- 1. PENSION CHOICESFOR LIFE AND BEYOND
- Brian Weatherdon, MA, CFP, CLU
2. How to use this seminar . . .
- This seminar used to be a public presentation of 45-60 minutes
plus questions & answers.With media clippings and some humour
it was rather bulky at 60 megabytes of memory.
- Time is precious for you.This personalized format now lets you
breeze through or pause, as often as you wish.I hope you find these
pages speak on their own.They will welcome your return whenever you
need clarification.Also, you can reach me directly.
- After you have reviewed these slides, lets find a convenient
time to discuss your questions and thoughts about this.Then there
are two ways to move forward.( 1 ) I can give you a free report to
help support your choice to stay within the typical pension plan.Or
( 2 ) in seminar #2 Ill show how we move forward into a
personalized pension plan to secure the freedom and life-choices
you want to enjoy.
- My role is not to propose one choice over the other.I clarify
matters and counsel with you so you can choose the approach best
fitting your needs, feelings, family, and lifestyle.
3. WELCOME TO SEMINAR #1 PENSION CHOICES FOR LIFE As you near
retirement you have the choice to receive a steady income from a
traditional pension plan, or to commute and take a lump sum to
create your own personalized pension plan.This is a vital decision
one of lifes largest and will greatly shape how your pension
resources will support how you choose to enjoy life, as well as the
estate you eventually wish to leave for loved ones. In short, this
is all about LIFE. Each choice here has risks and opportunities.As
you review this seminar I urge you to have an open mind and fully
consider both sides.The traditional approach was to draw the
pension.More people now are commuting. Getting the results you want
depends on how you make the choice, and how the plan is designed to
support your financial needs throughout early-, middle, and later
retirement.So enjoy this window into the choices before you.I
welcome hearing from you:is this seminar helpful? how can we
improve it? what further questions come to mind? 4. Most common
values people share for Retirement:
- To have enough.Avoid running out of money
- Provide for future health costs:desire for higher income when
needed.
- Avoid sacrificing the lifestyle of your dreams;live the life
you choose.
- Enjoy your home, traveling, active lifestyle wherever &
however you choose
- Explore how a surplus can further your goals & new
opportunities
- Enjoy family, consider philanthropy and new ways to learn and
share.
- Family, community, old and new friendships
- Freedom to travel,explore world & cultures
- Giving, helping,learning,sharing
5. Retire and enjoy life on your own terms! Credit to Zoomer
Magazine Retirement 6. Avoid having to worry about falling short
Credit to Zoomer Magazine 7. Widespread concerns over falling short
Advisor.ca 3/3/10
- Nanos Research,An overwhelming majority of Canadians polled
believe the future of private pension plans is at risk.
- 69.6% believe private pension plans will have to reduce
payments to pensioners in the future.(Others discovering this is
true, and isnt new.)
- dark cloud on the horizon is their worry public and private
pension plans will have to reduce payments to pensioners in the
future in order to remain solvent."
- Securing the value in existing pension plans, & our
personal retirement choices, are the greatest issues aside from
healthcare, for our generation.
8. Stories can help unveil our inner feelingsand clarify
valuable choices.Which ofthese comes closest to you?
- 1.GILBERTS CHOICE to draw fixed-income pension
- Gilbert considered his pension options.He had always valued
guarantees.Investing in his home, GIC and term deposits, he is
comfortable knowing his money is safe.
- Gilbert has each years pension statements.They show the pension
income he expects in retirement (plus some inflation
protection).While some pensions have had cut-backs; he knows the
pension trustees will do their best to preserve value.
- Gilbert waived other opportunities (in next screens) and chose
a fixed-income.With savings he and his wife built up over the
years, they expect to be secure.Staying with traditional pension
plan seems a good fit with this familys needs and comfort.
9. Stories can help unveil our inner feelingsand clarify
valuable choices.Which ofthese comes closest to you?
- 2. MARYS CHOICE for her family estate
- Marys biggest concern when she retired was that she might not
live long.Women in her family had never lived past 63 years of
age.She wanted a way to protect the value of her pension, 100% to
her husband and then all remaining value for her family.
