By Paola Loriggio, The Canadian Press - Tuesday, December 25, 2012 - 0 Comments
TORONTO – Dwindling pension benefits are forcing many Canadians to rethink how they’ll spend…
TORONTO – Dwindling pension benefits are forcing many Canadians to rethink how they’ll spend their golden years, but that doesn’t necessarily mean giving up their dreams of a sun-soaked retirement.
Some experts say that with proper planning, uprooting to an exotic locale can actually help cash-strapped seniors stretch their retirement dollars.
Aside from milder temperatures, they say many of the destinations favoured by Canadians — including parts of Mexico, Panama and Costa Rica — offer another advantage prized by those on a fixed income: a lower cost of living.
“It’s sometimes assumed that an international retirement vision or lifestyle is something that wealthy people pursue,” said Rod Burylo, a Calgary-based financial advisor specializing in international retirement.
“The reality is… some people retire to Mexico because it’s so darn cheap,” he said.
“One could reason, therefore, that if the economy suffered and their finances suffered, they may be more inclined to retire to Mexico because… they could have a better quality of life than they could have here.”
Many Canadians are having to make tough financial choices — including prolonging their careers or downsizing their homes — in preparing for retirement as debt-ridden governments and companies scale back benefits.
While financial considerations alone are rarely enough to prompt a drastic change of scenery, they often play an important role in the decision-making process, according to a recent survey by the BMO Retirement Institute.
The survey by one of Canada’s largest banks found more than 70 per cent of Canadians aged 45 or older have given thought to where they want to live out their golden years.
But it also found that while many fantasize about retreating to faraway lands, just over 10 per cent of respondents said they were willing to follow through and leave Canadian soil.
“I think you get people moving abroad for two reasons,” said Brian Burlacoff, a financial advisor with Sun Life Financial.
“You get a proportion of people who do want to spend time very purposely outside of Canada — snowbirds, for example, in Florida or Arizona — (and) they have a plan for that,” he said.
“But the other group that you get moving away are people that have no plan and they’re kind of drawing at straws because they have to find a place that’s less expensive to live in order to carry out their retirement objectives.”
That kind of “reactive” move, he said, is similar to trading a downtown Toronto lifestyle for a more affordable one in a neighbouring suburb.
But unlike a simple hop across municipal borders, crossing national boundaries can have serious tax and health care implications, he warned.
And even regions where the average day-to-day costs are low can drain the savings of those without a clear budget plan, he said.
A guidebook published by the Department of Foreign Affairs lays out the potential pitfalls for those looking to retire abroad, from the loss of Canadian citizenship or residency — and the resulting loss of health coverage — to the intricacies of foreign tax systems.
“Many developing countries lack the resources to collect taxes on foreign-source income, so they compensate by imposing high consumption taxes or import duties,” the document reads.
“Make sure you take into account all taxes, duties and fees, as well as the withholding taxes you will pay on income originating in Canada.”
Burlacoff and Burylo both recommend consulting an advisor who understands the specific challenges involved, and keeping in touch throughout the preparations and after the move.
At 61, Kerry Strayton believes he’s still up to a decade away from retirement, but that hasn’t stopped the Richmond, B.C., resident from getting a head start on his plans to retire abroad.
He’s already “actively researching” possible destinations for him and his wife, such as Colombia, Uruguay and Thailand — places with a pleasant climate and a thriving cultural scene, that he says are accessible enough that their son and daughter will be able to visit.
Moving seems like a necessity for the couple, whom Strayton says will have to live off their savings and his wife’s “small, very modest” pension given that his employer doesn’t offer a pension plan of its own.
He estimates it would cost roughly $1,500 a month in one of his chosen destinations to keep the same standard of living that would cost $2,500 in Richmond.
“To be honest, living in this part of the country in particular, which is very, very expensive, it’s hard to see how we would manage to have at least some kind of reasonable lifestyle,” he said.
Many unknowns remain: for one thing, the couple hasn’t decided whether to make a permanent move or take the more popular snowbird route.
But with several more years of squirrelling away savings ahead, the pair has some time to figure it out.
And in the meantime, Strayton said, they’ll be checking out the top contenders to see which one could eventually become their new home.
