Delaying the retirement age removes the urgency to act

As you keep on pushing your retiring age, the urgency to immediately set a retiring date and take action accordingly is delayed and drifted further. Similarly, other aspects related to retirement such as decreasing the expenses, decreasing the credit use and also rethinking the style of investment according to the regular fixed income also tend to get delayed further. In an unprepared situation if the retirement sneaks up suddenly unannounced near the age of 65 or so, you certainly find yourself in shallow waters.

Risks of delaying retirement age

• Even if you are really not expecting to retire, one fine day it catches you unprepared as it has to come some day, prepared or unprepared.
• There comes a situation in your family or due to personal health or other crisis, you have to suddenly retire and stop working even when you are not prepared for it.
• If you are forced to retire suddenly, you are left with inadequate finances that can support you in your non-working days. This leaves you financially insecure and may be financially dependent.
• You lose your self-confidence and self-worth, as you do not have enough amounts financially to support yourself in the old age.

Extending careers unlimited

Many people love the importance, name, fame and financially security high profile career jobs provide. Such people are reluctant to leave this status and position and hence keep on rescheduling and delaying their retirement age. These professionals and careerists are never in urgency to stop working. Even the Canadian federal government wants its good skilled workers to retire late and contribute in the economic growth. That is why it has been raising the OAS or Old age security age of eligibility.

The Canadian pension plan or the CPP provides greater benefits if the workers retire at the age later than 65 years. Delaying retirement age is toiling at the age when you should enjoy better privileges of life and take care of health.

Before knowing how to have a happy retirement, we need to know what actually a comfortable retirement requires. It is not a wild guess work. Rather, it requires an analysis of our spending as well as savings we need to make.

A successful retirement requires getting advice from financial advisers or making use of online retirement calculators for best financial planning. At least, it does prepare a person better for having a successful retirement. And there is no room for guessing about the expenditure since it is only going to jeopardize their preparation for retirement.

Let’s see steps for a successful retirement—

• Reviewing expenses—Its time you begin reviewing your expenditure and then do the changes by including the items that are going to change once you retire.

• List—List all of your financial assets to calculate the maximum income that could be earned in the retirement period.

• Investment goals—We need to know how much money we actually need to retire. This can be ascertained by beginning with your gross income (before taxes). From this amount, deduct the annual savings to arrive at the figure of annual spending. Deduct annual (estimated) Social Security and Pension benefits from this figure to arrive at your net number. This net number needs to be multiplied by 20 and to be adjusted for any inflation.

• Allocate your assets—A balanced asset allocation plan is needed for a successful retirement. For this, you need to find out the percentage of fixed income investments and equities required in your portfolio. Use investments likely offering the opportunity to diversify.

• Pay off your debts—Pay off all your debts (whether its low-rate mortgage or anything like this) before you reach the retirement period.

• Maximum savings—Make sure to maximize your savings for a satisfied retirement. Go for a defined benefit plan or just make regular contributions to a good investment vehicle.

• Tax plans for retirement—Best tax strategies for retirement must include using tax-deferral, tax-advantaged and tax efficient. This means using retirement accounts, going for tax-free bonds and making tax-efficient investments.

• Retirement job—If you consider yourself a little bit less stable financially for retirement, you can opt for taking up a retirement job or continue working part-time in your present job. Such a decision will increase your financial stability.

Rules for successful investing don’t always have to be tough. Rather, such rules are quite simple. So, lets see some key rules for successful investments.

