Staying One Step Ahead of Inflation.
by Michael Danchuk, CFP & Richard Nash, CFP
Investors Group Inc.

Once most individuals reach retirement, their primary investment objectives generally shift from growth to income generation and capital preservation. Investment portfolios are therefore often geared towards safer investments. Depending on the retirement lifestyle you choose, the after tax returns generated from these investments may be enough to sustain your lifestyle throughout retirement. Or will they?

The Eroding Power of Inflation

Over the past 25 years, inflation has averaged approximately 4% annually. Currently, the annual inflation rate is sitting at approximately 2%.

Although the latest inflation figures show relatively low inflation and day-to-day inflationary price increases are often barely noticeable, over the long term a yearly inflation increase can add up to a serious drain on your buying power.

Let’s take a look at what effect a 2% and 4% rate of inflation would have on your retirement portfolio and assume you currently rely on $50,000.00 per year from your investments to sustain your current lifestyle.

Reduce Your Risk by Diversifying Your Portfolio

A common and often effective antidote to inflation is to build a retirement portfolio that is primarily geared towards income generation and capital stability but includes a capital growth component as well. Although common stocks and equity mutual funds are potentially riskier investments in the short-term, they have historically offered the best aftertax opportunity to stay ahead of inflation and keep income growing. And contrary to popular belief, it may be possible to include stocks or equitymutual funds in your retirement portfolio without incurring much additional risk.

This is because many financial markets and asset categories do not move in the same direction at the same time, which can decrease the overall volatility of your portfolio. For instance, when bond prices decline in value, stock prices typically go up.

Protect Your Purchasing Power

Why not ask us today how we can help you protect your purchasing power and keep one step ahead of inflation.

This report specifically written and published by Investors Group Financial Services Inc. (in Quebec, a financial services firm) is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal advice. Prospective investors should review the annual report, simplified prospectus, and annual information form of any fund carefully before making an investment decision. Clients should discuss their situation with their Consultant for advice based on their specific circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ™Trademarks owned by IGM Financial Inc. and licensed to its subsidiary corporations. “Staying One Step Ahead of Inflation” ©2007 Investors Group Inc. Comments or questions – Michael Dunchuck and/or Richard Nash can be reached at (604) 270-7700 or by email richard.nash@investorsgroup.com
*Symphony recommendations relate only to Investors Group mutual funds. Please speak to your Investors Group Consultant about how Symphony can be used as part of your overall financial plan.

How to keep more of your retirement income for yourself
by Michael Danchuk, CFP & Richard Nash, CFP
Investors Group Inc.

Old Age Security

While everyone meeting these eligi­bility requirements is eligible for an OAS pension, higher income pen­sioners must repay part or all of their benefit. The repayment is equal to 15% of the person’s net income that exceeds a stated “threshold amount” which is increased each year based on increases in the cost of living. Once your net income exceeds a maximum threshold amount, your entire OAS pension will be subject to the “claw­back”.  See an Investors Group Con­sultant for the current net income threshold amounts.

Age Credit

The age credit is a non-refundable tax credit only available to Canadians 65 years of age and older.  You may be eli­gible for at least a portion of this credit, providing your net income does not exceed a predetermined threshold.  If you don’t need all of your age amount to reduce your tax­able income to zero, the unused por­tion can be transferred to your spouse.  See an Investors Group Con­sultant for the current net income and credit threshold amounts.

