As soon as she began her career in her 20s, Shelley Pringle was contributing to an RRSP. Back then it was a simple matter of putting a few extra dollars aside each month.

“I knew I needed to get in the game as soon as possible. But when you’re young, it’s hard to think seriously about it,” says the Toronto-based PR consultant. Marriage and a mortgage changed the investment picture once she hit her 30s.

“Other things took a higher priority. But as the years went on and the house was off the list of things we had to save for, we began to think more about our RRSPs,” she says.

Now in her 50s, she is “starting to take retirement more seriously.”

As investors change, so do their plans.

“Everyone is different. But everyone ages one year at a time,” says Gaetan Ruest, assistant vice-president strategic investment planning for Investors Group in Winnipeg.

The first stages of planning should begin in your 20s, a time when many are experiencing the changes that a new job, new income and in some cases new student debt bring. At this stage, retirement planning is barely in the picture.

Putting aside even a little bit of cash for your RRSP can go a long way, despite the temptation to spend all your new-found income, says Katrine Clark, financial advisor with Edward Jones in Vancouver.

“People need to get the message that starting early makes a huge difference in terms of compounding. It’s also a great time to take advantage of any company plans.” Mr. Ruest suggest trying to put aside about 10% of your income every month, including any company pension fund contributions.

“The earlier you start investing, the more time you have and the less money you need because you can allow it to grow over time.” Once you hit your 30s and 40s, things get more complicated and new realities set in. Family expenses, mortgages and careers become competing priorities for your hard earned dollars.

“Expenses go up and even if your career is going well, your disposable income is probably less,” Mr. Ruest notes. That’s the time to consider what’s most important in your planning he adds.

“You shouldn’t overlook paying down your mortgage or funding your children’s education. Hopefully you’ve put enough money aside in the early years to create significant growth in your portfolio and can take a break from contributions if you have to so you can meet your priorities.”

While there are many pressing things to spend your money on, you should still try to do what you can on the contribution front, Ms. Clark advises.

“It’s especially important in this time of your life to not lose focus on your retirement goals.” If all goes well, a 50-something will likely be at their peak earning years and nearing the end of their mortgage payment and supporting their children. With more cash flow, it’s time to get serious and play catch-up, Mr. Ruest says.

“You’re now at the final hurrah towards retirement. So you need to make sure you’re on track to meet your needs.And if you took a bit of a break in your contributions during your 30s and 40s, this is the time to make up for it.”

At this point, it becomes increasingly important to protect your savings. That means rethinking your risk tolerance and working on building a balanced portfolio, Ms. Clark notes. “You should be adjusting your portfolio and finding the best places to utilize the income.”

And even when your retirement date approaches, the planning isn’t over, cautions Mr. Ruest. “This is when you take any risk in your portfolio off the table. You need to be more defensive and conserve that value you built over the years by reducing your equity exposure. Don’t take risks with that nest egg, because it has to last a long time.”

From:Financial Post | Business » Personal Finance

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No one will tell you going public is easy, but the rewards can be monumental. The key is proper preparation, experienced guidance and effective execution. When preparing to issue an initial public offering (IPO), you should take into consideration such factors as the strength of capital markets, timing, your company’s past and current performance as well as the related costs (current and future) associated with being a public issuer.

Valuations

The valuation of a business is crucial when preparing to go public. This is a great indicator for potential investors and shareholders as it not only showcases your company’s worth, but also helps determine if your IPO is profitable and sustainable. There are a couple of ways of conducting a valuation. The first is to get a sense of your company’s value from the investment bank taking it public. The second is to have a valuation performed in advance by an accounting firm.

Conducting an extensive comparative analysis will allow you to better understand the market and heighten your competitive edge. Assessing similar companies in your market that have experienced issuing an IPO is a great way to learn from their mistakes and successes and also prepare you for your journey. Your assessment should look at reviews of financial statements, operational structure, boards of directors’ composition and year-over-year growth (or retraction).

Governance and corporate structure

With heightened corporate governance standards for public companies and increasing liability exposure, the process of assembling a strategic board of directors is more complicated and critical for today’s IPO candidates than it was in the past. Unlike a private board, your public board will require a substantively diverse mix of audit, governance, compensation and compliance specialists. Corporate strategists and experienced executives will also ensure you receive good counsel. Attracting the right board members can be difficult, so ensure you can clearly outline your company’s purpose and long-term vision.

Retaining the right talent and molding your company structure to operate in a public environment require a lot of time and money. To avoid any public scrutiny and lawsuits, you must train your employees to adjust to an increased level of transparency.

