Jul 13: Best from the blogosphere
July 13, 2015By Sheryl Smolkin
Back from two weeks of vacation and back in the saddle! While it’s hard to get re-establish anormal routine, it’s not difficult to find many interesting personal finance stories and blogs to share with you because all of our favourites kept on blogging when I was away.
On Boomer & Echo, Robb Engen wrote about The Evolution of Loyalty Cards. Scanning weekly flyers and clipping coupons is a great Canadian tradition but he says that like the landline telephone, VCRs, and analog TV – coupons and flyers are on their way out. Retailers are moving online and developing smart phone applications to get more personal with their offers.
In Is Paying Down a Mortgage Underrated? on Our Big Fat Wallet, Dan says the real value of paying down the mortgage isn’t the interest savings. With rates as low as they currently are, the interest you save will likely be minimal. He suggests the best approach for anyone looking to use extra funds to pay down their mortgage is to consider a ‘hybrid’ approach – using the money to reduce the mortgage and then putting more money each month towards investing.
Blond on a Budget’s Cait Flanders has finally finished her year-long shopping ban. In a herculean 6,000 word blog The Year I Embraced Minimalism and Completed a Yearlong Shopping Ban she explains why she did it and how it changed her life. Flanders says, “There is nothing I need right now that could make my life better than it already is and that’s a great feeling to end this year-long challenge with.”
Globe & Mail reporter Ian McGuigan agrees that accumulating wealth is a challenge but he says that “decumulating” it can be trickier still. In a recent article he refers to the paper Making Sense Out of Variable Spending Strategies for Retirees written by Wade Pfau, a professor of retirement income at American College in Bryn Mawr, Penn. McGuigan notes that spending only 4% a year works out pretty well if you don’t want to outlive your money. It also keeps your spending at a constant level, in after-inflation terms. However, it’s not so good if you’re interested in being able to live as well as possible in retirement.
Guess who’s saving for retirement? The kids reports Adam Mayers at the Toronto Star. While we often point the finger at young people as having limited interest and understanding of their personal financial affairs, Sun Life finds that’s not so. Younger workers know a good deal when they see one and like all smart consumers they’re snapping it up. Only 40% of those in their 40s and 50s are taking full advantage of matching Registered Retirement Savings Plan or pension money in plans Sun Life administers. On the other hand, 90% of those in their 20s (presumably new employees) are opting in.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.
Lisa Taylor: Challenge Factory
July 9, 2015By Sheryl Smolkin

Today I’m interviewing Lisa Taylor, the president of Challenge Factory for savewithspp.com. The Challenge Factory offers a broad range of services to both employers dealing with an aging workforce, and individuals looking for a career change or transition. We are going to talk about how career timelines have changed, and how you can define and embrace encore or second act careers. Welcome, Lisa.
Thank you. It’s a pleasure to be here.
Q: Lisa, tell me a little bit about your own background, and when and why the Challenge Factory was born.
A: In 2003 and 2004, the question that intrigued me the most, was why was it, even in fantastic companies, so many people were successful in their jobs but not satisfied. They were seeking something else, but also not willing to take the risk to make a move. As a result I did some research. That led me down the path of really understanding demographics and the workplace.
Q: When did you actually start the Challenge Factory?
A: The Challenge Factory started in 2009. It really grew from my initial experience meeting people who wanted to figure out how to make meaningful change later in their careers.
Q: What other professionals do you have on your team?
A: Challenge Factory is made up of a wide variety of professionals. We have career coaches, HR and management strategy professionals and analytic specialists that work with our corporate clients to help model out what the cost would be of shifting the workforce around in different ways.
With our individual clients, we have a really unique body of over 160 experts who are top in their own jobs, and they agree to take on Challenge Factory clients for one day test-drives.
If you’re in one occupation, and thinking that you might want to do something totally different, the best way for an adult to make decisions is to do a dry run. This gives our clients an opportunity to spend a day with an expert in that particular field to find out if their assumptions are really true and whether the job is really as great as they thought it would be. Between our coaches, our consultants, and our test-drive experts, we have a really diverse group of people who are all there to support the clients that work with us.
Q: Do you draw on these experts on an as-needed basis?
A: Yes, based on what’s relevant to each individual client or group that’s going through the program.
Q: We hear more and more in the media about encore, or second act, or legacy careers, tell me what those terms mean for you.
A: Whether it’s an encore career, a second act or a legacy career, I think what the terms are demarking is that this isn’t just an extension of mid-career or mid-life. It’s not just doing the same thing you’ve been doing but doing it longer.
