Retire “retirement”

2. Retire “retirement” • 87% of Canadians said the word retirement does not mean today what it meant years ago. • What should we call it? • Next stage of my life • Rest of/second half of my life • Time to pursue my dreams • My years

3. Today’s Retirement • The Changing Retirement picture: • Semi-retirement • To be mentally active • To keep in touch with people and • To earn money • Sandwich generation • Life expectancy • living longer (middle age is 54) Result: 65 is an arbitrary age – retirement is no longer a “point in time”

4. “Risky” Business • Longevity Risk • Contingency Risk • Income Risk

5. Longevity Risk (2)- Extending Planning Horizons 86 91 96

6. Contingency Risk • Eldercare • By 2010, 60% of Baby Boomers (age 50+) will have surviving Senior parents or grandparents some of whom will require specialized care and support (Source: Canadian Academy of Seniors Advisors, Inc. c. 2003-05) • Personal Health Issues ** Source: Manulife (Canada) * Source: World Health Organization Definition:Healthy LifeExpectancy (HALE) is based on life expectancy, but includes an adjustment for time spent in poor health. This indicator measures the equivalent number of years in full health that a person at age 60 years can expect to live based on the current mortality rates and prevalence distribution of health states in the population.

7. Income Risk Source: Fidelity Investments

8. Retirement Your Way How will you spend the rest of your life?

9. RegenerationRe-designing the next phase If you were to imagine your life in retirement, what would it be like? What does the word “retirement” mean to you? How will you spend your time? Where will you live? What interesting things do you want to do?

10. RegenerationRe-designing the next phase • Will you continue to work and transition into full time retirement? • What will you miss most about work and how will you replace it? • Have you considered your partner’s plans/goals? • Does longevity run in your family? • How do you want to be remembered?

11. Why is Financial • Planning Important?

12. Where will you be at 65? Take 100 40-year-olds today. Where will they be at 65? MenWomen • Wealthy 1 1 • Financially Secure 8 2 • Must continue to work 14 11 • No longer alive 24 4 • Require financial assistance 53 82 Where do you want to be?

13. What is Financial Planning? • 1. Know where you are now – the starting point of any financial plan • Your Net Worth • + $ Assets • - $ Liabilities • $ Net Worth • Your Cash Flow • Income • Expenditures • Savings Activity

14. What is Financial Planning? • 2. Know where you want to go • If you don’t know where you’re going you’ll never get there

15. What is Financial Planning? Develop and implement the plan • This is where you may need assistance • The plan should help you to achieve your financial goals • It should be realistic based on your current financial position

16. The 6 Steps of Financial Planning • Clarify your current position • Identify financial and personal goals • Identify financial problems • Find solutions • Implement the strategy • Ongoing reviews

17. The Changing Retirement Picture • Active retirement • To be mentally active • To keep in touch with people and • To earn money • Sandwich generation

18. The Changing Retirement Picture • Life expectancy • Living longer (middle age is 54) Result: 65 is an arbitrary age – retirement is no longer a “point in time”

19. 65 Traditional Retirement Plan Total Retirement Savings Capital Draw-Down Capital Accumulation Working Career Fully Retired Age • Key Concerns: • How much income will I have? • Where will it come from? • Will I outlive my savings? • Key Concerns: • Am I saving enough? • Am I investing wisely?

20. Today’s Retirement Plan Capital Draw-Down Capital Accumulation Fully Retired Working Career Transition Active Dependent 85 70 55 65 75 • Key Concerns: • Am I saving enough? • Am I investing wisely? • Key Concerns: • Have I accumulated enough to do what I want to do? • Will I need to continue working? • How can I afford to help my parents and/or other family members? • Key Concerns: • Will I have to change my lifestyle? • Will I outlive my savings? • How can I create more income based on my total net worth? • What happens if I or my spouse need specialized care support and/or nursing home care?