Timing and market readiness

Many companies are still too small when they decide to go public and usually lack the necessary resources and expertise needed to thrive in the market. Part of transitioning to a public company is converting and adhering to International Financial Reporting Standards. The conversion is not only very expensive, but time consuming.

In addition to ensuring your internal environment displays market readiness, you must first evaluate your competitive environment and determine whether the market is ready to accept an IPO. To determine this, choose an underwriting group that is familiar with the IPO pipeline and can assist in determining when to file the prospectus document.

As the saying goes, timing is everything. If timed properly, you will achieve a favourable position with potential shareholders and also provide your investors with the greatest gain for the months and years after the IPO.

If timing isn’t right, you should consider waiting to ensure optimal returns — as taking the time to understand the pros and cons of an IPO and the impact of such a transaction on your organization is vital to a company’s success.

Is your company ready?

Going public is a landmark decision for any company. Without the proper framework, it’s unlikely that your business will succeed in issuing an IPO. Many pieces need to fit together — such as the right timing, the right economic climate and the right financing — to issue an IPO and maintain long-term success. Having all of these key elements secured and primed before moving forward will strengthen your position. If one piece falls short, your whole IPO opportunity may be in jeopardy, and the outcome could be costly.

Rather than asking if the markets are ready for you, determine whether you are ready for the public markets.

David is a partner in the Assurance group of Ernst & Young. David has over 17 years of experience and an extensive background managing audit and tax assignment for both private and public companies. David works predominantly in the manufacturing, steel, technology and professional services sectors. Over the years, he has built a practice focused on assisting clients in expanding and diversifying their business units throughout North America and worldwide.

From:Financial Post | Business » Entrepreneur

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The confidence fairies somehow believe when budget deficits are reduced that businesses and consumers will invest and spend more. But how when workers are laid off, and salaries cut to achieve that result? This results in lower incomes, so lower spending, hence lower demand for the very goods and services that would spur growth.

The U.S. now seems to be entering a virtuous growth cycle just because we didn’t follow the advice of the confidence fairies. Increased stimulus spending has increased hiring, causing in turn increased demand, which then spurs more hiring, and so on, whereas the Eurozone economies are falling into another recession.

Professor Krugman has been telling Europeans what would happen if EU leaders continued to listen to their confidence fairies:

“Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.”

So it is our experience with the Great Depression and President Roosevelt’s New Deal that has kept us from following the path of austerity economics, even in the face of continued cries for less government involvement in our recovery. That doesn’t work, as “Hoovernomics” proved. In fact, it was GW Bush’s attempts to follow Hoover’s path that led us into the Great Recession. Bush decided on all those tax breaks, instead of using Clinton’s four years of budget surpluses to fix social security and Medicare, resulting in the largest budget deficits since Ronald Reagan, told in telling detail by Bush Treasury Secretary Paul ONeill and Ron Susskind in The Price of Loyalty.

Meanwhile, the U.S. economy continues to grow. Retail sales are one of the best indicators of consumers’ financial health. Excluding autos, retail sales surged 0.7 percent in January after decreasing 0.5 percent in December (due to lower auto sales, said the report). But that may be an anomaly due to a small sampling of auto dealers, because other data show auto sales have been increasing. The Fed’s January Industrial Production report said the output of motor vehicles and parts surged 6.8 percent following an upwardly revised increase of 3.8 percent in December.

Overall industrial production was unchanged in January after a 1.0 percent jump the month before, but the manufacturing component jumped 0.7 percent, following a 1.5 percent comeback in December. In January, utilities dropped 2.5 percent while mining output declined 1.8 percent, was the reason for overall production being flat. The manufacturing sector was strong in several Fed regions. Both the Empire State (New York Fed), and Philly Fed manufacturing regions are booming.

These factors also led the index of leading economic indicators to a solid 0.4 percent gain in January following upwardly revised gains of 0.5 and 0.3 percent in the prior two months. Other areas showing strength in January include credit activity and building permits, gains that underscore the improving outlook for the housing and construction sectors.

What makes me think this is really a virtuous growth cycle, rather than another early-in-the-year spurt that might die later is that the nation’s inventories are lean and well managed — meaning there are no headwinds from excess inventories. Business inventories rose a moderate 0.4 percent in December, below the 0.7 percent rise for sales and pulling down the stock-to-sales ratio by 1 tenth to 1.26. That means demand is keeping up with production, since the stock-to-sale ratio hasn’t increased.