Strategies to keep more

• Pension income splitting.   You are able to allocate up to 50% of your “eligible pension income” to your spouse for taxation purposes. “Eligible pension income” includes payments received from a registered pension plan irrespective of your age and RRIF payments once you have reached age 65.  Taking ad­vantage of the pension income splitting provisions may reduce your family’s overall tax bill and could reduce the affects of the OAS “clawback”.
• Other income splitting strategies.   You should consider strategies such as: gifting or loaning assets to your spouse for investment purposes; spousal RRSPs; and decisions re­garding who pays for daily living ex­penses and who invests.  The goal is to move as much taxable income into the hands of the lower income spouse to benefit from their lower tax rate while at the same time min­imize any “clawbacks” which may apply to you.  These strategies can be difficult to implement and tax advice is necessary to ensure you are following the rules regarding income attribution.
• Withdrawing the minimum from your RRIF.   Again, depending on your in­come needs, given the fact that RRIF withdrawals are fully taxable provides a real incentive to leave as much of your registered assets tax-sheltered for as long as possible. To get the most tax deferred growth from your RRIF, and keep your re­ported taxable income as low as possible, consider withdrawing only the minimum each year and if you have a younger spouse, base your withdrawals on their age, as this will produce a smaller mini­mum withdrawal.  Note however, that at age 65 RRIF income is eligi­ble for pension income splitting.
• Seek out non registered investments that offer preferential tax treatment.   The goal of this strategy is to keep taxable investment income to a minimum.   A strategy to consider is investing in equities rather than fixed income investments, as capi­tal gains are 50% taxable versus in­terest income which is 100% taxable. However, caution is ad­vised.  You should keep in mind the balance between equities and fixed income investments over your whole registered and non-regis­tered portfolio.   Also, from a tax and “clawback” perspective, you want to ensure you are not investing in in­vestments that produce large amounts of dividends as the re­ported taxable income from divi­dends is the “grossed up” amount before the dividend tax credit.  An­other strategy to consider is tax ad­vantaged or switch funds for your non – registered portfolio, as you report capital gains for tax purposes only when you leave the structure.¹Keep in mind that your invest­ments should be chosen based on your individual goals and risk toler­ance first and not based solely on the tax consequences.  Reporting less net income is the key to avoiding the “clawback” on OAS and the age credit.  Remaining vigilant in paying less tax can not only assist in avoiding the “clawback”, but can also assist in preserving your wealth for years to come, and ultimately, make your retirement as fulfilling and worry-free as possible.

Why not ask us today how to struc­ture your retirement income in the most tax efficient way possible.  Since these decisions are often irreversible, a few minutes invested today could turn out to be your smartest tax choice this year.

This report specifically written and published by Investors Group is presented as a general source of information only, and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide legal advice. Prospective investors should review the annual report, simplified prospectus, and annual information form of any fund carefully before making an investment decision. Clients should dis-cuss their situation with their Consultant for advice based on their specific circumstances. Commissions, trailing commissions, manage-ment fees and expenses all may be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. ™Trademark owned by IGM Financial Inc. and licensed to its subsidiary corporations. “Beware of the “Clawback”!” ©2007 Investors Group Inc. (09/2007) MP1029 Comments or questions – Michael Dunchuck and/or Richard Nash can be reached at (604) 270-7700  or by email richard.nash@investorsgroup.com
 1. You may also be taxed on capital gains dividends that may be periodically paid by the Fund.

submitted by TD Waterhouse Private Investment

Planning properly is often the key to success, no matter what your goal is. !

1. Timing – for a smooth transition, move gradually into retirement.
2. Keeping interested — stay active in what interests you: hobbies, a sideline business, charities, etc.
3. Finding a passion — consider volunteer work to replace the emotional and personal fulfillment your career has provided.
4. Trying it out — if you’re thinking of relocating, try it on a trial basis first, to make sure it’s the right decision for you.

Once you’ve decided what you want, you may want to ease into it slowly, because sudden changes — even positive ones — can be stressful.

Stay Active in your health and the community

Today’s retirees are generally healthier and more active than previous generations. In fact, many people look forward to the freedom from work responsibilities, so that they can devote their time to personal interests, whether that’s a hobby, a second career, or charitable work.

As you prepare for your retirement lifestyle, look for a role and activities that could replace those aspects of your job and career that you find most fulfilling. Many people find it stimulating and rewarding to do volunteer or paid part-time work after they retire that allows them to contribute their knowledge and skills.

Why not test drive the new lifestyle or home base

Retirement will also give you more time for travel, as well as for recreational, social, cultural, and educational activities. You may want to try out different aspects of your retirement lifestyle by getting more involved in some of your favourite activities and pursuing new interests before committing to any one activity or organization for the long term.

