Latest Posts
Friday, August 13, 2010

Welcome to Do Not Wait!

by admin  | Write a Comment  (No Comments)

We can tell that there are a few obvious and inevitable things in life such as debt, taxes and death. I actually believe that there should be another inevitable thing in life: a great, comfortable retirement!

We were once sold on the idea of retiring at 55. That the golden pension plans are dying like flowers in a desert and that riding stock markets are heavier than an old Metallica show, we all need to get our stuff together and start to learn how to build our own retirement plan.

This is the purpose behind Do Not Wait!; to inform both Canadians and Americans how to manage their personal finances. Yup, we will be reviewing Canadian and American law as well as investment rules to make sure you get the right information depending on where you live! While some articles will be applicable to both countries we will explain how a Roth IRA, a 401(k), an RRSP or a defined contribution pension plan works. Our goal is really to compile financial information and make it accessible for anybody who wants to stop procrastinating and start acting now for a better financial future.

What you will find on Do Not Wait!

-      Lengthy and complete but easy to understand articles about personal finance.

-      Informational articles about retirement planning, investment strategies, debt management and legal aspects.

-      Information that is timeless, which means that you will be able to use today, in 6 months and in a year from now.

-      Baby step guides, tables and calculators (work in progress) definitions, financial product reviews as well as more complex strategies to improve your financial situation.

What you won’t find on Do Not Wait!

-      Miraculous solutions to get rich.

-      Silly answers to complex questions

-      Personal financial advice (this is an informative site only, we do not provide financial advice services).

Your Input is Mandatory

Through this website, we want to build a place where you can ask your questions and where we can provide you with high quality information.

Read Post   No Comments   Print This Post Print This Post
Posted in Featured |
Monday, March 2, 2009

The Role of a Financial Planner

by admin  | Write a Comment  (No Comments)

With the numbers of babyboomers thinking about their retirement, we saw a major increase of financial advisors, financial planners and other titles (brokers, insurance rep… financial clowns ;-) ). It is important to know what your needs are and what each of them can offer you. There is no need for a broker if you do not plan to be included in the investment decisions.

Depending where you live, a financial planner can be an official title or simply someone who decides one day to add this title on his business card. This is why you must be very careful and make your own research about financial planner in your area (states, provinces). You will discover which background is required to get the financial planner title and you will be in a better position knowing that your financial planner must have a finance background or if he is coming back from a 3 months class.

A financial planner is a finance doctor

The financial planner will answer most questions about general concerns on the following:

- Retirement planning

- Investment (asset allocation, investment strategies)

- Protection (critical illness insurance, disability insurance, etc)

- Estate planning (will)

- Tax planning (differ, divide and deduct in order to save on taxation)

- Personal finance (credit, emergency fund, martial status, etc.)

- Insurance (life insurance)

Depending on his licence, he may or may not be able to sell you insurance, help you write a will (you are better off with a notary or a lawyer for this) or advise if you should buy or sell a specific stocks (broker can do it, for financial planners, this is not automatic).

This is why we are saying that a financial planner is a finance doctor, he will be able to do an overall diagnostic but if you need a specialist for a specific topic, he will refer you to a notary/lawyer, insurance representative, tax expert (accountant most of the time), etc.

A financial planner will be of great help to take a look at your overall condition and tell you what is urgent and what would be nice to do. He will write a financial plan where he will explain your situation and the impact of your decision on your personal finance and will write recommendations according to his observations.

This becomes your “to do list”. A financial plan is usually reviewed once a year to make sure your financial and personal situation doesn’t change. For example, if you have a kid, your financial priorities will differ from the year before!

So the role of a financial planner is to guide you through your personal finance by looking at all the points mentioned in this post. This is definitely a great start to build a strong retirement plan!

Read Post   No Comments   Print This Post Print This Post
Posted in Uncategorized |
Monday, February 16, 2009

Understanding The Concept Of Inflation

by admin  | Write a Comment  (1 Comment)

“It was much cheaper in the good old days”. I guess you probably heard your parents or grandparents say something like this. They were able to buy a house for half the price of a Toyota Corrolla “back in the day”. However, they don’t mention that they were making 1$/hour. So was it really cheaper back then?

The fact that prices of good keep increasing over time is inflation. This is one of the 5 risks of retirement. It is probably the most dangerous as it seems insignificant. How a 2.5% inflation can really affect my lifestyle? What I pay $100 today, I’ll pay it $102.50 next year…. Big deal!

