by John Moakler | Mar 14, 2022 | Uncategorized
March 14, 2022
I also cover this in a YouTube video. Click here to watch!
What is the #1 risk to you enjoying a comfortable retirement?
In this blog, I’ll be sharing with you what people are most worried about as they plan for retirement and how you can take steps now to avoid this issue.
First, let me ask you a question: what do you think is the #1 issue facing Canadians as they enter into retirement?
Is it the return rate on their investments? If they have decided to downsize their home, do you think they are worried about whether or not they will get the maximum value when they sell?
The #1 issue – which becomes the #1 question I am asked to answer for clients when we develop their written retirement plan – remains: will I run out of money in retirement?
There are so many variables to consider when answering this question. Here’s what we can do:
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We can gather all of your documents and review your current risk management strategy (such as Disability and Critical Illness Insurance);
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We can have you calculate your monthly lifestyle expenses as you enter into retirement; and
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We can extrapolate these expenses against the liquid investments that you currently have to determine if there is a gap – to which we could develop a plan to fill that gap before you retire.
But there is still one variable that we cannot control for lack of a magical crystal ball…
What happens if you are retired, and five years into retirement you have a life event that now requires $10K or $15K a month in health care costs to take care of you… Where is the money coming from?
Sure, we can liquidate all of your assets, sell your home, and you could move into a nursing home. But what happens if you live for another 10 or 15 years?
We all saw what happened in 2020 with Covid-19: over 70% of the deaths in Canada were attributed to nursing and retirement homes.
But what if you didn’t have to sell your house? What if you could stay in your home and have an additional steady stream of tax-free income to help pay for all of your health care needs?
I call it Living Care Insurance – the industry calls it Long Term Care Insurance, or LTC for short.
If you cannot perform two out of the six daily activities of living, you automatically start to receive a tax-free benefit each week for the rest of your life. Best of all, you do not need to move out of your house, you can stay in your home and have the health care services come to you.
When designing a plan like this, you can include other features such as Cost of Living to offset any inflationary factors. You can look at whether or not you want to make only premium payments for the next 25 years – which covers you for life – or if you’d prefer to take a more cost-effective approach, you could continue to pay premiums each year until you tap into the Long-Term Care coverage.
Now, from an underwriting perspective, LTC is one of the toughest insurance policies to qualify for… But if you do qualify for the coverage, and you cannot perform at least two of the six daily activities of living, then tax-free money is available to you to pay for your health care costs. Up to $2,000/week or $104,000/year – coverage for the rest of your life.
It is estimated that over the next 25 years Canadians will be facing $1.2 trillion in healthcare costs, with only 50% of this being funded by the government… So we need to act now and we need to build a financial and retirement plan that is 100% bulletproof.
If you’d like to learn more about how you can implement an LTC plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Mar 10, 2022 | Uncategorized
March 10, 2022
I also cover this in a YouTube video. Click here to watch!
What are the 3 Secrets to a successful retirement plan? And what do Canadians need to have in place before they decide to retire? That’s what I’m talking about in this week’s blog.
Think about it for a moment. When our parents retired, they typically retired at age 63 or 65, and their life expectancy was maybe 12-15 more years after that. So if they started working at age 25, they worked for 40 years, retired at age 65 and supported themselves in retirement for 15 years.
Fast forward to today: if you’re married, and you and your spouse both retire at age 65, there is at least a 60% chance that one of you will live to age 90; that means that you worked for 40 years, retired at age 65 and now you need to have enough money in place to support yourself for 25 more years… And guess what: we are all living longer! The oldest known person in Canada was Phyllis Ridgway, who died at the spectacular age of 114 in June 2021. So, in her case, if she started working at age 25, she worked for 40 years and retired at age 65. She would have been retired for 49 years, which is nine years longer in retirement than in her working life. Phyllis may be the exception, or not.