If you are considering moving, be sure to take your time and assess the choices that are available. This is especially important if you are thinking of relocating to another community, province, or country. It’s a good idea to stay there for an extended period on a trial basis so that you can really experience the lifestyle there and make an informed decision.

Successful retirement involves more than simply ensuring that you’ll have enough money to do what you want. It’s also important to visualize a lifestyle that you would find stimulating. Plan on it!!

TD Waterhouse Discount Brokerage is a division of TD Waterhouse Canada Inc.,a subsidiary of The Toronto-Dominion Bank. TD Waterhouse Canada Inc. – Member CIPF. TD Waterhouse is a trade-mark of The Toronto-Dominion Bank, used under license. TD Waterhouse Private Investment Advice is a division of TD Waterhouse Canada Inc. (“TD Waterhouse”), a subsidiary of The Toronto-Dominion Bank. (*)Trade-mark of The Toronto-Dominion Bank. TD Waterhouse is a licensed user. TD Waterhouse – Member CIPF.

by Nancy Shewfelt, B.A., FCSI, CIM
Senior VP and Investment Advisor at Wellington West Capital Inc.

Investing for Income in Retirement.  What a challenge for today’s active retiree to secure predictable monthly income while GIC rates are at their lowest levels in over 50 years!

The question most often asked of me as an investment advisor for the past 27 years is, “What can I invest my money into, to get me the highest monthly income with the lowest amount of risk?” Without getting too detailed, I will give you some suggested investments to look at for alternatives to GIC’s (Guaranteed Investment Certificates) from your bank or credit union.

Government Bonds:

Government bonds can be bought and sold any business day of the week. The interest rates are fixed when the bond is issued (e.g. Government of Canada 4%, June 1 2019) and then the price can fluctuate daily based on market expectation of future interest rates.

All government bonds (municipal, provincial and federal) are assigned credit ratings. The higher the credit rating (i.e.: government of Canada is AAA) the safer they generally are. However, this also means a lower yield. The lower the credit rating, the higher the yield (municipal bonds usually have a higher yield than a federal government bond).

Interest is paid semi-annually on most bonds.

Investment Grade Corporate Bonds:

These are bonds of great companies that have borrowed money to fund some of their operations. These ratings can range from BBB to A with various ranges in between (i.e: TD bank bonds have A credit rating).

The current yields on these bonds range from 4-6% depending on their credit rating and maturity dates.

High Yield Corporate Bonds:

High yield bonds are debt obligations of corporations that have credit ratings below BBB and are considered riskier. These pay substantially higher income and, in my opinion, this is the current sweet spot of the bond market for investment opportunities after 2008’s global credit crisis.

Yield opportunities can range from 6% to over 10% in this category, but wise investment advice and professional management is recommended.

Convertible Corporate Debentures:

These are hybrid bonds which give you the upside of the underlying corporate growth along with the income characteristics of a bond. With the market drop of 2008, convertible debt is very attractively priced for income and capital growth. Please seek investment expertise before investing in this area.

I could go on to describe bond funds, ETF’s, preferred shares, income trusts, annuities, and high dividend paying stocks also for income needs. These are all attractive ways to get good after tax income and should be discussed with your trusted advisor for suitability.

Finally, look at a diversified basket of various investments to supply you with your required monthly income. This might include a laddered portfolio of bonds, some high quality preferred shares and some convertible debt.

By balancing it out into various baskets, you can potentially increase your monthly income and protect yourself against the foreseeable inflation impact expected over the next decade.

The information contained herein is derived from sources which are believed to be reliable but Wellington West Capital Inc. (WW) makes no representation that this information is accurate or complete nor does this necessarily represent the views and opinions of WW. The document is delivered by WW on the condition that WW, its officers, directors and affiliates shall incur no liability whatsoever or howsoever arising in connection with the information contained herein or reliance thereon. Any opinion expressed herein is based solely upon the author’s current analysis and interpretation of each information and is subject to change. Wellington West Capital Inc. is a member of the CIPF.