Buying Time E-Book

Dick Diamond

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2015

Seitenzahl: 433

Beschreibung

DO EVERYTHING YOU WANT, AND STILL COVER EVERYTHING YOU NEED, IN RETIREMENT. Buying Time begins where most other retirement books end. Instead of covering how to accumulate money for your retirement, it gives you direction from that point forward-how to draw upon your assets most efficiently to create the income you will need throughout retirement. It provides an integrated approach to planning your income in retirement, so that you can do everything you want and still cover everything you need. Buying Time will help you to make better use of your resources, and make the best of your prime retirement years. * Explains how to set your lifestyle objectives and plan for the best use of your money in retirement. * Cover different strategies for different stages of retirement, so that you can make the best of your prime years while still providing for contingencies and long-term health considerations. * Fully updated, this revised edition includes information on: adjustments in tax rates and tax credits; new and amended tax legislation; major changes to the pension income-splitting rules; new financial products and investment options for people in retirement; and more. * A proven, integrated, four-part approach to retirement planning: structuring and planning income, investing during retirement, health-risk management, and wealth transfer. * Offers advice on how to work with an advisor to create and implement a plan that's right for you. * Includes practical examples, illustrations, forms, and checklists. Buying Time offers practical, proven strategies that readers can apply at every stage of retirement, from the "golden years' to the "olden years."

Leseprobe

Table of Contents

Title Page

Copyright Page

Dedication

Acknowledgements

Preface

Introduction

A FEW QUICK NOTES

HOW TO USE THIS BOOK

PART ONE - In Preparation

CHAPTER ONE - Fundamentals of the Prime Approach™

THE TIME HUB AND THE MONEY HUB

BUYING TIME

THE SABOTEURS—INFLATION AND TAXES

THE DOUBLE BITE ON YOUR INVESTMENT RETURNS

THE FOUR Ds OF EFFECTIVE TAX PLANNING

SUMMARY OF THE PRIME APPROACH

PART TWO - The Four Planning Channels

CHAPTER TWO - The Structural Plan

INITIAL CONSIDERATIONS

SECTION 1: - Government Retirement Benefits

SECTION 2: - Pension Plans and Locked-In Accounts

SECTION 3: - Registered Retirement Savings Plans (RRSPs) and Registered ...

SECTION 4: - Non-Registered (Open) Assets

CHAPTER THREE - The Investment Portfolio

THE PURPOSE OF YOUR CAPITAL

RISK MANAGEMENT

CAPITAL LOSS

INVESTMENT LOSS

REDUCING RISK

YOUR PARENTS’ INVESTMENTS

SUMMARY OF THE INVESTMENT PORTFOLIO CHANNEL AND THE PRIME APPROACH

CHAPTER FOUR - Health-Risk Management

DEFINE YOUR OBJECTIVES

CRITICAL ILLNESS (CI)

LONG-TERM CARE (LTC)