Cash Flow is King
The 1st Secret to a successful retirement plan is knowing how much Cash Flow you are spending each and every month. You need to calculate how much your current monthly lifestyle is costing you – for perspective, the average business owner I work with today is spending anywhere from $10K per month all the way up to $40K per month. Long gone are the days when you could retire on $1M… It just won’t last, given our lifestyles and our longevity/
If you assume a 5% net rate of return after management fees, your monthly lifestyle expenses are $10K, and you retire at age 65, you will need at least $1.7M in liquid assets to stay secure – and that assumes no inflation or unexpected curveball life might throw at you. On the other end, if you have lifestyle expenses of $40K per month and you retire at age 65, you will need at least $7M in liquid assets.
The 2nd Secret to a successful retirement plan is knowing how to develop your retirement paycheque. It is made up of at least three types of income:
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100% taxable income – something like the Canada Pension Plan, a personal RRSP, or a Registered Retirement Income Fund (RRIF);
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Tax-preferred income – like Dividends or a Non-Registered plan that is only 50% taxable on the capital gain;
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100% tax-free portion, which is created from your Tax-Free Savings Account (TFSA), or from the Cash Value of a Permanent Life Insurance Policy.
Over the years, many experts have agreed to disagree on the ideal mix of your net worth as you enter into retirement. Typically, you would see the following breakdown:
House or Real Estate should make up 30% of your Net Worth Liquid Investments – such as your RRSP; Non-Registered (seen as NR in the pie chart above) or Corporate Money should make up 50% of your Net Worth; and finally, the Cash Value sitting inside a Permanent Insurance policy should make up 20% of your Net Worth.
When we develop a written retirement plan for our clients, we take them through a discovery process to learn more about their retirement and estate planning goals. For example, we inquire about where, and how often, they would like to travel, as well as any hobbies they may have. Then we have our clients complete the “monthly lifestyle expense spreadsheet,” mentioned as Secret #1.
Usually, we would like to start this process about 7 to 10 years prior to retirement – that way, if there are any course corrections that need to be made, we have time to work it out.
The 3rd Secret to a successful retirement plan is having a back-up plan when the markets crash. The markets go through cycles, and when they go down by 25-30%, you need to have a game-plan in place to continue to pay yourself a paycheque.
When most people retire in Canada, they have a two-legged chair, their liquid investments (like an RRSP or Non-Registered investments), and they have their Real Estate (which is typically their home or a vacation property). However, as we experienced in 2001, 2008, and again at the beginning of 2020, most of these two-legged chairs fell over. The markets came crashing down and people still needed to create their retirement paycheque from investments that were now underwater.
Here are some key facts to consider: when the markets go down 40% – say, 10,000 points to 6,000 points – how much do the markets have to go back up to return to the original 10,000 points? The answer is 4,000 points, but that is now a 67% market increase – which is not a recovery that will happen overnight. So, when the markets are down 30-40%, you need a third leg on your chair so that it doesn’t tip over and allow you to tap into another bucket of money, on a tax-free basis, just to create your retirement paycheque. This will allow you to put a pause on your current liquid investments – allowing them time to recover – while you tap into this other bucket… However, less than 10% of Canadians have access to this third leg on the chair that creates this additional bucket of money.
WHY IS THAT?
Because their current Financial Planner or Advisor may or may not be licensed to talk about the third leg on the chair. Worst yet, their current Financial Planner or Advisor is not even aware of the third leg on the chair.
The third leg on the chair is the Cash Value or CSV that is sitting inside of a Permanent Whole Life Policy.
DID YOU KNOW that last year in Canada, money sitting inside of a Permanent Whole Life Policy was receiving a Dividend of approximately 6%? And for the past 25 years, the Dividend has had an average annual rate of return of 8.4%? Here is another key fact: when this Dividend is declared, it is guaranteed in writing from the insurance company, so it cannot go down in value. All of this is a part of the insurance contract, and we always design our policies for maximum cash flow in retirement.
I usually refer to a Whole Life Participating Policy as the Fixed Income Anchor in your overall investment & retirement plan. So, when life throws us a curveball and the markets hit a speed bump, you must have a three-legged chair in retirement. Otherwise, your chair will tip over and then you will be scrambling to create your retirement paycheque from assets that have been hit hard and are perhaps underwater.
