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Retirement Planning: 5 Steps To Success

Mike : Hello, Canada. Welcome to today’s seminar, “Retirement Planning: 5 Steps To Success.” My name is Mike Tata and I’m a Portfolio Manager at MD Private Investment Counsel in Ottawa. I’m here today with my very kind colleague, Sally McRae.

Sally : Hello, Canada.

Mike : She’s a Senior Financial Consultant with me at MD Management in Ottawa. Today’s presentation should be less than an hour long. We will be taking questions as we go along, so please feel free to post your questions. Please use the Q-and-A box on the right-hand side of the WebEx app. If you cannot see the Q-and-A box, you will need to hit “Exit Full Screen Mode.” Please submit your questions to all panellists. This will make sure that our entire team can help respond. We’ll answer as many of your questions as we can, but if we miss your question, we recommend reaching out to your MD Advisor. A recording of tonight’s session will be posted to our website and YouTube channel.

Sally : Planning for retirement is such an important topic. With all the time and hard work that physicians have invested in their careers, you want to make sure that your retirement is meaningful and rewarding, right Mike?

Mike : You bet.

Sally : So I thought I’d start off with the results of a survey we had with physicians about retirement. Now Mike, since you like numbers so much, what do you think are physicians’ top retirement goals?

Mike : I don’t know, maybe having enough money.

Sally : Not surprisingly, achieving financial security is the most common goal; 95% of physicians say it’s important to them.

Mike : That’s a great reason to have your retirement plan in order. The less you have to worry about your financial health, the more time you can devote to activities that can make a real impact on your community.

Sally : All right, so on the next slide, here’s the topics that we’re going to look at today. We’ll discuss the three main pillars of a financial plan, which are retirement planning, risk management and estate planning. We’ll consider these three pillars within the context of MD’s five-step financial planning process for physicians.

Mike : As we go through the seminar, you’ll gain an understanding of how to integrate and maintain the components of your personalized financial plan. Last, but not least, we’ll talk about the various ways that MD can support you in your financial planning efforts, including MD ExO, your expert office for total wealth management strategies.

Sally : And now we’ll look at the five steps. We’ll cover each of the following five steps to financial planning.

Mike : All right, so to begin, number 1: Identify and prioritize your goals.

Sally : Number 2: Analyze your current situation.

Mike : Number 3: Develop your plan.

Sally : Number 4: Implement your plan.

Mike : And number 5: Monitor and review your plan. Are you having any fun yet?

Sally : I’m so excited to share this with physicians coast to coast—of course I’m having fun.

Mike : Yeah, me too. So the first step to successful retirement planning is to identify a set of goals. Without knowing what your goals are, determining what type of income you will need can be very futile.

Sally : You know our goals can vary considerably. For instance, you may consider volunteering with Doctors Without Borders or Habitat for Humanity. You might travel more, spend time with relatives overseas, and so on.

Mike : Goals can contribute to how much income you will need to support your retirement lifestyle. Do you like golf?

Sally : I love golf.

Mike : OK, well, like most people, you may not have had the time to give it much thought up until now.

Sally : And your retirement lifestyle may also vary over time, and we have to plan for this. So you might wish to travel extensively in your 70s, but you may need to fund long-term care in your 80s or 90s. OK, now onto the next slide. As you’re identifying and prioritizing your goals, keep in mind these questions that pertain to risk management.

Mike : Oh no Sally, we’re planning to flatline?

Sally : No, not just that Mike. What about the case of disability or critical illness? A physician’s most valuable asset is their ability to earn income. We really need to protect that. In the case of premature death...

Mike : Here we go again.

Sally : We want to ensure your dependants are able to fund their lifestyle, right Mike?

Mike : I guess so. Oh no, this slide, again? More death? Let me get out the paddles.

Sally : No, more planning, Mike. Consider these three questions related to estate planning.

Mike : Which people do you want to account for in your estate plan?

Sally : Yeah, will you leave a legacy? That’s a good one, right Mike?

Mike : Yeah, it is. When did you last review or revise your will or powers of attorney? We suggest you do it at least every five years, right?

