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Top retirement advisor tips to get the most from your savings

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All investments come with a mix of risk and potential reward. The greatest danger comes when you understand the mechanics of an investment, but you’re missing some of the details. Your understanding of the potential reward can make you greedy, while the gaps in your knowledge limit your natural, healthy sense of skepticism.

When it comes to retirement, you should be long-term focused, which takes a lot of the guessing and game playing out of the equation. The best retirement plan you can have is to start saving as early in your working career as possible. You then invest a steady or rising amount of that money in the stock market every year. When you follow this plan, you automatically profit from dollar-cost averaging. You will automatically buy more shares when prices are low, and fewer shares when prices are high.

Continue reading for more retirement advisor tips and strategies for saving.

Retirement advisor tip: Use an RRSP For Retirement

You have to learn a lot of things to become a successful investor, and few people learn them all in any logical progression. Instead, most of us move from one subject of interest to another, with a lot of zigs and zags in between.

But one tip is clear: If you want to pay less tax on your investments while you’re still working, investing in an RRSP (Registered Retirement Savings Plan) is the way to go.

To cut tax bills, RRSPs are a great option. RRSPs are a form of tax-deferred savings plan. RRSP contributions are tax deductible, and the investments grow tax-free. (Note that you can currently contribute up to 18% of your earned income from the previous year. March 1 is the last day you can contribute to an RRSP and deduct your contribution from your previous year’s income.) When you later begin withdrawing the funds from your RRSP, they are taxed as ordinary income.

Registered Retirement Income Funds (RRIFs) are also a great long-term retirement investment planning strategy

Converting your RRSP to a RRIF is clearly one of the best of three alternatives at age 71. That’s because RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal (which in most cases is a poor retirement investing option, since you’ll be taxed on the entire amount in that year as ordinary income).

Like an RRSP, a RRIF can hold a range of investments. You don’t need to sell your RRSP holdings when you convert—you just transfer them to your RRIF. Continue Reading…

Creating retirement income: a Fixed Payment Strategy

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Once you stop working you may want to simplify your investment strategy. Your objective shifts from growing your investment portfolio to generating income. Flat and unpredictable markets, combined with historically low interest rates, can make this a challenging time in terms of creating retirement income.

One idea for creating a reasonably consistent level of monthly income is with a Monthly Income Fund. These funds have been around for quite some time. They hold a variety of government, municipal and corporate bonds, preferred shares and dividend stocks, and the payments come from a combination of interest and dividends, and sometimes, return of capital.

With these investments, cash flow is based on the number of units you own, not on the market value of the assets.

In non-registered accounts, the distributions can be more tax efficient than interest earned on GICs and bonds. However, keep in mind that there can also be taxable distributions in December (just as in other mutual funds) in addition to the monthly payout amounts.

Comparison of monthly income funds

Monthly income funds are sold by Canadian banks and mutual fund companies, and are also available in ETF versions.

The following chart is a comparison of some funds sold by Canadian banks as well as two popular ETFs. Continue Reading…

Buying a condo in the GTA on one income? Here’s where It’s possible

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Looking to purchase a home in the Greater Toronto Area on your own? According to new data, the real estate reality for solo buyers is pretty heartbreaking, with most options out of financial reach for those earning the median single-household income in the region.

In fact, owning a condo within a GTA municipality will set a single homeowner back more than double the recommended shelter cost, even in the most affordable markets. With two incomes getting far more home for their buck than one, it’s no wonder buyers are increasingly partnering with family, friends, or even strangers to improve their real estate affordability.

Tough affordability throughout GTA

Check out this infographic to see how affordable condos are for both single and multi-income buyers throughout the GTA.

To find out the extent of housing affordability for single buyers, Zoocasa calculated what’s called the home-price-to-income ratio in 17 of the markets tracked by the Toronto Real Estate Board. Crunching the average January 2018 condo price and median income earned in each municipality determines how many years of total income (as in, one’s entire annual salary) it would take to pay off a condo in that region. The higher the ratio, the tougher the home will be to carry financially.

The ratio recommended by most financial experts for shelter costs is three, but that’s well below what’s possible in the GTA market, the numbers reveal. The data finds that the minimum ratio for a single condo buyer is seven, available in only two markets: Milton and Clarington.

That’s not to say dual-income households have it much easier; coupled-up buyers have only three regions that satisfy the recommended affordability ratio (Milton, Clarington, and Whitby), while another 10 regions hover just above the four-point mark.

