Golden Girl Finance
 
Jill Chambers
Posts (6)
 
 

Ask the Expert

Q&A: Will I have enough to live on in retirement?

August 10th, 2012 by
 

I am 65 years old and planning on working another year. I have no debts, $26,000 in my RRSP (it's currently not doing much for me), $2,000 in a TFSA, and a pension. All combined it will net me approx $1000 a month. Any suggestions?

Asked by A.P., Brampton, ON

 

I am guessing that you are concerned about $1000 a month being enough to live on in retirement? It's going to be tough; this would be a challenging situation for most.

Without knowing too much detail about your situation, I have a few questions and suggestions...

When you speak of pension, is that a company pension? Does that include your CPP benefits?

You are able to collect CPP and earn a salary once you are 65 years of age. This would allow you to save while you are still working. You need to apply for CPP - the benefits are not automatically sent out.

Another possibility: if you own your home, that may be another source of revenue through a reverse mortgage (though there are drawbacks, so do seek professional advice).

I wish you the best of luck in managing your retirement on a limited income. Professional help and planning would be of great value.

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Q&A: How do I find someone who can invest in stocks for me?

June 20th, 2012 by
 

I am 29, own a condo and have no other debt. I contribute 18% to my RRSPs annually but I feel like I am missing out on investing in stocks. My current financial planner manages my RRSPs well but says she cannot purchase stocks. Where do I go, who do I talk to and how do I start investing in the stock market?

Asked by Anonymous, Toronto, ON

 

Wow! You are doing really well to be maxing out your RRSP each year and be debt free!

The decision to invest in stocks should be based on your investment risk tolerance profile. Stocks are suitable for an aggressive risk tolerance, meaning you can sleep at night when the markets are swinging wildly up and down.

Could you stomach a 35% drop in the value of your investment - as happened in 2008 to folks heavily invested in stocks or "equities"? The riskier the investment, the greater the volatility (ups and downs) and hopefully, the greater the return or growth on your investment. Usually an individual would have a net worth of at least $250,000 before investing in individual stocks.

As an alternative, Exchange Traded Funds ("ETF") are a more nimble and cost effective alternative to mutual funds.

Feel free to check out www.KYFA.com to find a financial advisor who can provide access to the products you desire.

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Q&A: Do you need to invest in an RRSP if you have a pension plan?

June 19th, 2012 by
 

My fiance has a pension plan and I do not; he will retire in 4 years. I only have RRSPs and he contends that this is not the way to go. I have a home almost paid for and some savings as well. My question is this: are RRSPs good to have if you do not have a pension plan? My fiance would rather not contribute to an RRSP, believing that his pension plan will suffice for us well into retirement. Is this correct or do we need more diversification? I'm 51 and he is 50 with no children.

Asked by Helene, Barrie, ON

 

Yes, a RRSP is good to have particularly if you don't have a pension plan as you are encouraged to save for retirement and also receive tax benefits. I am surprised that your fiance would have sufficient funds in his pension plan to fulfill your needs to age 90, especially when he plans to retire at age 54.

Some of the many other questions to be answered include:

  • What kind of pension plan is it?

  • When does he expect to begin drawing his pension?

  • What option is he considering in regards to survivor benefits?

Work with your fiance and a financial planning professional to identify the answers to these and many other questions while developing a written, comprehensive, financial plan.

Also know that "diversification" in investments refers to factors such as geographic allocation, type of revenue generated, management style - not whether retirement income comes from a pension plan or a RRSP.

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Q&A: Should I set up investments within my TFSA?

May 4th, 2012 by
 

Do you recommend setting up investments within the TFSA and if yes, is it best to use the maximum amount of funds in your account?

Asked by Sheila, Toronto, ON

 

Absolutely! It is very unfortunate that the phrase "savings account" was associated with Tax Free. Many folks think that the money must be in a bank account. That is not the case at all! Think of TFSA as a Tax Free Savings Plan just as you would a Registered Retirement Savings Plan. Any form of investment you can have your RRSP dollars in, you can also have your TFSA dollars in - stocks, bonds, exchange traded funds, mutual funds, segregated funds.

Maximizing a tax sheltered investment opportunity is very smart. Depending on your situation, it may be wiser to:

  • Maximize your RRSP contribution

  • Maximize your TFSA contribution, or

  • Some combination of both

The wisest choice for an individual depends on variables such as age, current and anticipated tax brackets, company pension plan and overall personal debt levels.

If you don't have the funds to max out the contribution, don't worry as you won't lose the contribution room. The room carries forward and you can catch up when you can.

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Q&A: How to achieve a 10 percent rate of return?

May 4th, 2012 by
 

I've read that a 10 percent rate of return is possible on investments, at least historically. What would be the best way to invest my money in order to access that kind of interest?

Asked by Anonymous, Calgary, AB

 

The financial industry collectively has a history of being too optimistic. Ten percent was a reasonable rate of return in the past...but "we're not in Kansas anymore" as the saying goes. Ten percent is not a reasonable rate of return for the near future.

The rate of return on an investment varies with the risk or volatility of the investment. The more conservative the investment, the lower the volatility and a corresponding lower rate of return. A more aggressive investment would have more volatility and typically a higher rate of return to compensate for taking the risk.

The probable rate of return you can expect for even a more aggressive portfolio is likely 6 - 8% for the next few years based on the harsh realities of global challenges, including demographics, debt and de-leveraging.