- Net Worth
- Investment Recovery
- Mutual Fund Fees
- Net Worth
- Pay Down Debt or Invest
- Pay Off Credit Cards and Debt
- RESP Savings Calculator
- Retirement Budget Worksheet
- RRSP Savings Calculator
- TFSA
Retirement Planning
When combined with other calculators, they are powerful tools. For example, the Retirement Budget Worksheet is a very flexible tool which helps you to identify expenses and income streams before retirement and to estimate them after retirement. A spreadsheet allows you to compare them.
If you need to expand your understanding of various investment categories such as TFSAs and RRSPs and RRIFs and Annuities you can refer to the Retirement Planning section of the OSC website. It is excellent.
If you are interested in developing a financial projection to ascertain your financial status as your retirement progresses, you can couple the information from the retirement budget worksheet with an interesting tool developed by Cascades Financial Solutions.
Cascades is a Canadian company that developed software to assist professional financial planners to prepare retirement plans for their clients.
Cascades is an intuitive retirement income questionnaire for financial advisors that once submitted, creates a report that demonstrates the value of planning advice by revealing the income tax savings of competing withdrawal strategies.
While its primary mission is to serve financial planners, the company also offers services to individual investors (for $85).
The reports present and compare three strategies managing one's financial affairs in retirement.
Registered Funds First – This strategy involves creating retirement income from registered funds first, reducing the risk of leaving highly taxable investment
accounts to an estate. The second priority is given to taxable non-registered accounts, leaving Tax Free Savings Accounts (TFSAs) last.
Non-Registered Funds First – This strategy involves creating retirement income from non-registered funds first, deferring the income taxes payable on registered investments. The second priority is given to registered investments, leaving Tax Free Savings Accounts (TFSAs) last.
Tax Free Funds First – This strategy involves creating retirement income from non-registered funds first, and postpones the use of registered funds as long
as possible. The second priority is given to Tax Free Savings Accounts (TFSAs), leaving registered funds last.
Determining a Winning Strategy – With all other factors being equal, the winning strategy provides a client longevity and the highest estate value, net of
taxes and fees, at life expectancy. The differences in the net estate value represent the income tax savings of the winning strategy.
Here is a sample report: Report
Like all financial projections, it is important to examine carefully one's assumptions before setting out. For example, estimating future rates of inflation and returns on investment vehicles is akin to witchcraft. That is why it makes sense to proceed with rather pessimistic assumptions with the hope that you will be able to make it through dark and stormy nights during periods of financial market turmoil.
The Cascades website also contains some really useful articles in their resources section.
The Government of Canada also presents some really useful financial planning tools in Your Financial Toolkit.
A comprehensive learning program that provides basic information and tools to help adults manage their personal finances and gain the confidence they need to make better financial decisions.
It is excellent.
Banks and other financial institutions also provide financial calculators.
It is useful to visit several sites and compare results. Why?
- results may vary according to differences in jurisdictions (e.g. tax policy)
- there may be a built-in bias which favours the investment philosophy/approach of the provider
- comparing differences will contribute to a better understanding of the intricacies of financial planning
Other Aspects of Financial Planning
I wish that I had access to many of the aforementioned tools when starting out in my investment planning. For example, it took me a few years to appreciate the adverse impact of mutual fund fees. For fun, you should run the OSC's mutual fund fees tool to see how fees impair returns on your investment.
In addition, most mutual funds fail to outperform benchmarks over prolonged periods of time. And even then, the funds employ financial trickery to make their returns look good (talk about putting lipstick on a pig):
Take a look at these findings from The BAM Alliance in an article entitled Mutual Fund Benchmark Discrepancies Can Fool Investors:
While most funds appear to have a risk-appropriate prospectus benchmark, we find that a substantial portion of funds have a prospectus benchmark that understates risk and, consequently, overstates relative performance. Further, we show that funds benefit from that overstatement, as investor flows respond to performance relative to the prospectus benchmark even when a fund has a benchmark discrepancy.”
Incidentally, The BAM Alliance is a very useful source of information on things financial. Its mission is:
The BAM Alliance is built for you. It's a community of investors and advisors who've discovered a better way to take control of financial futures and achieve life's most important goals.
You can subscribe to its e-mail newsletter (free) to receive updates on new articles. It's a great site.
There are many other great sites with a wealth of very useful planning tools. The trick is to combine their power with other tools with a view to developing comprehensive financial strategies. This is where professional financial planners can add real value. As a DYI person, I prefer to do things on my own, but if things get a bit complicated, as for example, some aspects of tax planning, I will not hesitate to retain a professional.
Lastly, it will literally pay to read books. Without doubt, the best book on financial planning that I've ever read is The Wealthy Barber by David Chilton. The original edition is the best as it has a vitality which is lacking in later versions. If you want to get your financial house in shape, there is no better way to start than by delving into this book. Some of the details may be a bit outdated, but the general thrust of the book is timeless. It's a real gem and a work that I have given to many of the people who are important in my life.
There are many other great sites with a wealth of very useful planning tools. The trick is to combine their power with other tools with a view to developing comprehensive financial strategies. This is where professional financial planners can add real value. As a DYI person, I prefer to do things on my own, but if things get a bit complicated, as for example, some aspects of tax planning, I will not hesitate to retain a professional.
Lastly, it will literally pay to read books. Without doubt, the best book on financial planning that I've ever read is The Wealthy Barber by David Chilton. The original edition is the best as it has a vitality which is lacking in later versions. If you want to get your financial house in shape, there is no better way to start than by delving into this book. Some of the details may be a bit outdated, but the general thrust of the book is timeless. It's a real gem and a work that I have given to many of the people who are important in my life.
No comments:
Post a Comment