By Julia McKinnell - Tuesday, January 24, 2012 at 11:40 AM - 0 Comments
No-frills advice for investors from a very frank financial planner
Selling stock when it’s going down and buying when it’s going up is irrational, writes Carl Richards, a ski fanatic from Park City, Utah, whose new book The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money is full of ironic advice like, “Don’t just do something, stand there!”
“When the market soars or hits a rough patch,” he writes, “there’s a natural tendency to do something. Fast. Our natural reaction is to sell after bad news (when the market is already down) and buy when news is good (after the market is already up), thus indulging our fear and our greed. It’s an impossible strategy.”
Richards, who is also a certified financial planner, uses the term “behaviour gap” to describe any situation where a person’s behaviour leads to subpar results. For example, if you are lonely, you may feel unsafe, and in an effort to belong, you may buy a new car or some clothes that allow you to blend in. “Meanwhile, you may sacriﬁce your real ﬁnancial security in your half-conscious attempts to achieve emotional security.” He tells his clients, “Find out who you are and what you want. Then you can stop wasting your life energy and your money on stuff that doesn’t matter to you.”
Feeling certain that a stock is a great deal? “Overconfidence is a serious problem,” he writes. “If you don’t think it affects you, that’s probably because you’re overconfident. Fortunately, we can do something about it. We can recognize that we’re not as smart as we think we are. The next time you’re about to make an investment decision because you’re certain you’re right, take time to have the ‘overconfidence conversation.’ Find a spouse, friend, or anyone you trust, and walk them through your answers to: what impact will it have if I’m wrong? And, have I been wrong before?”
Speaking of advice, ignore it, writes Richards. “Let’s face it, most of the advice we give and get is useless or worse. People tend to give advice that’s based on their own fears, their own experiences, their own motivations.”
Following a tip you’ve read about is “just dumb.” If you read about it in The Economist, a magazine that sells more than a million copies a week, so did “a whole bunch of people who think they are being clever in exactly the same way at exactly the same time.”
When planning for retirement, don’t get hung up on how much money you’ll need to buy your dream house, he urges. “Just make sure there’s enough in the budget to visit the kids, pay your golf club dues, and maybe see a marriage counsellor when things get bumpy.”
If you’re routinely buying or selling at the wrong time, Richards suggests one alternative is to swear off the stock market forever. “I’m not kidding. Whatever the experts may claim, steering clear of stocks isn’t stupid.”
Or if you’re constantly worrying and fiddling with stocks, try going on an information fast. “We can check the performance of our stock portfolio in the middle of the night, on vacation, at our daughter’s wedding. The trouble is it often makes us feel worse—and eventually we act on our fears.”
Richards, the founder of Prasada Capital Management, confesses that he doesn’t know when it is a good or bad time to buy, and this frustrates friends and family. “It’s bad enough that I don’t know where the market is going. People are still more confused when they find out I don’t even care. Believe it or not, the ability to build and protect wealth is often inversely related to knowing what’s going on in the market. I tell my clients: it’s a terrible idea to try to predict the market’s movements. Worse, it makes people anxious—and anxious people screw up.”
Focus on personal goals, he writes. If your financial goal is to send the kids to college, “tracking the performance of the Dow this week is not going to help you reach that goal.”
He tells the story of an older woman, worried how events in Lebanon might affect her portfolio. “I told her two things. ‘First, Lebanon isn’t going to play a major role in what happens to you. Second, there is not a thing you can do to inﬂuence events in Lebanon.’ Then I asked her, ‘Given those two facts, why are we talking about Lebanon?’ ”
By the editors - Tuesday, March 8, 2011 at 10:21 AM - 1 Comment
A substantial portion of Canadians have not put very much thought into their financial future
Many Canadians seem to be feeling lucky. But are they smart enough to know that feeling lucky isn’t enough?
As Senior Writer Anne Kingston reports, lotteries have become an integral part of Canadian life. So much so that almost a third of Canadians facing retirement recently told an Environics/TD Waterhouse poll they expect lottery winnings to support them once they quit working. Another poll by another bank showed more people were relying on lottery winnings for their golden years than on support from their children.
Whether all this is simply wishful thinking, or reflects the absence of coherent plans, it seems clear a substantial portion of Canadians have not put very much thought into their financial future.