SUMMARY OF THE HEALTH-RISK-MANAGEMENT CHANNEL AND THE PRIME APPROACH

CHAPTER FIVE - Wealth Transfer

THE COMPOSITION OF YOUR ESTATE

STAGES OF TRANSFER

PLANNING FOR WEALTH TRANSFER

METHODS FOR TRANSFERRING YOUR ASSETS

WEALTH TRANSFER AT DEATH

TAXATION ON ESTATES

USING DISCOUNTED DOLLARS TO FUND THE TAX LIABILITY

USING LIFE INSURANCE

REDUCING TAXES AND OTHER ESTATE EXPENSES

ADDITIONAL ESTATE-PLANNING TOOLS

SUMMARY OF THE WEALTH-TRANSFER CHANNEL AND THE PRIME APPROACH

PART THREE - Putting the Prime Approach to Work

CHAPTER SIX - Conclusion

IN SUMMARY

CLOSING WORDS

DATA FORMS

INFORMATION GATHERING—PART ONE

INFORMATION GATHERING—PART TWO

YOUR TIME HUB PRIORITIES

YOUR MONEY HUB PRIORITIES

YOUR RETIREMENT BUDGET

HOUSEHOLD NET WORTH STATEMENT

FOR ADVISORS

Index

AUTHOR CONTACT AND WORKSHOP INFORMATION

Copyright © 2008 by Daryl Diamond

All rights reserved. No part of this work covered by the copyright herein may be reproduced or used in any form or by any means—graphic, electronic or mechanical without the prior written permission of the publisher. Any request for photocopying, recording, taping or information storage and retrieval systems of any part of this book shall be directed in writing to The Canadian Copyright Licensing Agency (Access Copyright). For an Access Copyright license, visit www.accesscopyright.ca or call toll free 1-800-893-5777.

Care has been taken to trace ownership of copyright material contained in this book. The publisher will gladly receive any information that will enable them to rectify any reference or credit line in subsequent editions.

This publication contains opinions and ideas of the author. They are not presented to provide a basis of action for any particular circumstances without consideration by a competent professional. The author and publisher expressly disclaim any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, direct or indirect, of the use or application of the contents of this book.

Prime Approach is a registerd trademark.

Library and Archives Canada Cataloguing in Publication Data

Diamond, Daryl, 1953-

Includes index.

eISBN : 978-0-470-73928-0

1. Retirement income‚—Canada—Planning. 2. Retirement income—Canada. I. Title.

HQ1062.D.024’014 C2007-906090-0

Production Credits

Cover design: Ian Koo

Interior text design: Mike Chan

Printer: Tri-Graphic Printing Ltd.

John Wiley & Sons Canada, Ltd.

6045 Freemont Blvd.

Mississauga, Ontario

L5R 4J3

TR

To Karen, Geoff, and Kelly For all of their support and encouragement

Acknowledgements

The author would like to gratefully acknowledge the following for their generous cooperation and assistance in helping to put this project together.

John Wiley & Sons, Inc.

The Knowledgebureau

Michelle Bullard, Editor

Dynamic Mutual Funds

CANNEX Financial Exchanges Limited

Morningstar Canada

Franklin Templeton Investments

Thank you for your support and your enthusiasm for this project.

Preface

The purpose of this book is to provide an opportunity for retirees and those soon to retire (otherwise known as the baby boomers) to experience a more fulfilling and meaningful retirement. We will examine how to make the most efficient use of your time and your assets during your retirement years.

In the four years since this book was first published, there have been many changes. Tax rates and tax credits have been adjusted. There is new and amended taxation legislation, including the most exciting of all—the pension-splitting rules for retirees. And new products have been introduced to provide retirees with investment options they previously did not have. These changes allow us the opportunity to examine new strategies and solutions to help you make the most efficient use of the assets and benefits you have taken a lifetime to accumulate. It is important to remember that even a few small improvements, applied to a block of capital and multiplied over a number of years, can add up to a very large number.

I have been in the financial services business for more than 30 years. The last 18 of these have been dedicated to helping people consolidate their retirement income in the most efficient manner from the assets they have saved and the benefits they have earned. This includes individuals who are within 10 years of a target retirement date, those about to retire, and those who are already retired. Our business practice, which is composed of qualified planners and support staff, is dedicated to serving this group of people.

Most people retire only once, but we have had the experience of being able to retire several hundred times through the clients we serve. This has afforded us the opportunity to live through the experiences of many people and has allowed for some of the conclusions that form the planning concepts and strategies found within this material. There is much to be said for knowledge and information, but there is no substitute for experience and the resulting insight when it comes to providing meaningful advice and direction.

The bottom line is that our experience has shown us that people currently in their retirement years have a very different attitude about spending and using their assets than does the generation that follows them. Within the group of current retirees, we see tremendous waste in terms of asset use and taxation, and too many missed opportunities. Having experienced many retirement scenarios over the last 18 years, we have concluded that there is a way for retirees to make better use of their resources, readily meet other financial objectives, and take advantage of the time afforded them during their best retirement years. Stated another way, retirees could do a much more effective job in spending their assets while covering off health-risk and wealth-transfer objectives.