Sally : Yeah, because circumstances can change and we need to take a look at that every five years. What steps have you taken to provide for your beneficiaries?

Mike : Or, do you prefer a controlled distribution of your assets?

Sally : See Mike, these are all important questions.

Mike : Yeah, it does look like it.

Sally : Now, we’re already on to step 2: Analyze your current situation. This is a time when you collect all your data and your financial consultant will take it all and organize it for you.

Mike : OK, so this next slide.

Sally : The next step is to run a retirement projection. Remember when you used to do those Mike, when you were a Planner?

Mike : Yes, it’s true. To do that, there are a variety of ways we can tackle this. To begin, we need a rough estimate of your future lifestyle cost. A simple way would be to subtract taxes, savings and all other expenses that will not occur during retirement such as childcare, business expenses, mortgage and debt repayments from current income.

Sally : Now with your lifestyle costs in mind, we’ll then look at various scenarios with respect to meeting your income goals. The projection will show if those goals are achievable. This is fun, what’s on the next slide, Mike?

Mike : I don’t know, let’s have a look. Oh no, so now I know why you’re excited about this. You’re planning to flatline again, aren’t you?

Sally : Well, I want to take care of our clients, so this is what we need to do. Identify the income your family will need if you die or become disabled. Calculate the estimated estate tax liability and then we have to consider existing insurance coverage and other assets to fund tax liabilities. Now, what’s the last thing Mike?

Mike : I guess it’s to identify opportunities and constraints.

Sally : Good guess, it’s on the slide.

Mike : It’s on the slide.

Sally : OK.

Mike : So, when we analyze your estate planning situation, we cover the following: take inventory of assets to analyze potential tax liability at death.

Sally : Oh, and Mike, I also want to mention we need to consider the corporate assets and how they’ll transfer on death. Many physicians neglect to do this.

Mike : I know and if you don’t, it’s very costly.

Sally : Exactly.

Mike : We need to note beneficiary designations for registered funds in insurance, compare needs and wishes with resources available and identify gaps.

Sally : Also ensure that the legal documents are in place and if you need a referral to a lawyer, every regional office has a list of qualified specialists they can refer you to.

Mike : So, what does the next slide look like?

Sally : Wow, we’re at step 3 already, Mike.

Mike : Wow.

Sally : Develop your plan.

Mike : OK.

Sally : OK, so in this meeting, that’s when we make our decisions for your retirement together. We determine the amount of savings required to achieve the goals that we talked about.

Mike : And where to allocate your funds, woo hoo.

Sally : That’s your favourite part, right?

Mike : You bet. Construct an asset allocation strategy and actually an asset location strategy, as well.

Sally : Mike, you better explain what that means.

Mike : Well, once we’ve identified your overall portfolio risk level, we locate assets with higher interest and dividend income in your tax sheltered accounts, such as your RRSP and TFSA. Your corporate and investment accounts will mostly have assets which are expected to produce capital gains.

Sally : OK, well there’s other elements required to build your retirement plan, like identifying additional income sources like pensions, we build in contingencies and then consider strategies for tax optimization, right Mike?

Mike : That sounds great, I like reducing taxes.

Sally : I know you do, yeah. So on the next slide we’re going to talk about developing a risk management plan. We need to make sure your plan does the following…do you want to say what they are, Mike?

Mike : Sure. Identify risk minimization strategies for both current and anticipated risk, and use life insurance to maximize your estate for beneficiaries and to fund tax liabilities. We’re just zipping through these.

Sally : I know, we keep going by so fast.

Mike : You know we can have questions from Canada out there, so if there are any questions out there, please don’t hesitate to post them.

Sally : Yeah, if you have any questions about retirement planning or investments, we’d be glad to help you. So Mike, while we’re waiting for questions, why don’t we wrap up the estate planning section, because I know you don’t like talking about it.

Mike : No I don’t, I don’t like the flatline.

Sally : OK, most assets will normally pass to your spouse tax free, so a lot of the planning we do focuses on the death of the second spouse.

Mike : Trusts may be used for tax reduction and control of distribution.

Sally : Another thing we talk about is the timing of gifting of assets, whether it’s done before or after death.