A lot of times when people hear about working longer, they sigh and say, “Oh my goodness, I’m ready to be out of here.” But they’re not actually ready to stop making a meaningful contribution. I think that those terms help us to draw the line in the sand, to say it’s okay to think about these next 20 or 25 years differently than you’ve thought about the last 20 or 25 years.
Q: Is the encore idea only focused on paid work?
A: Not at Challenge Factory, and not from my perspective. The purpose isn’t necessarily to define paid work that people can move into. For some people, that’s a very core part of their plan for their 50s, 60s, even into their 70s and beyond. For other people, it’s really about coming up with the right portfolio of activities. We call that the career portfolio plan.
The encore concept really says, “What’s the balance between stable work, hobbies and interests, and risky or entrepreneurial ventures — things that may or may not pay off in the future, but you know what, you’d love to give them a try and see what happens.”
Q: How do new careers in later life typically differ from the kind of careers people embark on right out of school, or the careers they left behind?
A: I think the biggest difference, when you’re making a transition and it’s later in life, compared to when you’re right out of school, is how significant what you do, or what you have been doing, is tied into your sense of identity.
We introduce ourselves by using what we do as the social placeholder so that we can figure out quickly who everyone is at the cocktail party or at the meeting. Even at the family barbecue when there’s someone new, we often will ask as a very first question, “It’s nice to meet you. What do you do?”
After decades of explaining what you do, starting to identify what else you could really do and what you want to do separate from that particular way of describing yourself is very difficult.
Q: Is an encore career a luxury for people who’ve saved enough money so they have choices, or is the concept relevant for a broader group of people?
A: The relevance of an encore career for everyone is to recognize that it’s not about an aging workforce. It’s about the benefits and the impact longevity brings. The longer we live, the more time we have to contribute in different ways. There is a way for anyone to think about how they want to spend the next 20-25 years of their life.
Q: Do you think the desire to work at something different later in life is more a factor of knowledge workers, or does it also include trades people, independent business owners, blue collar people etc.?
A: It’s assumed that it’s really just for the professional sector. But it’s not true. The Challenge Factory works with individuals looking for their legacy career, for their next step, and they come from all different sectors. We also work on the other side of this equation — inside organizations to see how career paths can change so that their workforce can continue to contribute and deliver value for longer periods of time.
Q: You provide career exploration services on both a group and a one-on-one basis. Your offices are in Toronto. How do you accommodate people outside your geographic area?
A: Challenge Factory is headquartered in Toronto, but we offer services in cities across the country, North America and Europe using technology.
Q: Participants complete 19 assignments using an online collaboration tool. Can you briefly tell me a little bit about these assignments?
A: Sure. Different programs have different numbers of assignments. Our whole career transition program has 19. These assignments are short, but very pointed questions that require our clients to go out and experience something new, talk with friends and family and then reflect on the responses, or do some reflective writing on their own.
We have an online collaboration site where our clients complete their assignments, and their coach and anyone else that they’d like to can see their responses as they work their way through the program. This is in between the coaching sessions.
If they are not meeting with their coach, or their group isn’t meeting again for another two weeks, but they’ve just had a real significant breakthrough, and have written something that’s very meaningful, their coach will see that and be able to respond back to them online within a short period of time.
Q: Can you give me an anecdotal example of a client who went through your program, and his before and after careers?
A: Sure. Frank was the COO of a family-run print business. He had been with the organization for a very, very long time, had really loved his career, but had started to find that he was ready for something new. He was pretty sure he wanted to make a radical change.
In talking with us, one of the things that he found was that there were a couple of aspects of his career that had always made him really excited. One of them was in a particular sector that provided services to his company.
On further exploration, he actually found that there was an organization that was looking for senior-level expertise to help them improve their relationships with their customer base. He was able to step out of his COO role and move over into an organization he had always held in high esteem, in a totally different sector, by leveraging the experience he had by being a client for so many decades.
Q: How long do encore careers typically last? After all, retirement has been described as three stages: go-go, slow-go, and then no-go, although the age span will be different for everyone.
A: This new segment, this language, of encore, or legacy or second act careers, helps to differentiate that you’re not in retirement for decades. That period of time at the end of your life where you actually withdraw from, whether it’s paid or voluntary contribution to society, is a specific moment in time because it’s time for you to start to take care of yourself and to really focus on what’s important as you get to the end of your days. This instead of putting a line in the sand that says, “You know what, by the time everyone is 71, that’s got to be finished.”
Q: Thank you very much for your insights, Lisa. It’s been a pleasure to talk to you.
A: And with you.
7 Things to Know About Practicing Safe Sun
July 2, 2015By Sheryl Smolkin
After a long winter, when summer weather finally comes, all I want to do is close my eyes and bask in its warming rays. It doesn’t seem possible that this is a high risk activity, yet melanoma skin cancer caused by damaging ultraviolet (UV) radiation is one of the fastest rising of all cancers in Canada.
