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FINANCIAL FACELIFT: With ambitious retirement goals, will this couple have enough to meet their lifestyle needs?

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Below you will find a real life case study of a couple who are looking for financial advice on how best to arrange their financial affairs. Their names and details have been changed to protect their identities. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

gam-masthead
Written by: DIANNE MALEY
Special to The Globe and Mail
Published January 18, 2019

Shawn and Sharon plan to retire together in a year or so, leaving jobs that pay a combined $195,885 a year. He is 59, she is 56.

Shawn has a defined benefit pension plan that will pay him about $21,000 a year starting in 2020. Both have substantial sums in defined contribution pension plans, which depend on financial market performance for their value. Shawn’s is from a previous employer.

They have a house in Saskatchewan with a mortgage and two grown children, one of whom is living at home. They are helping one of the children pay off a student loan.

Their retirement goals are ambitious: winters down south, frequent trips to visit family and some overseas travel, as well. This leads them to a spending target of $90,000 a year for the first 10 years, falling thereafter. Their plan to retire early would require them to draw heavily on their DC pension plans in the first few years.

We asked Matthew Ardrey, a vice-president and portfolio manager at TriDelta Financial in Toronto, to look at Shawn and Sharon’s situation.

What the expert says

Mr. Ardrey looks at how Shawn and Sharon would fare if they retired in a year and a half – on June 1, 2020 – and deferred Canada Pension Plan benefits to age 65 as planned.

Further saving potential is limited. While they show a surplus in their cash-flow statement, this money is going to travel and helping their son pay off his student loan, the planner notes.

When Shawn retires, he will get $21,000 a year from his DB pension plan. They will retire with a mortgage and line of credit outstanding, Mr. Ardrey notes. The mortgage of $126,000 is scheduled to be paid off by November, 2024, and the $10,000 line of credit by October, 2020.

“Once they retire, they will need to draw on their registered assets almost immediately,” Mr. Ardrey says. Their DC pension plans are a bit different from most. Usually DC pension plans are converted into locked-in retirement accounts (LIRA) when a person retires and then to a life income fund (LIF) when they begin drawing a pension. Sharon’s DC plan can stay with the Saskatchewan government’s Public Employees Pension Plan administration and be transferred to what is known as a variable pension benefit account. Or it can be transferred out to what is known as a prescribed registered retirement income fund (PRRIF). Shawn’s locked-in retirement account (from his DC plan) can be transferred into a PRRIF as well.

The advantage of a PRRIF is that you can take locked-in money from a pension (a LIRA) between the ages of 55 and 72 instead of putting it into a LIF, which has maximum withdrawal restrictions. “So essentially, it is allowing locked-in money to be used like regular RRIF money” from an RRSP, the planner says.

“The advantage here is that there are no maximum withdrawals in these accounts, allowing them the necessary financial flexibility to draw on their savings,” he says.

But are their savings enough to last a lifetime?

Shawn and Sharon are currently spending about $76,000 a year once debt repayment and savings are subtracted. They would like to raise this to $90,000 a year when they retire to allow for additional travel in the first 10 years.

“Based on these assumptions, Shawn and Sharon will not be able to achieve their goal,” Mr. Ardrey says. They will fall short in their later years, when Shawn is about age 85. They would still have their house, which they could sell, but “I much prefer to leave the home intact as a financial cushion to cover unexpected expenses,” the planner says.

They could alter their plans, working longer, saving more and spending less in retirement. Or they could take steps to improve their investment returns after fees. Leaving their goals intact, Mr. Ardrey looks at how they might fare if they sought professional investment management for their entire portfolio, their personal savings and their combined work pension money.

As it is, their RRSPs are 75 per cent in stocks, which is high, given how close they are to retiring, he says. Instead, the planner suggests they add some alternative income investments to their portfolio, something they can do by hiring an investment counsellor (portfolio manager) with expertise in the area. Alternative income funds include such strategies as private debt, accounts receivable factoring and global real estate.