However, the same item at $100 will be paid $209 in 30 years at an inflation rate of 2.5%. You house that worth $250,000 today will worth $524,000 based on the same principle. The worst part is that you if you retire between 60 and 65, your chances of living 30 years are pretty good! Therefore, you absolutely need to consider the impact of inflation in your calculation (this will be shown in a later post).


Where inflation come from?

Inflation is the result of a vicious circle: When economy goes well, people tend to buy more goods. Therefore, we need to produce more of everything. Since resources are limited, prices will slowly go up to adjust to the demand (economic 101). This is one of the reason why prices of good climb.

Then, employees will ask for a raise because:

#1 There is a lot of competition to get good employees

#2 The company is making profit (remember, we are in a good and healthy economy)

#3 They want to keep up with the inflation ;-)

So if companies have to pay their employees higher, there is a good chance they increase the price of good and help the inflation rise again.

During economic crisis, we often see a low inflation rate. The economy is slowing down, people don’t buy much anymore and prices will slowly decline. The opposite of inflation is called deflation (when overall prices go down). This will be discuss in a another post as well (I don’t want to keep you forever on my blog… you still have to work to pay for your retirement ;-) ).

How is calculate inflation?

To make it simple, imagine that you take $100 and you buy specific items with it. The year after, you take the same shopping list and you calculate how much it cost. If the total is $103, this means that the inflation went up by 3% during that year.

There is a specific list of items that reflects an idea of “the normal cost of living”. This list is generally determined by a government agency and you can follow the CPI (Consumer Price Index) from your government websites:

Canada CPI

US CPI

UK CPI

Read Post   Comment (1)   Print This Post Print This Post
Posted in The 5 Risks of Retirement |
Monday, February 9, 2009

Your Investment Withdrawal Rate May Freak You Out At Retirement

by admin  | Write a Comment  (No Comments)

As a financial planner, I have the opportunity to see a lot of wealthy clients. However, when they stop working and start calling themselves “retirees”, they get pretty concern about their yield.

Sometimes I get to wonder if Internet is really helping those retirees since they can check their investment fluctuation on a day to day basis.

Considering the current market, looking at your investment portfolio everyday will get you see sick.

“Don’t be surprised if I call you to sell everything one day” one told me a few days ago. You really want to lose your money? Then do it. The client is freaking out because he lost 10% since July 2008.

The thing is that he is now freaking out because the money is not coming in like it used to. He sold his business and withdraws money every month from his non-stop-dropping investments for living. This is why he became so cautious about his money and look at his net worth every 30 minutes.

I’m telling you this story because when you are looking at retirement planning, you must put your emotions on the side and stick to the plan. Stick to the plan. I know, it’s tough, I know, it’s not my money that I’m loosing, I know, I’m younger and I have plenty of time in front of me. I know.

Well, let me tell you something; I was discussing with a journalist that used to work for a well known business newspaper. He told me that there is so little bad news these days (not many wars, no cyclones or tsunamis, no epidemics) that the only thing journalists have to talk about is the economy and that Obama is our saviour.

He actually told me that we might stop hearing about the recession (depression?), the bear market and other things all of a sudden in a few months. Why? Not because the crisis is over but because they will get new meat to bite on. Then, people will read less dramatic headlines about the stock market and will start to believe in the long term investments.

So this post is meant to be a warning to protect you from… yourself. It will be normal that at retirement you will want to “stop the madness” and cash in your investments. However, cashing your investments is the worst thing to do. The truth is that because of inflation, you won’t be able to live on GIC’s and other fixed income. If you do this, you will survive your capital.

Is there any antidote to not freak out at retirement?

There is on trick I can give you. Find yourself a great financial planner and have him design a retirement plan for you. With a solid plan and a great asset allocation, you will be able to withdraw enough money and live a great life.

We will get back to the financial plan in another post. In the meantime, send me your questions at thefinancialblogger-at-gmail-dot-com or comment on this post.

Read Post   No Comments   Print This Post Print This Post
Posted in The 5 Risks of Retirement |
Monday, February 2, 2009

What Are The Major Concerns About Retirement? Part 2

by admin  | Write a Comment  (No Comments)

In one of our previous posts, we talked about two major concerns about retirement. There were being along and boredom. While these were quite important concerns, the other two are affecting 40% and 60% of the population. These are definitely the major challenges to a happy retirement.

Health Problems (2 persons out of 5)

Who doesn’t know a parent or close relative that got sick at the age of 55, 60 and couldn’t enjoy their retirement as they wanted? Even worst, some people die the very same year of their retirement.