But we all want retire healthy and live to a ripe old age. So the good news is that skin cancer is preventable if you practice “safe sun.” That means correctly applying sunscreen at recommended intervals and wearing protective clothing such as hats and sunglasses. Sunscreens are products combining several ingredients that help prevent the sun’s ultraviolet (UV) radiation from reaching the skin.
Two types of ultraviolet radiation, UVA and UVB, damage the skin, age it prematurely, and increase your risk of skin cancer. UVB is the chief culprit behind sunburn, while UVA rays, which penetrate the skin more deeply, are associated with wrinkling, leathering, sagging, and other light-induced effects of aging (photoaging). They also exacerbate the carcinogenic effects of UVB rays, and increasingly are being seen as a cause of skin cancer on their own. Sunscreens vary in their ability to protect against UVA and UVB.
SPF — or Sun Protection Factor — is a measure of a sunscreen’s ability to prevent UVB from damaging the skin. If it takes 20 minutes for your unprotected skin to start turning red, using an SPF 15 sunscreen theoretically prevents reddening 15 times longer — about five hours.
SPF 15 filters out approximately 93% of all incoming UVB rays. SPF 30 keeps out 97% and SPF 50 keeps out 98%. They may seem like negligible differences, but if you are light-sensitive, or have a history of skin cancer, those extra percentages will make a difference. And as you can see, no sunscreen can block all UV rays.
Here are 7 things you need to know about “practicing safe sun”:
- Who should use sunscreen? Everyone regardless of skin tone or ethnicity over age 6 months should use sunscreen. Younger infants should be kept in the shade or wear protective clothing.
- Cloudy days: Up to 40% of the sun’s ultraviolet radiation reaches the earth on a completely cloudy day. This often leads to the most serious sunburns, because people spend all day outdoors with no protection from the sun.
- Expiration dates: When it comes to sunscreen, expiration dates really do matter. The active ingredients in sunscreen can deteriorate over time, which means the protection won’t be as effective. What’s more, an open bottle is more likely to become contaminated with germs as the preservatives meant to prevent bacteria can also lose their efficacy. Read the suggested expiry date and storage conditions on the label.
- Choosing the right sunscreen: The kind of sunscreen you use may vary depending on the type of outdoor exposure you are expecting. For incidental sun exposure — when you are outside only for minutes at a time — an SPF of 15 is probably sufficient. Your sunscreen should have broad spectrum protection, meaning it effectively protects against significant portions of both the UVA and UVB ranges of the light spectrum. Most broad-spectrum formulas contain multiple sunscreen ingredients. For more detailed information on ingredients and how to choose your sunscreen, click here.
- SPF in your makeup: A two-in-one foundation/sunscreen certainly seems handy, but that doesn’t mean it works. Part of the problem is quantity: a dab of foundation isn’t the same as the amount of sunscreen you should slather on your face. However, a moisturizer with SPF can do the trick.
- How much is enough? To ensure that you get the full SPF of a sunscreen, you need to apply 1 oz. – about a shot glass full. At least four ounces per day with four applications means one 8 ounce bottle will only last the weekend. With 15 weekends between Victoria Day and Labor Day, you’ll need at least 15-8 ounce bottles per family member to get you through the season—even on rainy or cloudy days!
- Proper application: Sunscreens should be applied 30 minutes before sun exposure to allow the ingredients to fully bind to the skin. Reapplication of sunscreen is just as important as putting it on in the first place, so reapply the same amount every two hours. Sunscreens should also be reapplied immediately after swimming, toweling off, or sweating a great deal.
You can use both sunscreen and insect repellent to protect your health but be sure to read and follow the instructions on both containers to make sure that each product is applied properly. Health Canada recommends that if you apply both products; put the sunscreen on first, followed by the insect repellent.
What the new RRIF withdrawal rules will mean for you
June 25, 2015By Sheryl Smolkin
By now you may be aware that there are changes to the Registered Retirement Income Fund (RRIF) withdrawal rules in the 2015 federal budget. But you may be wondering what difference it will make to you.
The basic purpose of the tax deferral provided on savings in registered pension plans (RPPs) and registered retirement savings plans (RRSPs) is to encourage and assist you to accumulate savings over your working career in order to meet your retirement income needs.
Consistent with this purpose, savings in Saskatchewan Pension Plan and RRSPs must be converted into a retirement income vehicle by age 71. In particular, unless you purchase an annuity, an RRSP must be converted to a RRIF by the end of the year in which you reach 71 years of age and a minimum amount must be withdrawn from the RRIF annually beginning the year after it is established (alternatively, the RRSP savings may be used to purchase an annuity). This treatment ensures that the tax-deferred RRSP/RRIF savings serve their intended retirement income purpose.