Mike : Insurance strategies through the corporation to maximize estate values.

Sally : So do we have any questions.

Mike : So I guess we’re on step 4?

Sally : Yes, implement your plan.

Mike : Oh, we have a question out there.

Sally : All right.

Mike : There’s a question about life insurance here.

Sally : All right.

Mike : One of the really neat uses of life insurance is that if there’s too much capital, particularly in your medical corporation, to fund your retirement, we need to find ways to extract that at a low cost. So life insurance could be used to take money tax free out of your medical corporation upon death.

Sally : And what’s nice about it is it grows tax sheltered.

Mike : Let’s see if there are any questions out there. “Any cost for estate planning through MD?” Well, when you meet with our Estate and Trust Advisors there are no costs. We’ll actually reduce some of the costs that it takes to meet with a lawyer, and then the Estate and Trust Advisor with us coordinates with your lawyer to make sure that it’s written up properly and read it over with them just before you go and sit down and sign it.

There’s a really neat question here that we have.

Sally : I see here, there’s quite a few.

Mike : “At some point, can you expand a bit on the particular issues related to a corporation?“ There are lots of issues related to a corporation.

Sally : And the other thing is every province has different rules with the corporation.

Mike : True. So, corporations are used for two basic needs. One of them is for income splitting and the other one is to leave money, retained earnings, inside a corporation to be used at a later time as income.

Sally : All right.

Mike : We have a slew of questions, look at that.

Sally : Shall we go back to the slide for a bit and then answer questions after?

Mike : No these are really good, these are really good. Look at this one...

Sally : OK.

Mike : “If I die and I still own my house, and I don’t have a spouse or children, will the full amount of my house go to my estate or will it be subject to capital gains or estate tax?” So, with the exception of the Province of Quebec, there are no estate taxes on death, but all the other provinces in Canada, yes if you die, your house will be subject to probate. Now our Estate and Trust Advisors do have some techniques, particularly if you live in Ontario and you purchased your home before 1999, to reduce that.

Sally : OK. “Do corporate assets always transfer to a spouse?” Normally, yes. But it can depend, that’s why it’s good to have the advice of an Estate Advisor.

Mike : Right, yeah. There’s another question out there: “What’s the role of an IPP?” Well, an IPP can help supplement your registered assets. It’s not as popular as it used to be. What we find is, it’s very prevalent in terms of small businesses, so not generally our physician population. So, a small business will usually use an IPP if the owner has not been able to save sufficient amounts of money in retirement. They use an IPP usually when things go a lot better and they try to capitalize on the registered assets before they sell their business.

Sally : And I just want to interject. When you have an IPP and you start receiving income, it’s like taking it all from an RRSP, you’re going to be taxed on it, so that’s why most of our physicians just save straight in the corporation just to save on taxes, and also to have the option.

Mike : There’s a lot of really neat questions coast to coast.

Sally : Yeah, for sure. OK.

Mike : You want to go back to step number 4?

Sally : Yeah, let’s go to step number 4 and then we’ll come back answering questions after.

Mike : But keep it coming, we love it.

Sally : Yeah, OK. So step number 4 is implementing your plan. This is when we take strategies we have developed that are tailored to you and apply them and actually every physician is different. I don’t have one plan that’s exactly the same, that’s why it’s very individualized, right Mike?

Mike : That’s right, it’s very personalized for your needs.

Sally : Yeah. So Mike, what’s involved in this next step, let’s just start it up.

Mike : OK, so in this fourth step, we will help ensure that the following activities take place.

Sally : I’ll take this one.

Mike : OK.

Sally : Establish pre-authorized contributions for required savings.

Mike : Develop plans for your corporation.

Sally : Implement insurance solutions to mitigate financial risks related to death or disability. You know I really want to do that, Mike.

Mike : Yeah, I know you do. Implement estate planning solutions to facilitate and maximize transfer of wealth to beneficiaries, as well as, my favourite, minimize taxes.

Sally : Yeah, that’s your favourite, for sure. Also, keep your will and power of attorneys updated. And I’d like you to do that every five to seven years.