- If Mary drew the pension in a traditional way, her pension
would reduce to 60% for her surviving husband, and offer nothing to
their children.
- Commuting her pension gave Mary control to draw a higher income
in the early years, and leave 100% of that for her husband.When he
passes someday, the remaining value will benefit their children and
grandchildren.
10. Stories can help unveil our inner feelingsand clarify
valuable choices.Which ofthese comes closest to you?
- 3. JOHNS EXPERIENCE with under-funded pension plan
- Johns pension obligated him to stay in the pension plan.Heres
his experience.
- Before he retired, Johns pension statements showed an expected
income near $5100 per month.Two years into retirement he showed me
the deposits at $3137 into his bank account.More recently it has
fallen to $1961/month.Cutbacks like this occur when pension plans
are under-funded, experience poor investment returns, and have
ongoing obligations to their retired members.Johns loss has been
quite severe.
- John and his wife have part-time jobs.They travel less than
they wish.They worry about expenses because Johns family lives into
their 90s.His fathers health costs already show that John doesnt
have enough money to grow old safely.He can consider increasing
future resources with long term care insurance but how to pay for
it !
11. Stories can help unveil our inner feelingsand clarify
valuable choices.Which ofthese comes closest to you?
- 4. ERICS CHOICE gaining a highly flexible income
- Eric retired knowing he would continue a private consulting
career for five years or more. Expecting $10,000 a month from
consulting, he wanted to delay drawing his pension (thus reduce
tax) and let the pension asset keep growing until he really
retired.
- We found Eric would have four life stages after leaving work.(
i ) ongoing consulting for private companies.( ii ) active
retirement lifestyle age 70+ in which he can enjoy high spending.(
iii ) Some years of lesser spending while still in good health.( iv
) Late senior years when Eric would likely require costly personal
assistance.Erics personalized pension plan will adapt to the
changing needs of all four periods.
- A bonus for Eric, being single, was knowing that if anything
should happen to him his pension can be paid directly to his estate
or to a Family Trust for his grandchildren.*
- *(minus taxes, unless otherwise funded)
12. Stories can help unveil our inner feelingsand clarify
valuable choices.Which ofthese comes closest to you?
- 5. PATS CHOICE having Seed Capital for new business
- Pat was eager to retire because her research was preparing her
for a new business opportunity.All she needed was Seed Capital for
the first few years.Borrowing from a bank would be difficult and
expensive.
- Pats pension became the Seed Capital she needed.Her commuted
pension was split in two, giving her a Life Income Fund starting
from 6%/year and a RRIF from which she drew higher amounts
supporting her business.As business increased, Pat reduced her LIF
& RRIF income to minimum, and lives primarily on salary &
dividends.
- Pat will sell her company in 3-5 years for much more than the
original seed capital.Her financial means, and the joy of her
achievement are proud rewards.
13. TEN POINTS OF COMPARISON
- Inflation, cost of living, capped?
- Value to surviving spouse 60%?
- No value to children, estate
- Requires Certified Advisor
- Value to spouse 100% or +
- Value to children & estate
14. Pension Trustees viewpoint
- Some trustees prefer keeping assets in the plan;others see
commuting as reducing the plans future liabilities
- Longevity riskas retirees live longer
- Worsening under-funding as govt regulations inhibit surpluses;
rising interest rates cause capital-losses to bonds;payments to
retirees inhibit recovery even during good markets
- Reduced risks & liabilities
15. Advisor needed for . . .
- Advisor can manage other savings (not pension)
- Highly certified qualifications
- Listens & communicates well
- 30 year commitment to plan
- Continues service globally
- Advice, recommendations, results
- Sustains & adapts future income
16. Health insurances. . .
- May include some health benefits
- May exclude out-of-country
- No future guarantees.Extra costs for excluded coverages, and
for loss of independence, long term care.
- Choice to insure at competitive cost
- Choice to insure through spouse or through eg. retired teachers
plan
- Option to combine health & dental, plus out-of-country
coverage
- Can include loss of independence, illness, long term care
coverage.