Between the ages of 55 to 65, the risk of having a critical illness increases drastically. Besides eating healthy food and doing physical exercise, there is not much to do to avoid a heart attack. However, there are tools to prevent that your financial dependant won’t suffer from your loss. Better than that, there are insurances giving you an amount upon diagnosis and that include a search for the best hospital to cure your disease.

We all want to stay young forever. We all want to stay healthy. The problem is that we have little control over our future in term of health. I guess this is why so many people are concerned about it!

Lack of Money (3 persons out of 5)

And we finally get to our main concern: lack of love… nah.. sorry! It’s the lack of money that worries the population! With your chances of hitting 100 year old increasing, the chances of surviving your capital increases at the same rate!

Believe me, it’s not with the government’s financial help that you will be able to live a happy retirement. You will rely on 5 sources of revenue at retirement. It would be important to determined whether you will use all of them or if you will concentrate your effort in building a rental properties empire ;-)

I personally suggest that you try to buy rental properties, contribute to your savings and registered plans (pension plan or government registered saving plans), that you start a small company on the side or that you keep working as a consultant for a few years. If you start young enough, you will be able to achieve all these goals. At the end, you will have enough money to retire without any money worries.

I want to go golfing in the morning and still be able to afford a $200 dinner at night with my wife without counting I much I have left from the government’s cheque of $600 a month! I don’t know about you, but I think we all better start working on our retirement planning in order to avoid some of current retirees concerns!

Read Post   No Comments   Print This Post Print This Post
Posted in Concerns and Priorities |
Monday, January 26, 2009

Investment Management Fees (MER’s) – The Cost Of Managing Your Retirement

by admin  | Write a Comment  (No Comments)

“Don’t worry; I’ll take care of it”. This is a common line for financial advisor. They will surely “take care” of your investments, give you financial advice and, if you are lucky, do a full financial plan with investment projection, advices on your financial situation on several points such as legal, retirement, insurance, protection, estate planning, etc.

However, when you take your investment statement, you should not only look at your net return. In fact, you should climb up the mountain of numbers on this little piece of paper until you see something like “management fees”, “MER’s”, “fixed fee”, “cost”. If you can’t find them, go back to your financial advisor and ask a simple question: “how much to I pay you to manage my money?”.

Ohhh…. It’s the same fee for any kind of institutions. BS! There are actually several ways for financial institution to charge their investment management fees. Today, we will look at different type of ways to charge clients while we will take a closer look at each of them on separate articles.

Management Fees (MER’s)

You will see those fees when you have mutual funds. It is basically the fee paid to the fund manager in term of a percentage. For example, the MER’s of a mutual fund is 1% and you invest 100K. At the end of the year, if the fund manager could bring any value and your investment still worth 100K, the company charge 1% of 100K as management fee anyway. Therefore, you will end up with a negative return of -1% and your investment statement will show 99K.

There is usually two ways of presenting your investment yield: before management fees of after management fees. This is really important that you ask your investment representative if your statement shows a yield net of MER’s. This could make a huge difference.

Asset Based Management Fees

This is a similar way to charge management fees on a client account. In fact, the financial institution is charge a percentage of the managed asset. The more it grows the lower management fees become. On the other side, if your investments drop, the fund manager will receive a higher percentage but a lower amount in term of dollar for his work.

This type of account usually shows investment yield before management fee. Then again, it is very important to clarify how much the investment yield reporting and the management fee structure.

Asset based management fees are usually very interesting for large and active investment account.

Cost Per Transaction

Another way to charge a client account is to require a transaction fee. You will this type of account when you have a broker that trades stocks or bonds. Each time he buys or sells a stock, there is a transaction cost attached to the transaction. This type of account was very popular a few years ago. Brokers were making client trade like they were day traders simply to get the commission in their pocket. It now tends to disappear since we have trading accounts pushing commission on trade to a lower level.

Loads

There are several other fees related to mutual funds and those will be discussed in a further article. Right now, you can still come up to your financial advisor and ask him if you have front load or back end load fee on your mutual funds.

As you can see, there are several ways to charge an investment account. In a further post, we will look at the advantages and disadvantages of each of them.

Read Post   No Comments   Print This Post Print This Post
Posted in Ìnvest to retire |
Monday, January 26, 2009

Investment Management Fees (MER’s) – The Cost Of Managing Your Retirement

by admin  | Write a Comment  (No Comments)

“Don’t worry; I’ll take care of it”. This is a common line for financial advisor. They will surely “take care” of your investments, give you financial advice and, if you are lucky, do a full financial plan with investment projection, advices on your financial situation on several points such as legal, retirement, insurance, protection, estate planning, etc.