Mike : Let’s have a look and see if there’s some questions out there.

Sally : OK.

Mike : “How do you decide when to start receiving CPP?” Well, let me put it to you this way. If you don’t have any health issues—if you do have health issues, you probably want to start it as soon as you can—if you don’t have any health issues, the best time to start your CPP would be when you retire.

Sally : And not only health issues, if you don’t have longevity in your family, you want to start that earlier, right?

Mike : We have a nice comment out here that we’re real, we’re not robots.

Sally : Trust me we’re not, yeah.

Mike : You know what…Sally, how long have you been with MD now?

Sally : I’ve been with MD…this year will be 14 years.

Mike : And, this year it will be 17 for me.

Sally : Yeah.

Mike : And you know what, we work in the same team. We started in the same team at head office at the Trade Centre, so we’re kind of used to each other. Sally used to work right behind me.

Sally : Yeah. That’s so true and now we still work together so it’s really nice.

Mike : Yes, and we have clients together. We help people make their dreams come true, it’s really interesting. “I have a universal life policy fully paid over half a million dollars.” That seems really nice. Do you have it in your medical corporation?

Sally : Yeah, that’s very important to have that and you should have that reviewed with the Insurance Advisor. There might be other things that you can do, so I would really check that and not just leave that.

Mike : “What’s the difference between providing gifts before death and after death?” Well, some parents feel that it’s important to give money while they’re alive to their children versus after death. That’s really a family-type decision. Now we can’t make that kind of decision for our clients, we just help them through it. So, providing a gift before death, usually what we try to do is make sure that their retirement projection is healthy and that there’s plenty of money to make sure that their retirement can happen properly. And if that’s the case, if that family decides, if that couple decides, to provide money to their children before death, it’s up to them.

Sally : Yeah, so as your Planner, I want to make sure that you have enough money, no matter how long you live and if there’s a lot of excess, I’m happy to give it to your family then. But I just want to make sure you’re protected, especially if you have to go into a long-term care facility. They’re very, very expensive.

Mike : Hey, there’s really a neat question here: “Can you use your own lawyer for estate planning?” Absolutely. So our Estate and Trust Advisors, even though most of our Estate and Trust Advisors are lawyers, we can’t write your will for you. So we always coordinate with your own lawyer for estate planning. Those questions are great.

Sally : Oh, here’s another one I really like, can we go to the next one? “Can you explain more about using life insurance in the corporation?” Well, both Mike and I love that because you save taxes and it enhances your retirement plan.

Mike : And you know what, Sally, you know me, I really do like to plan for investments for our clients but one of the things that I’m really adamant about is that if we have more financial assets, particularly in a PIC portfolio, then what a person really needs in their lifetime, we tend to take that excess amount and put it in a life insurance policy. This is very useful so we can extract money upon death from the medical corporation to the family. So we’ll kind of come back to the questions. We’re probably going to go on to the next slide.

Sally : Good idea, Mike. OK, this is our fifth and final step: Monitoring and reviewing your financial plan. Your personal situation and the family dynamics, your goals, objectives will change over time and all these changes must be reflected in your financial plan. Now, once your financial plan is in place, it’s important to review, update and closely monitor it. Mike, can you give examples of what things we would cover in a meeting like that just so they have an idea.

Mike : We had one together like this yesterday didn’t we?

Sally : Yeah, actually we did. We have them every day.

Mike : We have them every day, but you and I had one yesterday.

Sally : Yeah.

Mike : We include a re-assessment or review of goals, your income needs, the status of your investment portfolio.

Sally : Oh Mike, that’s your favourite.

Mike : Yeah, that’s my favourite, yeah. And any material changes in your health or family situation. So, on this next slide, if you’re looking for help with your wealth management, look no further than MD ExO, your Expert Office. MD ExO is a collaboration among Financial Advisors.

Sally : Like me.

Mike : And specialists.

Sally : Like you, Mike.

Mike : We actually engineer total wealth management strategies for physicians.

Sally : Just like you, Canada.

Mike : We offer advice and solutions related to financial planning, investments, insurance, estate and trust planning, banking and borrowing and medical practice incorporation.

