ARE YOU PLANNING FOR
Your FUTURE?
Presented by
Kevin D. Brewer CFP
Kevin Brewer Financial
Investia Financial Services Inc.
Kevin D. Brewer CFP
Suite 301, 500 Beaverbrook Court
Fredericton, NB E3B 5X4
506-454-4478
Kevin@kevinbrewerfinancial.com
www.kevinbrewerfinancial.com
* Certified Financial Planner
* Mutual fund and Life/Disability
Insurance licensed
* 20+ years industry experience
* Specializes in Retirement and Estate
Planning
* Trained in CRP (Comprehensive
Retirement Planning) software.
* Independent representation
providing broker services of
financial products
* Hobbies/Passions/Community
include boating, grandkids, past
President JoyFm radio, Volunteer
Ambassador Fredericton Food Bank,
Volunteer advisory board member
of Alzheimers Society NB,
volunteer Salvation Army.
Today’s purpose…
No Sales guarantee
I will not talk about
specific products
(except for one)
Free service to groups
and organizations
Raise awareness of
sound financial practices
Today’s agenda… but not in this order
Tax brackets
Retirement Allowance
Taking CPP
New CPP rules
Pension integration
OAS claw back
Pension vs. Lira
Pension at death
Estate Planning ideas
Stock Markets
Investments
Your questions
What Are Your Goals?
•Retire early
•Retire comfortably
•Pay less income tax
•Preserve my Estate
A Solid Foundation
Rules of Cash Management
* Spend Less Than You Earn
* Read TWB - David Chilton
* The dreaded B word
* Pool anyone?
* Pay Yourself First
Rules of Debt Management
* Spend Less Than You Earn
* Do not borrow to pay debt
(except in some cases …)
* One at a time
* Is there good debt?
* Never be late.
It’s Patrick!
Why Insure?
Provides protection against loss …
* Loss of life (life insurance for dependents and/or CRA)
Term, UL, Whole Life
* Loss of income (disability insurance)
* Loss of independence (Long Term Care and Critical Illness)
* Leave Inheritance to family/charity
* Last expenses
•
Why does insurance planning come before investment
planning?
The Reality . . .
1/3 People will be disabled for more than 90
days before they turn 65.
1/ 2.8 People will develop a critical illness
The “sandwich generation” deals with the care
needs on both ends of the life spectrum.
… most everybody has life insurance but few are
prepared for the sickness or disability.
Running
with
the
Bear!
Market Volatility
Today’s market
Past experience with market fluctuations
Good or bad time to buy??
What to buy??
Best time I’ve seen or worse??
What about the headlines??
July 9th, 1979
DOW JONES = 852.99
DOW JONES 10yrs later =
2,487.86
$1,000 invested in the Dow
Jones on the day this issue
hit the stands would have
been worth $2,917 ten years
later.
(almost tripling in 10 years)
July 9th, 1979
December 3rd,
1984
DOW JONES = 1,182.42
DOW JONES 10yrs later =
3,745.62
$1,000 invested in the Dow
Jones on the day this issue
hit the stands would have
been worth $3,168 ten years
later.
(more than tripling in 10
years)
December 3rd,
1984
November 2nd,
1987
DOW JONES = 2,014.09
DOW JONES 10yrs later =
7,442.08
$1,000 invested in the Dow
Jones on the day this issue
hit the stands would have
been worth $3,695 ten years
later.
(more than tripling in 10
years)
November 2nd,
1987
THE WEEK THAT CHANGED AMERICAN
CAPITALISM
Wall St Journal, Sept 20/21, 2008
A Rough Start to 2009
Nobody Forecast This!
January 1, 2009 to March 2009 Trough
-15.5
-24.3
-20.4
-19.0
Nobody Forecast This!
March 9, 2009 Trough to May 31 2010
55.4%
61.0%
47.7%
39.0%
Local Currency
Source: Bloomberg
Words of Wisdom
JOHN KENNETH
GALBRAITH
Economist
“We have two classes of forecasters:
Those who don't know – and those who don't
know they don't know”
Three Places to Invest
Low
Medium
Variability Variability
High
Variability
Interest
Interest /
Dividends
Capital
Gains
.25 – 2.5 %
2.5 -5 %
5–?%
Pros and Cons




Capital gains and Dividends received preferred tax
treatment (only on non-reg investments).
Minimum 5 year period required for equity
investments (7-10 would be better)
Real risk tolerance not known until something bad
happens
Financial planner’s rule of risk = 100 - age
Traditional Wisdom Says:
Time not Timing determines Success.
Asset Allocation with systematic rebalancing is the
key to strong and steady performance with reduced
risk.
“ BUY LOW – SELL HIGH – REPEAT”
Kevin Brewer
…What is the single largest
expense we, as Canadians
will face in our lifetimes?
TAX!
3 Primary Tax Brackets
$11,000 $38,000
$38,000 $76,000
$76,000 –
$124,000
15% Fed
9% Prov
22% Fed
12% Prov
26% Fed
12%Prov
Approx. 24%
Approx. 34%
Approx. 38%
Can you pay less tax?
Tax deductible non-registered investment
strategies (use existing cash to purchase…)
Income splitting
Buy RRSP/RRIF Insurance
Borrow to top up allowable RRSP limit (use
good debt to pay bad).
Borrow X2
Save for your goals tax-free!
Retirement Allowance (Severance Pay)


