It was a Tuesday to remember for investors as U.S. stocks wrapped up their best quarter in more than 20 years, a remarkable turnaround after the coronavirus pandemic brought global economies to a halt in March and April. The S&P 500 finished Q2 up 20%, its biggest percentage gain since Q4 of 1998, while the Dow climbed 18%, its best quarterly performance since 1987. The rally has cut the indexes’ losses for the year to 4% and 10%, respectively. While those numbers are impressive, the Nasdaq Composite outshined them all, rising 31% in the quarter and 12% year to date. Meanwhile, the TSX recorded its best quarter since the global financial crisis, surging 16%.

There was also good news for oil prices on Tuesday, which approached the $40 per barrel mark, putting oil on track for its largest quarterly percentage gain in 30 years. The rebound comes after an historically rough Q1, which saw the biggest quarterly percentage drop going back to 1983.

It’s been a strong week for markets thus far. U.S. stocks were up Monday on news of a rebound in previously owned homes, suggesting a turnaround in the U.S. housing market, while TSX was up 201 points, as rising oil prices lifted the energy sector. Following Tuesday’s strong performance, the S&P and Nasdaq closed higher Wednesday on news that the Institute for Supply Management’s June manufacturing index rose to 52.6 from 43.1 in May, outpacing analysts’ expectations. The Dow was slightly off Wednesday, while the TSX was closed for Canada Day.

U.S. markets started off strong Thursday on upbeat jobs data showing 4.8 million jobs added in June, bringing the unemployment rate down to 11.1%. However, permanent job losses keep rising as the “core” unemployment rate jumped to 5.9% in June, a number that’s expected to rise as more businesses close for good. By Thursday’s close, the Dow had added 92 points, the S&P gained 14, the TSX climbed 107, and the Nasdaq added 53 points to hit a new record close.

Read more…

source https://richarddri.ca/optimism-high-as-n-a-markets-finish-best-quarter-in-years/

It looked like it was going to be another week of steady and modest gains for N.A. markets, as investors focused on economic data, largely shrugging off rising infection rates in the U.S.

On Monday, U.S. stocks rallied after a choppy morning session, finishing higher as the Dow added 154 points, while the TSX added 43. That positive momentum continued into Tuesday as investors parsed improving economic data. U.S. private sector business activity improved for a second consecutive month in June, while new homes sales jumped nearly 17% in May, dwarfing analysts’ projections of a 3% rise. Tech stocks led the way for much of Tuesday’s session as the Nasdaq posted its 21st record close of the year. By Tuesday’s finish, the Dow was up 131, the Nasdaq climbed 75, and the TSX added 48.

Another emerging storyline on Tuesday was gold prices, which approached a new seven-and-a-half-year high. Prices are up 16% for the year, boosted by coronavirus-related economic uncertainty and expectations for more stimulus and rock- bottom interest rates.

It was quite a different picture on Wednesday, however, as the three major U.S. indexes saw their biggest daily percentage drop in almost two weeks, largely due to surging coronavirus cases in the U.S. Shares of airlines, resorts and cruise operators tumbled as the spectre of a second wave of infections soured investors. The TSX was also hit hard, dragged down by a nearly 4% decline in the energy sector.

Adding to the gloom on Wednesday was a report from the International Monetary Fund, which predicted that the global economy will contract nearly 5% in 2020, worse than its previous forecast of a 3% contraction. Also weighing on sentiment was increasing tensions between the U.S. and Europe. According to reports, the U.S. is considering levying tariffs on $3.1 billion worth of European products. That news came on the heels of Tuesday’s warning from the EU that Europe might not allow visitors from the U.S. once it reopens, citing the U.S.’s failure to contain the virus.

N.A. markets struggled for direction Thursday as the Labor Department reported another 1.5 million jobless claims last week, while coronavirus cases continued to surge in Texas, Florida, Arizona and California. Although U.S. stocks opened lower, all four N.A. indexes finished the day in positive territory.

Read more…

source https://richarddri.ca/markets-stumble-mid-week-as-rising-infection-rates-dampen-recovery-hopes/

Russell Alexander is the owner and founder of Russell Alexander Family Lawyers, and he is my first second time guest, having previously appeared on Episode 26 of the podcast. Since so much has changed for lawyers and business owners since our first interview, I have invited him back to share the differences he has observed during the pandemic. Russell discusses the adjustments that he and his team have made, the impact of the pandemic on the legal profession and on couples and families as well, and explores one of the biggest parenting issues that has developed. He also introduces us to his new book, ‘Everything You Wanted to Know About Divorce’, and offers some of its highlights. In finishing, Russell shares his valuable advice for business owners, for marriage, for divorce, and for all three of these during a pandemic.