If you would like to learn more about how these 3 Secrets can help you to enjoy your retirement, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Mar 7, 2022 | Uncategorized
March 7, 2022
I also cover this in a YouTube video. Click here to watch!
STUDIES HAVE SHOWN that Canadians who actively work with a Financial Planner retire with at least 30% more money. Now, are you interested in being in the top 10% financially in Canada? Well, by the end of my blog – having presented a couple of ideas for you to consider – you’ll be one step closer to retiring more comfortably and belonging to the Top 10% Club.
Now, If you were building a house from scratch, what would you need to get started? Blueprints, building permits, contractors… and a written plan.
So why is it that over 90% of the people that I meet with do not have a comprehensive written financial and retirement plan? It’s true: successful business owners, doctors, dentists, pharmacists – some of the most educated members of our society – do not have a written financial plan.
So now I ask you: do you have a written financial and retirement plan?
It is shocking to me that eight to 10 million Canadians will be entering into retirement in the coming years and do not have a clue if their money will outlive them. Worse yet, they don’t know if they will outlive their money and need to turn to the Government for assistance in order to survive. That is why I decided to write a book in 2016 to help my fellow Canadians and I became a best-selling author. My book, linked here, is called “Heal Thy Wealth” – How Doctors Are Misdiagnosing Their Own Financial Health And What They Can Do About It… but really, it’s essential for every Canadian.
One of the keys to growing your wealth is only spending what you actually need in order to enjoy your current lifestyle.
My team will take you through a cash flow exercise in order to minimize taxes in how you pay yourself from your corporation, thereby building up a bigger cash reserve for when you want to retire.
Everyday life throws us a lot of curveballs, just look at what has been happening with Covid-19… And so you need to make sure that when you do hit a speed bump, that you have your seatbelt on tight, because your life could change in an instant. In other words, you need to have the necessary bumper guards in place, otherwise panic will set it.
Smart money has all of the necessary bumper guards in place. Some examples: Disability Insurance to protect your current paycheque; Critical Illness Insurance to protect against cancer, heart attack, and stroke (plus so much more). Becoming more popular now is Living Care Insurance – that’s right, the industry calls it Long-Term Care Insurance, but the way we design policies for our clients, you can turn Living Care Insurance on and off during your lifetime so that you won’t become a burden to your family.
Do you think the rich get richer using their own money or Other People’s Money? The correct answer is Other People’s Money or OPM for short.
We have a bulletproof strategy that allows you to get the protection you need for you and your family, but instead of it costing you one dollar for a one dollar of coverage, we can give you one dollar’s worth of coverage for pennies… It’s designed to grow your wealth by using Other People’s Money.
So how do you qualify for the 10% Club?
First off, you need to work with a qualified Financial Planner who does not have any conflicts of interest, and who will take you through a proven and repeatable methodology; a good Financial Planner will also help you develop a comprehensive, written financial and retirement plan.
From there, we can map out both your current paycheque, as well as your future retirement paycheque, to minimize taxes. Then we need to make sure you have the necessary risk management in place in case life throws you a curveball.
The next step is to build a pension plan that is 100% funded by your corporation. Depending on how you are currently paying yourself, there are a number of choices to make regarding how we build that pension plan. Ideally, one of the options we prefer is to make sure that we design your pension as 100% tax-free in retirement. Finally, we build an estate plan to make sure that Revenue Canada does not become the biggest beneficiary of your estate.
If you would like to learn more about how you can incorporate these strategies into your own financial plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Mar 3, 2022 | Uncategorized
March 3, 2022
I also cover this in a YouTube video. Click here to watch!
WHAT IF you could plan for today so that if you or somebody you love needs around-the-clock health care, you would have the necessary funds already set aside to allow them to get in-home care?
Well, by the end of this short blog, I’ll have given you a couple of ideas to consider so that you can avoid ending up in a long-term care home.
Now let me ask you a question: if you had a choice, with Covid-19 all around us, would you let your loved ones end up in a nursing or long-term care facility?
Really be honest. This is a difficult topic to discuss at the family dinner table – kind of like people who don’t want to put their wills in place because they believe that once they are, they might die. But I’ve got news for you; we haven’t yet figured out how to avoid death.
