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HomeMy WebLinkAboutThe Citizen, 2015-02-12, Page 12PAGE 12. THE CITIZEN, THURSDAY, FEBRUARY 12, 2015. MS –Some people don’t have the ability to begin saving for retirement early on. Others may have brushed retirement savings aside for so long that they are now worried that it’s too late to begin socking away money for retirement. While it’s best to start saving for retirement as early as possible, the good news is that it’s never too late to start planning for retirement. If your 40th birthday has long passed and you’re finally thinking ahead to retirement, consider these catch-up strategies. • Research tax-advantageous retirement savings plans. A financial planner can point you in the right direction, or consult with your employer about employee programs. • Cut back on expenses. Cutting back on unnecessary expenses is a great way to save more money for retirement. Figure out where you can save some money you can then allocate to retirement savings. Maybe you can reduce insurance coverage on an older car or raise your deductible? Downsize cable packages or skip that costly cup of coffee on the way to work. Perhaps it’s time to look for a smaller, less expensive home or a compact car instead of an SUV. Any money saved now will benefit you when the time comes time to bid farewell to the workforce. • Delay your retirement. Many people who retire find themselves bored and looking for ways to fill their time, and as a result more and more people are delaying their retirement, which also gives them more time to save for that day when they do call it quits. If you want to work less, discuss and negotiate a phased retirement with your bosses that allows you to stick with your employer but gradually work fewer hours until you retire completely. You may be able to work part-time for several years and retire when you’re most comfortable. • Consider more aggressive funds. Even if you are 50 you still have a few decades before retirement, which leaves lots of time to grow your retirement savings. But you may want to consider more aggressive funds that can help you catch up more quickly than less aggressive investments. Just know that aggressive funds may also leave you susceptible to substantial losses. • Don’t amass debt. If you’re saving for retirement but only paying minimum balances on your credit cards, then you’re not really saving. Pay down credit card debt before you begin to set aside money for retirement. Delaying retirement planning may mean you have to work a little harder to build up a solid reserve. But by following some financial tips and persevering, you can still enjoy retirement with security. NC –Did you jump out of the markets in 2008 or 2009 and continue to be so anxious that you didn’t get back in? More than five years after it hit bottom on March 9, 2009, the S&P/TSX Composite Index (Total Return) has gone up approximately 116 per cent, and yet some investors are still reluctant and are sitting in cash. “Often events like the financial crisis of 2008 sends nervous investors running to the equity market sidelines, resulting in them sitting out on the gains of subsequent years,” says Philip Bensen, senior vice president at Franklin Templeton Investments Corp. “When investing for retirement over a few decades, it’s important to take on some strategic risk to help ensure long-term investment growth.” Some of the emotional mistakes that investors make are: • Being overly influenced by the negative. Decision-making is often Late start to retirement savings? No problem What is a mutual fund? Don’t invest emotionally FINANCIAL 2015 We have smart tax solutions that can meet your growing business needs. Our tax advisors will work with you year-round to help you minimize your taxes and maximize your profits. Assurance | Accounting | Tax | Advisory 47 Alfred Street West P.O. Box 1420 Wingham ON N0G 2W0 519 357 3231 www.bdo.ca TAXES GIVING YOU A HEADACHE? Susan Alexander,CFP CLU CHS EPC Doug Sholdice 472 Turnberry St. PO Box 69 Brussels, Ontario N0G 1H0 www.sholdicefinancial.com Phone: 519-887-2662 PEAK Investment Services Inc. What is a Mutual Fund? A mutual fund is a pool of investments that have been purchased with money contributed by many different investors. Let’s break it down into an example: You would like to invest in some high quality stocks that offer long term growth potential and might even pay some dividends along the way. After doing some research, you’ve decided that you want to purchase the stocks of a high tech firm in San Francisco, a Canadian retailer that’s based out of Toronto and a multinational company that’s in the pharmaceutical industry. After looking at the current stock prices of each firm and doing some calculations, you realize that you’ll need over $20,000 to buy a mere 100 shares of each company. The problem is that you only have $8,000 to invest. If you invest your money in only one of your selected companies, you have no diversification. If that company’s stock price falls, the value of your investment goes down by the same percentage. If the price goes up, your investment value goes up too. It could be a wild ride as the price moves up and down. Here’s where mutual funds come into play. At the same time you’re deciding to invest in the equity stock markets, there are 999 other people who are in the same situation as you. They have a limited amount of money and - just like you - would really like to buy stock from multiple different companies so they can add some diversification to their portfolio. If you all put your money together and each owned 1/1,000th of the portfolio, then dozens of different stocks could be purchased in many different industries. As a group, you would all participate in the rise and fall of the overall portfolio however, by pooling your money together, you have reduced the risk represented by each of the individual companies. There still exists the risk of being invested in the markets in general, but you’re in a better position than if you had acted on your own with limited resources. Mutual funds operate exactly the same way. A ‘fund manager’ is responsible for a team of analysts and decision makers who buy and sell the stocks they feel offer the best chance for a good rate of return. The money collected from the investors (1,000 in our example) is carefully administered by a trustee and available for redemption whenever you request it. In exchange for receiving the management services of the mutual fund, the investors agree to pay the expenses incurred to operate the fund (transactional, clerical and legal) in addition to a management fee paid to whoever is managing the fund. There are different types of mutual funds (equity, bond, money market, etc) and each has a different management style and risk profile. Fees associated with the different funds vary quite a bit. As well, your overall financial situation, level of investment knowledge and time frame for investing determines what fund(s) is suitable for you. – By Glen Steinson, Bayshore Financial Management / Interglobe Financial Services Corp. Continued on page 13 GRANT GNAY CPA, CGA Accounting & Tax Services 133 South St., Goderich 519-524-5113