City Centre most challenging for all buyers

The toughest place to purchase for all Toronto condo buyers is Toronto central, which sets single buyers back a whopping 16 times their income, and seven times for multi-income buyers. And, while affordability varies throughout the region, it’s steep across the GTA; Mississauga condos command 10 times a single buyers’ income, while Vaughn costs 11 times the median household income.

Penelope Graham is the Managing Editor of Zoocasa.com, a leading real estate resource that uses full brokerage service and online tools to empower Canadians to buy or sell their home faster, easier, and more successfully.

 

 

9 ways to survive when money’s tight on Maternity Leave (or Pat Leave)

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By Maria Weyman

Special to the Financial Independence Hub

Being on maternity ‒ or paternity leave ‒ usually means you’re taking a pay cut, and that can leave you feeling perpetually broke.

Not only are you bringing in a smaller income each month, but you’re also shelling out for baby items you never had to buy before. Despite the crunch, many parents also struggle with the temptation to shop more than usual since they have extra time to spend wandering around the malls or browsing online.

However with some effort, it’s possible to get through maternity leave with your finances ‒ and your sanity! ‒ intact.

Challenge yourself

Saving money can be kind of fun if you make a game out of seeing how much you can save ‒ and then trying to beat your own record.

1.) Get your thrift on

Babies outgrow their clothes very quickly, and secondhand items are usually in nearly-new condition because they’re hardly worn.

So why not plan an outing at the thrift store, meet up with a friend (who’s also on mat leave) and dig through the bins and racks together.

2.) Try couponing

Even if you’ve never clipped a coupon in your life, there’s no better time to learn.

You can save on groceries once you learn how to find grocery coupons online, how to stack coupons, and earn money with cash-back couponing apps.

Pssst. Babies also come with some handy freebies if you know where to look.

3.)  Trim the budget

Sit down and look at where your spending could be tightened, and decide on a goal that’s going to help you spend less each month.

If you’re overspending on groceries ‒ after all, you are home all of the time now ‒ maybe you can set a strict budget and really stick to it.

If you’re visiting the coffee shop a little too often, make the effort to bring a hot drink in a travel mug when you head out the door.

Look for free fun

It might feel like every activity costs money, but there are so many ways to get out that are absolutely free.

4.) Take a walk

Walking is a great way to explore new neighbourhoods, get some exercise, and lower your stress levels by breathing in the fresh air.

Babies also enjoy going for walks, and usually the movement lulls them to sleep. If it’s too cold or rainy to walk outside, look for an indoor track. Often it’s free for people from the community to use, and you can bring the baby in their stroller.

5.) Try something new

Most gyms and fitness centres offer a trial membership, whether it’s a day pass or even a full week. By expressing interest in maybe joining their facility, you can get the chance to try out their equipment, sweat through a cardio class, and take a shower in peace.

Bonus points if you find a place that offers free daycare for your little one!

6.) Join a group Continue Reading…

Even more rookie mistakes that seasoned investors make

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By Neville Joanes

(Sponsor Content)

Even though we all “knew it was coming” the precise timing of the market correction this month caught quite a few seasoned investors by surprise. Hey, it happens. No one can predict where the stocks go all the time. But how did you respond? Did you sell along with the herd — and lock in your losses? Or did you see this as a buying opportunity? How were you prepared for it in the first place?

Even the most experienced investors can get caught short in times like these. Recognize your investing biases that can lead to bad decision-making — and learn from them. Here are a few more that we didn’t cover last time. (See 3 rookie mistakes that seasoned investors still make.)

Confusing the familiar with the safe

Disney, Coca Cola and Starbucks are big brands. But are they safe, or even good investments — by virtue of their size?

Just a few years ago, you might have gotten the same feeling of rock-solid reliability about Nortel, Blockbuster or Kodak. Or Sears. Pan Am airlines. Netscape. Pets.com Or hundreds of other companies with billions in their war chests …  that aren’t even around today. By last year, just 60 companies remained from the original Fortune 500 list.

Investors have inherited the illusion of stability and power from size, possibly from our origins in hunting wooly mammoths with wooden spears. The big guys are hard to take down (we think). So even experienced investors will throw their money at blue-chip stocks and other institutional-style investments. It’s a half-baked hedging strategy.

When you have this bias, you don’t do the proper due diligence you would with other investments. Why look too closely, when the trading megafauna like Amazon or Apple just keep bounding onward and upward? Because the bigger they are, the harder they fall.

A big-name brand is not necessarily a bad bet. This is where a strategy of diversification comes in. By planting seeds in a range of investments instead of a single big-name brand, you’re in safer territory. Continue Reading…