Doing so should boost their investment returns to about 6.5 per cent, or 5 per cent a year after subtracting investment costs of 1.5 percentage points. “In Shawn and Sharon’s case, the value [in alternative investments] is not only the increased return, but also the reduction in equity exposure, reducing the overall portfolio volatility.”

This compares with historical returns of 4.25 per cent before fees of 0.5 per cent on their DC pension money and 4.55 per cent before fees of 2.2 per cent on their personal savings. “After inflation of 2 per cent, there is very little real return in their personal strategy,” the planner says.

The effect of a 5-per-cent net return on their retirement plan would be dramatic, Mr. Ardrey says. “Instead of falling short of their goal and running out of money when Shawn is 85 they would have more than enough to meet their lifestyle needs.” They would even be able to increase their spending by $9,000 a year if they chose to.

Client situation

The people: Shawn, 59, and Sharon, 56

The problem: Can they afford to retire early and travel without running out of savings?

The plan: Either adjust the goals or take steps to improve their investment returns after fees by hiring a professional money manager.

The payoff: With higher returns, they could well meet their original goals.

Monthly net income: $10,800

Assets: Cash $5,000; his TFSA $10,000; his RRSP $90,000; her RRSP $25,000; his DC pension plan $420,000; estimated present value of his DB pension plan $435,755; her DC pension plan $585,000; residence $450,000. Total: $2-million

Monthly outlays: Mortgage $1,980; property tax $330; home insurance $125; utilities $305; car lease $650; insurance, fuel $350; grocery store $700; clothing $100; line of credit $500; gifts, charitable $245; vacation, travel $800; dining, drinks, entertainment $1,450; personal care $350; pets $350; other personal $60; health, life, disability insurance $185; phones $160; TV, internet $150; TFSAs $400. Total: $9,190. Surplus of $1,610 goes to student loan and travel spending.

Liabilities: Mortgage $126,000; line of credit $10,000. Total: $136,000

Want a free financial facelift? E-mail finfacelift@gmail.com.

Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
matt@tridelta.ca
(416) 733-3292 x230

Q4 TriDelta Investment Review – Out with the old and in with the new

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Overview

Out with the old and in with the new
Q4 and in particular December, was a period to forget from an investment perspective.

An example of the damage includes the following quarterly returns in their home currency:

S&P 500 (US) -14.6%
TSX (Canada) -11.1%
Euro Stoxx 50 -11.7%
China Stocks -12.1%
Japan Stocks -16.4%
Oil Prices -40.0%
CDN Preferred Shares -11.6%

Fortunately, TriDelta clients were cushioned somewhat from the damage by three main factors:

  1. A diversified portfolio that is not close to 100% in stocks.
  2. Exposure to our select group of Alternative Investments that were mostly up in the range of 1% to 2.5% on the quarter.
  3. The Canadian dollar decline helped to boost the return of foreign investments.

Most TriDelta clients ended the quarter down in the range of 3% to 5% depending on their exposure to stocks and overall asset mix.

What do we see in 2019 and why

As mentioned last quarter, the recent pullback has been caused by:

  • Rising interest rates – which lead to higher borrowing costs for companies, and higher returns on lower risk investment alternatives like GICs (although they remain low historically)
  • U.S.-China Trade Wars (and broader trade conflicts globally)
  • Fears of higher inflation
  • Declining earnings growth in the U.S. following the one time benefit of a new lower tax policy.

We are now fairly positive on stocks for the short term – and the rationale goes back to the four points above.

  1. We see interest rates in a stable range in 2019 with few if any rate hikes. While this is somewhat a comment on the general economy, we believe that stock markets will mostly react positively to news of slow to no rate hikes.
  2. While the U.S.- China Trade war is the hardest to predict for a variety of reasons, we do believe that there is a good chance of a “deal” taking place in the next few months and the stock market reacting positively on a global basis. The Chinese stock market fell 24% in 2018. U.S. markets were negative. Both countries are looking for a way to show investment growth in 2019 and the one area they can control is the negotiations and substantive agreements.
  3. As Oil prices fell 40% in the quarter, this has had a meaningful impact on inflation. Central banks in Canada and the U.S. like to keep inflation in the 2% range. Canadian inflation dropped to 1.7% in November, and U.S. inflation rate was at 2.2%. These rates ease some fears of higher inflation.
  4. The 20 year average of stock market valuations in the U.S. as measured by price/earnings, is 15.8. On December 31st it stood at 14.4 times earnings, almost 10% below its average. The TSX has a forward price earnings ratio of only 13 times earnings, compared to its 10 year average of closer to 15 times earnings. For the first time in several years, stock markets are ‘undervalued’ with Europe, Japan and Emerging Markets trading at even lower multiples.