A formula is used to determine the required minimum amount a person must withdraw each year from a RRIF. The formula is based on a percentage factor multiplied by the value of the assets in the RRIF. The percentage factors (the RRIF factors) are based on a particular rate of return and indexing assumption.
Until this year, a senior was required to withdraw 7.38% of their RRIF in the year they are age 71 at the start of the year. The RRIF factor increased each year until age 94 when the percentage that seniors were required to withdraw annually was capped at 20%.
The existing RRIF factors were in place since 1992. The 2015 Federal Budget adjusts the RRIF minimum withdrawal factors that apply in respect of ages 71 to 94 to better reflect more recent long-term historical real rates of return and expected inflation. As a result, the new RRIF factors will be substantially lower than the existing factors.
The new RRIF factors will range from 5.28% at age 71 to 18.79% at age 94. The percentage that you will be required to withdraw from your RRIF will remain capped at 20% at age 95 and above. Table 1 below shows the existing and proposed new RRIF factors.
TABLE 1: EXISTING AND NEW RRIF FACTORS | |||||
Age at January 1 | Existing Factor % | New Factor % |
Age at January 1 | Existing Factor % | New Factor % |
71 | 7.38 | 5.28 | 84 | 9.93 | 8.08 |
72 | 7.48 | 5.40 | 85 | 10.33 | 8.51 |
73 | 7.59 | 5.53 | 86 | 10.79 | 8.99 |
74 | 7.71 | 5.67 | 87 | 11.33 | 9.55 |
75 | 7.85 | 5.82 | 88 | 11.96 | 10.21 |
76 | 7.99 | 5.98 | 89 | 12.71 | 10.99 |
77 | 8.15 | 6.17 | 90 | 13.62 | 11.92 |
78 | 8.33 | 6.36 | 91 | 14.73 | 13.06 |
79 | 8.53 | 6.58 | 92 | 16.12 | 14.49 |
80 | 8.75 | 6.82 | 93 | 17.92 | 16.34 |
81 | 8.99 | 7.08 | 94 | 20.00 | 18.79 |
82 | 9.27 | 7.38 | 95+ | 20.00 | 20.00 |
83 | 9.58 | 7.71 | |||
SOURCE: BUDGET 2015 ANNEX 5.1 |
By permitting more capital preservation, the new factors will help reduce the risk that you will outlive your savings, while ensuring that the tax deferral provided on RRSP/RRIF savings continues to serve a retirement income purpose.
As illustrated in Table 2 below, the new RRIF factors will permit close to 50% more capital to be preserved to age 90, compared to the existing factors (Table 1 above).
TABLE 2: CAPITAL PRESERVED UNDER THE RRIF FACTORS | |||||
Age at January 1 | Under existing RRIF factors | Under new RRIF factors | Difference (% more remaining) | ||
71 | 100,000 | 100,000 | – | ||
80 | 64,000 | 77,000 | 20 | ||
85 | 47,000 | 62,000 | 32 | ||
90 | 30,000 | 44,000 | 47 | ||
95 | 15,000 | 24,000 | 60 | ||
100 | 6,000 | 10,000 | 67 | ||
1 For an individual 71 years of age at the start of 2015 with $100,000 in RRIF capital making the required minimum RRIF withdrawal each year. | |||||
2 Age 71 capital preserved at older ages is expressed in terms of the real (or constant) dollar value of the capital (i.e., the value of the capital adjusted for inflation after age 71). The calculations assume a 5% nominal rate of return on RRIF assets and 2% inflation. | |||||
SOURCE: BUDGET 2015 ANNEX 5.1 |
By reducing your RRIF withdrawals, you can retain more assets in your RRIF—assets that will continue to accumulate on a tax-deferred basis to support your future retirement income needs should you live to an advanced age. In addition, if you do not need your minimum RRIF withdrawal for income purposes, you can save the after-tax amount for future needs — for example, in a Tax-Free Savings Account (TFSA), if you have available TFSA contribution room.
Of course, if you need more money sooner, you can withdraw it from your RRIF and pay the tax owing. Any money that you withdraw from a RRIF will increase your income for the purposes of calculating the Old Age Security clawback and eligibility for the Guaranteed Income Supplement.
Also read: RRIF rules need updating: C.D. Howe
Jun 22: Best from the blogosphere
June 22, 2015By Sheryl Smolkin
This week marks many milestones in the life of our family — Father’s Day, my husband’s retirement and my 65th birthday (really?). Also our granddaughter and her Moms will be in Toronto to celebrate her 3rd birthday. It seems like just yesterday we drove from the cottage in Muskoka to Ottawa to meet her for the very first time!