However, when you take your investment statement, you should not only look at your net return. In fact, you should climb up the mountain of numbers on this little piece of paper until you see something like “management fees”, “MER’s”, “fixed fee”, “cost”. If you can’t find them, go back to your financial advisor and ask a simple question: “how much to I pay you to manage my money?”.

Ohhh…. It’s the same fee for any kind of institutions. BS! There are actually several ways for financial institution to charge their investment management fees. Today, we will look at different type of ways to charge clients while we will take a closer look at each of them on separate articles.

Management Fees (MER’s)

You will see those fees when you have mutual funds. It is basically the fee paid to the fund manager in term of a percentage. For example, the MER’s of a mutual fund is 1% and you invest 100K. At the end of the year, if the fund manager could bring any value and your investment still worth 100K, the company charge 1% of 100K as management fee anyway. Therefore, you will end up with a negative return of -1% and your investment statement will show 99K.

There is usually two ways of presenting your investment yield: before management fees of after management fees. This is really important that you ask your investment representative if your statement shows a yield net of MER’s. This could make a huge difference.

Asset Based Management Fees

This is a similar way to charge management fees on a client account. In fact, the financial institution is charge a percentage of the managed asset. The more it grows the lower management fees become. On the other side, if your investments drop, the fund manager will receive a higher percentage but a lower amount in term of dollar for his work.

This type of account usually shows investment yield before management fee. Then again, it is very important to clarify how much the investment yield reporting and the management fee structure.

Asset based management fees are usually very interesting for large and active investment account.

Cost Per Transaction

Another way to charge a client account is to require a transaction fee. You will this type of account when you have a broker that trades stocks or bonds. Each time he buys or sells a stock, there is a transaction cost attached to the transaction. This type of account was very popular a few years ago. Brokers were making client trade like they were day traders simply to get the commission in their pocket. It now tends to disappear since we have trading accounts pushing commission on trade to a lower level.

Loads

There are several other fees related to mutual funds and those will be discussed in a further article. Right now, you can still come up to your financial advisor and ask him if you have front load or back end load fee on your mutual funds.

As you can see, there are several ways to charge an investment account. In a further post, we will look at the advantages and disadvantages of each of them.

Read Post   No Comments   Print This Post Print This Post
Posted in Ìnvest to retire |
Monday, January 19, 2009

The 5 Sources of Income at Retirement

by admin  | Write a Comment  (No Comments)

It is obvious as a punk at the orchestra that regardless the moment you will retire; you will still need money to support your life style. Some people will live frugally; some others wish to live the great life. In the end, we will need to find a place where we can withdraw on a monthly basis.

While we will look deeper in each source of income at retirement, this article has been written in order to draw a chart of these resources. It can help designing your retirement plan. Before calculating how you much you will receive from your different income sources, you must know what they are.

Government Pension

Depending in which country, state or proving you live in, government pension at retirement may vary. In Canada for example, we have the federal pension plan in addition to provincial pension plan. Some of them are created so they become a source of income at retirement for everybody and you must contribute to some others in order to have the right to withdraw money.

Pension Plan

Your employer might give you the opportunity to contribute to a pension plan. The growth of this account is tax sheltered and could represent an interesting source of income at retirement. I personally have some of my clients who will depend only on government pensions and their pension plan. They most likely work for the government anyway ;-)

At this point, you must remember that there are defined contribution pension plans and defined benefit pension plans. Defined benefit pension plans are the most generous of all but are generally offered only by government and a few big companies (when they still can afford it!).

Savings

There are many ways to put money aside while you are working. In Canada, you have the option of contributing to a Tax Free Savings Account (TFSA), a Registered Retirement Saving Plan (RRSP) or in a non-registered account. In USA, you have the possibility or starting a Roth IRA and a 401(k) account. All of these accounts are good source of income at retirement and will be discussed in other articles.

Rental Property

For those who hate investing on the stock market but are still looking for a stable source of income at retirement, there is the real estate business. While rental properties can provide you with a steady cash flow, it requires time and liquidity (when nobody is paying the rent, you still have to pay the mortgage, taxes and maintain the property in a good shape).

Work

Finally, if you didn’t save enough money and you can’t get much from the government at retirement, you might have to keep working. Some people decide to open their own business, work as a consultant or work part time to maintain another source of income. If you like you job and you want to keep working, which could be a great alternative. However, if you can’t stand you boss and wish that all day you finish at 3 o’clock, you might want to reread the first 4 sources of income at retirement!