The last reason that we are more positive about stocks is captured in the chart below. The chart looks at the S&P500 since 1940, focused on the seven worst quarters it has experienced. It then looks at the market performance in the one year, three year and five year periods after that terrible quarter.

Most investors would have been happy with the one year return in six of those seven scenarios, and happy with seven of seven scenarios for three year and five year returns.

Essentially, the stock market tends to go up in the long term. When it has a particularly bad period, it tends to bounce back, based in part on simply catching up to fair value.

Our positive outlook is not blind to some of the prevailing risks, which include:

  • higher U.S. borrowing costs
  • increasingly high debt levels (both government and consumer)
  • political gridlock
  • unwinding of previous stimulus

Nevertheless, we are looking to see decent stock market growth in 2019.

Our fearless predictions for 2019:
  1. Better than average stock market returns in most major markets including Canada and the U.S., barring a breakdown on global trade.
  2. Interest rates being mostly flat with maybe one ¼% increase in both Canada and the U.S with a real possibility of an interest rate decline in Canada before the year is out.
  3. The Canadian dollar being fairly flat vs. USD, but being tied more to oil than we have seen in the recent past.
  4. Oil prices rising, but only slowly.
  5. Preferred Shares having a strong year, bouncing back from their late year steep declines.
  6. Marijuana stocks will see a general decline overall as high valuations and uncertain revenues work their way through, but with increasing gaps between the winners and losers. In fact, we expect to see several bankruptcies in 2019 among the weak players in the market, and at least one major blow up of a more established firm (we just don’t know which one).
  7. Corporate bonds outperforming Government bonds.

Based on these short term beliefs, we have reduced our cash weightings in our stock funds down to essentially fully invested in both our Pension and Growth funds.

In the Growth fund, which is more active in terms of adjusting industries, we will be adding to Energy and Industrials, while reducing Telecoms and Utilities.

In the Fixed Income world we are looking to add some High Yield Debt and Preferred Shares to the fund.

How Did TriDelta do in 2018?

Overall, most clients had returns in the 0% to -5% range on the year depending on their individual asset mix. Given the major stock market declines, most of our clients did much better than the average Canadian investor for the year.

Our 2018 returns were as follows:

TriDelta Pension Pool (Stocks) -2.2%
TriDelta Growth Pool (Stocks) -8.1%
TriDelta Fixed Income Pool -2.2%
TriDelta High Income Balanced Pool -1.9%
Most Alternative Investments +5.2% to +10.5%
Other news and items of interest
  1. The 2019 Edition of our TriDelta Retirement Income Guide has just been released. It contains a wide range of tips and information on the different sources of retirement income, and how best to draw that income. Ask a TriDelta Wealth Advisor for a copy.
  2. A reminder that now is a great time to top up TFSA’s. They have added $6,000 per person to contribution room in 2019. If you have the funds, January is also a good time to do 2019 contributions to RRSPs, RESPs and RDSPs, as appropriate, as it will help you to have tax sheltering for a full year.
  3. U.S. consumer debt payments as a percentage of disposable income were 9.9% in 2018. That is the lowest rate in over 30 years.
  4. For a 65 year old couple (male and female), there is a 22% chance that a male will reach age 90, a 33% chance that a female will live to age 90, and a 48% chance that at least one person in the couple will live to at least age 90, so investors need to plan for the long term.
  5. According to studies by the U.S. research firm Dalbar, in the 20 year period from 1998 to 2017, the S&P 500 averaged a 7.2% annual return, the U.S. bond market averaged a 5.0% return, yet the average U.S. investor only averaged a 2.6% annualized return. The reason for this underperformance is primarily attributable to too much trading and shifting of portfolios, particularly moving away from risk after stock markets have declined, and too heavily to stocks when markets are peaking.
Summary

As long term investors know, down markets eventually recover and great markets don’t last forever. Right now we believe that we are in the ‘down markets recover’ stage and are acting accordingly.