Download the full transcript here

Highlights:

– The pandemic has caused an increase in couples separating and divorcing.
– The courts are treating custody, visitation and child access cases as priorities, dealing with them on an urgent basis.
– Having a domestic contract or a marriage agreement is always helpful.
– Russell hopes that his new book will help make the court more efficient, and able to deal with the matters of those going through divorce in a more timely way.
– In terms of the business and even your marriage, Russell believes that routine is really important.

Quotes:

“Because we had the technology and the culture of working remotely, it hasn’t been as hard on us as it has with some other firms who have decided to shutter their offices and stop meeting clients altogether.”
“It could be like this for a while. We just don’t know how long it’s going to be until things get back to normal.”
“ I think across the board for lawyers and the legal industry, billings and revenues are down.”
“ This new normal, unfortunately, is not working out for a lot of families.”
“There is a process that is respectful, is peaceful, and it helps people get a resolution provided you choose the right professionals and the right team to help you through it.”
“There’s hope at the end of the tunnel.”

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Listen to more podcasts by Richard Dri:

Making family law collaborative with Russell Alexander

Being a lifelong entrepreneur and surviving recessions with Kyle Kotack

Financial Planning and the COVID-19 Pandemic with David Victor

source https://richarddri.ca/running-a-law-firm-in-the-age-of-covid-19-with-russell-alexander/

Never Retire Profile of the Week

Alain Ducasse

When it’s safe to travel again, you may want to include a stop at one of Chef Alain Ducasse’s many fine dining establishments. The 65-year-old “Emperor of French Cooking” has over 30 restaurants around the world and has earned an astonishing 21 Michelin Stars over his gastronomic career. No longer working in the kitchen – in some cases banned for his fussy and obsessive interfering – the eccentric chef now oversees an empire of restaurants, cooking schools, cookbooks and consulting activities, which together earn tens of millions in revenue each year, and also works with the European Space Agency to develop astronaut meals. When the pandemic first hit, he was one of very few top chefs to offer take-out at one of his exclusive Paris restaurants. With restaurants throughout France and in Tokyo, Hong Kong, New York, Las Vegas, London many other international locations, consider adding a Ducasse-designed meal to your bucket list before this wonder of the culinary arts hangs up his toque blanche – though it doesn’t look like that will be happening soon.

Alain Ducasse

If you’re like me, you spend a decent chunk of time considering your retirement. Maybe that means planning your future travels. Or selling the family home and moving to the country (or ski hills or beach or mountains). Or turning that hobby into a sideline business. Or sending your grandkids to private school. Whatever your dreams, you want to be able to finance all of its facets and features so you can live it fully and well.

Of course, I also think about retirement because it’s my mission to help my clients and anyone else I bump into to Stay Rich, Live Well and Never Retire. That looks like a contradiction, but those of you who follow my blogs know that by “never retire” I mean “work as much or as little as you like at what you like.” Retirement doesn’t necessarily mean never working. It means doing the work you love because you want to.

So when I talk about retirement, I mean all kinds of things ranging from putting your feet up at your cottage 24/7 to launching a woodworking enterprise from your garage. And I talk about retirement a lot! So here comes more information to help you reach your goals.

In Part 2 of “When can I retire?” I explain that traditional retirement calculators require estimates for inflation, life expectancy, expected returns, sequence of investment returns, and expected pension entitlements. I outlined the difficulty of making long-term assumptions and the consequences of underestimating the required retirement pool on your retirement lifestyle.

In short, if the assumptions are too aggressive, you will overly sacrifice current lifestyle for future retirement years. The opposite scenario may cause you to be more frugal and sacrificing than you want in your retirement.

Given the risk of underestimating your financial independence (FI) number, how do you know you have made the right assumptions? In Part 2, I suggest we adopt conservative assumptions, such as assume inflation between 2-4%, assume investment returns between 2-6%, and assume life expectancy between 95-100 years.

In addition, I suggest updating projections when major events occur, such as a pandemic, a raise, a bigger home, or extended sickness. So the projections are conservative and dynamic.

But is there a better way?

As a certified financial planner, I encounter many investors who are searching for a method of calculating their financial independence (FI) number without making 30 to 50 year assumptions.