21. Three Tiered System Government $ Employment Related Personal Savings

22. Government Benefits • Old Age Security • Payments start at 65 • Pension based on years of Canadian residence • Maximum benefit for 2007 is approximately $6,027 • Additional payments made to those with low income

23. 1. Government Benefits • Canada/Quebec Pension Plan • Benefits normally start at 65 • They can be requested at 60 or deferred until 70 • Pension is based on contributions • Maximum pension for 2007 is $10,365

24. 1. Government Benefits OAS and C/QPP total about $16,392 per year Is this going to be enough to fund your retirement? Guaranteed Income Supplement

25. 2. Employment Pensions • Two main types: • Defined Contribution Plans • Similar to an RRSP • Pension is based on contributions and investment performance • All of the investment risk rests with the employee

26. 2. Employment Pensions • Defined Benefit Plans • Pension is based on a formula • Looks at earnings and service • Investment yield doesn’t affect payments • May be integrated with government plans • May have indexing feature

27. 3. Personal Savings Non-registered savings RRSP/RRIF Locked-in plans Other options

28. 3. Personal Savings Non Registered Savings Bank accounts Brokerage accounts No restrictions on contributions and withdrawals Income is taxed when earned

29. 3. Personal Savings RRSPs/RRIFs • Tax deduction for contributions • Unused contributions may be carried forward • Contributions may be restricted due to participation in a pension plan • Tax deferral on growth

30. RRSP versus Non-RRSP Savings $789,544 RRSP

31. RRSP versus Non-RRSP Savings

32. RRSP/RRIF Income splitting possibility with spouse Cash withdrawals can be made at any time RRSP matures at age 71 • RRIF • Annuity • Lump sum cash withdrawal

33. RRSP Withdrawals • Home Buyers’ Plan • Lifelong Learning Plan

34. 3. Personal Savings Locked-In Plans Can only be funded when assets are transferred from a pension plan Restrictions on timing and amount of withdrawals Otherwise similar to “regular” RRSPs

35. 3. Personal Savings Other Options Saving more Taking less Earning more Waiting Lottery Winnings Downsize House

36. Future Challenges Inflation Rate of return Tax rates

37. Questions?

38. ESTATE PLANNING

39. Fundamentals • Will • Exercise your right to choose who gets what and when. • Power of Attorney • Appoint someone you trust to handle things in your absence, and make personal decisions if you are unable.

40. Estate Costs/Fees/Taxes Probate Income tax Executor/Trustee fees Legal costs

41. Probate What is it? The formal confirmation by a Court that the Will is the last Will of the deceased and gives the executors named in the Will the authority to act. Fees/Costs vary by province In Ontario - $250 on the first $50,000 of an estate and 1 ½% on value above $50,000

42. Reduce Probate Fees – Property passing outside Estate • Joint with right of survivorship • Beneficiary Designations • RRSP, RRIF and Insurance • Alter Ego or Joint Partner Trusts

43. Joint Accounts with person other than spouse: Problems • Deemed sale and Tax on creation to contributor • Tax on income to all joint owners • If not intended to be effective till death • All have access • Claims of 3rd parties • Will your intentions be carried out?

44. Non Tax Uses of Testamentary Trusts • Spendthrift trusts • Disabled beneficiary • To protect capital for others • If spouse remarries • For children of 1st marriage • For grandchildren

45. Tax Uses of Testamentary Trusts • To get spousal rollover but preserve capital for another • To income split with a beneficiary • To sprinkle income to low tax rate family members

46. Income Taxes • Deemed disposition of all assets at their fair market value plus a de-registration of all RRSP/RRIF accounts • Tax deferral available if assets are inherited by spouse • Special tax deferral for RRSP/RRIF assets inherited by a minor child or dependent disabled child

47. Common Solution To Estate Taxes & Fees • Joint last life insurance contract • Funds the tax & fees at half the cost • Provides liquidity in the estate • Peace of mind that it’s done • Just another way to ensure the family gets the full value of the RRSP accounts, the cottage or business.

48. Gifting public company shares ... • Backgrounder • Gift of public securities to public charity • May 2, 2006 federal budget • Reduced capital gains inclusion rate to nil • Includes stocks, bonds, mutual funds, seg funds • Includes stock options • Significant tax incentive for funding major gifts

49. Disclaimers • All insurance products are offered through BMO Nesbitt Burns Financial Services Inc. by licensed life insurance agents, and, in Quebec, by financial security advisors. • This presentation has been prepared with the understanding that BMO Nesbitt Burns Financial Services Inc. is not engaged in providing legal or accounting services.

50. Stocks, Bonds or Cash?