Time and time again, we see people who did not do the things they wanted to do after retirement because suddenly either they or their spouse started to lose their health, needed care, or passed away. We see large retirement accumulations sitting idle, held by people who do not even spend their government benefits on a monthly basis. This in turn leads to larger personal liabilities to fund their long-term care and larger-than-necessary income and estate taxes.

We hope to bring together various concepts and strategies and, in doing so, show how a comprehensive planning process can help you achieve more enjoyment from your retirement years. We will also show you how to make more efficient use of the assets you have to create the income you need. Given the book’s space constraints, it will not be possible to cover off all the planning areas in the type of detail that would be possible if this book was dedicated to simply one particular planning stream. This conceptual resource will, however, assist people, in conjunction with their advisors, to investigate the individual and integrated planning concepts available.

We will accomplish this by bringing together the various multidisciplinary planning channels and by laying the groundwork for meaningful discussions between you and your financial advisor. It is not designed to be a “do it yourself” book. It is intended, by facilitating more comprehensive communication between individual and advisor, to be a “do it properly” and “do it better” manual.

The contents of this book apply to the baby boomers and their currently retired parents. In many instances the principles involve both groups simultaneously since there are familial responsibilities and financial links between the generations. Yet there are also many differences between these two groups, especially when it comes to the value and use of money.

There is no question that each retirement situation is unique. The material presented in this book is based on the general trends we have witnessed through our work. We are able to share with you our experience and insight into this process. In addition to this, we have a strong conviction about where we, as a nation with an increasing number of aging citizens, appear to be heading and the resulting planning issues that need to be addressed, and we will touch on these subjects throughout the book.

Introduction

This book begins where most other retirement planning books end. Many well-written books deal with the subject of accumulating money for your retirement; however, there are very few that give direction from that point forward—that time when you are drawing upon your assets to create the income you will need in retirement.

We may ultimately spend from one-quarter to one-half of our adult life in retirement. It is very common for people to think of retirement as one phase in life, when in fact it is comprised of many different stages over a 20- to 40-year period. Some of these stages may include:

• Starting your retirement

• The early or prime years of retirement

• Children leaving home or moving away

• Arrival of grandchildren

• Changes in your health

• Disability or failing health of a spouse or partner

• Caring for adult children

• Caring for aging parents

• Changing your place of residence/type of accommodation

• Breakdown of marriage

• Second marriage and a resulting second family

• Death of friends

• Loss of a spouse or partner

The stages identified above tend to involve health-related events, changes in family situation, and sometimes both. We refer to these as life-altering events. The reason we call them this is that what follows one will always be different from the way things were before the event occurred. It is also important to note that the vast majority of retirees will go through any number of these events in their lifetime. Granted, some of these events can and do occur before we retire, but most of the events listed above are typically associated with aging. These are retirement realities, and they need to be included in the setting of objectives, the consideration of asset use, health-risk management, and wealth transfer.

The fact that these changes impact our situation is one of the reasons why we emphasize using an advisor, someone with whom you discuss and work upon your financial, lifestyle, investment, and health-risk management issues. The main reason for using an advisor is because the creation of a plan is not what makes things happen. It is the implementation of the plan that makes things happen. Your advisor’s role should also include assisting you to take the steps necessary to put the plan into action and turn your objectives into reality. Your relationship with your advisor, and the role he or she plays, will constantly change, just as your needs change through the various stages of retirement.

With the boomers and their parents we have one retired generation and one about-to-retire generation. While they have retirement in common, they also have some significant differences between them. Compared to their parents, the boomers expect to retire earlier, live longer, and do more in their retirement. However, most do not know how much money they will need to do this, and they are not as financially prepared as they need to be. This book contains technical and practical concepts designed to help you get the most from what you have been able to accumulate. These are proven strategies that work when implemented in conjunction with comprehensive planning.