Fortunately, I have a unique solution for this challenge of knowing when you have accumulated enough money in your retirement pool to achieve FI. I call it the Live Well Calculator, because I believe it offers a standard of living you can fully enjoy in your later years. Here are the individual parts.

1. Monitor your personal expenses

It is often recommended to focus on what you can control and leave what you can’t. So, what can we control when calculating our FI number? Life expectancy, investment returns, salary, inflation? No. But we can control our expenses. We alone can choose to buy a coffee at Starbucks or brew at home and bring a thermos to the office.

For example, if we decide that our lifestyle expenditure is $50,000 per year, and we assume a 4% investment rate, then based on a perpetuity formula, we need to save $1,250,000 to achieve FI. For some people, this number may be too large and unattainable. If so, it may be best to reduce their lifestyle expenditures.

If we can lower monthly expenses by $1,000, the FI number in the above example is reduced by $300,000. The new FI number become $950,000 and is easier to achieve. (Tip: for every $1,000 reduction in monthly expenses, the FI drops by $300,000, assuming a perpetual formula using 4%). Many investors will find it easier to reduce expenses rather than aim for a higher rate of return by increasing their risk tolerance. The other option is to work longer before achieving FI, but reducing expenses may be more palatable then extending your working career, unless you love to work.

Allow me to demonstrate how frugality can lead to becoming financially independent in 17 years. (Note: if anyone is wondering, I can also make it work in less than 17 years!)

• Assume annual earnings of $48,000 net.
• Save 50% or $2,000 per month, increased by 2% each year to cover inflation.
• Live on $2,000 per month (increased by 2% each year).
• Investment return is 5% compounded annually.
• After 17 years, the retirement pool equals $733,000.
• Begin withdrawing 4.5% of the retirement pool or $33,000 per annum, which is the equivalent to $24,000 of spending in year one. Now you have created a situation of passive income equal to your monthly expenditure, and I classify that as Financial Independence.

If the total portfolio growth minus income is greater than inflation, you will never outlive your money. The retirement pool throws off the inflation adjusted amount you were spending in year one and the capital is never used.

The first rule is to focus on your lifestyle expenditures and not on the many assumptions that are required by traditional retirement calculators.

2. Accumulate inflation-protected assets

The second rule is to spend your working career accumulating assets that generate inflation protected income. For example, many publicly traded companies pay annual dividends and have historically increased their dividend annually at a rate of inflation or higher (i.e. Canadian banks). Another example of an income producing asset is a rental property such as an apartment building. Rental buildings require more attention, but they do offer monthly income and the ability to increase the rents by the rate of inflation or more.

When your assets throw off your lifestyle expenditures (i.e. $50,000 a year), then you are infinitely wealthy. For example, if you accumulate a diversified portfolio of assets equal to $1,250,000 and they generate an inflation protected income of $50,000 per year, I consider this to be financial independence, and it can be achieved at any age.

Another example is an inflation protected life annuity. This asset pays an inflation protected monthly income for the life of the beneficiary.

Just to be clear, I am not selling parts of the asset pool to support lifestyle expenditure: in retirement, you would be living on the income of the asset pool only. If we have the right assets in the pool, the lifestyle expenditures will be satisfied each year and the asset pool value will also increase.

This approach allows you to ignore life expectancy and inflation. Follow this model, and you will be FI when your assets throw off inflation protected income that exceed your lifestyle expenditures. Remember, you can only spend the income that the portfolio generates, hence you cannot outlive your asset pool.

3. Organize and diversify your assets

The third rule is to organize your assets so that the growth rate is greater than the rate of inflation. For example, the total return of the portfolio minus income should be greater than inflation. If the total return of the portfolio is 6% (3% portfolio growth and 3% dividend) and inflation is 2%, you will never have to worry about inflation.
The selection of assets is especially important. A portfolio of bonds will not work, because the capital and the interest income do not grow with inflation and thus eventually devalue your purchasing power.

You also want to diversify your assets, so the income is generated from multiple uncorrelated sources. In a previous blog, I wrote about a client who – against my advice – had all her retirement assets invested in her employer stock plan, which happened to be Nortel. As we all remember, Nortel declared bankruptcy, and my client lost most of her retirement assets. The moral of the story is to diversify assets and reduce the risk of overconcentration.

When gathering income producing assets, think of dividend paying stocks, income producing real estate, business income, inflation protected bonds, inflation protected annuities, and inflation protected government and corporate pension plans.

Avoid investing in stocks that have “big upside” potential but no income, non-income producing real estate such as land, and most bonds.

