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Retire “retirement”. 87% of Canadians said the word retirement does not mean today what it meant years ago. What should we call it? Next stage of my life Rest of/second half of my life Time to pursue my dreams My years. Today’s Retirement. The Changing Retirement picture: Semi-retirement

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retire retirement
Retire “retirement”
  • 87% of Canadians said the word retirement does not mean today what it meant years ago.
  • What should we call it?
    • Next stage of my life
    • Rest of/second half of my life
    • Time to pursue my dreams
    • My years
today s retirement
Today’s Retirement
  • The Changing Retirement picture:
    • Semi-retirement
      • To be mentally active
      • To keep in touch with people and
      • To earn money
    • Sandwich generation
    • Life expectancy
      • living longer (middle age is 54)

Result: 65 is an arbitrary age – retirement is no longer a “point in time”

risky business
“Risky” Business
  • Longevity Risk
  • Contingency Risk
  • Income Risk
contingency risk
Contingency Risk
  • Eldercare
      • By 2010, 60% of Baby Boomers (age 50+) will have surviving Senior parents or grandparents some of whom will require specialized care and support (Source: Canadian Academy of Seniors Advisors, Inc. c. 2003-05)
    • Personal Health Issues

** Source: Manulife (Canada)

* Source: World Health Organization

Definition:Healthy LifeExpectancy (HALE) is based on life expectancy, but includes an adjustment for time spent in poor health. This indicator measures the equivalent number of years in full health that a person at age 60 years can expect to live based on the current mortality rates and prevalence distribution of health states in the population.

income risk
Income Risk

Source: Fidelity Investments

retirement your way

Retirement Your Way

How will you spend the rest of your life?

regeneration re designing the next phase

RegenerationRe-designing the next phase

If you were to imagine your life in retirement, what would it be like?

What does the word “retirement” mean to you?

How will you spend your time?

Where will you live?

What interesting things do you want to do?

regeneration re designing the next phase10
RegenerationRe-designing the next phase
  • Will you continue to work and transition into full time retirement?
  • What will you miss most about work and how will you replace it?
  • Have you considered your partner’s plans/goals?
  • Does longevity run in your family?
  • How do you want to be remembered?
Why is Financial
  • Planning Important?
where will you be at 65
Where will you be at 65?

Take 100 40-year-olds today. Where will they be at 65?


  • Wealthy 1 1
  • Financially Secure 8 2
  • Must continue to work 14 11
  • No longer alive 24 4
  • Require financial assistance 53 82

Where do you want to be?

what is financial planning
What is Financial Planning?
  • 1. Know where you are now – the starting point of any financial plan
  • Your Net Worth
    • + $ Assets
    • - $ Liabilities
    • $ Net Worth
  • Your Cash Flow
    • Income
    • Expenditures
    • Savings Activity
what is financial planning14
What is Financial Planning?
  • 2. Know where you want to go
    • If you don’t know where you’re going you’ll never get there
what is financial planning15
What is Financial Planning?

Develop and implement the plan

  • This is where you may need assistance
  • The plan should help you to achieve your financial goals
  • It should be realistic based on your current financial position
the 6 steps of financial planning
The 6 Steps of Financial Planning
  • Clarify your current position
  • Identify financial and personal goals
  • Identify financial problems
  • Find solutions
  • Implement the strategy
  • Ongoing reviews
the changing retirement picture
The Changing Retirement Picture
  • Active retirement
      • To be mentally active
      • To keep in touch with people and
      • To earn money
    • Sandwich generation
the changing retirement picture18
The Changing Retirement Picture
  • Life expectancy
    • Living longer (middle age is 54)

Result: 65 is an arbitrary age – retirement is no longer a “point in time”

traditional retirement plan


Traditional Retirement Plan

Total Retirement Savings

Capital Draw-Down

Capital Accumulation

Working Career

Fully Retired


  • Key Concerns:
  • How much income will I have?
  • Where will it come from?
  • Will I outlive my savings?
  • Key Concerns:
  • Am I saving enough?
  • Am I investing wisely?
today s retirement plan
Today’s Retirement Plan

Capital Draw-Down

Capital Accumulation

Fully Retired

Working Career









  • Key Concerns:
  • Am I saving enough?
  • Am I investing wisely?
  • Key Concerns:
  • Have I accumulated enough to do what I want to do?
  • Will I need to continue working?
  • How can I afford to help my parents and/or other family members?
  • Key Concerns:
  • Will I have to change my lifestyle?
  • Will I outlive my savings?
  • How can I create more income based on my total net worth?
  • What happens if I or my spouse need specialized care support and/or nursing home care?
three tiered system
Three Tiered System







government benefits
Government Benefits
  • Old Age Security
    • Payments start at 65
    • Pension based on years of Canadian residence
    • Maximum benefit for 2007 is approximately $6,027
    • Additional payments made to those with low income
1 government benefits
1. Government Benefits
  • Canada/Quebec Pension Plan
    • Benefits normally start at 65
    • They can be requested at 60 or deferred until 70
    • Pension is based on contributions
    • Maximum pension for 2007 is $10,365
1 government benefits24
1. Government Benefits

OAS and C/QPP total about $16,392 per year

Is this going to be enough to

fund your retirement?