“Now the results are in,” says Krugman, “and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.”

“Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.”

Harlan Green © 2012

From:The Blog

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These days, making a living in bank accounts or GICs, bonds or in stocks is tough. A bank deposit that pays a couple of per cent a year passes for a shrewd investment, even though what’s left after tax and inflation may be next to nothing. That’s the dilemma for investors who can try to get a return or try to find a manager who will do it for them.

“Interest rates on fixed-income investments are so ridiculously low that you can’t even consider them as a viable option for your future financial security,” says Bill Beatty, an Edmonton-based telecommunications company manager who hopes to retire in seven years or less and prefers not to take big risks with his money.

“I think we’re forced to rely on money managers who, we hope, can make up some money.

Trouble is, finding those managers is very hard. And paying them is a gamble.”

That’s the dilemma: Find a manager who may or may not be worth his fees or save the fees and risk being pennywise and pound foolish. After all, a couple of bad days in the market can cost more than a few per cent paid to a manager.

“The picture of what mom and pop investors have achieved in this market is bleak,” says Dan Hallett, director of asset management for HighView Financial Group in Oakville, Ont. “Individuals trade too often, give up too much return in fund and trading fees and taxes, make bad timing decisions, and generally underperform the
market.”

Unfortunately, fund managers on average have not done a lot better than markets.

For example, Canadian money market funds posted an average 0.42% return for the whole of 2011. That rate would have generated $ 420 before tax. At least that was a positive return.

The S&P/TSX Composite Index lost 11.1% in the year. Even balanced mutual funds that are constructed to reduce risk lost 3.9% in the year.

Some managers add value to market returns. James Hymas’s Toronto-based Malachite Aggressive Preferred Fund, for example, produced a 14.8% average annual gain for the five years ended Jan. 31, 2012 vs. the 4.15% average annual gain of its benchmark, the BMO Capital Markets 50 Index.

His fees, which start at 1.34% of net asset value and drop as amounts invested grow, are below average.

His style is the rigorous fundamental analysis used for fixed income assets – balance sheets, study of corporate capital structure, and a good deal of what one might call iconoclastic beliefs in the market. His territory, preferred shares, is usually ignored by other managers. But his returns show that a maverick manager who does not follow the market can perform well for clients.

But if you look at the overall market, only a handful of managers have the skill to do well for their clients, says Som Seif, president of Claymore Investments Inc. in Toronto. “The rest don’t do well or are inconsistent.”

Retail investors know they need guidance. The quest is therefore to find a manager who justifies his or her fees. The average fee on equity funds is 2.5%. The average fee on bond funds is 1.5% per year, enough to confiscate most of what little interest government bonds pay.

It has to be said that not every investment goal needs a manager. If an investor wants nothing more than a 10-year Government of Canada bond to provide a sum of money known to the penny every year to maturity in 2022, there is no need for a manager, says Caroline Nalbantoglu, a registered financial planner who heads CNal Financial Planning Inc. in Montreal. “You just buy the bond and hold the position until maturity. You have the guarantee of the government and the certainty of getting interest precisely on schedule. It does not pay much, but there is no risk of default.”

There is a middle ground for investors – exchange traded funds – where fees and performance are in a potentially reasonable balance.

A new generation of index funds tries to maintain the advantages of active investing, selecting stocks for various merits such as free cash flow per share, says Mr. Seif.

That puts the fund in a space between traditional active management in which managers follow themes or their favourite valuation models and the low costs of passive investing in index funds. The new generation can add value to index funds, he says.

The Claymore S&P/TSX Canadian Dividend ETF (CDZ-TSX) returned 19.19% per year compounded annually for the three years ended Dec. 31, 2011 compared to the S&P TSX 60 total return index, which gained 10.95% in the same three-year period.

Over three years, the fund had a cumulative return of 69.32% compared to the 36.58% cumulative gain of the index. Its management fee, 0.67% per year, is about a fourth of the 2.5% average annual fee for managed stock funds.

In the competitive fund and ETF market, it is essential to look at track records to find not just hot recent performance, but consistent performance. It is an old saying that managers who take the risks that will put them in the top of rankings sometimes wind up at at the bottom. Look at fees and compare the costs with those of peers. Over time, fees shift a lot of gains to managers, Ms. Nalbantoglu notes. “The point of hiring a manager is to get value for fees. That is at least as hard as picking stocks.”