4. Delay retirement

The next rule is to be very conservative and delay retirement until the income from the portfolio exceeds your lifestyle expenditures. Then, reinvest the extra cash flow back into the retirement pool and allow it to compound over the years to help mitigate the effects caused by black swan events such as the current pandemic or the financial crisis of 2008.

This four-part approach – the Live Well Calculator – does not make assumptions about life expectancy, inflation, sequence of returns, or investment returns. All that is required are a) your current lifestyle expenditures, b) the return of the retirement pool, and c) ensuring the retirement pool grows in excess of the inflation rate.

I know that some readers will compare the Live Well retirement pool with the retirement pool generated by traditional calculators and note that mine requires a substantially larger retirement pool. I totally agree. That’s because the traditional retirement calculator depletes the retirement pool during retirement and is subject to the consequences of inappropriate assumptions.

A hybrid method between the traditional and the Live Well approach may help some investors reach sustainable financial independence. If the FI number calculated by the Live Well Calculator is unattainable because you started too late and or did not save enough money, consider the following hybrid method.

First, divide your lifestyle expenditures into fixed and variable expenses. Take the fixed expense and run the calculations through the Live Well Calculator. For example, if total expenses are $50,000 per year and $35,000 is considered fixed expenses, you will need $875,000 to cover your fixed expenses (assuming 4% investment return). Once you have accumulated this number, you can relax knowing that the family’s fixed expenses are covered and any additional saving (above $875,000) will be used for discretionary expenses.

Too often, I see retirees adopting a scarcity and poverty mindset because they see their retirement pool drop after each monthly withdrawal. As the pool gets closer to zero, their anxiety magnifies. Traditional retirement calculators may prevent a retiree to Live Well – hence my calculator.

This model is amazingly simple: focus on your sustainable spending, not the assumptions required to achieve a certain retirement pool. Armed with this number, search for assets that together throw off enough passive income (after inflation) to cover your spending requirements. That is it!

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here. 

Call me if you in want to map out how you can Never Retire. You can also subscribe to our Never Retire Newsletter, contact us to order a complimentary book, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416.355.6370 or email me at richard.dri@scotiawealth.com.

source https://richarddri.ca/when-can-i-retire-part-3-the-live-well-retirement-calculator/

Never Retire Profile of the Week

Michael Enright

It would be fair to call Michael Enright a national treasure. With a career in journalism spanning over 50 years, the 77-year-old host of CBC’s The Sunday Edition has seemingly done it all: four highly-regarded CBC shows; managing editor of CBC News; on the editorial board at Time, Quest and MacLean’s magazines; writer for The Toronto Star and The Globe and Mail; and member of the Order Of Canada for his “his contributions to Canadian print and broadcast journalism, and for advocating on behalf of people with intellectual disabilities.” Enright’s passion for justice and commitment to in-depth research on every topic he presents has made him a lively and engaging – and sometimes fierce – conversationalist with guests on his shows. A high school drop out, Enright has been awarded two Honorary Doctorates and – even more cherished – an honorary high school diploma. A passionate advocate for prison reform and the rights of the intellectually disabled, Enright has no plans to retire. While he is leaving The Sunday Edition at the end of this month after a 20-year run, he is embarking on a new CBC programme this fall.

Michael Enright

Have I saved enough money to retire? How long will my investments last if I stop working? Has the pandemic deferred my retirement goals? How much money should I save each month? Which investments are appropriate for achieving retirement?

If you find yourself asking these questions – and everyone does at some point in their lives – then you likely want a clear answer by calculating your Financial Independence number.

I don’t call that your retirement number, because I’m the Never Retire guy who doesn’t believe in the traditional and outmoded version of “life after work.” Most of the people I know don’t want to stop working entirely – they want to have choices about how much and what kind of work they do. If you want to read more about what Never Retire means, check out parts 1-3 of my book Live Well, Stay Rich and Never Retire. For convenience, I refer to “retirement” in my title and in the advice below, since that is the common term. But keep in mind that you can “retire” and “never retire” at the same time!

Continue reading “When can I retire part 2: Calculating your financial independence figure” →

It’s been a volatile week for N.A. equity markets as investors continue to weigh positive economic data against a disconcerting rise in coronavirus cases in the U.S. and around the globe. Although stocks initially opened sharply lower Monday on reports of an uptick in U.S. infections, markets recovered gradually throughout the day—surging even higher after Fed Chair Jerome Powell announced that the central bank would broaden its corporate credit purchases to include individual company bonds.