DID YOU KNOW that by early January last year (2021), according to the National Institute on Aging at Ryerson University, retirement/nursing homes in Canada accounted for over 70% of the people who died from Covid-19?
Would you ever put someone you love into a nursing or retirement home if you didn’t have to?
Wouldn’t it be better to build value in a strategy, so that you could pay for care at home?
What if I could show you how to use the living benefits of a Cash Value Life Insurance Policy to pay for all of your long-term or nursing home needs?
EVEN BETTER, by design, it is guaranteed to you in writing that you will never lose any money, ever again.
And what if I ALSO told you that you could have access to the cash when you need it, with little or no income tax liability?
Wouldn’t it be wonderful if we could build up $300,000, $400,000, or even $500,000 of cash value in this strategy so you could be in control of situations like this?
And the absolute best part of all of this is that if you don’t ever need long-term care, then you haven’t wasted any money on the coverage! And when you retire, we can supplement your retirement paycheque with tax-free income for the rest of your life; when you die, we will send whatever is left to your family, or charity of your choice, 100% tax-free.
In a recent video from my YouTube channel, I mentioned that Canada is one of the global leaders in debt per capita. That dramatically growing debt will increase the difficulty in providing the promised retiree benefits for Canadians.
That said, do you think taxes will be going up or down in the future?
Given the amount of “free money” that our Federal Government was handing out over the past year, how do you think they will get all that money back?
There is nothing free in this world other than the old adage: death and taxes.
So would you prefer to pay your taxes when they are on sale now, or do you want to wait until you have to pay full price in the future?
Demographics and longevity – meaning we are living longer and illiquidity of the assets owned by Canadians – will put more and more stress on Canadian retirees. That’s why it’s my job, as a Financial Planner, to develop written, comprehensive financial and retirement plans for my clients that help reduce or eliminate Revenue Canada from your estate.
I see a lot of people who are Asset Rich and Cash Poor. What I mean by that is that they have a home (their real estate anchor), but they haven’t planned for liquidity as they enter into retirement… and you just can’t count on the government to fund your retirement.
We must build liquidity by using Tax-Free Savings Accounts and Cash Value Life Insurance so Canadians can have the retirement they deserve… and not end up in a long-term care facility in the process.
However, action must be taken soon before it is too late! I cannot give you back the factor of “lost time”.
If you’d like to learn more about how you can implement a number of the strategies highlighted here, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
by John Moakler | Feb 28, 2022 | Uncategorized
February 28, 2022
I also cover this in a YouTube video. Click here to watch!
Let me ask you something – why are you paying for healthcare costs out of your own pocket, when you can have your corporation pay these expenses?
Get ready, friends, because I’m about to give you ALL the necessary information you’ll need to consider setting up a Health Spending Account in order to protect you and your family. Essentially, you are turning Personal Costs into Corporate Tax Deductions.
A professional who has a corporation is like any other business owner who is challenged with how to pay for drug, dental and extended healthcare costs – both here in Canada, and when traveling for vacation or business outside of Canada.
If you do not have access to a group plan through your spouse, you will have to pay for these expenses out of pocket using after-tax income. This is where a Health Spending Account or HSA would be of great value to you and your family. Once you’re no longer paying for these expenses personally, all you need to do is to set up an HSA. Any contributions by your corporation are 100% tax-deductible to the corporation, while all eligible medical and dental expenses are reimbursed to you and your family tax-free.
HSAs are less expensive than group insurance policies. With group insurance plans, the costs are based upon the previous “experience” in terms of claims filed, plus the insurance company’s fees and profits. And, the more you use a group plan, the higher the renewal costs down the road. It’s kind of like they don’t want you to use the group plan because they will penalize you if you do… Why do that?
So, what is a Health Spending Account?
Well, an HSA is a self-insured Private Health Services Plan set up by the employer – that would be you as the owner of the company – as a benefit for their employees. An HSA provides expanded medical and dental coverage to professionals and business owners, their families, and certain employees.
How Does a Health Spending Account Work?