From:Financial Post | Business » Personal Finance

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The document is intended to operate as a type of prospectus franchisees can rely on in making informed investment decisions about entering into the franchise system. As a result, the statutes in the aforementioned provinces set out a detailed list of information that every valid disclosure document must include.  Beyond the content, though, are technical timing and format delivery requirements with which franchisors must comply.

The penalties for failing to comply with these legislative requirements are staggering and are a very powerful remedy franchisees should be aware of.

If a franchisor fails to provide a disclosure document at least 14 days before the franchisee signs any agreement or pays any money to the franchisor, that franchisee will have 60 days from the date it received the document to “rescind” the franchise agreement. And if a franchisor fails to provide a disclosure document at all, the franchisee will have up to two years from the date it signed its franchise agreement to have that agreement “rescinded.”

So what does mean for the parties involved?  Within 60 days of the effective date of rescission the franchisor must:

1. Refund to the franchisee any money it received, other than for inventory, supplies and equipment;
2. Purchase from the franchisee any inventory, supplies and equipment that was purchased pursuant to the franchise agreement at a price equal to what the franchisee paid for them;
3. Compensate the franchisee for any losses incurred in acquiring, setting up and operating the franchise.

In essence, the franchisor must make the franchisee whole — as if the agreement was never signed. To avoid this franchisors need only ensure their disclosure documents are compliant.

Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto and can be reached at cfinkelstein@dalelessmann.com or (416) 369-7883.

From:Financial Post | Business » Entrepreneur

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The move is supposed to be “revenue neutral” — meaning the administration is also proposing to close assorted corporate tax loopholes to offset the lost revenues. One such loophole allows corporations to park their earnings overseas where taxes are lower.

Why isn’t the White House just proposing to close the loopholes without reducing overall corporate tax rates? That would generate more tax revenue that could be used for, say, public schools.

It’s not as if corporations are hurting. Quite the contrary. American companies are booking higher profits than ever. They’re sitting on $ 2 trillion of cash they don’t know what to do with.

And it’s not as if corporate taxes are high. In fact, corporate tax receipts as a share of profits is now at its lowest level in at least 40 years. According to the Congressional Budget Office, corporate federal taxes paid last year dropped to 12.1 percent of profits earned from activities within the United States. That’s a gigantic drop from the 25.6 percent, on average, that corporations paid from 1987 to 2008.

And it’s not that corporations are paying an inordinate share of federal tax revenues. Here again, the reality is just the opposite. Corporate taxes have plummeted as a share of total federal revenues. In 1953, under President Dwight Eisenhower, a Republican, corporate taxes accounted for 32 percent of total federal tax revenues. Now they’re only 10 percent.

But now the federal budget deficit is ballooning, and in less than a year major cuts are scheduled to slice everything from prenatal care to Medicare. So this would seem to be the ideal time to raise corporate taxes — or at the very least close corporate tax loopholes without lowering corporate rates.

The average American is not exactly enamored with American corporations. Polls show most of the public doesn’t trust them. (A recent national poll by the University of Massachusetts at Lowell found 71 percent with an unfavorable impression of big business — about the same as those expressing an unfavorable view of Washington.)

The administration’s initiative doesn’t even make sense as a bargaining maneuver.

Republicans will just accept the administration’s lower corporate tax rate without closing any tax loopholes. House Republicans have already made it clear that, to them, closing a tax loophole is tantamount to raising taxes. And corporate lobbyists in Washington know better than anyone how to hold tight to loopholes they’ve already got.

Big business will fight to keep their foreign tax shelters. After all, it’s almost impossible to distinguish between their foreign and domestic earnings, which is why the U.S. Chamber of Commerce and other business lobbies have spent the past three years trying to make it even easier for companies to defer U.S. taxes on income they supposedly earn outside the country.

Representative David Camp, a Michigan Republican who heads the House Ways and Means Committee, has already proposed a 25 percent corporate top rate and changes that would let companies avoid paying U.S. taxes on even more of the income they say they earn outside America.

Nothing is going to be enacted this year, anyway, so it would have made more sense for the administration to support a hike in corporate taxes — and use it to highlight the difference between the president and his likely Republican challenger.

Mitt Romney wants to reduce the corporate tax rate to 25 percent before eliminating any tax loopholes. Rick Santorum wants to cut the rate to 17.5 percent and eliminate corporate taxes for manufacturers. Newt Gingrich wants to cut the rate to 12.5 percent and let companies write off all capital investments immediately.

It’s discouraging. The President gives a rousing speech, as he did on December 6 in Kansas. Then he misses an opportunity to put his campaign where his mouth is.

