Currently, CPP at age 65 is $934 per month.   Starting in 2011, CPP will begin phasing in higher payments to those of us who wait beyond age 65 to start our pensions, and lower payments for those of us who decide to collect them earlier.

Under the proposals, deferring our pension will add $78 each year, up to $1326 per month by age 70.  On the other hand, if we start to collect early, we will lose $67 each year, and receive only $598 at age 60.  (Our actual pension will depend on our contribution history, and annual inflation adjustments.)

Also, starting in 2012 we no longer have to stop work or reduce our earnings for at least two months in order to apply for CPP.  If we collect early and continue working, both we and our employer will still be required to contribute to CPP.  (This means a higher pension the following year.) At  age 65, contributing to CPP will then be optional.

Exchange Traded Funds (ETFs) seem to be multiplying daily, and evaluating how they might fit into your portfolio can be confusing.

ETFs give investors exposure to a group of securities, and trade on exchanges like stocks.  Most of us think of ETFs based on well known market benchmarks like the S&P/TSX index, but now ETFs can also be based on very specific sectors like natural gas, gold, REITs, etc…  and are often traded actively.

Outside of institutional investors, sophisticated investors with adequate time, knowledge and access to quality research, may be comfortable acting as their own portfolio manager.  However, most investors find they are better served by the biggest funds in Canada, which on the whole have delivered good returns, with more stability and less drama.

An actively managed portfolio is often more diversified amongst companies, sectors and geographic regions, avoiding many of the excesses and flaws inherent in simply tracking an index.  Unlike ETFs, many of the biggest funds have beaten the indexes over numerous time periods.   
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Everyone’s situation is different.  Your personal and family circumstances, risk tolerance, age, investment capital available, existing sources of guaranteed income, and retirement income expectations are all important considerations.

A life annuity is for those of us who want safety and guarantees, and don’t want any management responsibilities.  It will guarantee you income for life, or provide income for the lifetimes of you and your spouse. Because you give up flexibility and access to your capital, you need to keep other money available for the unexpected, or have access to money with a secured line of credit against your home.

Annuities can be great for a healthy individual or couple with longevity on their side, and for the financially unsophisticated (or when one spouse is more knowledgeable than the other, it can protect the surviving spouse if they outlive the more financially experienced one).

If you have ever spent sleepless nights worrying about your investments because of market volatility, locking part of your money into annuities will provide risk-free income at a high rate of return relative to current low interest alternatives like term deposits and bonds.  Annuity income is also very tax advantaged, if you invest non registered money.  
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Canada is definitely in the global spotlight these days. Our financial system is envied by most, our currency is strong, and our natural resources are in demand. It should be no surprise then to find energy, financial, and material companies making up almost 80% of the TSX index. This kind of market concentration means that most Canadians portfolios are influenced by those three sectors.  Much of last year’s market rebound was focused on these very sectors; however, in the process the other side of the market received little attention and has yet to fully participate in the market recovery. Fortunately, that is good news as it means that there is still value in the market if you look hard enough.

While most Canadian’s investment exposure is in the big three sectors, attention should be paid to the other 20% of the index which offers potentially better opportunities for relative and absolute growth. Which sectors make up the other smaller half of the market? They are mostly less cyclical sectors like utilities, consumer staples, telecommunications, and health care. It is these sectors that were ignored last year and potentially offer better value going forward. Often in investing, the best opportunities are where no one is looking.
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Once in a while, life knocks us for a loop.

Sometimes it presents itself as the abrupt end to a 15-year marriage. Or maybe it’s a child who refuses to communicate with his parents. It can even be a poor business decision that results in bankruptcy.

Sadly, countless people endure these and other life-changing experiences. While each situation is unique, the initial response from most every one often is “I didn’t see it coming.”

Let’s be honest. There probably had been indications along the way. Signals that, had they been acknowledged, might have prevented the problem from escalating. But in some cases there are no warnings, particularly, when it involves one’s health. One day we’re running 10K, the next we’re on life support.