Allowed to rolled to an RRSP (direct transfer)
$2000 for every year or partial year in which you
participated in pension plan prior to and including
1995. Anything above that cannot be rolled
directly but may be eligible for RRSP contribution
based on personal room.
Generally capped to 25 weeks based on final
year’s income.
Retirement Allowance (New
Options)
Effective March 31, 2013, management and
non
union employees in parts 1,11, and 111 will
no
longer accumulate retirement allowance
credits.
OPTIONS
1. Obtain a payout in lieu of ret. allowance
based on credits accum’td and salary to
Retirement Allowance (New
Options)
Question of the day:
Do I take the money now or defer it a few
years
until I retire?
Retirement Allowance (New
Options)
Example:
Joe, age 45, 15 accumulated pension years
credit
Salary $52,000 ($1000 week)
Pay in lieu of retirement allowance = $15,000
Assumption: intent is to work another 15
years
Retirement Allowance (New
Options)
Based on the previous assumption, the
investment
simply has to outpace the rate of salary
increases
each year (or the average). Ie: if the salary
for this
job description only increases by CPI of 2 or
3%
each year, the investment portfolio only has
Retirement Allowance (New
Options)
So if you think that investment performance
will outpace your salary increase then the
choice based on that alone would be to take
the money today. However …
What if the expectation is that you will move up
the ladder to a more senior position in Govt
over the years and thus retire with a salary
much larger than your present one? What
would that increase in salary have to be to
offset an investment return of 4%, 5%, or 6%?
Retirement Allowance (New
Options)
$15,000@ 4% return over 15 Yrs =
$27,014
$93,648 = $1800.93/wk X 15 wk =
$27,014
$15,000 @ 5% return over 15 Yrs =
$31,184
$108,104 = $2078.92/wk X 15 wk =
$31,184
Other Considerations (New Options)
What if you defer the retirement allowance
but
before you reach your intended retirement
age you
decide to voluntarily leave your employment
?
Other Considerations (New Options)
What if you defer the retirement allowance
but
before you reach your intended retirement
age you
decide to voluntarily leave your employment
?
Under the old rules you would not qualify for
the
Other Considerations (New Options)
Is it better to put this investment in my
spouse’s
name (Spousal RRSP) for tax purposes?
Other Considerations (New Options)
Is it better to put this investment in my
spouse’s
name (Spousal RRSP) for tax purposes?
Much of the advantage in doing a spousal
RRSP
has been negated with the introduction of the
new
Pension Income Splitting rule. However, it
Summary (New Options)
This decision is made more difficult because
it
must be made based on these unknown
variables
and assumptions:
What will be the performance of my
investment
versus
What will be my final salary at retirement (if I
Summary (New Options)
Bottom line:
A Bird In The Hand …
Procedures/Paperwork (New
Options)
For allowances less that $10,000:
1)
2)
CRA Letter of Intent Regarding a
Deductible Contribution to an RRSP
Province of NB Financial Institution Form
Forms: Declaration of Intent
Form: Financial Institution
Information Form
Procedures/Paperwork (New
Options)
For allowances greater than $10,000:
1)
2)
Apply to CRA using CRA form T1213 for
permission for Province to do a direct
transfer to your financial institution of
choice. Allow 4-6 weeks for their
response. Then provide their response
along with the form below to Province
Province of NB Financial Institution Form
Form: CRA T1213
Procedures/Paperwork (New
Options)
In the first case (less than $10,000) you are
indicating to the Province that you have the
room
to transfer to an RRSP. In the second case
(more
than $10,000) proof is required from CRA.
IF this
is the case, you must submit your request to
CRA
OAS and the OAS Clawback




Amount same for everyone at age 65 =
$546.07/mo or $6552.84/year
Claw back begins at $70,954 and is depleted at an
income of $114,640
If a taxpayer in receipt of OAS benefits has net
income in excess of the base amount for that year
($70,954 for 2013) he or she must repay 15% of
net income in excess of the base amount.
Example: net income = 80,954 then 15% of
$10,000 ($80,954-$70,954) or $1500 of OAS must
be paid back of the $6552.84 annual payment.
Pension Options and death of pensioner
Generally offered 5 or 10 year guarantee and…
 A reduced amount with 50% to surviving spouse or…
 A reduced amount with 60% to surviving spouse or…
 A reduced amount with 75% to surviving spouse
(reduced to $0 upon death of final spouse)
WHAT ABOUT COMMUNTED VALUES vs PENSIONS?
* Owner controls investment choices (must have discipline)
* Locked-in rules apply limiting maximum annual withdrawal
* Locked-in rules broken at death allowing full tax sheltered transfer
to remaining spouse
* Can be passed to beneficiaries upon death of final spouse but taxes
will be owing


There is a need for estate planning in these cases
My Dear Children…
…we love you so much
we’ve decided to leave
half our wealth to the
Canada Revenue
Agency
Estate Planning Strategies
 Beneficiary
designations
 Joint ownership
 Gifting
 Insurance
 Trusts
 Segregated funds
 Annuity products
About WILLs and POAs ...
Prevents the courts
from making
decisions for you.
Allows life to carry
on for those left
behind the way you
intended it to.
Education Savings
Registered Education Savings Plans (RESPs)




Government savings program
20% grant on contributions
Can withdraw contributions and growth if not used, just
have to return grant
If used, withdrawn at beneficiary’s Marginal Tax Rate
Conclusion
Financial planning is complex
 Your true beliefs have to be taken into
consideration
 Decide what you want to achieve - what’s
most important to you and your family
 Talk to those that are affected by your
wishes
 Planning is a work in progress - it requires
ongoing review and modification

Types of Financial Plans:
* Fee for Service based on complexity
of plan required.
* No fee but based on assumption that if
good work/advice is provided then
future business may occur. Fee then
paid in form of commission by product
manufacturer – not the client.
ONE LAST THING
In appreciation of
your attendance . . .
THANK YOU
QUESTIONS?