Tips for safe and successful investment—

• Time horizon—One of the basics for a wise investment approach is to keep in view one’s time horizon for making investments. Yes, that’s true. For example, you need to adjust your investment decisions keeping in view whether you are reaching retirement or young person.
• Safety—Safety means the element of risk involved in any investment. And a point worth notable here is that higher will be the returns in case of higher risks and vice-versa. Moroever, the element of risk taking depends on capability of the concerned person as well as the investment time horizon.
• Stick to your ability, needs—Before heading towards any investment decision, you need to consider your capability and the needs. Never take risks beyond your capacity or you may be in for big trouble. So, keep in mind your ability to bear loss, rate of return needed to meet your targets, income stability and your horizon while making your investment plans.
• Getting rich versus staying rich—Do you know a vital difference between getting rich versus staying rich. Well, in case of getting rich, you need to take(certain amount of risk) risks. However, if you want to stay rich, then you need to cut or reduce your risks and restrict your spending.
• No complex investments please—Are you allured towards complex investments? If the answer to this question is yes, then you need to wary. That’s because you need to know that it’s the issuer of the investment who is going to be gainer and not the investor in case of a complex investment plan.
• Don’t consult commission-based investment adviser—Seeking the services of a commission-based investment consultant can increase the risk of getting a biased guidance. So, don’t contact a commission-based investment adviser.
• Good advice—Remember, you must take into consideration the cost of getting a good advice but never compromise on the value of advice and risk your investments.
• Don’t fall prey to ‘new’—It is not uncommon for any of us to feel attracted towards something that is new and promises of big returns. But, the bottom line is to avoid doing so.

Some of the advice you may cash in are listed here below:

 If you can start with sufficient cash:

 Jason Papier, President, Fluent Wealth Partners and an expert in stock option in the Silicon Valley suggests that an entrepreneur must keep a year’s worth of personal expenses as stand by in a liquid account to respond to an emergency situation.

Make sure that you have control over your cost of living:

The founder and chief marketing officer of Confirmation.com, Brian Fox, managing theBrentwood, Tenn based online auditing company, is a good example in this matter. He had the teething trouble of raising his company. At the beginning when he encountered various cash crunches, he had surrendered TV viewing need, stopped eating out and minimized his mobile phone expenses by switching over to an economic plan. Jason Papier furthers to say that if needed, you may have to even cut down your food bill by satisfying yourself with the bare food needs.

Support of your friend and family:

It will be better if your friend and family stand by you. The most important part here is to make your own circle understand your venture / your confidence in running the venture / the venture’s strength and so on. Once you can convince your own circle, you can pass through different obstacles coming in the way.

But here is a caution from Fox. He says do not go for a partnership business. Better you take loan with proper documentations, so that your sunny days in future should not be converted as murkier by your so-far friends. Many times it happens. Another expert, Dan Sudit advises that when you are taking the monetary help from your own circle, be transparent to each other about the expectations they may have from you, nothing should be left unspoken / unexplained / undocumented.

Do not off-load too many shares in haste:

In case you want to have the shares of many others in your enterprise, better keep the largest chunk with you. Your friends, family or employees must not surmount you, and you become underdog.

Never touch your retirement savings:

Many are there to have fallen down after usurping their home equity lines, credit card debt and such other giant sources.

According to a leading online Canadian Finance Daily, the 10 year tenure mortgage is at its lowest rates i.e. 3.6 % in Canada. Central Banks across the world, no exception to Canada, are lowering their aspiration from the economic growth after the biggest ever economic melt down in 2008, after the World War II. Every bank is passing through the very nightmare and wanting to avoid any sort of spending freeze. So these attempts are the heating up the money flow by offering the trend-setting rate of interests, which is just close to zero per cent.

The fact of the matter is the apparent posted rates of fixed mortgage are almost the replica of the sticker price of a car. It is to be taken as the general guide. The sidelines are the open question to any one. So the customer can prudently take advantage of the situation because it is not the final amount. Countless variables are there still unearthed and fully negotiable. The customers can find the most suitable rate.

Having said all, a big question came up with Manulife’s balking. It is no doubt that insurance and banking are very highly regulated industries; Manulife has announced its five years’ posted mortgage rate to 2.89 from 3.09. This was the echoing of BMO’s roaring rate of 2.99%. All these finance institutions are well aware about the fact that Flaherty is going to admonish. The Finance Minister, just recent past, has warned every one against the grounded rates on household debts.

So, conclusively, if you have a fixed-rate scheme of mortgage and tending to renew it at the lowest possible rate as on today, you are not free from complications. Be cautious about the lenders offering locked-in period or rates on long term basis with the intention of remortgaging at the lowest possible rates and make their profit. The additional cost in this fixed rates benefit the borrower the security from the escalating rate during the mortgage term; here the lender has to assume the risk.