We’re planning an informal backyard barbecue for close family and a few friends with a home-made ice cream cake. But the cost of children’s birthday parties can really get out of hand with families striving to “keep up with the Joneses.”
This week we share links to articles and blogs that will help you manage the cost of kid’s birthday parties.
How to throw a great, cheap party for your child has great ideas like make your own pizza parties, pool parties, get crafty instead of buying decorations and sourcing balloons and other party paraphernalia at the dollar store.
On About Parenting, Megan Cooley suggests that you keep down the guest list, forget goody bags in favour of a simple gift related to the party theme like a cookie cutter or seeds for the garden and play traditional party games instead of hiring outside entertainment.
Six years ago, Lindsay Armstrong on babble.com offered 25 birthday party tips that still resonate today. I think throwing a costume party is a great idea. Award prizes for the silliest costume, the most colorful costume, etc. (just make sure that everyone gets a prize). If nothing else, the other parents will appreciate getting some extra use out of last year’s Halloween costume.
My suggestion if you own a photo printer or can borrow one, is to purchase inexpensive 4’ x 6’ frames in advance. Take lots of pictures during the party and print either a group or individual pictures that can be framed and sent home with each child. You can also have the children decorate the frames first using washable paint plus odds and ends they can glue on like shells or buttons.
And finally, how about asking guests to bring a donation to a charity instead of bringing gifts? Help your child select a charity that is meaningful. What does your child care about? It could be animals, the elderly, homelessness or hunger. Instead of Pin the Tail on the Donkey, movies or kickball, consider an activity specific to the charity of choice. Be sure it is age appropriate and enjoyable for everyone attending.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.
Chet Brothers: Brothers and Company named to Financial Wealth Professional Magazine Canada's 2014 Top 50 Advisers
June 18, 2015
By Sheryl Smolkin

Today I’m interviewing Saskatchewan financial planner Chet Brothers for savewithspp.com. He formed Brothers and Company Financial, an independent planning and wealth management firm in 1994 after spending a number of years at the wealth management subsidiary of a large Canadian financial Institution. He’s experienced in all aspects of personal finance and wealth management.
Brothers has dedicated his professional career to educating the public and financial advisers about the importance of comprehensive financial planning. His professional qualifications include Certified Financial Planner and Registered Financial Planner designations. He also served his profession as past president of the Institute of Advanced Financial Planners and he is currently on the board of the Canadian Institute of Financial Planners. He came to my attention as Wealth Professional Magazine recently named him one of only two Saskatchewan financial planners on their Canada’s Top 50 Advisers’ list in 2015.
Thank you so much for joining me today Chet.
You’re welcome.
Q. How did you get into the business of financial planning?
A: I started in investment sales and was looking for a career that offered lifetime learning opportunities. So I upgraded and moved into the financial planning area.
Q. How do you think Canadians can benefit from working with a financial planner?
A: I think a financial plan really makes the most efficient use of all the resources that an individual or a family has at hand to enable them to realize the hopes and dreams they have for themselves, their family, and their community.
Q. Are your clients typically close to retirement or do you work with a broad spectrum of clients developing financial plans?
A: I would say if you looked at the bell curve, the peak would be people either five years before or five years after retirement. But we do deal with the entire spectrum. Often as people get closer to retirement, the importance of financial planning becomes clear to them and they seek out advice.
Q. What should people who require financial planning services be looking for? What questions should they be asking?
A: First, I think you want to make sure you are dealing with an accredited person with a professional designation — either the CFP or RFP or hopefully both. You want to make sure that they have some experience. Let them practice on someone else. I started at a large financial institution, essentially apprenticing. They also need to have a defined and tested investment strategy and a comprehensive approach. If someone wants to talk to you just about your investments and hasn’t asked you about your will or your power of attorney, I’d run.
Q. Do you sell products like securities or insurance or are you an independent adviser?
A: I am an independent adviser who is licensed in securities and insurance. In order to implement a financial plan in this country, you need to be licensed to sell individual securities, mutual funds or insurance. So, we do implement plans and we are licensed.
Q. How are you compensated? Do people pay a flat fee or an hourly rate to have a financial plan developed or are you on commission?
A: To develop a financial plan, we charge an hourly rate of $175/hour. At that point, the client can do what they want with the plan. If they choose to implement with us, then we will use the products and services available to us and we’ll offset that fee. If someone were to use our investment services, any revenue that we receive from the investments or insurance would offset the fees that they paid for the financial plan in first 18 months.
