca 416-230-2703.  Visit us at www.retireonyourterms.ca