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Se are Health to decline and self “What’s the use? I don’t ek tends to focus thoughts make enough money to invest." on the estate. The aim is to. “Taxes take all minimize taxes. by George Perdue B. Sc. P. Eng. my, money." "I don’t know where to put my Py so I'll make a ae return." Do you recognize where you are? Well, now let’s look at the game plan that allows you to retire in such a way as to be able to do what you want, when you want, where you want, and with whom yo want. "I've got kids and they take all the extra money I make." "I’m retiring early to travel and do more wood carving and fishing. My investments wall: pay the way." Do these statements sound familiar? Maybe not the last one, at least. not for most of us. However, most people can make investments and they can earn good returns. You can too. If you start early enough you can be in the position for early retirement. So how do you proceed? First of all, recognize that what is important is how much you keep, not how much you make. Obstacles in the way are; time, taxes, inflation, and a plan. Time allows us to accumulate through compounding. The longer the period, the more Let’s examine some dramatic the influence of general situations. ‘ compounding. ‘Accumulation Distrbation 8 t Dependent |Independent| Active | Estate jae We all go through the stages shown in the time line diagram above - in one form or another. Halton Hills This Week’: Financial Update '93, Wednesday, January 13, 1993 - Page 11 Yes, you can invest and make money obligations, and your income. Second, set financial objectives for the short term and the long term. Third, make a set of action plans to achieve the objectives. Keep it simple to start with. Objectives In one way or another the action plans must embody the principles of growth, income, tax relief, and security. Each person will have a prefered emphasis and this may change depending on the stage on the time line. Get Growing Growth is important in order to beat the effects of taxes and inflation by the largest margin possible. This in turn will yield a retirement income greater than the government pensions (if they continue to exist in the future) to approach pre retirement income. ee Example 1991 Canada Savings Bonds Advertised Return 7.5% Taxes (at 40%) -3.0% Inflation (Average) 5.0% Net Return 0.5% The first stage is young adults and families. During this stage earnings tend to be lower and expenses fairly high. Expenses are high because of mortgages and small children. The aim is to pay down the mortgage, accumulate some assets, protect them, and still have some fun. If anything is left over it could be invested, but this is often a low priority. The second stage of accumulation is characterized by higher family income (spouses. going back to work and promotions to higher paying jobs) and lower expenses as mortgages become either paid off or relegated to a smaller percent of income and children leave to go on their own. For those of you who are wondering about this, it is typical for the kids to stay around home until they are well into their twenties today. The aim is to pay down the mortgage, accumulate more assets, and still have some 7 fun. As retirement approaches so does ‘self examination and the realization that some action should ” be taken in order to supplement a retirement income. 1) third stage is retirement. You might define retirement as “not having to work" and “doing what I want, or what I can afford". Expenses can either rise or fall according to activity and availability of money. During this stage people tend not to try to accumulate more wealth. Some people do some free-lance work that allows them to maintain their accumulated wealth position for a period of time, but this activity usually evolves into full scale retirement and the accumulated wealth declines. The aim here to to secure an income and to al Taxes are paid in order to provide services desired by the majority of people. These would include highways for transportation, mail service, national defence, garbage removal, education, health care and welfare. Unfortunately, Canadians are now among the most heavily taxed people in the world. To go along with this our services are no where near the leaders in the world. According to the Fraser Institute we have sustained a tax increase from 34% of houshold income in 1962 to 51% in 1992. Guess what is ahead? So we need a plan for minimizing taxes. Inflation is a silent killer. What cost $1.00 in 1970 costs about $4.00 in 1992. Inflation erodes your investment return to the point where many people, at best, are not getting ahead in real terms. Pensioners on fixed income are hard hit. A pension’s buying power is cut in half every 12 years or so, and people are living longer. A plan provides a focus. No plan, no focus, no achievement. Taxes take full bite, time slips away, inflation quietly takes its toll. minimize the tax burden associated with this income. The fourth stage is an extension of the third stage. People tend to become less active and the What to Do Make a_ financial plan. There are three basic components. First, figure out your assets, your + Some other way must be used if =~ you are seeking growth. In order to get growth you must experience something like the following: 2 Example Long Term Return 14.0% Taxes (at 40%) 5.6% Inflation (Average) -5.0% Net Return 3.4% eee How do you do this? You follow the following steps: 1. Start now - for compounding 2. Pay yourself first - budgeting yaaa oe ‘Age Monthly Investment Value 3. Invest regularly - cost average 4. Invest, don’t deposit - own 5. Diversify - safety 6. Minimize taxes - keep maximum $ enna Start Now - Pay Yourself First If you start early you can start small. Small you really can afford. Put aside $30 a month before you spend on anything else. You will be amazed to find that George Perdue is a you get so that you do not miss the Financial Planner, Business money. Consultant, and Partner in Money So what can $30 a month Concepts, Halton Hills. He can be do? If you start early enough you contacted at (416) 873-1877. would be amazed. at 12 %inside an RRSP Thankyou compounding! You can’t afford to wait. EE H&R BLOCK OS AT EE A Why wait for your tax refund when you could get Cash Back fast If you qualify you can get a cheque for 85% of the first $300 of your tax refund and 95% of the rest. Plus your tax return will be prepared at no extra charge. So why wait for the refund cheque to arrive by mail? Ask about Cash Back at H&R Block, and get your refund fast. 130 Guelph St. Georgetown (416) 873-7855 The Bank of Nova Scotia RICHARD ERNST Personal Investment Manager RRSPs - TAKING ADVANTAGE presents... * Your RRSP versus Acton Branch (519) 853-2420 OF THE RULES TO MAXIMIZE YOUR RETURNS * Registered Retirement Savings Plans: Rules and Opportunities * Contributions and Deductions: Getting the Biggest Tax Savings * Spousal RRSPs and Other Retirement Planning Ideas * Simple Investment Strategies to Maximize your Returns Tuesday, oe 2, 1993 7:00 pm The Bank a Nowe Scotia 304 Guelph St. Georgetown Please Reserve Your Complimentary Seat Today! George Hume, Manager Your Mortgage: Winning Both Ways Georgetown Branch John Hucalak, Manager Georgetown Branch (416) 877-6995 Scotiabank &