blog11feb2007

Hot Off the Web

In “Is your portfolio ready for a slump?”  we are reminded that good times in the market won’t last for ever, and we should check if our portfolio has shifted significantly away from the target asset allocation. Also, if we have for example a position that has grown to $50,000, we may want to ask “if we had $50,000 cash, would we invest it in that position?”
The potential good news for two-income families with asymmetrical earnings is that they may get a fairer shake as Globe reports that “Flaherty says income splitting not ruled out” In Barron’s “A boomer’s guide to taxes”  (American) boomers are warned about the potential of blowing a big hole in their accumulated assets by not getting proper tax advice on how to deal with: “rolling out of 401(k)s”, “receiving an inheritance”, “creating an estate plan”, “second home shuffle”, and “selling a business”. So while some things we may be able to do ourselves but let’s not be penny wise and pound foolish.
Reading the business sections of Canadian papers, it’s difficult not to remember that it’s RRSP season again. Here is a sampling of the views expressed:
In “RRSP scare tactics skewing retirement strategies” it is suggested that perhaps the financial industry is trying to stampede you into saving more money than you may need to at the expense of spending more money on oneself today, or on charity. In the opposite corner is “Retirement planning: it IS about the money”  Stephen Gadsden is quoted that failure to save is a combination of “ignorance, sloth and greed”. The author dismisses the result of the recent survey that retirement is “not about the money”, when in fact it is and “failure to plan is planning to fail”. And even though this is expected to be a record year for RRSP contributions we are reminded that “RRSP growth lag income growth, inflation”.
In “Fifty years of tax deferred investing”  tax expert Hamilton reminds us that with the ongoing elimination of DB pension plans, RRSPs will be even more important. He also reminds us that in Canada there is really a two-tier system. On one side those with public pension plans with higher mandatory contributions and then people with private DB plans (which by the way limit individuals’ ability to adequately contribute to RRSPs due the Pension Adjustment factor). Then there are those with RRSPs with possibility of contributing up to 18% of income, however even that is insufficient to match the resulting public pension plans. (Sounds like an advocacy opportunity)
And finally in “Reckoning what you’ll need to retire on” suggests that “retirees can expect to live moderately on 60 to 70 per cent of their pre-retirement income, comfortably on 70 to 85 per cent and well on 85 to 100 per cent, according to Manulife’s WealthStyles retirement primer. Statistics Canada found the replacement percentage goes down as income rises.”
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