Great question. From a visual perspective, picture a health spending account like a type of piggybank for your drug, dental, and extended healthcare needs. Money deposited by your corporation can be used to cover all CRA-approved eligible personal medical expenses. As I mentioned previously, all contributions are 100% tax-deductible to the Corporation, and they are 100% tax-free to the employees.
An employee pays for the health or dental service upfront and then submits the expense to an automated claims process by visiting my website at MoaklerWealthManagement.com. Once the expenses have been submitted and verified, the money is then deposited into their personal bank account of file approximately two to three business days later. You do not need to mail in any paperwork, but the plan does call for you to keep your receipts in case of an audit by CRA.
An HSA can be set up for a 1-person business or multi-employee corporation as a cost-effective alternative to an insured drug and dental plan.
If you’d like more information on how you can set up an HSA plan with us, please send me a message via my contact information at the very bottom of this post.
How is a Health Spending Account Funded?
Another great question!
When you are initially setting up the HSA, you have options. You can contribute a lump sum upfront, you can turn on a monthly contribution, or you can do BOTH. If you have some idea of what your health and dental care expenses are going to be over the next year, you can contribute this amount (plus a small service fee and taxes) as a lump sum and then decide if you also want to turn on a monthly contribution.
If you initially decide to only go with a lump sum contribution, then you can only add additional money to the account on your anniversary date or if you experience a “life-changing event.” Because of this restriction, I usually encourage my clients to make an initial lump sum contribution as well as a monthly contribution. You can always turn off the monthly contribution at any time later on.
Who is Covered Under the HSA?
The definition of dependents for an HSA is more flexible than in a traditional plan. That means that any person related to you by blood, marriage, or law who is financially dependent on you can be covered under the plan.
It is becoming more and more common for children to either return or stay home after graduation from post-secondary school. As well, there is an ever-increasing trend for people to pay for the healthcare costs of their elderly parents who might not be covered by a government program. And if you don’t spend all the money in the plan this year, then it continues to roll over and can be used to cover medical expenses in subsequent years.
I have a couple of client examples here.
The first is one whose father was visiting a country on the other side of the world and he felt ill. He had to pay to see a doctor and then he was prescribed a prescription. Upon his return to Canada, both the cost to see the doctor and the prescription were covered under the HSA plan.
This other example comes from a client who didn’t know if he needed to put $14K or $15K into his plan for the upcoming year, so he did a lump sum of $10K and then turned on a monthly contribution of $500. 4 months in, he determined he had enough money in the plan and was able to turn off the monthly contribution. Once he turned off the monthly contribution, he couldn’t put any more money into the plan until the anniversary year of the plan.
This key difference is one of the reasons why the HSA plans that we set up are covered under the CRA guidelines.
Be careful out there because the CRA is clamping down on HSA plans that are called “Cost-Plus” plans and so they should be. Picture this, you have a $10K medical expense, you pay for it personally, and then you submit the expense to your corporation for a full refund… If you have this type of HSA plan, then the benefit would be considered a “taxable shareholder benefit”.
I am licensed in a number of provinces; in British Columbia, Alberta, and Ontario, the HSA plans that I see for a number of clients are using a “cost-plus plan,” but they haven’t been claiming the benefit on their personal income tax return. The CRA is starting to come down on this.
There is a level of risk involved in the way we design our HSA plans, so again I reiterate that the contributions you make are 100% tax-deductible to the corporation and 100% tax-free to the beneficiaries of the HSA plan.
If you’d like to learn more about whether you can take advantage of an HSA plan, contact me at the coordinates below to apply to become my client. Thanks for reading and always remember: when we design financial plans for our clients, we make sure that your money outlives you in retirement.
For the best life insurance advice and information, subscribe to my YouTube Channel and hit the notifications bell to be notified when we post new videos. The channel allows me to share my passion for personal financial planning and I produce content that I would want to watch – and because of that, I promise to give you 110% effort in every video that I make.
By John Moakler, BMath, CFP, CLU
President and Senior Executive Financial Planner
Moakler Wealth Management
info@moaklerwealthmanagement.com
1 416 840 8544
