ARE YOU PLANNING FOR Your FUTURE?

1. ARE YOU PLANNING FOR Your FUTURE? Presented by Kevin D. Brewer CFP Kevin Brewer Financial Investia Financial Services Inc.

2. Kevin D. Brewer CFPSuite 301, 500 Beaverbrook CourtFredericton, NB E3B 5X4506-454-4478Kevin@kevinbrewerfinancial.comwww.kevinbrewerfinancial.com * Certified Financial Planner * Mutual fund and Life/Disability Insurance licensed * 20+ years industry experience * Specializes in Retirement and Estate Planning * Trained in CRP (Comprehensive Retirement Planning) software. * Independent representation providing broker services of financial products * Hobbies/Passions/Community include boating, grandkids, past President JoyFm radio, Volunteer Ambassador Fredericton Food Bank, Volunteer advisory board member of Alzheimers Society NB, volunteer Salvation Army.

3. Today’s purpose… • No Sales guarantee • Iwill not talk about specificproducts (except for one) • Free service to groups and organizations • Raise awareness of sound financial practices

4. Today’s agenda… but not in this order • Tax brackets • Retirement Allowance • Taking CPP • New CPP rules • Pension integration • OAS claw back • Pension vs. Lira • Pension at death • Estate Planning ideas • Stock Markets • Investments • Your questions

5. What Are Your Goals? • Retire early • Retire comfortably • Pay less income tax • Preserve my Estate

6. A Solid Foundation

7. Rules of Cash Management * Spend Less Than You Earn * Read TWB - David Chilton * The dreaded B word * Pool anyone? * Pay Yourself First

8. Rules of Debt Management * Spend Less Than You Earn * Do not borrow to pay debt (except in some cases …) * One at a time * Is there good debt? * Never be late.

9. It’s Patrick!

10. Why Insure?Provides protection against loss … * Loss of life (life insurance for dependents and/or CRA) Term, UL, Whole Life * Loss of income (disability insurance) * Loss of independence (Long Term Care and Critical Illness) * Leave Inheritance to family/charity * Last expenses • Why does insurance planning come before investment planning?

11. The Reality . . . • 1/3 People will be disabled for more than 90 days before they turn 65. • 1/ 2.8 People will develop a critical illness • The “sandwich generation” deals with the care needs on both ends of the life spectrum. … most everybody has life insurance but few are prepared for the sickness or disability.

12. RunningwiththeBear!

13. Market Volatility Today’s market Past experience with market fluctuations Good or bad time to buy?? What to buy?? Best time I’ve seen or worse?? What about the headlines??

15. July 9th, 1979

16. DOW JONES = 852.99 DOW JONES 10yrs later = 2,487.86 $1,000 invested in the Dow Jones on the day this issue hit the stands would have been worth $2,917 ten years later. (almost tripling in 10 years) July 9th, 1979

18. December 3rd, 1984

19. DOW JONES = 1,182.42 DOW JONES 10yrs later = 3,745.62 $1,000 invested in the Dow Jones on the day this issue hit the stands would have been worth $3,168 ten years later. (more than tripling in 10 years) December 3rd, 1984

21. November 2nd, 1987

22. DOW JONES = 2,014.09 DOW JONES 10yrs later = 7,442.08 $1,000 invested in the Dow Jones on the day this issue hit the stands would have been worth $3,695 ten years later. (more than tripling in 10 years) November 2nd, 1987

23. THE WEEK THAT CHANGED AMERICAN CAPITALISM Wall St Journal, Sept 20/21, 2008

24. A Rough Start to 2009 Nobody Forecast This! -15.5 -24.3 -20.4 -19.0 January 1, 2009 to March 2009 Trough

25. Nobody Forecast This! March 9, 2009 Trough to May 31 2010 55.4% 61.0% 47.7% 39.0% Local Currency Source: Bloomberg

26. JOHN KENNETH GALBRAITHEconomist Words of Wisdom “We have two classes of forecasters:Those who don't know – and those who don't know they don't know”

27. Three Places to Invest Low Variability Medium Variability High Variability Interest / Dividends Capital Gains Interest .25 – 2.5 % 2.5 -5 % 5 – ? %

28. Pros and Cons • Capital gains and Dividends received preferred tax treatment (only on non-reg investments). • Minimum 5 year period required for equity investments (7-10 would be better) • Real risk tolerance not known until something bad happens • Financial planner’s rule of risk = 100 - age

29. Traditional WisdomSays:Timenot Timing determines Success. Asset Allocation with systematic rebalancing is the key to strong and steady performance with reduced risk. “ BUY LOW – SELL HIGH – REPEAT” Kevin Brewer

30. …What is the single largest expense we, as Canadians will face in our lifetimes? TAX!