Robert Reich is the author of Aftershock: The Next Economy and America’s Future, now in bookstores. This post originally appeared at RobertReich.org.

From:The Blog

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As the federal government tries to sell Canadians on changes to Old Age Security, a survey by Ipsos Reid for Sun Life Financial has found that only 30% of Canadians expect to be fully retired at 66.

Those expectations come as the federal government plans to tinker with Canadians’ social safety net.

There has been speculation the Conservative government will push back the qualifying age for Old Age Security to 67 from 65.

The Ipsos Reid survey released Wednesday showed that among respondents who said they expect to keep working, 61% will do so because they need to.

“These results are not surprising given the current economic volatility, increasing consumer debt loads, rising health-care costs, longer life expectancy and lack of planning,” said Kevin Dougherty, president of Sun Life Financial Canada, in a statement.

“We’re also finding that some Canadians believe they’ll have to work longer to be able to pay for basic living expenses.”

Concerns about the economy were prevalent among those surveyed. Nearly half — 47% — said they are worried about the debt they’ll be dealing with as retirees.

Many surveyed said they’re expecting retirement to be something they enter gradually, rather than simply giving up their careers all at once.

“Interest in phased retirement has been growing,” said Ian Markham of Towers Watson, a human resources consulting firm, in the statement released with the poll results.

Of those surveyed, 43% said they’ll start to phase in their retirement between the ages of 60 and 65, working either part-time or freelance before they fully give up work.

Twenty-one percent said they hoped to start retirement between the ages of 50 and 59.

But there were 8% who only expected to start pulling back from work between the ages of 66 and 70.

“Baby boomers are looking at (phased-in retirement) as a way to prolong their careers, pay off some debts and make a smooth transition into retirement,” Markham said.

“Having additional income during this transition creates an additional financial safety net for Canadians — which we’re seeing as increasingly important in today’s economy.”

The Ipsos Reid poll was conducted online between Nov. 29 and Dec. 12, and 3,701 working Canadians between the ages of 30 and 65 were surveyed.

Ipsos weighted the results to make them reflect Canadian demographics.

A survey with an unweighted sample of this size and a 100% response rate would have an estimated margin of error of 1.6 percentage points, 19 times out of 20, according to the poll.

From:Financial Post | Business » Personal Finance

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Location:  Nairobi, Kenya
Date:           February 24th–26th

Startup Weekends are 54-hour events where developers, designers, marketers, product managers and startup enthusiasts come together to share ideas, form teams, build products, and launch startups!

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From:Financial Post | Business » Entrepreneur

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“I don’t think any of us know what the future of the American economy is.”

That’s Christina Romer, former chair of the president’s Council of Economic Advisors, when speaking with NPR about the misguided allure of a manufacturing revitalization. In case you need clarification, the “us” refers to our country’s economic and political leadership.

Politicians are quick to devote themselves to the generic cause of “jobs” in an election year, but few have touched on the bigger concern of the Millennial Generation: What does a 21st jobs economy look like in America? The current generation — my generation — of young adults in our teens and twenties are some of the most educated and creative people this earth has ever seen, yet we graduate into a world that can’t use our brains, and so many of us end up serving fair trade coffee or stacking organic groceries.

In the 20th century the economic law of comparative advantage played to the United States’ favor – we were the exporters to the world. We had the infrastructure for companies to produce goods and turn a profit on a scale that no other country could touch; once other nations saw what we had going on they joined the global economy and easily wooed the same companies oversees with their low price points (monetary, ethical and otherwise) for labor and raw materials. Now the United States is losing out to countries in Southeast Asia, the Middle East and Latin America, who are all able to produce goods much cheaper than we are.

So of course manufacturing jobs have moved overseas, and yet our political leaders have spent the last four decades on a failed strategy of asking once-American-now-global companies to turn away from their financial interests in the name of a patriotism that does not exist in the commercial world.

At the same time, American youth are being told that they need a college education in order to compete for jobs in our country; and so they go. Many take out costly student loans for a degree and then enter into a world that not only has fewer manufacturing jobs, but now also fewer professional opportunities (many say we are now in the midst of a higher education bubble). Today the jobs that many college graduates end up taking often require no advanced skill or knowledge — they could probably be done by someone with a high school diploma. While it is true that those who do have financial stability in the 21st century will have at least a four-year diploma, this alone will not guarantee security. Now kids are realizing the limits of a college degree and many are going back for master’s degrees and doctorates, taking on larger debts and hoping that with more education comes better prospects. Unfortunately those prospects are all dependent upon the United States having a plan for creating and retaining enough high-skilled jobs for current and future generations; it’s pretty evident that we don’t have one. Until we create otherwise, this is America’s 21st century jobs economy.