Positive sentiment continued Tuesday over new data showing that U.S. consumer spending rebounded nearly 18% in May, the biggest monthly increase in retail spending going back to 1992. For many it was a sign that the recovery had turned a significant corner. By Tuesday’s close, the Dow had surged more than 500 points, while the TSX added 156.

However, N.A. stocks drifted lower Wednesday in a volatile session as investors weighed a spike in infections against a surge in U.S. residential construction. By day’s end, the Dow was off nearly 175 points, while the TSX tumbled 87, weighed down by weakness in the energy sector. The day’s lone bright spot was the Nasdaq, which extended its winning streak to a fourth day as tech stocks continued to climb.

Thursday’s session began with mixed economic news out of the U.S. The number of Americans filing for unemployment benefits was down slightly last week, but applications remained historically high at 1.5 million, outpacing economists’ expectations. Also weighing on markets Thursday was news that Chinese officials had cancelled hundreds of flights in and out of Beijing on Wednesday, as they struggled to contain a fresh wave of coronavirus cases in the nation’s capital. By Thursday’s close, markets were essentially flat, with the Dow down 40 points and the TSX up 51.

Read more…

source https://richarddri.ca/markets-struggle-for-momentum-as-coronavirus-cases-rise/

Never Retire Profile of the Week

Buck Martinez

We’re all missing live sports during this global pandemic, so maybe this is a good time to recognize an icon of Canadian baseball broadcasting: 71-year-old Buck Martinez. Before he became a colour commentator and then play-by-play announcer for the Toronto Blue Jays starting in 1987, Martinez played professional baseball for 20 years as a catcher (and, in one outing, a pitcher), with his final six seasons as a Blue Jay. He also managed the Jays for a few years and has written three books, the most recent being Change Up: How to Make the Great Game of Baseball Even Better. Since 2016, Martinez has also joined the team that brings us the World Series – an indicator of the respect he has earned in his long career as a player, manager, commentator, author and passionate fan of the game. If you’re ever in Dunedin, Florida for spring training, you’ll see Martinez watching in the stands with his family, chatting with fans, and catching up with the players before and after the games. Once we can have Major League Baseball again, let’s induct Buck Martinez into the Never Retire Hall of Fame!

Buck Martinez

There’s a reason why the most frequent question we hear from readers is, “When can I retire?” That’s because we all want to achieve personal financial freedom. For some people, it may be a primary life goal, or at least among the top ten. So it’s natural to ask, “When will I have saved enough money?”

Beyond its degree of personal satisfaction and challenge, your career or your business is a vehicle for achieving financial independence. With that independence, you are then free to focus on becoming your best self – which doesn’t necessarily mean leaving your work behind. It just means having choices to design your life as you desire.

We cannot be at our best with constant worries about money. Often, we can’t even fully enjoy the pleasures we already have, let alone plan for an exciting future. Instead, we’re cranky, stressed, short tempered, distracted, irritable and gruff. We all know how these feelings get in the way of our relationships at home and at work (check out The Ladder to Financial Independence.)

With financial independence comes the flexibility that lifts the dark clouds of worry and allows us to focus on becoming a better spouse, parent, sibling, citizen, co-worker, philanthropist…whatever we can and want to be.

The Dri Financial Group’s guiding philosophy is “Live Well, Stay Rich and Never Retire.” Achieving financial independence is the “Stay Rich” part. When you achieve your definition of rich, you can become your best self and “Live Well.”

So how much do you need to achieve financial independence?

The answer to that is a moving target. Obviously, the younger the desired retirement age, the higher the amount any business owner or professional needs to accumulate. To obtain the “right” number, we use financial planning software to model the family’s net worth from today until the date of second death.

The model must be flexible enough to include major outflows such as having children, buying a house, paying off debts, funding education, and so on. The model also makes assumptions on inflows, investment returns, tax rates, inflation, and life expectancy.

A plan that projects 40+ years into the future is bound to be wrong, so proceed with caution and be prepared to adjust along the way. Yet despite requiring course corrections, such a plan isn’t worthless in our decision-making process. Every major decision can be modelled into the projection for an estimate of its long-term implications. For example, if a couple wants to own a bigger house or increase their discretionary expenses or send their children to a private school, incorporating these costs into our financial planning software allows us to calculate the long-term implications of these expenses for the family’s long-term goals – which may include retiring at age 55.