Sally : So if you would like some help with your retirement plan, this is how we can support you. You really don’t have to do this alone. Oh Mike, I see some questions. Shall we go back to those now?

Mike : Let’s go back to those.

Sally : All right, let’s see, what’s the next one. OK, that’s a long question, OK, here we go. Oh, this is a good one: “How much should one set aside in an insurance policy to cover estate costs?” Well, that goes with the planning.

Mike : That goes with the planning, yeah.

Sally : So what we normally do at MD is, oh there’s another question here, we do your retirement plan. If you have excess, that’s what we normally put in the insurance policy and then we make sure that you have a buffer during retirement for anomalies in the market or any extra health costs, and that’s what we end up putting in the insurance policy. It’s a long discussion and then we discuss it with the Insurance Advisor as well.

Mike : Yeah. “Are there any rules of thumb for estimating income needs in retirement?” That’s a very, very complicated question. This is as individual as you are, so you know, we get to know you. You know, your Portfolio Manager, your Financial Planner gets to know you and try to understand that and we actually have software to provide a retirement projection.

Sally : Yes, that’s true. OK, what’s the next one?

Mike : “Implications of gifting before death?” Well, there is one large implication and that would be passing away and run out of money. That’s one of the largest implications. Well, before you retire, but even after you retire, we’re very adamant about doing regular retirement projections to make sure we’re on track. Making sure your spending and capital are balanced.

Sally : I’m not sure exactly what this question is: “How would I use this to benefit my corporate estate?” Are they talking about insurance? I’m not sure Mike, what do you think?

Mike : I’m not sure, let’s move on to the next question.

Sally : Yeah, we’re not sure what you mean, if you could just elaborate.

Mike : Oh, this is a very interesting one: “Should one draw down professional corporation assets before personal investment assets?” Well, this is what we try to do. So when we design a plan, we try to make sure that we balance out taxation over the years. So, we don’t want to have a number of years where the person has very, very low taxation and in the future years they have very, very high taxation. We actually try to take a balanced approach at the tax percentage, like the percentage you spend on taxes over your retirement lifetime is quite balanced. That’s a pretty decent question.

Sally : Yeah, I have a good one now: “I’m within five years of retirement. Is it too late to use insurance as a retirement strategy?” No, it’s not. We have different types of insurance that we use for different ages. The main thing is you have to have good health or your spouse has good health.

Mike : It’s actually cheaper when you insure two people instead of one, right?

Sally : TEXThat’s why we often do that Mike, because it is cheaper and if one spouse doesn’t have good health, the other can help. TE

Mike : So let’s just say one spouse, a male spouse is 55 years of age and a female spouse is 50 years of age, the cost of insurance would be like insuring a 38 year old, isn’t it?

Sally : It depends, but it can be as young as 38, that’s right. And that’s why it’s inexpensive to do it that way and we often do it that way.

Mike : Really good questions, keep it coming, Canada.

Sally : OK, here’s one: “How much amount of money is required per month to live on after retirement?” See, that’s very individualized. So we have to come in and we figure that out together.

Mike : But let’s just give them some averages. So, three-quarters of the time, it’s between $8,000 a month and $12,000. What do you think?

Sally : Yeah, in Ontario, yeah.

Mike : In Ontario, that’s usually what we see.

Sally : And it’s probably more here in Toronto.

Mike : Yeah, where you may be carrying a mortgage or something like that, or Vancouver.

Sally : And Vancouver as well, so those two would probably be a bit more and that’s why we have regional offices.

Mike : We try to measure that for you. Anyways, let’s try to get back to the slide and finish it up.

Sally : OK, where were we now?

Mike : So, we’re talking about MD Private Investment Counsel. So, MD Private Investment Counsel was established in 1999 to provide our clients with discretionary investment management services. Since then, we’ve grown to become the largest non-bank-owned private investment counsel company in Canada. Our clients have entrusted us with nearly 20 billion dollars of assets for their retirement.

Sally : Mike, why don’t you tell them how much we have in assets with MD.

Mike : Overall, coast to coast it’s about 40 billion dollars.

Sally : Wow.