In the very short term, anything can happen (all it takes is one Tweet). Having said that, most stock markets historically go up 7 years out of 10, and are more likely to go up in the year after having declined. Even for our older clients, there is usually lots of time to recover. There is an old adage that says “Investing is about time in the market, not market timing.”

At TriDelta we will continue to be nimble while focusing on the long-term plan. This would include a steady and diversified asset mix that is built appropriately for the goals of each client, and an eye on tax minimization.

Here is to a better investment year in 2019.

 

TriDelta Investment Management Committee

 

Cameron Winser

VP, Equities

Ted Rechtshaffen

President and CEO

Anton Tucker

Exec VP and Portfolio Manager

Lorne Zeiler

VP, Portfolio Manager and
Wealth Advisor

A proven path to higher and stable returns

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The global equity markets have been very volatile and have understandably rattled investors confidence. The ‘winds of change’ to one of the longest bull markets have arrived and our portfolio safety metrics are being tested.

At TriDelta we set out to construct conservative portfolios designed to deliver in all market cycles for financial peace of mind.

Investors understandably remain nervous as year end approaches and we expect more volatility as concerns over the China trade deal, elevated market valuations and Brexit uncertainty. Other concerns include the inverted yield curve and rising interest rates that may stall any ‘Santa Claus’ rally this year.

At TriDelta Financial we come well prepared and deliver highly diversified portfolios that typically include a significant allocation to Alternative Investments that include global real estate and private debt.

Alternative investments are essentially any asset that is not a public stock, bond or cash security. Alternative investments often provide higher returns than traditional assets by focusing on less efficient or private asset classes, such as infrastructure and private equity.

They can generate stable, high levels of income by investing in private income oriented investments, such as real estate and private debt. Hedge Funds, such as Market Neutral Hedge Funds can also reduce volatility by using sophisticated hedging strategies.

We have long held the view that traditional equity and bond investment portfolios simply do not deliver consistent wealth accumulation. Portfolios require more diversification to ensure uncorrelated, multi-factor protection against downside risk. We manage our clients wealth in the same way pension funds do by strategically building portfolios that include a number of investment types and strategies.

We use stocks, bonds and preferred shares, but also include Alternative Investments such as global real estate, private debt solutions and hedge funds. Alternative investments compliment and add real value to portfolios by:

  • Provide high income
  • Diversification to reduce risk
  • Lowers portfolio volatility
  • Enhances returns
  • Protects capital during market weakness

The major pension portfolios are constructed in a very similar way. Here is an Extract from the CPP Investment Board 2018 Annual Report on how they diversify and reduce portfolio risk:

Diversifying sources of return and risk – the Strategic Portfolio

As noted, we manage the Investment Portfolio to closely match its total absolute risk with that of the Reference Portfolio. But that does not mean that we simply hold 85% of the Fund in equities, or even in equity-like exposures. This would be imprudent, as the portfolio’s downside risk would be almost completely dominated by a single risk factor – that of the global public equity markets.

We can, however, build a portfolio with a superior return profile for a similar amount of risk by blending a variety of investments and strategies that fit CPPIB’s comparative advantages. Each of these strategies offers an attractive return-risk tradeoff of its own, and their addition clearly reduces the dependence on public equity markets.

First, we can invest in a higher proportion of bonds and add two major asset classes with stable and growing income: core real estate and infrastructure. By themselves, these lower the risk of the overall portfolio. This risk saving then allows us to add a wide variety of higher return-risk strategies, such as:

  • Replacing publicly traded companies with privately held ones;
  • Substituting some government bonds with higher-yielding credits in public and private debt;
  • Judiciously using leverage in our real estate and infrastructure investments, along with increased investment in development projects;
  • Increasing participation in selected emerging markets; and
  • Making significant use of “pure alpha” investment strategies, which rely on the skills and experience of our managers.