The retirement projection provides the business owner or professional such as yourself with the annual savings requirement and the expected date of retirement. This information removes the vagueness around a question like “When will I achieve financial independence?” and is the first step in reaching your goal to Live Well, Stay Rich and Never Retire.

In addition to the approach I outline and advocate above, which involves creating a customized and detailed plan for financial independence, I can also provide two rules of thumb as rough guidelines or considerations.

1. Focus on the capital requirement

If we assume an annual withdrawal rate of 4% and a lifestyle expenditure of $50,000 in the first year of retirement, then you will need to save $1,250,000 ($50,000 *25= $1,250,000). Notice how simple the math is: no fancy calculator or PhD required! So financial independence is achieved when an investor accumulates a portfolio of $1,250,000.

We could also try the rule of 33, which assumes a 3% withdrawal rate and retirement savings of $1,650,000 ($50,000*33=$1,650,000).

Or the rule of 20, which assumes a withdrawal rate of 5% and a retirement savings of $50,000*20=$1,000,000.

2. Focus on the income requirement

This method considers an investor financially independent when their investment portfolio generates residual income (passive income) that exceeds their personal expenses.

For example, if a couple accumulates a $2,000,000 investment portfolio which generates $60,000 of net after tax income per year, and their annual lifestyle requirement is $50,000, then this couple will have achieved financial independence because their cash flow requirement is completely covered by the income generated by the investment portfolio (without having to draw down the capital).

There are just a few more requirements for this to work: a) The investor can only spend the income and never touch the capital, b) the income generated by the portfolio ($50,000) and the capital ($2,000,000) must both increase by at least the rate of inflation, and c) the investment portfolio must be diversified, the income must be generated from multiple and uncorrelated sources (for example, dividend paying stocks, income producing real estate, inflation indexed annuities), and the investor should consider any guaranteed pensions available from our government and from company plans.

Note: The above methods may not account for taxes, inflation, or unexpected retirement expenses and should only be used a guidepost and not as the basis for dependable long-term retirement planning.

In short, without a financial independence number, you – the investor – will wander throughout your career without being clear on the amount of savings and the type of investment required to become financially independent. This may cause you to experience lifestyle creep or complacency and result in postponing the time of life when it’s possible to live your best self.

My key messages are consistent and dependable. Create a detailed plan for financial independence that best suits your current situation and future dreams. Don’t rely solely on broad guidelines such as those above – instead, have a personalized plan uniquely tailored to the specifics of your life. And hold in mind what you are trying to achieve: the freedom to make choices about how much and what kind of work you will do – and how to Live Well.

Did this article resonate with you? What did I miss? Send me a note and let’s start the conversation.

The process of finding an Advisor can be overwhelming. Our process is designed with you in mind. Its structured framework helps you make an informed decision about engaging an appropriate advisor.

Get started here. 

Call me if you in want to map out how you can Never Retire. You can also subscribe to our Never Retire Newsletter, contact us to order a complimentary book, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416.355.6370 or email me at richard.dri@scotiawealth.com.

source https://richarddri.ca/when-can-i-retire-and-how-much-do-i-need/

It may come as no surprise, but it’s now official. According to the National Bureau of Economic Research, the U.S. entered a recession in February, marking the end of the 128-month expansion that was the longest going back to 1854.

Meanwhile, the World Bank said this week the global economy is expected to shrink by about 5% in 2020 as a result of the coronavirus pandemic, making it one of the four most severe downturns in 150 years, noting that never before have so many countries entered a recession at once.

In other economic news, the Organization for Economic Cooperation and Development said a second wave of lockdowns to counter a resurgent novel coronavirus would deal a terrible blow to a global economy already facing a severe contraction. The OECD said it expected the global economy to contract by 6% this year if a second wave of infections and containment measures can be avoided. However, the news in the U.S. isn’t particularly good as some states that were largely spared from the pandemic are now seeing record hospitalizations, causing experts to fear that a second wave may be an inevitability.

Finally, Fed officials on Wednesday signaled plans to keep rates at zero for years, adding that the U.S. unemployment rate would average between 9% and 10% during the last three months of the year. All the sobering news and data has had a chilling effect on markets, especially as the week progressed. On Monday, markets were up as Friday’s surprisingly upbeat jobs report continued to fuel hopes for a quick recovery. The Dow was up more than 460 points, while the TSX added 121.

Although the TSX, S&P 500 and Dow fell on Tuesday and Wednesday after recent strong gains, the Nasdaq was becoming the story of the week after hitting new highs in the first three sessions and closing above 10,000 for the first time on Wednesday.