Guaranteed Income Supplement

2 employment pensions
2. Employment Pensions
  • Two main types:
  • Defined Contribution Plans
    • Similar to an RRSP
    • Pension is based on contributions and investment performance
    • All of the investment risk rests with the employee
2 employment pensions26
2. Employment Pensions
  • Defined Benefit Plans
    • Pension is based on a formula
    • Looks at earnings and service
    • Investment yield doesn’t affect payments
    • May be integrated with government plans
    • May have indexing feature
3 personal savings
3. Personal Savings

Non-registered savings


Locked-in plans

Other options

3 personal savings28
3. Personal Savings

Non Registered Savings

Bank accounts

Brokerage accounts

No restrictions on contributions and withdrawals

Income is taxed when earned

3 personal savings29
3. Personal Savings


  • Tax deduction for contributions
  • Unused contributions may be carried forward
  • Contributions may be restricted due to participation in a pension plan
  • Tax deferral on growth
rrsp rrif

Income splitting possibility with spouse

Cash withdrawals can be made at any time

RRSP matures at age 71

  • RRIF
  • Annuity
  • Lump sum cash withdrawal
rrsp withdrawals
RRSP Withdrawals
  • Home Buyers’ Plan
  • Lifelong Learning Plan
3 personal savings34
3. Personal Savings

Locked-In Plans

Can only be funded when assets are

transferred from a pension plan

Restrictions on timing and amount of withdrawals

Otherwise similar to “regular” RRSPs

3 personal savings35
3. Personal Savings

Other Options

Saving more

Taking less

Earning more


Lottery Winnings

Downsize House

future challenges
Future Challenges


Rate of return

Tax rates

  • Will
  • Exercise your right to choose who gets what and when.
  • Power of Attorney
  • Appoint someone you trust to handle things in your absence, and make personal decisions if you are unable.
estate costs fees taxes
Estate Costs/Fees/Taxes


Income tax

Executor/Trustee fees

Legal costs


What is it?

The formal confirmation by a Court that the Will is the last Will of the deceased and gives the executors named in the Will the authority to act.

Fees/Costs vary by province

In Ontario - $250 on the first $50,000 of an estate and 1 ½% on value above $50,000

reduce probate fees property passing outside estate
Reduce Probate Fees – Property passing outside Estate
  • Joint with right of survivorship
  • Beneficiary Designations
    • RRSP, RRIF and Insurance
  • Alter Ego or Joint Partner Trusts
joint accounts with person other than spouse problems
Joint Accounts with person other than spouse: Problems
  • Deemed sale and Tax on creation to contributor
  • Tax on income to all joint owners
  • If not intended to be effective till death
    • All have access
    • Claims of 3rd parties
    • Will your intentions be carried out?
non tax uses of testamentary trusts
Non Tax Uses of Testamentary Trusts
  • Spendthrift trusts
  • Disabled beneficiary
  • To protect capital for others
    • If spouse remarries
    • For children of 1st marriage
    • For grandchildren
tax uses of testamentary trusts
Tax Uses of Testamentary Trusts
  • To get spousal rollover but preserve capital for another
  • To income split with a beneficiary
  • To sprinkle income to low tax rate family members
income taxes
Income Taxes
  • Deemed disposition of all assets at their fair market value plus a de-registration of all RRSP/RRIF accounts
  • Tax deferral available if assets are inherited by spouse
  • Special tax deferral for RRSP/RRIF assets inherited by a minor child or dependent disabled child
common solution to estate taxes fees
Common Solution To Estate Taxes & Fees
  • Joint last life insurance contract
  • Funds the tax & fees at half the cost
  • Provides liquidity in the estate
  • Peace of mind that it’s done
  • Just another way to ensure the family gets the full value of the RRSP accounts, the cottage or business.
gifting public company shares
Gifting public company shares ...
  • Backgrounder
    • Gift of public securities to public charity
      • May 2, 2006 federal budget
      • Reduced capital gains inclusion rate to nil
      • Includes stocks, bonds, mutual funds, seg funds
      • Includes stock options
      • Significant tax incentive for funding major gifts
  • All insurance products are offered through BMO Nesbitt Burns Financial Services Inc. by licensed life insurance agents, and, in Quebec, by financial security advisors.
  • This presentation has been prepared with the understanding that BMO Nesbitt Burns Financial Services Inc. is not engaged in providing legal or accounting services.
stocks bonds or cash51
Stocks, Bonds or Cash?
  • Stocks have provided the best returns (Pre-Tax Total Returns)
stocks bonds or cash52
Stocks, Bonds or Cash?
  • Asset returns after taxes
stocks bonds or cash53
Stocks, Bonds or Cash?
  • Keeping pace with Inflation (After-Tax Total Returns)
stocks bonds or cash54
Stocks, Bonds or Cash?
  • Treasury bills provide steady returns...
stocks bonds or cash55
Stocks, Bonds or Cash?
  • Bonds provide superior returns …
stocks bonds or cash56
Stocks, Bonds or Cash?
  • While stocks are more volatile
stocks bonds or cash57
Stocks, Bonds or Cash?
  • Two types of risks
stocks bonds or cash64
Stocks, Bonds or Cash?
  • Recommended Asset Mixes