CPP Investment Board 2018 Annual Report

To help put the current market turmoil into perspective, here are a few opinions from the large US investment firms:

JPMorgan Chase see the pessimism in equity and high-yield bond markets as overdone, as it sees only a 20% to 30% chance of a recession in 2019, with an increased probability in 2020.

The bank’s strategists, led by John Normand, analyzed equity valuations and credit spreads for high-yield bonds in the period leading up to past economic recessions.

The team continues to favor stocks over corporate bonds in developed markets and takes a neutral view on emerging markets.

“It is right to anchor portfolio strategy in a late-cycle framework that anticipates below-average returns into and through the next recession, but we note it is also excessively pessimistic to price so much downside now as equity and HG credit markets are doing,” the analysts wrote.

Goldman Sachs generally believes the bull market will continue in 2019, but it could get choppier as the year continues and investors begin to worry about a recession in 2020.

Here are some of the investment bank’s predictions for next year:
The S&P 500 will rise 5 percent to 3,000 by year-end 2019 (after closing 2018 at 2,850).
Investors should raise cash.
Investors should be defensive.
The market could be in for big trouble from tariffs.

Bank of America ML believes that “the long bull market cycle of excess stock and bond returns is expected to finally wind down next year, but not before one last hurrah.

Their Research team forecasts 2019 to deliver:
Modest gains in equities.
A weaker US dollar.
Emerging markets are cheap and under owned, they could be a big winner in 2019.
Higher levels of volatility.
A notable slowing in global earnings growth.

Morgan Stanley believes US stocks will underperform and Emerging Market stocks will outperform.

They see a number of macro changes as a result of slowing global growth in US and developed markets, rising rates, higher inflation and tighter policy. They believe these shifts will result in reversals of some key market sectors as follows:
US dollar strength will weaken once the Federal Reserve pauses on rate hikes.
US stocks outperformance will change to underperform.
US and European rates will converge.
Emerging markets have underperformed, but will retake the lead and outperform once China easing starts working.
Value portfolios will start outperforming growth.
Emerging market sovereigns will start outperforming US high yield bonds.

The TriDelta Approach:

TriDelta’s Alternative Assets Investment Committee focuses on putting the odds in our clients’ favour by focusing on:

  • Proven managers with strong track records and disciplined investment philosophies
  • Earning more stable returns
  • Generating premium yield in less liquid investments
  • Solutions that lower clients’ portfolio volatility

It is often difficult for investors to access these investments for three reasons:

  1. Alternative Investments are often restricted only to Accredited Investors (those with family income of $300,000+ or an investment portfolio of $1 million+)
  2. Many large Canadian financial firms simply do not make them available to their clients because alternative investments are often more complex and require a specialized skill set to analyze, review and select managers; and
  3. Many of the best alternative managers provide only restricted or limited access to their funds.

At TriDelta Investment Counsel, we solve all of these problems.

As an investment counsellor, we are able to offer these investments to all clients on a discretionary account basis. Alternative investments are a key element of our overall investment strategy.

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CIM, FCSI
Executive VP and Portfolio Manager
anton@tridelta.ca
(905) 330-7448

Real Estate – Is now the right time to downsize?

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By: Vivien Sharon

It was my pleasure to host an exclusive event at Sotheby’s International Realty Canada in Toronto recently.

The subject was: THE BIG QUESTION: IS NOW THE RIGHT TIME TO DOWNSIZE?
Special guests included Ted Rechtshaffen, who discussed income & tax planning for Boomers and Ismail Barmania, a lawyer specializing in estate planning for Boomers. I discussed the real estate choices facing Empty Nesters planning to Downsize.

From a real estate perspective, here are 5 key concerns that Downsizers face:

  • What to do with all our stuff?
  • How do we prepare our home for sale?
  • Where to move to and when should we sell?
  • Will your next move be by choice or circumstance?
  • What is our house worth and can we afford to move?

What to do with all our Stuff?