Mike : It’s true. MD Management is the 13th largest investment firm in Canada.

Sally : All right, on to the next slide. So now we turn to MD Insurance, which offers you strategies to build, protect and share your wealth.

Mike : Lastly, let’s consider MD Estate and Trust, which provides peace of mind for you and your loved ones through comprehensive estate planning.

Sally : Do we want to take more questions?

Mike : I think so, we still have time don’t we? All right. “Can you gift a recreational property to your kids?”

Sally : No, “how can you.”

Mike : Oh, “How can you gift a recreational property to your kids?”

Sally : You’re still going to have to pay tax on that.

Mike : Yeah.

Sally : So, normally what we have is insurance to cover the tax on the recreational property because sometimes the capital gains on those are pretty high, right Mike?

Mike : Yeah, can be. “Can you explain probate?” So, with the exception of Quebec, all the other nine provinces in Canada, probate is a percentage that needs to be paid to the provincial government to liquidate the estate of the surviving spouse, the last spouse.

Sally : OK. “As far as risk goes, any comments about planning for divorce?” Well, you can have a marriage contract when you first get married, but they can be fought in court. It costs about $2,000 with a lawyer to have that done.

Mike : But not all the assets are protected right? There are some assets that are divisible.

Sally : For example, the home. It’s divisible 50/50.

Mike : Yeah, that’s a very big question and we usually refer our clients to specific legal advice for that. It‘s very difficult to parse through but again, you know, it’s very difficult to be completely protected.

Sally : Mike, here’s a nice question: “For someone who is starting to slow down their work schedule, how much income does one need to generate in order for the medical corporation to be considered still active?” Well, actually any income, it’s still active. And just to go further with that, once you do retire, it’s very easy to change a corporation to a holding company, just go to a lawyer. It’s inexpensive and you just change the name and once that’s done your investments don’t have to change, we’re just going to change the name of the account.

Mike : Right, you don’t liquidate your assets; you don’t realize the capital gains that have already been provided inside the account, that’s really important.

Sally : And also, for the costs of having a corporation run, you may or may not want to just totally stop.

Mike : It’s relatively rare that at the beginning of retirement we close a corporation account all at once.

Sally : Unless he’s talking about the end of that retirement fund. OK, next question, do you want to say the next one, Mike?

Mike : “With the fact the taxes have gone up while incorporating, especially in Quebec, what are the rates?” I think the rates in Quebec in 2019 for active income is 23.5%, if memory serves me right. So there’s still a deferral that’s available. In Ontario, for example, right now the small business rate is 15.5%.

Sally : “Is there a rule of thumb as to what percentage of my current after-tax income I will need in retirement?” On a lot of things online, they say 70%, but at MD dealing with physicians I find that they are...

Mike : It’s closer to 100%, isn’t it?

Sally : Yeah, actually they’re spending the same because they’re doing different things, they’re travelling more, doing things they didn’t have time to do when they were working.

Mike : Like playing more golf.

Sally : Yeah. So that’s why, again, if you see your Advisor they’ll help you figure that out, because we do it all day long, every day.

Mike : “An IPP?” So, an IPP is an individual pension plan. An individual pension plan is a tool that can be used in a medical corporation to fund the retirement of the main shareholder, the physician. We don’t have that many clients that use it, there are some clients that have used it but we don’t have that many. One of the biggest issues is the cost of compliance; it costs about $1,000 a year to keep the compliance going for that.

Sally : And also again, you have more options if you just save in your corporation.

Mike : Right.

Sally : And just save in an RRSP, that’s usually sufficient.

Mike : What is the question below that one? There we go.

Sally : You want the big one?

Mike : No, that one, yeah.

Sally : SALOK, read it. LY

Mike : “I have purchased some stocks in my cash account, after-tax money. Can I sell the stocks and re-invest in my RRSP. They are U.S. dividend stocks so I’m having to pay U.S. withholding tax in the cash account or can I loan the dollars back to the corporation?” Yeah, you don’t want to loan the dollars back to the corporation. You can sell the stocks from your investment account to your RRSP. Some investment platforms allow that to be done, it’s called a cross.

