Lifestyles, Life Income, and Lifeboats
Silver and Gold, March/April 2011 - By Brian Weatherdon, MA, CFP, CLU, MDRT.
The most vital questions people raise with me, focus on the lifestyle they want to enjoy, and the life income they need to protect that lifestyle. If storms come and the winds blow it could be helpful also to have a Lifeboat...
WHAT LIFESTYLE?
As we write for readers from 55 and up, we all know what we mean – and YOU know what you mean, when you’re talking about your ‘lifestyle’. Lifestyle is protecting how you want to live. It’s knowing you can continue the activities you enjoy. It’s having fun, companionship, and stimulating activities day by day.
SNG readers can explore how “Life comes alive at 55”! Hiking Arizona or cruising Europe, cultivating relationships, sampling fine cuisine and learning about good health, from 55 onward. Adult ‘living’ means what you want it to mean – at home and abroad wherever you choose!
Adult living isn’t standing still. The first boomers hit 65 this year; they will change the world as they’ve always done in the past. For some people this is the first time in your life you could abandon responsibilities and freely set forth in the world… Lifestyles are the choices you make to enjoy life every season of the year!
LIFE INCOME.
This is the number one reason people call me. They are asking a vital question, “Should I scale back and accept a lesser lifestyle, or will my money last as long as I need it to?” In short, we are desperately hungry for YIELD.
Recent issues of SNG have touched on ways to lower taxes, get pension credits you deserve, and enjoy a secure income. Some people call and ask me, “Can you give us a clear, specific example of how this is to be done?” If you have a certified planner (and I certainly hope you do!), you must discuss how these following simple ways can help you increase your YIELD and after-tax cash flow:
GICs. I wonder how many realize that GICs are a guaranteed way to lose money! I have kept a graph of GIC returns for the past ten years. After-tax, and after-inflation, GICs have averaged a 1% loss annually. Owning GICs can mean running out of money. Even a 3% GIC will lose value due to tax and inflation. Fortunately we have other ways to secure income for life.
Life Annuities. Nothing is more conservative for today’s active seniors – plus you get a mortality bonus or credit guaranteed for life. An insurer will pay to age 150 – or to age 90 if one dies sooner. The second-best secret is how much of the income can be tax-free. Someone in their mid 70s may get over 8% cash flow after-tax, guaranteed for life! As it also reduces the tax clawback on OAS, there are times this income will feel totally tax-free.
Investment Funds. I see all kinds of fund accounts; often the results are not what you wanted. The simplest and cleanest success could be shown as 65% dividend funds and 35% income funds. I can easily show 6.5% returns over the past ten years. It’s clear enough for an MBA and simple enough for an industrial worker. Simple works, and since year 2000 – the toughest decade of our lives – this simple formula protected lifestyles!
Home Equity Reverse Line of Credit (HERCL). Note: It’s NOT a reverse mortgage. People still reach me about this, so look back to September’s S&G issue if you’d like (or request a copy by contacting me.) Showing your bank how they can give you a totally tax-free income is a win-win (for you and the bank, if fees are waived and interest rates are low).
Low-tax Funds. Most advisors can offer corporate class funds which magically cut the tax in half when you invest in fixed-income cash or bond funds.
NOW TO THE LIFE BOATS.
No one wants to scale back their lifestyle due to money worries. Would you travel less? Delay the rewards of your retirement? Cut back on charity? Spend the family inheritance? Would you someday need assistance but then feel you couldn’t afford the cost?
The first lifeboat is having a plan. 86% don’t have a fully written plan as to how their money will serve them for life! Many worry their money will disappear before their years are completed. Like Trudy said in January’s S&G article I wrote, “If we had known we would live so long, we might have done something differently with our money.” The answer is not about living less! The answer is having the plan that protects your lifestyle for life!
Another lifeboat is the Long Term Care insurances treated in recent issues. Life insurance too can be what we call a “Promissory Note” that repays life’s expenses when we die. Insurance planning is a special area that can support income while we’re living.
LIFESTYLES FOR LIFE.
You and I know the future holds many opportunities and seasons...and you want to live fully and enjoy life. As you can see, we’ve been able to highlight the conversation you want to have with your family, your friends, and whomever advises you... because we’ve shown you can enjoy a strong income forever – as long as you live... and sometimes even longer!
See our March/April issue for Brian’s FREE DINNER CONTEST!
For more information about this article, without obligation, or for a brief discussion with Brian Weatherdon, please contact him directly at: brian@sovereignwealth.ca or at (905) 637-3500 x 223