That is one of the biggest concerns. If you are like most people, you’ve accumulated a lot of “stuff” over the course of a lifetime.

Quite often, with the exception of a few family heirlooms, neither adult children nor grandchildren will be interested in these items.

Here are a few ideas that will make the downsizing process easier:

  1. Make a list of your furniture and household possessions. Decide what things you want to take with you to your next home.
  2. What does your family want? The best way to handle any potential disagreements is to have family members work it out themselves.
  3. What to do with valuable items that neither family nor friends want? Depending on the value, an auctioneer may be your best bet. There are auctioneers, appraisers, valuators and other experts who are knowledgeable.
  4. What can I donate? There are many charities that are interested in donated items that can be picked up or dropped off, usually for a tax receipt.
  5. Who can help? Fortunately, there is a network of specialists such as transition specialists, (downsizers), movers, packers, home stagers, decorators, contractors, etc., who can simplify the process.

I understand your concerns first-hand. I downsized myself, 15 years ago from a large North York home to a city condo.

Specialized Real Estate Agents for the Boomer/Senior Market

In the past 20 years the idea of specialization by real estate agents has become very popular. There are agents who only work with Buyers, some only with Sellers. Then there are agents like myself, who have chosen to make Boomers and the Seniors market a speciality. I have specialized training in working with Boomers, Seniors and their families as a Master-ASA (Master-Accredited Senior Agent).

I have been trained in what is important to this demographic and the extra time that is required when contemplating a late-in-life move.

What has changed in real estate?

If you are like most Boomers and Seniors, you haven’t bought or sold real estate in many years. The basics of the business hasn’t changed, it’s still all about helping make your move (or your family’s move) as easy as possible.

Agency Representation

Prior to 1995 in Ontario and 1994 in British Columbia, all real estate agents were representing the interests of Sellers. This was confusing to Buyers, who thought the agent helping them buy a home was working for them, when in fact, they were working for the Seller. Since the mid-90’s, Buyers are typically represented by an agent they have “hired”, so there is no confusion as to whose best interests the agent is protecting. In all jurisdictions of Canada, a real estate professional is required to present you with a written explanation of how representation works, at the beginning of a working relationship.

Different Commission Models

Sellers pay the Commission to the Listing Brokerage (for Sellers) and also to the Co-operating Brokerage (for Buyers) upon closing.

When dealing with such a large investment as your home, which is also a huge nest egg, it would be penny-wise and pound-foolish to base your decision solely on the fee. As with professionals in all areas of life, you really do get what you pay for.

Who Pays Land Transfer Tax?

Buyers of houses and condos pay Land Transfer Tax when they purchase a property. Each province has its own set of rules when it comes to Land Transfer Tax. Sellers never pay. Your lawyer will arrange for land transfer taxes to be paid when the deed to the new home is transferred in your name on closing day. The cost of your land transfer tax is a percentage of your home’s value.

The Paperwork

There is a significant amount of paperwork when you embark on a real estate transaction, whether buying, selling or both. A real estate agent will orient you on all the required paperwork. The forms are standard on a provincial basis, so real estate lawyers will be very familiar with them.

Please contact me if you have any real estate questions or concerns. I am happy to help.

Vivien Sharon, BA, Master-ASA, Seniors Real Estate
Real Estate Broker
Sotheby’s International Realty Canada
vsharon@sothebysrealty.ca

Meditation

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I have always been fascinated by the practice of meditation, yet somehow never really adopted the discipline. Not because of time limitations or anything other than not knowing how best to learn the basics and get involved.

I spent some time reading on the subject and for those interested here are a few starting points for the novice, like me:

It seems that a basic framework is necessary or at least very helpful to start the journey of meditation discovery. Meditation means to think, contemplate, devise and ponder, mindfulness. The meditation practice of ‘mindfulness’ and ‘refuge’ are done to support and enable a meaningful life.

What is Mindfulness?

It is the basic human ability to be fully present, aware of where we are and what we’re doing, and not overly reactive or overwhelmed by what’s going on around us.