“Do you recommend any specific sequence of tax-efficient decumulation to provide income to fund retirement?” Well, so most of the time, it depends, but most of the time what we generally do is we say OK, when you’re not earning any income any more in your medical corporation from your practice, we tend to take the RIF minimums, convert your RRSPs to RIF, take the RIF minimums and then top up with dividends from your medical corporation. If that’s not sufficient, we generally take income from investment accounts as well.

Sally : OK, there’s another question here: “If you are healthy and there is longevity in your family, would you recommend waiting as long as possible to start collecting CPP?” Well, the longer the wait, the larger the amounts you will get.

Mike : That’s right.

Sally : So normally yes, I would recommend that, but it’s very individualized.

Mike : And if you’re working and your income is still relatively high, we suggest not to take CPP.

Sally : Because you’ll just be paying it in taxes.

Mike : Right.

Sally : And you can divert the OAS as well, if you want to, but you have to request it.

Mike : “Do you recommend buying long-term care or critical care insurance?” So you know what, most of our clients, this is not true for everybody, but most of our clients, they have quite a bit of financial resources. Long-term care or critical care [insurance] is generally best for families with low incomes. But then again, for some of our physician families it provides them with peace of mind, but it’s not something that we see very often in our client base.

Sally : And the thing is, when we do the tax sheltering you will be able to take some income from your insurance policies and that can be a backup as well that you can use. OK, any more questions?

Mike : That is an amazing question.

Sally : Oh, because why? It’s about investments.

Mike : It’s about investments. “How much of the total portfolio of two million dollars or more are required to have a monthly income of $10,000 via investments only in Canada?” OK, so let’s look at it this way. For every $10,000 a month, a person needs gross: in income, they need about a million dollars per decade. So if you’re going to be retired three decades at $10,000 a month gross, you need about three million dollars. That’s not precise, this is just a back of the envelope type of calculation to help you guesstimate how much money you need. But most of the time we suggest going to see, you know, a person like Sally that will do a retirement projection because there are other things, such as things as income splitting, can we do some income splitting with your spouse, do you have a large investment account where the taxes are paid and that’s where there’s a little bit of a grey area where we can have a better idea as to what a precise tax bracket will look like. These are really great questions Canada, we love it.

Sally : Oh, I see a question I want to answer: “Is it mandatory to update the will and power of attorney every five years?” No, you don’t have to update it; I just want you to review it. Take a look at it or bring it to your Advisor and take a look at it just to see if anything is missing, because tax rules change as well so we want to have it looked at. But no, you don’t have to change it with your lawyer, of course not.

Mike : Just a good read.

Sally : Yes, just a good read; take a good look at it.

Mike : “You’ve talked about the benefits of corporations and couples…we’d like to hear some strategies around those of us that are not incorporated and who are single.” Well, OK, so if you’re not incorporated and are single, are there things that you can do? Let me put it to you this way, being self-employed and single is probably a little bit more expensive in tax. If you’re able to save, let’s call it…easy number, $30,000 a year in your investment account and you’re single, it’s probably a good idea to look very closely at incorporation because you will be able to save, give or take, about $50,000 in a corporation and it really helps in retirement for a single person.

Sally : Now if you’re not incorporating, you might have a pension. I’m not sure why you wouldn’t be incorporated but we’d have to again look at it. You should come in and talk to someone and see if it’s worthwhile for you. We actually have calculators that can tell you if it’s worthwhile or not and it’s free and it takes five minutes on our system. OK, what’s the next question we should take Mike?

Mike : “The estimate you gave of $8,000-$12,000 a month for retirement income, is that gross income and is it also for a couple?” It’s mostly for couples and it’s net income, not gross.

Sally : Yeah, because we always deal in net income, right Mike?

Mike : Exactly. We always deal in net income.

Sally : Yeah.

Mike : How about the question below that?

Sally : “Can you advise, I have a relative who owns a home, is it better to gift it to her children while she’s alive or upon passing?”

Mike : We suggest that you really get legal advice to do that, because that’s a very dicey question, OK.