31. 3 Primary Tax Brackets $38,000 - $76,000 $11,000 - $38,000 $76,000 – $124,000 22% Fed 12% Prov 26% Fed 12%Prov 15% Fed 9% Prov Approx. 24% Approx. 34% Approx. 38%

32. Can you pay less tax? • Tax deductible non-registered investment strategies (use existing cash to purchase…) • Income splitting • Buy RRSP/RRIF Insurance • Borrow to top up allowable RRSP limit (use good debt to pay bad). • Borrow X2 • Earn Dividends or Capital Gains (not Interest). This applies to non-registered accounts only.

33. Save for your goals tax-free!

34. Retirement Allowance (Severance Pay) • Allowed to rolled to an RRSP (direct transfer) $2000 for every year or partial year in which you participated in pension plan prior to and including 1995. Anything above that cannot be rolled directly but may be eligible for RRSP contribution based on personal room. • Generally capped to 25 weeks based on final year’s income.

35. Retirement Allowance (New Options) Effective March 31, 2013, management and non union employees in parts 1,11, and 111 will no longer accumulate retirement allowance credits. OPTIONS Obtain a payout in lieu of ret. allowance based on credits accum’td and salary to Mar 31, 2013. Defer your retirement allowance until retirement based on current credits and salary at time of retirement.

36. Retirement Allowance (New Options) Question of the day: Do I take the money now or defer it a few years until I retire?

37. Retirement Allowance (New Options) Example: Joe, age 45, 15 accumulated pension years credit Salary $52,000 ($1000 week) Pay in lieu of retirement allowance = $15,000 Assumption: intent is to work another 15 years until retirement.

38. Retirement Allowance (New Options) Based on the previous assumption, the investment simply has to outpace the rate of salary increases each year (or the average). Ie: if the salary for this job description only increases by CPI of 2 or 3% each year, the investment portfolio only has to make 2 or 3% to match the eventual outcome. - $52,000 @ 2% increase over 15 years = final salary of $69,985 and ret allowance of $20,188. - $15,000 @ 2% increase over 15 Yrs = $20,188

39. Retirement Allowance (New Options) So if you think that investment performance will outpace your salary increase then the choice based on that alone would be to take the money today. However … What if the expectation is that you will move up the ladder to a more senior position in Govt over the years and thus retire with a salary much larger than your present one? What would that increase in salary have to be to offset an investment return of 4%, 5%, or 6%?

40. Retirement Allowance (New Options) $15,000@ 4% return over 15 Yrs = $27,014 $93,648 = $1800.93/wk X 15 wk = $27,014 $15,000 @ 5% return over 15 Yrs = $31,184 $108,104 = $2078.92/wk X 15 wk = $31,184 $15000@ 6% return over 15 Yrs = $35,948 $124,620 = $2396.54/wk X 15wk = $35,948 Salary must double to be equiv. to 5% return!

41. Other Considerations (New Options) What if you defer the retirement allowance but before you reach your intended retirement age you decide to voluntarily leave your employment ?

42. Other Considerations (New Options) What if you defer the retirement allowance but before you reach your intended retirement age you decide to voluntarily leave your employment ? Under the old rules you would not qualify for the retirement allowance. Based on available information there is no guarantee you would receive it in this scenario either.

43. Other Considerations (New Options) Is it better to put this investment in my spouse’s name (Spousal RRSP) for tax purposes?

44. Other Considerations (New Options) Is it better to put this investment in my spouse’s name (Spousal RRSP) for tax purposes? Much of the advantage in doing a spousal RRSP has been negated with the introduction of the new Pension Income Splitting rule. However, it may still be worth consideration.

45. Summary (New Options) This decision is made more difficult because it must be made based on these unknown variables and assumptions: What will be the performance of my investment versus What will be my final salary at retirement (if I make it to retirement age).

46. Summary (New Options) Bottom line: A Bird In The Hand …

47. Procedures/Paperwork (New Options) For allowances less that $10,000: CRA Letter of Intent Regarding a Deductible Contribution to an RRSP Province of NB Financial Institution Form

48. Forms: Declaration of Intent

49. Form: Financial Institution Information Form

50. Procedures/Paperwork (New Options) For allowances greater than $10,000: Apply to CRA using CRA form T1213 for permission for Province to do a direct transfer to your financial institution of choice. Allow 4-6 weeks for their response. Then provide their response along with the form below to Province Province of NB Financial Institution Form