Hot Off the Web
It is well worth visiting “BusinessWeek 2007 annual retirement guide” . It even has a link to the 2006 guide for many other useful articles. The 2007 focus is on retiring early and what you should watch out for (timing of your departure, who will manage your retirement funds, medical coverage (for Americans) until Medicare kicks in at 65 and what you’ll do in retirement). A couple of the notable articles are:
“More Dollars Later in Life” reiterates the virtues of longevity insurance, that I have been encouraging at this website for a while. It is a single payment deferred annuity that starts payments at around age 80-85, but without having to give up a significant portion of your assets up front. The advantage is not only guaranteeing an income stream for life even if you live past 100, but it allows you to increase your withdrawal rates during retirement because you now have an earlier known date to which your assets have to last (rather than the unknown death date). This approach can also increase your estate if you are long-lived.
“Until Medicare kicks in” discusses options for American early retirees to secure health insurance until Medicare kicks in. You must factor in high costs and difficulty of getting insurance if you have pre-existing conditions. Options for your consideration include: COBRA (allowing you to keep your employer’s health plan for 18 months with you paying the full shot), high deductible plans ($2000-5000), health savings accounts, professional-like associations or you can get a part-time job that provides access to health insurance.
Lauren Foster in the Financial Times’ “Be tax-savvy or lose out” reminds us that the only returns that count are the after tax ones, yet you the only ones that you ever see quoted are the pre-tax returns. Reported generic after tax returns are not on the horizon as it’s very difficult to do, since it is a function of the investors’ personal circumstances, no incentives for the managers and frequently changing tax codes. High turnover (an especially poor tax efficiency approach for Americans where short term cap gains are taxed higher) also reduces investors’ ability to allow tax deferred compounding of their gains. This is why index funds are particularly tax efficient (low turnover). But ETFs are even better in that they also don’t have taxable gain dividends (and have lower fees).
In the Financial Post’s “One in ten licensed for the ETF run-up” Jonathan Chevreau points out that most Canadian advisors don’t recommend ETFs because not just they don’t (with some exceptions) get trailer fees as for mutual funds, but also because only about 10% of them are licensed to sell them (because they a securities traded on an exchange). For those who are licensed, when investor uses mostly the buy-and-hold strategy, the fees generated are rather minimal. So you may have to encourage your advisor to use what is likely the best solution for you.
And finally, the Globe and Mail reports that “Retirees sue brewer Labatt”. It will be interesting to see how this plays out in the courts. Many long-term employees feel that they were led to believe that the employer, where they spent often their entire working lives, has a contractual obligation to provide lifelong health benefits. In fact many retirees made their decision to stay with the company pension rather than a cash payout on their pension, based on the understanding that health insurance benefits will continue during retirement.
Lauren Foster in the Financial Times’ “Be tax-savvy or lose out” reminds us that the only returns that count are the after tax ones, yet you the only ones that you ever see quoted are the pre-tax returns. Reported generic after tax returns are not on the horizon as it’s very difficult to do, since it is a function of the investors’ personal circumstances, no incentives for the managers and frequently changing tax codes. High turnover (an especially poor tax efficiency approach for Americans where short term cap gains are taxed higher) also reduces investors’ ability to allow tax deferred compounding of their gains. This is why index funds are particularly tax efficient (low turnover). But ETFs are even better in that they also don’t have taxable gain dividends (and have lower fees).
In the Financial Post’s “One in ten licensed for the ETF run-up” Jonathan Chevreau points out that most Canadian advisors don’t recommend ETFs because not just they don’t (with some exceptions) get trailer fees as for mutual funds, but also because only about 10% of them are licensed to sell them (because they a securities traded on an exchange). For those who are licensed, when investor uses mostly the buy-and-hold strategy, the fees generated are rather minimal. So you may have to encourage your advisor to use what is likely the best solution for you.
And finally, the Globe and Mail reports that “Retirees sue brewer Labatt”. It will be interesting to see how this plays out in the courts. Many long-term employees feel that they were led to believe that the employer, where they spent often their entire working lives, has a contractual obligation to provide lifelong health benefits. In fact many retirees made their decision to stay with the company pension rather than a cash payout on their pension, based on the understanding that health insurance benefits will continue during retirement.
RetirementAction.com 