17. Fixed or variable income . . .
- Retirement seen as a straight line of lifestyle and expenses
until death
- Results vary greatly due to funding, markets, economy,
regulation, and effective caps on surplus
- Life need not be a straight line.
- Fixed income if you choose:eg term deposits combined with life
annuity and life-income guarantees
- Variable and higher incomewhen your needs or dreams require
more; less as needs reduce; and more again when health
requires.Live and spend as you choose.
- At least 3 horizons in retirement
18. Safety . . .
- This was usually safe with a growing economy, higher interest
rates, fewer retirees and a younger population of workers.
- May assume 5 to 5% returns. Some pensions manage well. Many
will long continue struggling over shortfalls experienced with
investment losses from 2000-2008.
- Seminar #2,Pension Platforms, explains in depth how we create
ongoing safety for life-income .
- Mutual funds alone may not suffice since investments can fall
for a year or longer, while income is needed, thus depleting
account value.
- Combination of funds and guaranteed life-income strategies to
perpetuate income
19. Inflation / Cost of Living . . .
- Many pensions are indexed only to 3% and the retiree loses
purchasing power when inflation rises beyond that.
- Inflation in health is near 8%;;dental is near 7%;drugs are
>12%, andpersonal care costs will keep rising.
- Some rare pensions cover inflation even up to 7 or 8%:people
would usually stay in that kind of pension if it has funding to
keep its promises.
- Historically the strongest protection against inflation has
been dividend-paying equities.Pensions whether large or small
require inflation-fighting capacity of dividends &
equities.
- Life Annuities (LA) and ladders (LADs) also allow rising
payments, as do Lifetime Income Benefits (LIB).
- Seminar #2,Pension Platforms, will show how these in
combination support future purchasing power
20. Under-funding . . .
- Inflation indexing must falter if pension remains under-funded
.
- Pensions are widely under-funded by 20-40% coast-to-coast.
- As under-funding continues, pension incomes are
reduced.Cost-of-living is credited only on the lower base.
- The commuted pension is already fully funded.Trustees cannot
take it back.
- Protect this value with strong allocation and diversification
of assets, products, management, & guarantees.
- Rising dividend yield, commercial property income, equity
growth, and insured guarantees all contribute to your income in
retirement.Its your own pension plan you /your family are the only
owners.
21. Value for Spouse / Estate at death
- Choice of reduction to 75%, 60%, or 50% for surviving
spouse.When retiree passes on, only the agreed % will continue to
surviving spouse.
- 0% for estate when retiree & spouse have died.Value stays
in the pension plan to support members still living.
- Personal pension gets a tax-free spousal rollover of the entire
account.
- Spouse can continue receiving 100% or even more, for life &
health care.
- Full value *at the death of surviving spouse goes to estate, or
can by-pass probate & go immediately to family or a Trust for
family or other philanthropy.
22. Philanthropic opportunity . . .
- As no value remains after death of the retiree and spouse,
there is no way to make a final gift of this amount for your
charitable desires.
- Value remains with the Pension Trust and current / future
members.
- No tax credit;no tax relief for estate
- Survivor can bequeath value to:
-
- University or specific program*
- *Your Estate gets tax relief !
23. Tax Strategies . . .
- $2000 split to lower-income spouse
- Up to income-split to spouse while CRA allows
- $2000 split to lower-income .
- Up to income-split to spouse
- Working:LIF drawspousal RRSP
- Meltdown to lower lifetime tax load & clawbacks
- Other LIF yearly-meltdown strategies
- Philanthropy from Estate ( see slide 36 ) can reduce tax on
other family assets.
24. Service standards . . .
- No additional financial or estate services; no counsel on
strategies
- for future health and estate needs
- Advisory fee hidden in plan admin
- Personalized service daily
- Integrated withCertified Life and Financial Plan , andEstate
Planincluded freely at no further cost .
- Advisory fee is transparent and fully available.
25. Can we see an example . . . ? 26. A sample to open
discussion. . .
- For discussion only, not for DIY.Starting with a full-bodied
review of your lifestyle desires,your intended activities in
retirement, and personal values, we develop a personalized plan for
financial-, tax- and estate-planning.This sample isnot an offer of
any financial contract .We also happily review design and key
aspects of plan with your accountant & tax advisors.