Read Post   No Comments   Print This Post Print This Post
Posted in 5 Sources of income at retirement |
Monday, January 12, 2009

The 4 Phases of a Financial Life Cycle

by admin  | Write a Comment  (No Comments)

In order to get ready for retirement, it is important to know in which situation we are now. In term of retirement planning, there are 4 different phases of your financially life cycle. Today, we will briefly describe each of them as each cycle deserves more than one post by itself ;-) Therefore, we will look at your major concerns and priorities according to your age and financial situation.



Not Aware 15 to 35 years old

When I was writing this post, I thought of putting the “not aware” cycle from 18 to 99 year olds ;-) Some people will never know that they need to plan their retirement. They think that it’s their employer or the government responsibility. Unfortunately, this is not true anymore. You nee to take care of your own retirement plan.

Therefore, if you have kids, I strongly suggest that you educate them on the power of saving on a monthly basis as soon as they get their first paycheque (this is why I put the starting so young). Most people won’t even want to hear about retirement before the age of 35. In the meantime, they are busy partying, studying, finding the right spouse, buying a house and having children.

Accumulation 35 to 50 year old

During the accumulation period, people face several challenges: they need money to pay off their mortgage, their kids education, their vacation and they still need to put money aside for retirement. What should we do first? Should we pay off the mortgage and then think about retirement? How can I get a life and save money at the same time?

This is one of the most important stages of your financial life as it determines which kind of retirement you will benefit.

Transition 50 to 65 year old

Kids are gone (or about to leave), you already have a good amount on the side for retirement and you may be tired of your actual job. You think about a career shift, early retirement or starting your own company.

But the real question is; can you afford those changes? During the transition period, you will have several existential questions on how you want your “second life” to be. This is where most people are more receptive about retirement planning. While it’s a bit late, better later than never!

Withdrawal 65 and older

The game is over in term of accumulation. You now need to plan carefully how you will withdraw your money in order to live comfortably without surviving your capital.

Your investment strategy needs to be reviewed one more times and insurance strategies are starting to get more interesting in term of estate planning. Don’t be too fast on withdrawing your money as you might live longer than you think!

The age mentioned beside each phases is a guideline only. Some people will stay in the “not aware” stage for the rest of their life while others will enter in the accumulation process at the age of 18. The key is to get in the accumulation period as soon as possible and stay there for a while.

If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE.

Read Post   No Comments   Print This Post Print This Post
Posted in Uncategorized |
Wednesday, December 17, 2008

What Are The Major Priorities About Retirement?

by admin  | Write a Comment  (No Comments)

In the 20’s, retirement meant the end of your life. Most people never retire back then. In fact, your retirement period was directly related to the amount of days, weeks or months in bed due to some kind of illness right before your die. The concept of retirement evolved over time. We use to plan to have enough money so we can stop working at 70 and stay in some old people places. These days, some of us want to retire between 55 and 65 and they wish to do everything but staying home.

Unfortunately, if you want to retire early, you will need much more money. Young and healthy retirees don’t wan to sit and watch Oprah; they want to do stuff.

Relax

The first thing most people with is to be able to relax. They want to make sure they have enough money to go to the movies, take time at the spa and play their favourite sports. They want to enjoy life and take back what they left while they were working 60 hours with 2 kids at home.

Travel

This is another main priority at retirement. The world is full of great places to discover and retirement seems to be the perfect timing to do it. You have money, health and you know what you like. Travelling around the world with a packsack, going down south on a nice beach or going to Paris with in a guided tour; all these options are available at retirement.

Starting a second career

Have you ever dreamt of doing the job of your dream? Some of us did it and some others couldn’t afford it because they had too much to lose at the existing job (i.e. pension plan, steady income, insurances). Now that you have a solid nest egg, you can afford a second start in a field that you really love.

The major problem with these retirement priorities is that they require money… a lot of money. This is why it is so important to not wait before planning your retirement. If you want to retire at 55, this means that you will withdraw a good part of your portfolio before you reach the age of 65. You will be in a better shape to spend it and you will benefit of 10 years of happiness before you wake up at 65 broken and sore.

I do believe that retiring at 55 is possible even though you are not a hockey player or a rock star. Planning early, invest systematically and maximize your investment and you will be able to retire healthy and wealthy.

Read Post   No Comments   Print This Post Print This Post
Posted in Concerns and Priorities |