Q. If a client has little knowledge of investment products how do you educate them or how can they educate themselves so they make wise investment choices?
A: Investing is not rocket science. There are two basics: ownership or “loanership.” After that, explaining how markets work is not all that complicated. I think the industry makes it unnecessarily complicated for people. Most people grasp pretty quickly that if they are buying a fraction of a business, they have to identify what are good businesses. It’s a lot harder to determine whether it’s the right price to pay or not.
Q. How important is asset allocation from a risk management perspective? In other words, what portion of a client’s portfolio should be stocks, bonds or other assets? How do you decide what split to recommend for a client?
A: It depends on the client’s situation. But it’s also important to know that, just moving around asset classes doesn’t necessarily reduce risk. You want to make sure that you reduce the risk at the source. Buying quality is the first step.
That is if you’re going to buy into the equity market you should be buying quality, profitable businesses that pay dividends. That will reduce your risk on the equity side. On the debt side, you want to make sure that you are buying quality debt obligations of borrowers who can pay you back. You also want to make sure that the duration is reasonable.
The next step would be to determine what asset mix is appropriate. I think in very few instances would it be appropriate to have 100% of your money in ownership of businesses, just because most people can’t handle the volatility. They wouldn’t stick with program, and they’d bail.
For most people, depending on age and stage and their experience, we would add more or less fixed income to a portfolio. There’s no exact formula. It’s determined through the financial plan, interviews and getting a sense of their ability to handle volatility.
Q. When you are developing a financial plan or a retirement plan for a client do you consider the equity in the family home as a potential source of retirement income?
A: No. I generally wouldn’t. In a financial plan sometimes we run the plan out beyond age 80 and there could be a short fall. Then it’s conceivable someone would sell their home and move into a rental, or a long term care facility.
But, your home is your home. Borrowing or taking equity out of the home makes no sense. The other argument is “We’ll downsize when the kids are gone.” However, in this market, condos cost almost as much as stand-alone homes or more. There’s no real way to get equity out, in my opinion.
Q. There’s an ongoing debate in the media and the financial industry about actively managed portfolios versus passive index products. What are your views on the subject?
A: I think it’s funny, because the stats show that only 20% or 25% percent of actively managed portfolios beat the index. But zero percent of passive investments beat the index!
The only index or benchmark that a person needs to care about is the number that is in their financial plan. If you need five percent return on your investments over your lifetime to give you all of the things that you dreamed about for yourself, your family, and your community then, it’s irrelevant what the markets do as long as you get it.
Q. So, you are not an advocate necessarily of just an index or passive approach?
A: If you take an index or passive approach the problem is, which index? You’re making a market call. It’s incredibly risky. People who do so have made a huge call based on zero or little if not knowledge.
Q. Congratulations. I see you’ve been named one of Canada’s Top 50 Advisers in 2014. Tell me how this process took place and how you were ultimately named to the list?
A: Wealth Professional Magazine does an annual survey. We took part in 2014 and 2015. They base their decision on the number of clients, growth of client assets under management and other factors. And we were fortunate for two years in a row that we made the list.
It’s an honour to be on the list. But it’s certainly not how we measure our success. We measure the success of this business by the success or our clients. What we focus on is their results which we monitor and measure.
Q. The Saskatchewan Pension Plan’s Balance Fund in which non-retired members are invested earned 9.1% in 2014 and an average of 8.16% over the plan’s 29 year history. Do you think that participating in SPP can form a valuable part of an individual’s overall investment strategy?
A: Yes. Those are reasonable returns. I think that the hardest thing is accumulating the money in the first place. If you’re not doing anything else, the Saskatchewan Pension Plan makes it very easy to accumulate money at a reasonable price. Putting money into that pension plan on regular basis is a great starting spot. If you have more significant assets or a more sophisticated situation, or you are a more sophisticated investor, there may be other places to look. But, for a vast majority of people it is a place to start because SPP does some of the heavy lifting to help you save money.
Q. Thank you Chet. I really appreciate talking to you . It was a pleasure to speak to you today.
A: My pleasure.
—-
This is an edited version of a podcast interview recorded on April 15, 2015.
Jun 15: Best from the blogosphere
June 15, 2015By Sheryl Smolkin
This week we have a mixed bag of offerings from some of our favour bloggers and media pundits. First of all, Boomer & Echo’s Robb Engen discusses Why Multiple Income Streams Is A Better Emergency Fund For Millennials.
Engen says that instead of having 3-6 months worth of expenses sitting in a savings account for an emergency fund, a better way for Millennials to combat the threat of job loss – or job uncertainty – is to build up multiple income streams outside of their traditional day jobs.