Sally : “Is it worth taking insurance when one is over 60 years old? OMA insurance declines over a period of time, right?” Yes, and that’s when I normally look at the OMA insurance with my client to see if they still need it and if they don’t, we get rid of it at that time, that’s correct. But you really have to have someone look at it with you to make sure you don’t need it.

Mike : I’ll take the question below that: “I understand that a 4% withdrawal rate of retirement assets has been a good benchmark to ensure longevity of assets, so $40,000 can be withdrawn from a million dollars. Is the current environment still a reasonable benchmark?” Well, one of the issues is that bond income is very low right now. So just to give you an idea, a 10-year Government of Canada bond probably yields about 1.60% nowadays, so we don’t only invest in government bonds, we have a variety of corporate bonds as well, but it’s just to give you an idea that interest rates are quite low. So we have to take that number with a grain of salt. Unfortunately, with low bond income and conversely with lower equity growth as well, it takes more money than ever to have a proper retirement and that’s just a fact of life, yeah, at this point in time.

Sally : That’s so true Mike. OK, so we only have time for one more and then we’re going to do the next slide.

Mike : Oh, this is a good question: “If you have a corporation in one province and then relocate to another province, what do you do with the corporation? Intend to work part-time in the new province but income is much lower.” So you know what, if you intend on working in the new province part-time and your income will be much lower, you probably just want to be self-employed. Your corporation from your other province can just be transferred into a holding company and you can draw dividends a bit at a time as you need them.

Sally : You can also transfer between provinces, as well; I’ve done that with clients, as well. You need to talk to your accountant and your Financial Advisor. Again, everything is so individualized, we have to take a look at the numbers to see if we could work it for you or not.

Mike : But if you’re working part-time and earning less than $70,000 a year, it’s probably best just to be self-employed.

Sally : True enough. It depends on what the income is. Again I think you should talk to someone. OK, I think we’ve got to go to the slide now.

Mike : OK.

Sally : And then we’ll go back to the questions. OK, so, in conclusion, it’s time for you to consider your next steps as you look to develop your retirement plan.

Mike : Most importantly, contact your MD Advisor, like Sally, who will be with you every step of the way to build and maintain a comprehensive financial plan.

Sally : So Mike, they may want to visit our website, give them the website address.

Mike : It’s mdm.ca.

Sally : And then you can try our retirement planning calculator on your own.

Mike : This calculator will help educate you on how your retirement savings may be capitalized to satisfy your estimated income needs in retirement.

Sally : OK, shall we go back to the questions Mike or what do you think?

Mike : Yeah, let’s take a few questions.

Sally : Yeah, they’re really interesting ones, thank you so much. OK.

Mike : “You’re tempted to cancel your universal life policy, but it is now cheap insurance, keep it?” Probably yes.

Sally : Yeah, and again if you come in we’ll look at it with the Insurance Advisor. I wouldn’t want you to cancel something like that especially if you’re older. Really, come in and have someone look at it. Let’s see, what’s the next one.

Mike : “The ROR used for the assumption of one million dollars per decade is 10 million dollars gross per month?” Yes, that’s right. You have to pay tax on that. It comes out, more or less, to 4% percent per year. So again, it’s not precise, it’s just a guesstimate. Let’s go below that and see if there are any other questions. “If Canadians are living longer, is there any discussion in changing mandatory RIF withdrawal rate?”

Sally : They actually just did.

Mike : Yeah.

Sally : They changed the percentages by 2% less, so you can take out 2% less than you used to have to.

Mike : Yeah, they did that change in April 2015.

Sally : Yeah.

Mike : Well, I think that’s about it for us this evening. Thank you very much, Canada, for tuning in. We hope that you enjoyed our webinar.

Sally : And we hope that you’ll take some valuable information that you can use for your own retirement plan. If we missed your question, and there seems to be a lot of questions, we recommend reaching out to your MD Advisor. A recording of tonight’s session will be posted on our website and YouTube channel and you’ll receive an email letting you know when it’s available to watch and share.

Mike : Again, thank you very much, Canada.

Sally : Yeah, we really enjoyed speaking with you, thank you.

Mike : Good night.

Sally : Good night.

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