In fact, there’s ample evidence many Canadians are making financial plans based largely on self-delusion and blissful ignorance. A recent report from Statistics Canada revealed that over half of Canadians planning to buy a house figure the only expense they face is a down payment. Anyone who has ever bought a house knows these folks are in for a big surprise. And while 70 per cent of Canadians say they are confident they will save enough for a comfortable retirement, only 40 per cent have a reasonable idea of how much money that requires.
With personal debt at worrisome levels and mounting evidence that governments will be less able to fund retirement in the future, Canadians need to reverse course and take greater control of their own finances. With this in mind, recent interest in teaching financial literacy in schools seems well-timed.
This week, Ontario announced a new set of student resources, developed in partnership with the Ontario Securities Commission and the Investor Education Fund, to promote financial literacy in Grades 4 to 12 for the coming school year. Alberta and Manitoba are making similar changes to their curricula. This provincial activity reinforces recommendations made last month by the federally commissioned Task Force on Financial Literacy that said “financial education needs to be provided in the school system” and called on Ottawa to help make this happen.
By Chris Sorensen - Monday, December 6, 2010 at 9:40 AM - 3 Comments
Lessons in the way millionaires make (and sometimes lose) their money
On an evening earlier this year, billionaire investor Michael Lee-Chin stood before an audience of elegantly dressed men and women inside an opulent 32,000-sq.-foot mansion in Oakville, Ont., an affluent town just west of Toronto. He had been invited by a developer to share investing tips with potential buyers in a luxury condo project on the sprawling $35-million Edgemere Estate, a clever way to attract the type of people able to spend up to $6.8 million for a single lakefront unit.
Though a contrarian investor (Lee-Chin doesn’t believe in broad-based, diversified holdings), many of his insights could have easily been applied to Canadians of any means—buy into a few high-quality businesses, understand what you own, and invest for the long run. But others were clearly aimed at the well-to-do crowd before him. “When you borrow from the bank, make sure you borrow enough money so when there’s a problem, the bank is worried, not you,” Lee-Chin said with a loopy grin. The audience, largely tanned and sipping wine, responded with hearty guffaws and knowing nods. He was only half-joking, mind you, having at age 32 convinced a bank manager to loan him $500,000, which he used to buy a stake in Mackenzie Financial that was eventually parlayed into a personal fortune.
By Jason Kirby - Wednesday, December 10, 2008 at 6:04 PM - 3 Comments
BY JASON KIRBY
Starting in 1998 if an American family had socked away $100 a month for retirement or savings, which investment strategy would have produced the best returns as of now left you better off as of now—stocks, bonds, a balanced portfolio, or simply stuffing the cash under a mattress? As this short video from the Economist shows, Sealy and Serta beat out equities and ETFs in the end. While this type of analysis is fun, it obviously overlook the power of compounding as well as the corrosive effects of inflation. Even so, this simple clip sums up the gargantuan task the financial planning industry is going to face as it tries to win back peoples’ trust.
A classy, understated letter to the 400 billionaires on Forbes magazine’s latest list of the richest Americans
By Scott Feschuk - Wednesday, November 26, 2008 at 5:44 AM - 3 Comments
Have you lost weight? No? Well, you could have fooled me because you are looking fine. Powerful. Strong. Virile enough to tear in half a phone book! (Mr. Gates, please substitute “phone book” with “cocktail napkin.”)
Just FYI, you’ve probably heard that money is the root of all evil – but did you know it is also the root of most cancer and some leprosy? Seriously, the stuff is toxic. Here, let me hold it for you.
No? Fine. But that doesn’t change the fact that society expects you in these trying times to donate a substantial percentage of your wealth to the less fortunate. Everyone’s doing it. But here’s the crucial information you need to know: curing fatal diseases is difficult, whereas it is relatively easy to cure my lack of a summer home.
Come on. As the 400 richest Americans, you have a responsibility to give back to your community. And technically I’m part of your community now that I’m hiding in the back seat of your car. (If the people from the collection agency call, tell them I’m in a meeting in your seatback pocket.)
What’s that you say? You don’t need me on the payroll because you already have Yes men who agree with everything you say? Wow, is that really all they do? Just agree? Because that’s an insult to sycophancy. I will agree with you and then punch in the larynx anyone who doesn’t. I will agree with you with an enthusiasm and terrifying berserker rage that will remind you of a lion on an arthritic wildebeest or Kirstie Alley on a Continue…