However, market sentiment soured drastically on Thursday as investor fears of a surge in coronavirus infections sent stocks into free fall. By Thursday’s close, the Dow was down more than 1800 points, nearly 7%, while the Nasdaq lost 527 and the TSX plunged 650.

Read more…

source https://richarddri.ca/u-s-officially-in-recession-nasdaq-hits-new-highs-before-rough-thursday/

On today’s episode, Richard is his own guest once more for a discussion about investment policy statements (IPS). In addition to explaining just what an IPS is, what’s in it, and why it’s so important, Richard also reviews the performance of the S&P/TSX so far this year, and the dangers of making investment decisions based upon emotion rather that evidence. This may be a short podcast, but you can rest assured that it is an extremely important one, particularly given these unprecedented times.

Download the full transcript here

Highlights:

• The S&P/TSX is only 10% away from breaking even for the year.
• An investment policy statement (IPS) is a set of rules that will keep you grounded in order for you to reach and achieve your investment goals.
• The four steps in building an investment policy statement are establishing your goals, determining the amount of time to reach these goals, deciding on your risk tolerance, and selecting the investments that will help you achieve your goals.
• The IPS will most likely be challenged during market extremes.

Quotes:

“If you had stayed the course, your investment portfolio today would be very close to breaking
even.”

“I suggest strongly that we start with a set of policies or investment rules. Otherwise, I’m afraid
we will be investing blindly.”

“By comparing their investment returns to the appropriate benchmark, they may in fact learn
that they are actually progressing as planned in the investment policy statement, and there was
no need to worry, and definitely there was no need to change course.”

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Listen to more podcasts by Richard Dri:

Seven Tips to Handle a Bear Market

Frequently Asked Finance Questions with Richard Dri

Investing in Yourself with Bill and Kate

source https://richarddri.ca/investment-policy-statements-why-are-they-important/

Never Retire Profile of the Week

Carol Dweck

Carol Dweck is the 73-year-old Lewis and Virginia Eaton Professor of Psychology at Stanford University, where she has taught since 2004 after stints at Columbia, Harvard and the University of Illinois. As active today as she has ever been, Dweck is known for her groundbreaking work on the “mindset” psychological trait, made famous by her 2006 international bestselling book Mindset. In it, she laid out the findings of 30 years of research into human motivation. In particular, she shared her discovery that individuals with a fluid view of human ability (a Growth Mindset) have a much higher chance of success than those who believe that talent and ability are innate (a Fixed Mindset). Dweck’s ideas have transformed a range of fields, including education, human motivation and corporate approaches to talent development. She has also become a renowned speaker, sharing her wisdom and research with audiences around the world thanks to her own belief in a Growth Mindset and commitment to never retire.

Carol Dweck

As a Certified Financial Planner, one of the best parts about my work is that clients call me for advice and assistance with issues they are facing. It is an honour and privilege to support people as they navigate the complexities of life.

The advice our team offers is usually a combination of technical assistance and emotional support.

Personally, I rely on my 25 years of wealth management experience to provide technical answers or solutions to a client’s situation. For example, when a client asks whether they should lease or buy a car, we run the numbers, compare the short-term and long-term financial implications, and offer a recommendation complete with pros and cons of each alternative. More often than not, clients accept our research and take our advice.

When it comes to providing emotional guidance, I have always tried to step into the client’s shoes and ask myself, “What type of support would I need if I were in their position?” Typically, I could draw on personal experiences to provide guidance, because I have lived through something similar to what the client is going through. Or so I thought.

For example, I often take calls from clients or their children explaining that a spouse or parent has died. They are calling for advice about the technical elements of dealing with an estate—such as what to do with the deceased’s investment accounts—but the conversations always have an emotional element.

Until recently, I would offer my condolences and assume I knew how the client felt. I now realize that I knew very little about the realities of grief. I was well intentioned and did my best to be supportive, but I now see that my lack of personal experience meant that my emotional support lacked depth.

This realization came to me because, as most of you know, I experienced my own loss earlier in 2020. I now have personal experience with grief that puts me in a better position to offer emotional support to anyone coping with the loss of a loved one.

My direct learning about grief has changed my thinking about how I approach emotional support for clients. I no longer presume that I can imagine my way into their shoes. And I am committed to being transparent and cautious about acknowledging my lack of emotional understanding when it comes to client situations with which I have limited or no direct experience.

One such situation is the challenges and complexities of supporting a disabled child.