Shares and Stocks!

A few superannuated may become biased on stock market shares. Actually they consider that bond and other fixed income based securities are not those much lucrative as shares are?  This thought is pervaded by one sided consideration; so it is rather dangerous. Since the retirees need more protective coverage, stock market in Canada is not a safe game, it is always volatile. If it tumbles, it even tramples the mighty ones, what to talk about the retiring-age protection! 

What Do You Think About Dividends?

Dividends are again volatile too. If Royal Bank of Canada’s vice President, Howard Kabot, an expert in financial planning and wealth management is to be believed, it will be the very agonizing moments for the retired or retiring people to remain anxious and check the fluctuating performances of dividends. He of course suggests some plans for adding stamina in the savings & investments of the retiring people. His suggestion indicates towards the dividends of telecommunications, utilities and financial institutes as the blue chip or large cap stalwarts.

Why Don’t You Think Of High-Yield Bonds?

High yield bonds are considered as ‘investment grade’ by the bond-rating agencies like Moody’s and Standard and Poor. As they invariably carry the risk, they also redeem through their tradeoffs. According to some other expert, some of the high-yield investments even offer more than the guaranteed investments like fixed deposits and such like.

Annuities Are They One Word For ‘Absolute Peace Of Mind’?

People in large are not interested about annuities because of its low interest rates. This becomes more unpalatable when the interest rates of other variables go up. But, if any one wants to be free from any sort of volatility in this superannuated age, this is the unmatchable option in comparisons to share, equity bonds etc. 2008 must be reckoned to in this matter.

Real Estate Investment

The economic doldrums all around, have left people with little confidence to make investments in a sector which could be banked upon in their retirement days.

All over the world, the finance has seen more than expected “ups and downs” and so has the economy of Canada.

The worst affected are the common people who do not know the exact way to secure their future and grown their money.

In the process they toy around with many ideas in the look of some amount of “financial security”.

Real Estate viewed as a source of security for retirement days

The Bulls of housing market have been making an attempt to project housing market as a great source of reliance for the days when one does not have a definite and recurring source of income.

Looking at the disasters at various “investment fronts”, people are initiating to bank upon housing market for making investments, especially from the retirement days.

A survey indicates that almost 50% of the Canadians consider the investment in housing market to be a large source of security in the retirement period.
Reasons for housing market gaining trust of investors

Stock market results have only disappointed the investors, mutual funds narrating a no better story. The interest rate on savings account has been quite depressing and the other saving plans have nothing better to offer. Many of these inevstemnt plans have incurred huge loss to the investors over the period of time. In the process, housing market is the only source which seems to be reliable enough in the long term.

Risks associated with housing market

Housing market is largely affected by Government policies, so someone who bought a house merely for the same of having a “safe retirement” may not be able to enjoy it completely due to the introduction of a given policy which is unfavourable for the housing market.

Making any investment in the housing market can never be a complete “risk free” investment.

Any retirement plan should never be solely dependent upon a single source; rather, one has to make diversified efforts to be on the safe side.
Out of many investment plans, housing market has proven itself to be a more reliable one even if it could not gain the confidence of all the investors.

Jim Flaherty announces the changes in TFSA

Tax Free Savings Account is an account which can be opened and operated by an individual who is 18 years or above. This account allows the investor to deposit money up to a certain limit every year throughout one’s life and there is no tax exerted on the same.

Changes in TFSA

All this while, the limit of contribution made an investor every year was $5,000. From 2013, the investors can make a maximum contribution of $5,500.

The other facilities extended to the investors like, tax free withdrawals and deposits would continue to be the same as before.

Also, an investor can continue making contributions throughout his or her life.

The Aims of making such a change

Finance Minister, Jim Flaherty says, “The Government remains committed to its low tax plan for jobs and growth and hence we are offering this facility to the people of the country”.

The Minister further informs that, there are more than 8 million citizens of the country operate and hold such an account. And, almost 2.5 million people make the maximum contribution meant for this account.