In working with the parents of the boomers, we find that there is a great deal of inefficiency in how money is used for personal objectives, is taxed by the government, is used to pay for health-related expenses, and is ultimately passed on to future generations. What this book delivers is a combination of technical information and solutions that addresses the different yet connected problems of two generations moving through retirement at the same time. By employing an integrated approach involving four distinct planning channels, it also serves as a blueprint for planning between the generations. There is in excess of one trillion dollars of wealth to be transferred to the baby boomer generation over the next 25 years. How efficiently this is done will have a direct and profound impact not only on the retirement of the boomers, but on the generations that follow. Use this book to make a positive difference for you, your heirs, and future generations.

A FEW QUICK NOTES

We will use the term “couple” throughout descriptions in this book to refer to married couples, common-law couples, or individuals.

Also, we will use the term “advisor,” not “advisors,” although you may have more than one person with whom you work. We will not tell you that this is a mistake, but we strongly suggest that there is particular merit in coordinating all of your planning activities with one person or institution. We refer to it as consolidation and believe it delivers more effective planning and better results.

HOW TO USE THIS BOOK

There are three key steps you must take in order for this book to have the potential to make your retirement more fulfilling. They are:

Gain Awareness of the Process—and Yourself

The technical and strategic information in this book will provide you with a general knowledge base and understanding of retirement income planning. The exercise of establishing your objectives and priorities will allow you, and your partner, to better understand and emotionally relate to what it is you wish your retirement experience to be. Through our integrated planning process known as the Prime Approach™, you will find out how you can fulfill your objectives and enhance your best retirement years.

Align Yourself with an Advisor

The use of an advisor is a significant factor in successful planning. You may want to engage the services of someone who can help you in all four of the planning channels involved in this process. To assist you and your advisor in the planning process, we have included two important tools in the back of this book. First are the data forms. These will assist you to gather all of the information you will need to provide to an advisor in order for a comprehensive retirement income plan to be written for you. Second is a checklist that pulls together the key points covered in this book. Whether you are just having a plan constructed or you are reviewing and improving an existing plan, the checklist is an essential and valuable tool in the integrated planning process.

Our recommendation that you work with an advisor is not in any way to suggest that you are inept or unable. It is, however, to contend that you are better served over time by using the services of a professional to help you along this journey.

Put the Plan into Action

All the knowledge, awareness, and planning in the world is not of much benefit unless action is taken. This is also an area where working with an advisor is key. The joint efforts of you and your advisor will help ensure that the action steps you need to take are actually implemented. Just as importantly, the ongoing relationship with your advisor will enable you to make the appropriate adjustments to your financial plan as your priorities change or as life-altering events occur. While it may currently be your desire to handle your retirement planning on your own, there will likely come a time when either this will no longer be of interest to you or you will not be fully capable of handling your own affairs.

PART ONE

In Preparation

CHAPTER ONE

Fundamentals of the Prime Approach™

THE TIME HUB AND THE MONEY HUB

Everyone has a Time Hub and a Money Hub through which respective time priorities and money priorities are defined. The Money Hub pertains to those assets, benefits, and entitlements that will be used to create income, and the priorities we attach to their use. It is segmented into income priorities and asset priorities. The Time Hub, on the other hand, is composed of key personal needs. The priorities within this hub are driven by a combination of emotional and physical well-being. Both hubs are dynamic in size and driven by the factors of reality—the income/asset relationship to spending for the Money Hub, and the health, time, and emotional priorities for the Time Hub.

The Money Hub can be objectively and technically planned. The Time Hub, however, is the unknown in the equation because the most dramatic, life-altering events occur here, and they are primarily driven by emotion. Although the two hubs work in tandem, the priorities of the Time Hub are ultimately what determine the priorities of the Money Hub. It is the use of assets and income in relation to the Time Hub objectives that is the central premise of the Prime Approach to retirement income planning.

Establishing Your Time Hub Priorities

Whether you think of retirement as “the long holiday” or a “never-ending weekend,” it is the period in our life when we have greatest discretion as to how to use our time. What do you plan to or want to do with your time when you have the choice? It is the Time Hub priorities that will influence these decisions.

• LOVE

This is the strongest emotion we have. To what extent does this factor drive the prioritizing and setting of your objectives? Is the focus here on love of spouse, children, grandchildren, self, someone else, or something else?