There are plenty of articles that focus on things women need to know about life after work. But in a role reversal, on Retire Happy Donna McCaw writes about Issues that Men Face in Retirement. Her interviews with a number of men about their experiences with retirement reveal that for many, identity issues are paramount. Those who do not replace the status, position, role and job satisfaction with something else once they are no longer employed can have a real challenge regaining a sense of who they are and how their lives are meaningful.
In Diving Canadian Dollar Has Made Holiday Travel More Expensive, Sean Cooper quantifies the cold, hard facts about how poor performance of the loonie as against the U.S. dollar has made travel outside Canada a much more expensive proposition. With lower gas prices, he says this just could be the year to take the family on a road trip to learn more about what our beautiful country has to offer.
Globe and Mail personal finance guru Rob Carrick believes It’s time to get real about retirement planning. He poses the questions: What’s retirement really like from a financial point of view? How likely is an unexpected financial crisis, and how do people cope financially? How big a deal are health care costs? How feasible is it to plan on working in retirement?
According to Carrick, the answers to these questions can be found in a new report issued this week by the Ontario Securities Commission and prepared by Brondesbury Group, a consulting firm. It’s called Financial Life Stages of Older Canadians.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.
The rise of semi-retirement
June 11, 2015By Sheryl Smolkin
Call it semi-retirement, phased retirement, an encore career or a second act career. It all amounts to the same thing. And a new global survey from HSBC shows it is a growing international trend.
The reality of retirement is evolving and semi-retirement – working fewer hours and/or changing jobs – is becoming more widespread. Traditionally, retirement meant a sudden switch from a busy full-time work routine to a more relaxed lifestyle. Many of today’s working age people are seeking a more gradual transition to life after work.
Easing into full retirement
While only 17% of Canadian retirees semi-retired before fully retiring, almost half (45%) of working age people are planning to ease into retirement before they stop work completely. A similar proportion (40%) expect to switch straight from their current job and working hours to full retirement and 15% expect that they will never be able to fully retire.
There are differences between men and women, with more men (42%) planning to move immediately from their current job and working hours work to full retirement than women (38%). Those closer to retirement (aged 45+) are more likely to believe they will never retire (20%) compared to those aged 25-44 (12%).
The life of a semi-retiree
Almost three in five (57%) of those working age people planning to semi-retire want to stay in the same job but work fewer hours, while just over a third (35%) are planning a change in career as well as reduced hours. A significantly smaller proportion (8%), plan to semi-retire by changing career but working the same hours.
Men are more likely than women to favour staying in the same job but reducing their hours. More than three in five (62%) men plan to do this compared to just over half (53%) of women. Conversely, 37% of women plan to change jobs and work fewer hours, compared to 32% of men.
Choice or necessity?
The graph below illustrates the reasons why Canadian retirees who initially semi-retired made the decision to do so. It is interesting to note that only 18% said they semi-retired for health reasons and 12% said they could not afford to fully retire.
Why did you move from working full-time into semi-retirement? (Base: All who semi-retired)
18%: To reduce stress
38%: Didn`t want to retire full time immediately
37%: Keep active/ keep my brain alert
35%: Like working
26%: Wanted an easy transition into retirement
28%: I no longer needed to work full time
20%: It was something I planned and was able to do
18%: Health reasons/physical demands
17%: To maintain a comfortable lifestyle
12%: Cannot afford to retire
You can’t take it with you
When asked whether it is better to spend all of your money or save as much as possible to pass on to the next generation, the majority (66%) of working age Canadians take a balanced view, believing that it is better to spend some money and save some to pass on.
However not everyone agrees. More than one in five (21%) working age people believe that it is better to spend all your money and let the next generation create their own wealth. Comparatively few (13%) agree that it is better to save as much money as possible to pass on to the next generation.
Attitudes towards spending and saving vary from country to country. Over a quarter of pre-retirees in Hong Kong (28%), Canada (27%), the UK (26%) and Australia (26%) say that it is better to spend all your money and let the next generation create its own wealth.
In contrast, fewer working age people in Mexico (12%), the UAE (15%) and Indonesia (16%) agree that it’s better to spend all your money.
Also read: Will you be working at 66?
Jun 8: Best from the blogosphere
June 8, 2015By Sheryl Smolkin
Over the last few weeks bloggers and mainstream media have been reacting to Finance Minister Joe Oliver’s surprise pre-election announcement of the government’s intention to add a voluntary component to the Canada Pension Plan. Here is sample of some of the buzz created by this proposal.