When we receive a call from a parent or grandparent explaining that a child or grandchild with a disability has just been born, the caller is invariably experiencing both joy about the new arrival and worry about what the future will bring.

As I write this blog, I want to say in advance that my intention is to stick to delivering the technical details about the financial implications of supporting a disabled child. As a parent, I know what it’s like to worry about your children and want to do everything to support them. This content is offered in that spirit. But I will leave the role of emotional support in this area to those who have the lived experience and capacity to do so.

Understanding the nuances of the Registered Disability Savings Plan (RDSP)

In 2008, the Federal Government announced a new registered plan called the Registered Disability Savings Plan. It was designed to provide long-term financial security for disabled people. The new plan provides an opportunity to accumulate tax-deferred funds and government grants.

Here are three examples of situations when a RDSP might be useful:

1. Josh is a six-month-old boy with complex medical needs. His parents understand that Josh will not grow up to become an independent man. They realize their financial responsibilities will extend beyond their own deaths throughout Josh’s life. They consider establishing a RDSP to ensure that Josh has the funding necessary for his long-term care.
2. Beth is a 13-year-old girl in Grade 7 who has a severe learning disability. Her parents and grandparents would like to see Beth in her own home one day. They open a RDSP so that her parents and both sets of grandparents can contribute to the plan. Their hope is that one day, the fund will help Beth buy and maintain her own home.
3. Connie is a 25-year woman with a physical disability who works full time. She is worried that one day she will no longer be able to work or may only be able to work part time. Connie sets up a RDSP and begins saving money to top up her RRSP and employer’s retirement plan.

If you are in a situation like any of these, and are considering opening a RDSP, there is a range of considerations.

Here are ten things to know about a RDSP

1. There is no limit on annual contributions in a year but there is a lifetime limit of $200,000.
2. To assist with saving, the Federal Government offers Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs). If a family’s net income is up to $95,259, the maximum annual grant is $3,500. If the family income is above $95,259, the maximum annual grant is $1,000. There is also a maximum lifetime grant limit of $70,000 and the eligibility period for contributions ends on December 31st of the year the beneficiary turns 49.
3. From a tax perspective, there is no tax deduction for contributions but the investment growth (on the contributions and the government grants) is tax deferred.
4. If a family’s net income is below $31,120, the maximum annual CDSB is $1,000 with a lifetime limit of $20,000, payable until the end of the year in which the beneficiary reaches age 49.¹
5. Contributions are eligible for the Canada Disability Savings Grant (CDSG) until 49. However, there is a tax deferral advantage to contribute as much as possible and as early as possible (up to $200,000).
6. The plan holder can choose where and how to invest the funds in the plan.
7. You can spend the RDSP withdrawals as you wish. However, when the funds are withdrawn, there are some considerations. The original contributions are nondeductible when contributed and nontaxable when withdrawn. However, the investment income and the CDSGs and CDSBs are fully taxable to the RDSP beneficiary when received.
8. The money in the plan grows tax deferred. Over a 20 to 30 year period, these funds can compound into a large sum of money.
9. Payments from a RDSP do not impact other income-tested Federal Government programs such as OAS, GIS, CPP, GST benefit or Social Assistance. Plus, in Ontario, money held in a RDSP (assets) and money taken out of a RDSP (income) are fully exempt from determining eligibility for disability benefits.²
10. Anyone can contribute to a RDSP, including family, friends, neighbours, and charitable organizations, which enables many different people to assist with costs.

Here’s the bottom line: You can contribute up to $200,000, receive up to $70,000 of CDSG and receive up to $20,000 in CDSBs. Plus, you can earn tax-deferred growth on funds in the plan until the money is withdrawn.

I don’t personally know the challenges of raising a disabled child, yet I sincerely hope the above provides some comfort in knowing that Canada has a plan in place to help plan holders become better prepared for their financial future.

You can find additional information here.

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Call me if you in want to map out how you can Never Retire. You can also subscribe to our Never Retire Newsletter, contact us to order a complimentary book, register for one of our events, and call us to meet with a Certified Financial Planner. We offer you a range of services from a financial plan to investment advice or helping you take advantage of our investment models. Call me at 416.355.6370 or email me at richard.dri@scotiawealth.com.

¹For a minor beneficiary, the family net income is that of his/her parent. Where the beneficiary is over the age of majority, the family net income is that of the beneficiary and his spouse, if applicable.
²RDSP.com

source https://richarddri.ca/what-you-need-to-know-about-financial-assistance-for-a-disabled-child/