There are a few realities that the United States and its leadership need to face then. First, factory jobs aren’t going to be the basis of U.S.’s economy this century because production is now cheaper in other countries. Second, politicians should not pressure entire generations into debt-financed education in an economy which does not necessitate a college-educated workforce, and in a time where diplomas no longer ensure financial security.

So what should our future economy look like? There may not be simple or convenient answers but our leaders need to do two things: be honest with the American people about the nature of our problem and create a long-term sustainable solution for jobs in the 21st century. We can’t beg manufacturing jobs back into the U.S. but we very well may be able to create new job sectors in order to use the big-brained millennial generation and those that follow.

From:The Blog

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You might be surprised to hear that this year’s RRSP season is the worst possible time to make an RRSP contribution.

Money inside an RRSP grows tax sheltered until you withdraw the funds. The sheltered growth is one of the two great reasons to participate in the program. The second is the tax deduction, which leads to a nice refund in springtime. But, when you think about it carefully, the contribution for the 2011 tax year could have been made as early as January 1, 2011. That money could have grown tax sheltered for the past 14 months. And, if you didn’t know how much you could contribute until the CRA informed you after filing in spring 2011, you should have made the contribution then.

So is RRSP season misguided? I don’t think so. In my mind, the benefit of RRSP season is the inevitable conversations about retirement they generate — something that might be as important as the money itself. The advertising reminds Canadians about the looming milestone in their life.

To get those conversations started, here are some talking points.

1. How long will your RRSP (a.k.a. retirement nest egg) last, if you were to stop contributing today, and instead withdraw a fixed amount each year while earning a fixed interest rate? Although neither of these fixes is realistic in practice, this sort of analysis provides a sobering assessment of whether and when you can afford to retire. The underlying mathematics of this calculation is trivial and does not require any complex retirement planning algorithms. In other words, you — or your financial advisor — can’t hide behind optimistic projections.

2. Given your family history, current lifestyle and recent medical events, what are the chances that you, your spouse, or both of you, will reach the age of 90, 95 or even 100? Go online, talk to a medical professional, consult an actuary and learn the odds. In other words, get to know your longevity risk.

3. Does your company offer a true pension? Dig deep into the mechanics of your employer’s retirement plan. Many are called pensions but are basically pooled savings. If you don’t have a pension — a promise of real lifetime of income — then consider buying one, eventually.

4. How important is it for you to enjoy your money now versus later? The industry talks about replacing 70% to 80% or your income in retirement. But do you want the exact same standard of living regardless of how long you live? Or are you willing to scale back and instead enjoy the money earlier on? This is your subjective time preference. One size doesn’t fit all.

5. How comfortable are you with stock market risk? The past 10 to 15 years have taught us that time doesn’t necessarily diversify away risk. Stocks — which fluctuated more than bonds — earned less than bonds during the past 25 years. Whether this persists in the years ahead is debatable. But if stocks continue their lacklustre performance — and the economy sputters — will this impact your job? In the language of financial economics, is your human capital and financial capital intertwined? If so, you might want to lay off the stocks in your RRSP. Asset allocation should involve your entire balance sheet.

6. What do you plan to leave the kids? Is this a priority for you? I have seen many people who are close to or in retirement who dedicate a particular account, asset or sum for their loved ones. For example, it is not uncommon to hear that the house is going to the kids, or that the GIC will eventually go to the grandkids. This is commendable, but is it financially efficient? If legacy is your motive, you might want to see what life insurance can do for you. And vice versa, if you have life insurance – paid up or not – but need the money earlier, then you might want to think about giving it up.

7. Finally, the last topic is one best done with a financial advisor who has the requisite technology. Have the advisor run a so-called sustainability and stress a nalysis of your long-term financial plan. This takes account of your asset allocation, your pensions, your longevity and everything else on your personal balance sheet. Get a summary of your financial health.

In sum, although this season might not be the best time to make your RRSP contributions, it is the season to talk about retirement. That I have no quibble with.

- Moshe A. Milevsky, PhD, is a professor at the Schulich School of Business at York University in Toronto. He is the author of the forthcoming book The 7 Most Important Equations for Your Retirement – and the Stories Behind Them (Wiley, 2012)

From:Financial Post | Business » Personal Finance

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