Tax benefits for the investors

Canadians will be enjoying tax relief by making a contribution of any amount up to $5,500. With the growing tax burdens, the tax payers are finding it difficult to save money for them. However, such an account always helps people to save their hard-earned money.

The contributions can be made year after till the time the investor wants and the money grows without fearing any TX burden. Also, the withdrawals are exempted from taxes, provided certain criteria are met.

The investments made by TFSA

The amount which is contributed into TFSA, are invested into equities, mutual funds and such money making ventures so that investors can see a “sound growth” of their money.

The withdrawals you make

You can withdraw your money, if you need it at any point of time. The best part of this account is that you can replenish the amount you have withdrawn.

In this era, when taxes are a real burden for the investors and saving is another major concern, increasing the limit of contribution in Tax-free Savings Account is actually a blessing for the investors.

Gold Investment

Many of the investment managers foresee the coming year to be a time to make investments in gold. In fact, they suggest the investors to buy gold or to make investments in stocks and mutual funds in gold mainly.

Performance of gold in the last few years

Central banks around the world continued debasing their currencies. The year had driven the investors to wards gold.

Way back in 2008, the yellow metal had lost its glory, but later, the prices rose as much as 158% reaching the peak point in September of 2011. Again the prices went down by 13% since that period.

Opinion of Experts

David Rosenberg, chief economist with Lufkin Sheaf + Associates has opined that, “I think it will be flat year for equities but what worked in 2012 should work in 2013 as well.”

Dennis Gartman, economist and editor of the Gartman letter says, “I think gold goes much higher in Yen terms and right now it is trading around yen 143,000/ox and with the government there that shall be taking power in January fully committed to a Bank of Japan that prints unlimited sums of Yen.”

He also adds that Gold would trade at a much larger price than what it is today.

Gartman also has displayed his trust in gold equities for the first time in the last few years. He is hopeful that gold will gain upon bullion.

He suggests the long term investors in gold to buy the same and stock it. For traders he suggests that making an investment in Gold ETF is quite a good option to make money.

Jeff Killburg, founder and CEO of KKM Financial says that the inflation will pull the prices of gold much above $2,000. He believes that gold will regain its lustre once again which was somewhere lost a little in the past year. This clearly indicates a potential gain of 22% or even more.

Gold has always been a preferred and secured option of making investments. Many do not take it as a short term investment but also as the largest source and mode of long term investment.

Hence, the investors can get geared up  to buy as much gold as possible if they wish to have a kind of investment which will yield them good benefits in short period of time and a big security over the longer number of years.

Planning an investment

Planning an investment is as important as earning an income. Experts recommend that a considerable portion of the income should always be invested for future emergencies, needs and even security.

The investment should always be in accordance with the age and requirement of the investor.

Starting the investment plan early in life:

• If you are starting your investment process quite early in life, let’s say at 25 or so, and then you have the time in hand to take greater risks. In this case, you can always invest a major portion of your money into equity because in spite of ebbing volatile there is no other investment with high returns as this sector.
• Make investments in this sector when the market is low and depressed.
• Instead of making a large chunk of investment in one goes, you should pour in money bit by bit.
• Along with investing in stocks, make sure that your investments are made in life insurances, retirement benefits and even medical insurances.
• You must also choose mutual funds, bonds and guaranteed income plans so that at least a portion of your investment is secured.
• Even if you are starting early, there is no harm in thinking about “retirement plans”. Earlier you start more benefits you will enjoy.

Starting the plan at middle age:

• When you start to invest in the middle age, you have to consider a plan which secures the future of your spouse and children as well, because by this time you would supposedly get married and enjoy the responsibility of children as well.
• Here, you have to be a little conservative and ensure that your investment does not go majorly into stocks. Of course, you can always put a portion aside for this sector along with insurances covering life, health and medical needs.

Starting the plan quite late in life:

• If you have started the investments late in life then your emphasis should be on “retirement plans” so that your future is secured and you have a definite source of income when you retire.
• Your emphasis also should be upon the kind of “medical insurances” you can avail and make investments into.

When you sit down to make your investment plan always consider the age, the requirements, the responsibilities and the income you generate.