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THE HERALD WedKaday May 11 Page 15 Enemies of financial freedom identified By PAUL J ROCKEL Three Enemies of Financial Freedom Recently we reread an article that outlined some alarming statistics about the financial crisis many Canadians will be in when they reach retirement age Less than half of Canadians have an or a pension plan and even with the Canada Pen sion Plan which at best only replaces 25 of a persons earn ings and Old Age Security of Ontario workers retire with an income below the poverty line And all but about 5 depend on some financial assistance from the government or their family Why Procrastination and failure or lack of knowledge to plan ahead is the first enemy The second enemy is taxa tion the third enemy is infla tion Can you afford to earn in terest I cant even at 11 or annual return The very best rates now are around I have no investments that earn interest such as mortgages Guaranteed Investment Cer tificates Canada Savings Bonds notes or loans to other people I do have a bank account that pays interest but I only keep enough in it to pay regular bills etc fact when my sod purchased a home and asked if I would like to assume the mortgage my im mediate answer was No way but Ill back you at the bank or trust company if you wish let them earn the interest You see I cant afford to lose purchasing power each year ITS YOUR MONEY Paul J Rocktil It has always surprised me that most people in putting their sav ings to work look at only two things and this is the interest rate and guarantees Canadians love GICs In fact the banks hold well over billion dollars in this type of investment If the rate is many think they will have 11 to spend but will they If its guaranteed by the Canada Deposit Insurance Corporation what does the guarantee really mean It is far more important to look at the rate of return after taxes That is a very very Important point The third thing to look at is inflation These last two points have made it a losing proposition for me to earn interest If I asked you to invest in a common stock which would pay you a dividend of about but at the end of five years would only be worth of your original investment would you buyit I think not Inflation has averaged a little over for the last 30 years and this is likely to continue and maybe even go a little higher some years If your tax rate Federal and Provincial for is and the rate increases per year your average after return from the investment fo five years is But because Inflation averages over that same five years the buying power of the that you in vested will only buy worth of goods and services in five years Inflation will eat up your real tax return leaving you with almost nothing gained Now in five years that is still guaranteed by the Canada Deposit Insurance Corporation but my investment earning in terest is now only worth Do I need that kind of a guarantee There are two other forms of in vestment where the returns on that investment attract much less and have over time provided a good measure of protection against inflation They are dividends and capital gains People continue to remark How come no one has ever shown me the difference taxation makes the return that I can get from an investment I think the answer is quite simple Most in stitutions that we deal with day after day such as banks trust companies credit unions specialize in vehicles which offer only one kind of return and that is interest Even my bank manager admit ted to me that he does not unders tand the difference taxation makes on interest versus dividends and capital gains at the various marginal tax rates And I dont blame him all he deals with most days is how much interest he has to pay you for your deposit and how much interest he can charge you for a loan or mortgage For All Your Fine China Silvui Crystal Giftware 227 MAIN ST MILTON 8780050 BABY YBUR BUDGET STEVEN C FOSTER BA LLB BARRISTER SOLICITOR 3T MAIN ST SOUTH GEORGETOWN ONT L7G 3G2 8734961 fax 8734962 WITH MICHELIN SALE PRICES LIKE THESE I P17580R13 NEW IN TOWN Let Us Put The Mat Out For You ACTON Judy GEORGETOWN Debbie your Welcome Wagon hostess She will bring congratulations and 5 gifts lor the family and the NEW BABY i QUEENS TIRE SERVICE LTD I j 5198533940 If j 387 Queen ST ACTON ONT Where can you get dividends and capital gains We believe mutual funds offer the best ad vantage to the average in vestor If you are like me you know little or nothing about the stock market and you are afraid of it I know I am Mutual funds employ professional managers who spend as much time with investments and the decisions they must make as most of the rest of us spend at our jobs Can you compete with the professionals Are you taking advantage of the techniques available to minimize the effect of the three enemies so that you can max imize your financial future For a free comparison on what you will bave to spend after tax on various investments con tact Peter 10 Fagan Drive Georgetown Oat or phone Paul J Is the author of the best seller Why Invest In Mutual Funds and President of Regal Capital Planners Limited a 21yearold financial planning company with offices from coast to coast In Canada feeze 5 MILL ST 8530101 HOURS ly Tuesday Wedneidiy Thurs Saturday moay ACTON NOW OPEN MONDAY BREADED CHCKEN BREAST Lightly Seasoned and Breaded Boneless Not Chopped and Formed OR 88 lbs Box 340 lb LB OPEN SUNDAYS MCCAINS DELUXE PIZZAS 60 Pes i or 1 Pes lor CHECK OUT OUR DELI NEW YORK STRIPL0IN STEAK Only each MEAT AND CHEESE TRAYS PURE BEEF BURGERS 20 No Additives or Preservatives Buy Bulk and Save 41 for 21 99 QUALITY PRODUCTS 12 99 RAMB0W TROUT Also Available at 1 49 each FREE SAMPLES EVERYDAY BACON WRAPPED 12-4- 0199 21 FRIENDLY SERVICE CHICKEN WINGS Tips Removed 66 Lbs 13 SUPER SAVINGS COUPON BUTTER Price Without Coupon LB WITH COUPON I Only One Per Coupon I PRICES IN EFFECT UNTIL JUNE 12th OR WHILE QUANTITIES LAST