Cdn. Foreign

Income 10% 55% 15% 20%

As of September 2007

stocks bonds or cash65
Stocks, Bonds or Cash?
  • Recommended Asset Mixes


Cdn. Foreign

Income 10% 55% 15% 20%

Balanced 5% 30% 25% 40%

As of September 2007

stocks bonds or cash66
Stocks, Bonds or Cash?
  • Recommended Asset Mixes


Cdn. Foreign

Income 10% 55% 20% 15%

Balanced 5% 30% 25% 40%

Growth 5% 10% 35% 50%

As of September 2007

stocks bonds or cash67
Stocks, Bonds or Cash?
  • Benefit of International Diversification for Canadian Investors
  • (Using the MSCI World & S&P/TSX Composite Indices in C$)
stocks bonds or cash68

Risk (variance of returns) above market in (%)













Number of randomly selected securities

Stocks, Bonds or Cash?
  • Security specific risk (above market risk) for Canadian equities
stocks bonds or cash69
Stocks, Bonds or Cash?
  • Volatility decreases with time
s p tsx sector weights
S&P/TSX Sector Weights

As of May 31, 2007

s p 500 sector weights
S&P 500 Sector Weights

As of May 31, 2007

stocks bonds or cash74
Stocks, Bonds or Cash?
  • General Disclosure
  • The information and opinions in this report were prepared by BMO Nesbitt Burns Inc., and BMO Nesbitt Burns Ltee/Ltd’s Investment Strategy Group (“BMO Nesbitt Burns”). Harris Nesbitt Corp. (“HNC”) is an affiliate of BMO Nesbitt Burns. BMO Nesbitt Burns and HNC are subsidiaries of Bank of Montreal.
  • The opinions, estimates and projections contained in this report are those of BMO Nesbitt Burns as of the date of this report and are subject to change without notice. BMO Nesbitt Burns endeavours to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Nesbitt Burns makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Nesbitt Burns or its affiliates that is not reflected in this report. This report is not to be construed as an offer to sell or solicitation of an offer to buy or sell any security.
  • BMO Nesbitt Burns, HNC or their affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Nesbitt Burns, HNC, their affiliates, officers, directors or employees may have a long or short position in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO Nesbitt Burns, HNC or their affiliates may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. Bank of Montreal or its affiliates (“BMO Financial Group”) has lending arrangements with, or provides other remunerated services to, many issuers covered by BMO Nesbitt Burns’ Portfolio Services Group. A significant lending relationship may exist between BMO Financial Group and certain of the issuers mentioned herein.
  • Dissemination of Reports
  • BMO Nesbitt Burns Investment Strategy Group’s reports are made widely available at the same time to all BMO Nesbitt Burns Investment Advisors. Please contact your Investment Advisor for more information.
  • Additional Matters
  • TO U.S. RESIDENTS: HNC and/or BMO Nesbitt Burns Securities Ltd., affiliates of BMO Nesbitt Burns, furnish this report to U.S. residents and accept responsibility for the contents herein subject to the terms as set out above. Any U.S. person wishing to effect transactions in any security discussed herein should do so through HNC and/or BMO Nesbitt Burns Securities Ltd.
  • TO U.K. RESIDENTS: The contents hereof are intended solely for the use of, and may only be issued or passed onto, persons described in part VI of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001.
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  • ® BMO and the roundel symbol are registered trade-marks of Bank of Montreal, used under licence.