A Few Things to Know About Mindfulness:

  1. Mindfulness is not obscure or exotic. It’s familiar to us because it’s what we already do, how we already are. It takes many shapes and goes by many names.
  2. Mindfulness is not a special added thing we do. We already have the capacity to be present, and it doesn’t require us to change who we are. But we can cultivate these innate qualities with simple practices that are scientifically demonstrated to benefit ourselves, our loved ones, our friends and neighbors, the people we work with, and the institutions and organizations we take part in
  3. You don’t need to change. Solutions that ask us to change who we are or become something we’re not have failed us over and over again. Mindfulness recognizes and cultivates the best of who we are as human beings.
  4. Mindfulness has the potential to become a transformative social phenomenon. Here’s why:
    • Anyone can do it. Mindfulness practice cultivates universal human qualities and does not require anyone to change their beliefs. Everyone can benefit and it’s easy to learn.
    • It’s a way of living. Mindfulness is more than just a practice. It brings awareness and caring into everything we do—and it cuts down needless stress. Even a little makes our lives better.
    • It’s evidence-based. We don’t have to take mindfulness on faith. Both science and experience demonstrate its positive benefits for our health, happiness, work, and relationships.
    • It sparks innovation. As we deal with our world’s increasing complexity and uncertainty, mindfulness can lead us to effective, resilient, low-cost responses to seemingly intransigent problems.

-Mindful.org

What is Refuge?

‘Refuge’ means many things including safety, peace, presence, protection, deep relaxation, trust and much more.

The meaning of Refuge becomes deeper and deeper as one proceeds along the Buddhist path and its real depth and magnitude is only known at enlightenment. To put it very simply, to take Refuge is to turn decisively towards the most powerful, sublime, true and meaningful force in the entire universe, seeking its strength, protection and guidance. These will be necessary in order to successfully rid one's mind of confusion and suffering and to attain the peace, wisdom and qualites of enlightenment. This process - of connecting profoundly with the absolute - begins formally with the ceremony of 'Taking Refuge' and is thereafter developed through study and meditation to become a deep inner strength. It is also a commitment to the Buddhist path.

By taking the Refuge ceremony, one becomes a Buddhist. From then on, the inner confidence and support that comes from taking Refuge daily forms a psychological basis for all the work of self-knowledge and transformation of the Buddhist 'path of peace'. Like the foundation of a house, Refuge is the basis upon which all other Buddhist practice is built.

Here are two introductory videos that may get you on the meditation path:

I have included meditation on my 2019 to do list. I encourage you to join me.

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CIM, FCSI
Executive VP and Portfolio Manager
anton@tridelta.ca
(905) 330-7448

FINANCIAL FACELIFT: This couple started saving too late for retirement and now face some tough choices

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Below you will find a real life case study of a couple who are looking for financial advice on how best to arrange their financial affairs. Their names and details have been changed to protect their identities. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

gam-masthead
Written by: DIANNE MALEY
Special to The Globe and Mail
Published November 16, 2018

Sometimes, it seems you can work hard all your life and end up with less than you hoped for in your middle years.

That’s what happened to Evelyn and Rocky, who have had to help out parents and children alike over the years. He is 66, she is 54.

Their consulting business nets about $12,500 a month after taxes and business expenses, although their commission-based earnings are lumpy.

“We started late,” Rocky writes in an e-mail. “Nineteen years ago, we both came out of previous marriages with no assets to speak of other than a seven-year-old car.” Last spring, the family-related financial pressures eased and Evelyn and Rocky began saving aggressively for retirement, which for Evelyn can’t come soon enough. They hope to retire from work with $6,500 a month after tax.

They plan to sell their Toronto house, pay off the mortgage and move to a condo townhouse in St. Catharines, Ont., investing whatever is left. They’d continue to spend winters in their Florida condo. For extra income, they want to buy an investment property in the United States.

“How can we improve what we are doing?” Rocky asks.

We asked Matthew Ardrey, a vice-president and financial planner at TriDelta Financial in Toronto, to look at Rocky and Evelyn’s situation.

What the expert says

First, Mr. Ardrey looks at whether the couple’s plan is viable.