There’s no telling when life will throw a curve ball at us, or in the case of Sandra, hit us over the head with a sledge hammer.
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How can you get the government to give more money to your favorite charity or cause?

One way may be to lobby your MP or MLA. The prospect of a positive response would be less than certain, and the effort might not be the best use of your time.

A certain way to get the federal and provincial governments to support your charity is through their support of your contribution.

How does that work?

When you make a contribution that qualifies for a tax receipt, you get a credit against your income tax liability.

For the first $250 of receiptable donations, the tax credit is based on the lowest rate of tax.  However, if your donations total over $250 during the year, the tax credit is then based on the highest tax rate, currently 43.7%.
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Effective January 1, 2010, you now have another $5000 contribution room for your TFSA.  This is in addition to any unused contribution room you may have left from the $5000 entitlement for 2009.

Also, if you withdrew money last year, you can now replace it without affecting this year’s limit.

As with RSPs, personal investments can be transferred into TFSAs to avoid tax on future income.  Don’t forget though, you might trigger tax on any capital gains earned to the date you transfer investments.

The last day for topping up your 2009 RSP contribution is coming up fast.   Amazingly, many of us do not contribute our maximum, even though it still remains one of best ways to both save for retirement and reduce taxes.

If you don’t have the cash:

• Ask us about RSP loans.  They are quick and easy, and with interest rates so low, its a great opportunity to get the tax deduction and meet your retirement goals.
• Consider making a ‘contribution in kind’.  You can transfer investments you own personally to your RSP, and get a receipt for the current market value.  But don’t forget that any capital gains to the date of transfer will be triggered.

With the Winter Olympics taking place during the last two weeks of February, don’t wait until the last minute!  Getting around town during that time will be a challenge for everyone.

Consider a regular monthly RSP contribution, instead of coming up with a large amount at once.  It’s often easier on the pocket, and it’s often a better way to invest (dollar cost averaging).

Don’t forget to use your tax refund wisely!  Repay loans or mortgages, or get a jump start on your 2010 RSP contribution to make a significant improvement to your financial needs.

ZLC clients and friends enjoyed our recent workshop where our guest speaker, Doug Towill, presented several interesting and provocative thoughts on what we can expect in retirement.  Doug shared ideas on how we can best prepare ourselves to maximize our opportunities, and enjoyment, of this important, and hopefully long stage of our lives.

Highlights from the presentation included discussion on:

• The risks we face with Longevity (will we outlive our money during our 25 to 30 years of retirement?) inflation (what will a dollar buy us in 20 or 30 years?) and Market Volatility (will a drop in the market set us back?)
• The Sandwich generation (most middle age people have more parents than children)
• Our increased awareness of the dangers of retirement and whether products exist to help protect/manage losses (tragically, far too many assets are now held in tax inefficient and low interest bearing investments)
• The concerns we face in maintaining our lifestyle in retirement (a large percentage of us are finding that our expenses are much higher than we expected)
• The events that trigger retirement readiness (financial freedom, a significant age, health, death of someone close, career setback)
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Welcome to the next decade. Investors were tested to extremes this past decade; yet, wherever there is crisis, you can be sure there is opportunity close by. So as we all collectively stared into the abyss a year and half ago and our discipline was tested, we chose to focus and trust our independent analysis on the opportunities that were presenting themselves in 2008. The end result was a truly outstanding year for our Van Arbor Funds.

The Canadian Fund led the pack in 2009, doubling in value and more importantly outperforming the TSX Index by nearly 70%. The World Fund also stood out with its 43% return, beating the World benchmark index by nearly 35%. There is no doubt that 2009 offered better opportunities than most years; however, we like to look at the full two year cycle to gauge our performance over the down and up market.

The more important statistic we like to look at is the performance of the Funds since the  TSX  peaked in the summer of 2008. Since then, the  TSX remains 20% below its peak value, yet both the Van Arbor Canadian and World Fund have increased in value by nearly  40%  since  the  TSX peak. We are proud of that statistic because it exemplifies our focus on capital preservation alongside capital appreciation.
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