- 2000 to 2010 was troubled with meltdowns in technology and
resources, also the world financial collapse, plus ongoing war on
terrorism.Described as theworst decade since 1929 or 1820all
pensions and investment firms struggled.
- Yet surprisingly (next screen) a simple portfolio (30% Income
and 70% dividend) averaged compound growth 6.9% * .Other decades
have done more or less. This and more advanced models prove a
vigorous base to sustain lifelong income combined with income
guarantees detailed further in Seminar #2.
-
- *Retail model gave 6.3%.Discounts for Personal Pension
Platformsyielded 6.9 %
27. A historically difficult decade yielding 6.9%/year.Combined
with insured income guarantees &/or life annuities this can
support lifelong security.See Seminar #2 NB:Past returns are no
indication of the future. 28. How do you rate each of these in
personal importance?Lets discuss together
- Will your future hold 3 or more distinct periods:eg. early,
mid, later years?
- Do you want flexible income for an active and independent
lifestyle?
- Do you wish to reduce risks:which ones, and how?
- How important is a guaranteed income? Starting when?
- Should we aim to outpace inflation and reduce
taxes/clawbacks?
- Is gifting important to you .to protect estate value for
family&/orcharity?
- Well also talk about privacy and independence (you & your
estate).
29. Next step:call me.Well discuss and create a free report to
support your pension choice.Then if you like we can offer you the 2
ndseminar: PENSION PLATFORMS FOR LIFE AND BEYOND 30. Choiceisyours.
. Were here to help you as a. resource, whatever you decide. 31.
News clippings and sourcesavailable on request. . . 32. Appendix
#1:Quick slide on Estate Flow. We use both sides of this chart for
your benefit. Beneficiaries Home Investments Bank Broker
Investments at Life Insurance Co. Life Insurance Probate Fees Legal
Fees Exec Fees Time Delay EXTRA 33. Appendix #2:Controlling Assets
after death
-
- Direct beneficiary status
-
- Two Wills (eg. for Business/other assets)
- *There are inexpensive ways to set up
- trusts without paying huge trustee fees.
EXTRA 34. Appendix #3:common hazards of joint ownership,
including pension values left to heirs
- Joint ownership is often set up poorly, yet one can easily
learn what is needed from google or a certified advisor.Esp:Four
Certainties.
-
- Four certainties of law for joint trusts
-
- Fails if not created in same time & place, &
contract..
-
- All owners have equal ownership of the whole property
-
- Asset at risk from joint tenants creditors
-
- Asset has in-law risk under Family Law Act
-
- Tax risk:taxable disposition on transfer to joint tenancy
-
- Tax risk:losing full principle residence exemption
EXTRA 35. Appendix #4:glimpse at life insurance and long term
care insurance. . .
- Many at 60 or 70+have mortgage debt or other reasons to own
life insurance & may be paying 2x to 3x too much
- We may reduce costs, or find new value for you in existing life
policies.
- Life insurance may fit your long term estate planning, as a
place to hold value tax-free for the next generation or to multiply
your philanthropy.
- Long Term Care insurance, at $1/month now, can create $5 to $10
/month later for costs of personal care, privacy, dignity in your
home or elsewhere.LTCI reduces the impact of health inflation for
those who will live long!
-
-
- Caution:is it reimbursement-only or a true income plan?You want
to know
EXTRA 36. Appendix #5:consider how philanthropy can reduce taxes
that hit your estate EXTRA 37. Ask a Professional
- Reach me at your convenience
- Brian Weatherdon, MA, CFP, CLU.
- Sovereign Wealth Management
- We are an advisory firm specializing to protect the
resources
- you have built ,and ensure your financial capacity to enjoy
life
- as you choose while also reducing taxes and streamlining
- your estate for those dearest to you .
- Graphic Clippings from Zoomer Magazine,published by
CARP.Membership is inexpensive and fun, and hosts local action
groups to address legislative and other issues.Also consider Silver
and Gold Magazine,www.SNGmagazine.comfor content, deals, and great
ideas.