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Ed Rempel's Toronto clinic has a familiar group of people who are always looking for help. They are former do-it-yourself (DIY) investors.
These people managed their own finances and were often successful, but suddenly hit a wall in their 50s and 60s.
“They think accumulating a portfolio is something they can do, but they're confused about how to set up their retirement income,” says Rempel, a fee-based financial planner. says.
That makes sense, says Mairi Wong, senior portfolio manager and senior wealth advisor at Wellington Altus Private Wealth's Wong Group in Vancouver.
Many customers need guidance on the best time to start receiving Canada Pension Plan (CPP) benefits or take advantage of a registered retirement savings plan. Some people want to help their adult children buy real estate, but worry about depleting their retirement savings. Some people wonder if their investments are too conservative to keep up with inflation, while others wonder if they're not conservative enough. And they all want to be taxed as favorably as possible.
“All these things happen,” Wong said. “This is already serious work.”
He said advisors need to take on a financial planning role for former DIY investors, determining their clients' cash flow, future lifestyle and whether they plan to transfer wealth to younger generations. He said there is. At the same time, you need to evaluate your portfolio to determine if there is enough growth to ensure future cash flow.
Wong says that by incorporating several factors such as tax rates, rate of return, longevity projections and cash flow needs, advisors can present different scenarios to clients.
These scenarios, generated by advisors and their advanced financial planning software, can help you decide whether to change your investment risk tolerance, give money to loved ones, or inform your estate planning. She says it can be very enlightening for clients because it's helpful.
“This gives investors a more informed view of what could or is likely to happen, allowing them to make informed decisions.” she says.
provide an objective perspective
DIY investors who have been investing on their own for a long time are likely to have firm beliefs about their assets.
“We need to be aware of the prejudice they face,” Wong said. “Maybe they were chasing marijuana or mining stocks.”
When it comes to asset structure, the main goal is to have enough money for the long term, says Bob Sewell, president and chief executive officer of Bellwether Investment Management in Oakville, Ont. Even though Canada's market is “too small,” investors are often overly concentrated in Canada and invest in companies they recognize and feel comfortable with, he said.
In some cases, investors are too aggressive with their investments and need to move to more balanced investments. Sewell often recommends investing in private loans to generate income with some growth.
Rempel says a conservative stance is usually the first thing to do, due to factors such as inflation and the high cost of living. A “shocking” figure for many financial plans is that more than 70 percent of retirement income over 30 years may need to come from retirement investment growth, he says.
“Many people make the mistake of investing too conservatively, which means they have to cut back.” [on] It’s their lifestyle,” he says. “They usually end up saving too little.”
It's also difficult to know what to withdraw and when, Lempel said.Many people wonder when to start They receive pensions such as CPP, Old Age Security, and company pensions.
Some people consider whether they should withdraw more from their registered accounts in retirement to avoid being too large to be taxed when they pass away.
“You need to decide whether it's better to defer taxes for as long as possible, or whether it's better to withdraw the amount each year that you can at a lower tax rate,” Rempel says. “Everyone's situation is different.”
Other tax saving strategies
Wong says investors should consider life insurance to pay off their tax liability in the event of the latter's spouse's death. “When your taxes are due, you receive a tax-free lump sum,” she says. This helps pay taxes on a second property, capital gains, or when a registered retirement income fund is rolled over. This can prevent the beneficiary from selling the asset if they are not prepared to pay a large amount of tax.
“There, professional advisors can help DIYers review the different tools in their toolkit and understand the big-picture approach,” she says.
Sewell said pension splitting, where spouses split their pension income to lower taxes, is also a strategy to consider.
Retirement planning becomes about how much a client can withdraw or save for their desired lifestyle while minimizing their tax burden, Rempel said. And in some cases, you may need professional help.
“Once you understand all of this in a financial plan, you can be confident about the kind of lifestyle you can have for the rest of your life,” he says.
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