I wrote Voluntary CPP contributions will favour high earners on RetirementRedux and the blog was re-posted by John Chevreau on the Financial Independence Hub. I believe that too many questions remain unanswered and if voluntary CPP contributions are locked in until retirement, even when middle or low earners finally bite the bullet and set up a payroll savings plan, chances are they will opt for an RRSP or TFSA so they can get at the money in an emergency. Because employers probably won’t have to match contributions, there will be incentive for employees to contribute more money to CPP.
On Retire Happy, Jim Yih questions whether voluntary CPP contributions are a good idea. Yih also notes that the devil is in the details, and suggests that if there is no employer matching there is little difference between voluntary contributions to CPP or RRSPs (individual and group). Lower cost investing may be a plus but he says investors already have access to lower cost investments through Exchange Traded Funds (ETFs).
In the Globe and Mail, Bill Curry reports that the Conservative government rejected a voluntary expansion of the Canada Pension Plan five years ago as overly expensive and misguided, a history that is raising questions as to why it is now proposing that very idea. “This was rejected unanimously by our partners in the federation when we met and discussed the issue because it would not work and because the CPP would be unable to administer it,” Finance Minister Jim Flaherty told the House of Commons in September 2010.
In the StarPhoenix, Andrew Coyne writes Whether voluntary or mandatory, there is no need to expand the CPP. He says, “If people are saving about as much as they want to now, then forcing them to save more in one way, through an expanded CPP, may simply result in an offsetting reduction in their other savings, in their RRSPs or TFSAs.” He also opines that those of modest means are already well-served by the existing CPP and the further you climb the income scale, the hazier the case for public intervention becomes.
And finally, a Toronto Star editorial says Harper’s pension ‘fix’ falls short. This piece suggests that by far the best way to forestall a retirement income crisis would be to expand and enhance the existing, highly acclaimed CPP, by upping the input from employers and employees alike. With $265 billion in assets and an enviable 18.3% return last year, the plan has expert management, huge scale and a low-cost structure. Employers and workers pay equally, to a combined maximum of just under $5,000 this year. It locks in contributions over the long haul and it provides a safe, predictable retirement income.
Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.
Summer Jobs for High School Students
June 4, 2015By Sheryl Smolkin
School is almost out, and high school students are looking for summer jobs. But most of the good jobs have been taken by college or university students who hit the ground running at the beginning of May. Even summer camps staffed up in the spring, so it’s generally too late to apply for these positions.
Students who are prepared to continue working part-time through the school year may find this is the ideal time to look for positions in fast food restaurants or retail. Some summer resorts may also still have openings.
However, this could be the time to hone their entrepreneurial skills by creating their own jobs. Here are some ideas for enterprising teenagers who need to make money this summer:
- Babysitting: I remember when my daughter was born and suddenly I no longer had time to eat, sleep or take care of the house. I was delighted to hire a high school student to walk the baby in her pram and provide back up at home. Parents with a second or third child are often even more in need of assistance.
- Lawn care: Lawn care companies often hire seasonal help. But if the family has a lawn mower in good repair, neighbours and friends might be happy to have a dependable young person cut their lawn, water it and weed the flower beds, particularly if they are going to be away for all or part of the summer.
- Pet care: We have a dog and a cat and travel often, especially on summer weekends. One year when a teenager lived across the street, he fed and played with our cat and boarded the dog at home for a few days at a time. It was certainly more convenient and less expensive than having to drive and pick up the pets from a kennel.
- Car washing: There is typically one or two cars parked in every driveway. They are a virtually unlimited market for an “at home” car washing and detailing service. Here are some FAQs from Consumer Reports on the do-it-yourself car wash including products to use.
- Odd jobs: Everybody has small jobs around the house that need to be done ranging from garage cleanup to painting fences, or laying new walkways. Seniors who are still living in their own home are a great source of clients.
- Temporary agencies: Students with keyboarding and other administrative skills may be able to obtain short-term placements in interesting settings. Some Saskatchewan temp agencies are listed on this website. Students can also search online for openings in their area or network with family and friends.
- Tutoring: Students who are a whiz in math, science or other subjects may be able to offer peer tutoring for students who are challenged by the summer school curriculum or want to get a head start on the next year.
- Birthday parties: When my husband was a student, he and his brother did magic shows at birthday parties. The possibilities are endless for talented young people whether they excel in art, music or drama.
With colour laser printers in almost every home, it’s not difficult for teenagers starting a mini-business to print up flyers, business cards and invoices. Creating a simple website or blog for free has also never been easier. Prospective clients will be more receptive to neatly dressed young people with references and even pictures showing examples of their work.
The experience students gain by taking the initiative to create their own job is a great learning experience and a valuable addition to their resumes. However, in all cases the health and safety of young workers is paramount and parents should “vet” their “business plan” and provide necessary support.