The Rural Voice, 1999-01, Page 35yourself and your children and
expose your property to claims from
your children's creditors.
Many other elements of your
overall financial plan will have an
effect on your estate plan, and vice
versa. The age at which you plan to
retire could affect how much wealth
you can leave behind. An early
retirement will be more expensive,
since you'll have to support yourself
for a longer period of time.
Fortunately, there are a number of
techniques you can use in your
financial plan to ensure your estate
plan works with the (east amount of
hardship. One of the most effective is
life insurance.
Life insurance can help ensure
that your loved ones are provided
with a comfortable income when you
die. It can also help cover ti.ixes and
final expenses upon your death. Your
overall financial plan will help you
decide you how much insurance will
be required.
Jf you have considerable wealth,
your insurance needs may be low.
If you have insurance that pays
your mortgage when you die, you
won't need as much life insurance.
On the other hand, those who have
yet to build up investment wealth can
benefit from the peace of mind that
life insurance brings. Life insurance
will allow you to deploy your assets
for other purposes while you're alive,
and reduce the need to rely on
savings to protect your family and
leave an inheritance.
Do you really need an estate plan?
Yes, you do, if you own any
valuables, have a family or are
concerned about the disposition of
your assets when you die. In other
words, just about everybody can
benefit from a plan for the
disposition of their assets after death.
Although it sounds complicated,
estate planning is a simple concept. It
means ensuring that your loved ones
and other beneficiaries, such as
charities, are provided for according
to your wishes. Your "estate" is
simply another way of describing
your net worth - your assets minus
your liabilities - when you die. It may
also include any benefits payable on
your death, such as proceeds from a
life insurance policy payable to your
estate or the cumulative value of your
pension plan,.
THE GRANDPARENTS WHO WANT
JUNIOR TO BE A MILLIONAIRE
IT'S
YOUR
MONEY
By Paul J. Rockel
Chairman, Regal Capital Planners Ltd.
(NC) — The financial joke amongst
salesmen at the office tells about the
grandparents who were all excited, and
called from their home 200 miles away,
asking the mutual fund salesman to visit
them, as they wished to invest enough
money to make their newly -born
grandchild a millionaire at age 65.
And...the salesperson went, driving the
200 miles, without first doing some simple
mathematics.
He didn't figure out how much would
have to be invested at birth, to make a
newly -born child worth $1 million 65 years
later.
You see, Grandpa had been a mutual
fund client for many, many years, and he
knew that good mutual funds have
averaged some 15% per year, given 15 -
year or more timespans. Past
performance has proven it, and the
statistics on all mutual funds in Canada
are published monthly in the Globe and
Mail and Financial Post.
The salesman lost a lot of money
because he didn't do a simple calculation.
To achieve $1 million at age 65, assuming
a 15% average rate of return, all Grandpa
would have to invest for that infant
grandchild, would be $113.41.
The salesperson drove 200 miles to get
an investment of $113.41, and probably
earned a commission of less than $3.50.
Would you? (At 12% return, the single
investment amount required would be
$632.16).
But, did Grandpa really want the child to
have $1 million, or did he want the child to
have the purchasing power of $1 million
taREGAL
CAPITAL
PLANNERS
LTD.
today, 65 years from now?
And, that's a different story. Many of
the top experts are telling us that inflation
will again reach double digit figures (over
10%) in the not too distant future. Some
are forecasting inflation "averages" over
the next many decades that will be
somewhere between 5% and 6°°
averages per year. (Past 34 years
inflation averaged 5%).
Taking the idea that Grandpa wanted
Junior to have the spending power of 51
million when he reaches age 65,
assuming an inflation rate of 5% means
that Junior will need over $23 million at
that time, just to match the equivalent of
$1 million today.
If inflation were to average 8%, Junior
would need $148 Million at age 65, to
have the same purchasing power as $1
Million today. Shocking, isn't it!
To achieve $148 Million 65 years from
now, at 15% rate of return, Grandpa
would have to invest $16,784. For that
the salesperson might want to drive 200
miles.
Have you taken inflation into your future
plans? If your total pension benefits are
$20,000 yearly now, at 5% inflation you
will need $48,000 yearly 18 years from
now, just to match the purchasing power
of $20,000 today. Think about it!
"Rate of return is used only for the
purpose of illustrating the effects of the
compound growth rate and is not intended
to reflect future values of the mutual fund
or returns on investment in the mutual
fund."
Bus. (519) 887-2662
Res: (519) 347-2569
Maitland Valley Financial Consultants Ltd.
453 Turnberry St.,Brussels, ON NOG 1H0
siA
Susan Carter, C.I.M.
Financial Consultant
SOME OF OUR PRODUCTS AND SERVICES
Top Paying GICs, Tax Saving Strategies, Mutual Funds, Life & Disability Insurance, RRSPs, RRIFs and Annuities
(The above list represents only a few of the many financial services available
through your Regal Financial Centre.)
This is No. 1222 in a series of articles that have been appearing in newspapers and magazines
across Canada for more than 15 years. For Paul J. Rocket's book "WHY INVEST IN MUTUAL
FUNDS" contact your local book store or Regal Capital Planners Ltd., telephone 291-1353.
JANUARY 1999 31