They sell their Toronto home next spring for $675,000, net of selling costs, and buy a townhouse in St. Catharines for $325,000. They pay off their existing mortgage and use the balance to max out their registered retirement savings plans and tax-free savings accounts.

Evelyn would retire from work at the end of 2019 and their cost of living would rise by 2 per cent a year on average.

“Once Evelyn retires, they will be able to sell their business for an estimated payment of $100,000 per year over two years,” Mr. Ardrey says. This will be split equally between them. He assumes Rocky keeps working part time, earning $3,000 a month after taxes and expenses.

Rocky is already receiving Old Age Security benefits of $465 a month, reduced because he has been in Canada only since 1991. He will also get reduced Canada Pension Plan benefits, which he has opted to take at age 70. Evelyn will begin collecting CPP and OAS benefits at age 65.

For 2018, they have saved $11,630 to their RRSPs and $41,386 to their TFSAs. In addition they have saved about $39,000 for a down payment on a U.S. rental property.

A review of their investment portfolio – mainly mutual funds – shows a historical return of 4.28 per cent with investment costs of almost two percentage points. “With inflation assumed at 2 per cent, this leaves very little available for a real rate return,” Mr. Ardrey says.

To boost their income, Rocky and Evelyn plan to buy an investment property for US$120,000 that would generate about US$250 a month net of expenses.

Will their plan work?

“Based on these assumptions, Evelyn and Rocky fall way short of their retirement goal,” the planner says. They would run out of savings by 2031, when Evelyn is only 67. To make the plan work, they would need to reduce their target spending by 35 per cent to $4,250 after tax a month.

“There is no magic bullet for retirement planning. You have to retire later, save more, spend less or improve returns.” In Rocky and Evelyn’s situation, it is a combination of these four factors.

Even if they retire at the end of 2022 when Rocky is 70 and Evelyn is 58, they will run out of savings by 2045, when Evelyn is age 81, Mr. Ardrey says. Alternatively, they would have to reduce their spending by about 25 per cent to $5,000 a month.

To meet their goals, Rocky and Evelyn will have to make several changes. First, they need to improve their investment returns.

After they sell their house next spring, they will have enough money to hire an independent investment counsellor with a view to improving returns and lowering costs.

Mr. Ardrey suggests their new investment strategy include alternative assets, such as private debt, global real estate and accounts receivable factoring.

“This should increase their return to 6.5 per cent while reducing their investment costs to 1.5 per cent.”

(Many investment counsellors keep a list of alternative strategies – alternatives to stocks and bonds – that the firm has vetted and considers suitable for its clients. Investors whose income may not be high enough to buy directly from an alternative asset manager can buy these securities if they are working with a portfolio manager or investment counsellor.)

As for the U.S. investment property, Evelyn and Rocky should forget about it and direct the money instead to their investment portfolio, Mr. Ardrey says. At some point, they may also need to consider selling their Florida condo.

Client situation

The people: Rocky, 66, and Evelyn, 54

The problem: Can they afford for Evelyn to retire soon and still meet their spending goal? Should they buy a U.S. investment property?

The plan: Take steps to improve investment returns. Forget about the U.S. rental property. Consider working longer or lowering spending target.

The payoff: A more workable plan.

Monthly net income: $12,500

Assets: Cash $4,300; savings account $39,000; his TFSA $37,600; her TFSA $24,360; his RRSP $66,300; her RRSP $64,700; residence $675,000; Florida condo $175,500. Total: $1.09-million

Monthly outlays: Mortgage $1,275; property tax $350; home insurance $135; utilities $345; Florida condo fees $295; maintenance $50; transportation $620; groceries $900; clothing $40; charity $40; vacation, travel $460; dining, drinks, entertainment $260; personal care $50; pets $255; subscriptions, other $40; doctors, dentists $100; drugstore $50; health, dental insurance $355; life insurance $670; phones, TV, internet $365. Total: $6,655. Surplus $5,845 goes to TFSAs, other savings.

Liabilities: Mortgage $133,000

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Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
matt@tridelta.ca
(416) 733-3292 x230
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