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What To Do When You Do It Yourself

One of the great questions in life (other than why someone first decided to taste coffee beans sourced from monkey excrement) is deciding what we can do ourselves and when it is time to ask for a helping hand.  In most areas, it depends on the issue and the person.  Financial planning is no different; some of us have the time, knowledge and experience to handle many of our own financial affairs while others are probably better off bringing in hired help, especially if it’s not something we enjoy in the first place.  In reality, I suspect that most of us are somewhere in the middle; we can carry part of the load ourselves but like to bring in help for some of the heavy lifting.

On the other hand, even if you have a cadre of crackerjack trained professionals on your team keeping you on the straight and narrow, I still a strong advocate of self-empowerment.  In my view, taking the time to learn at least some of the ropes is almost always a good idea.  My reasons are as follows:

·         It allows to better assess if your team of topnotch hired help is really as good as they appear, whether they are truly acting in your best interests and whether they are worth what they’re charging;

·         It improves the quality of the questions you can ask, which keeps your professionals on their toes.  Even better, you might get your professionals thinking in new directions and letting them provide you with better outcomes – some of your team might just deal with the present rather than planning for the future.  Asking future-based questions may be the secret to getting good rather than great service.

·         Knowing some of the basics may be enough to tip you off when it’s time to for another consultation or to bring someone new into the mix.  Although you don’t need to know what to do, it’s vital to understand when it is time to talk to someone who does;

·         Your professionals are paid to give you advice, but the final decision is yours.  Besides, you will always remain the leading expert in the field of you.  The better you understand your choices, the better your chances of making realistic financial planning choices that will actually work in your personal world and will fit into your own vision of the future;

·         It may save you money!  In addition to doing more on your own, you might not need to spend as much time having professionals billing you at their hourly rate while they go over the basics if you are already on board.  You can also discuss lower cost options and know when to get rid of advisors who aren’t doing their job;

Now that I’ve done most of my preaching for the day, the rest of this article is devoted to providing a few useful resources for those of you eager to do it yourself or at least ask those better questions that I discussed earlier.    Most of the links to these useful tips are located on my website under the section of that same name.  Here goes!

I love this site! It has host of useful tax-related information on most tax topics under the sun.  They have charts showing you the different tax brackets in each province so you can make better decisions on things like how much to put into your RRSPs and so you know how (and maybe even why) dividends are taxed at a lower rate  than income or interest.

Ernst & Young Tax Calculators / KPMG Personal Income Tax Charts & both of their ongoing Tax Bulletins

If you want a down and dirty summary of about how much tax you’ll pay if you make $88,342 dollar in income this year in Alberta, the Ernst and Young Tax Calculator is the place to go.  I like using the KPMP Personal Income Tax Charts particularly when I’m looking at business tax rates.  I also love using the KMPG annual personal tax planning guide.   It combines a lot of really useful information in one place that you can thumb through even when your laptop is out of juice.

Both sites also let you subscribe for bulletins.  They are also great places to go after federal or provincial budgets so you understand which of the platitudes, cant phrases and big promises actually affect you and how.

RRIF Withdrawal Tables

I have one on my site and it is pretty useful for seniors who are trying to figure how much they need to pull out of their RRIF next year or planning further ahead.  Ultimately, the amount you have to pull out depends on your or your spouse’s age that January 1 (depending whose age you selected when you first set up the RRSP) and the value of your RRIF at that time.  You are required to pull out at least a set percentage of the January 1 value.  This percentage is determined by your age at that time.  The table provides the relevant percentage for your age at that time.  The rates hover around 5% for many years until clients their early 70’s.  At that point, the rates start to tick upward on an increasingly steep trajectory.  Knowing how this works before retirement can help you make decisions like when to convert all or some of your RRSP  to a RRIF and how much money to withdraw each year early in retirement before the withdrawal rates get too steep so you can keep your tax bill down and keep more of your OAS pension.

Canadian Moneysaver and Other Useful Financial Publications 

Whether we manage our own investments and finances, or bring in the big guns, a second (and third, and fourth) opinion may be invaluable.  It can provide us with different perspectives, a wider range of choices and better questions to ask the hired help.  Not only do I like the Canadian Moneysaver because it publishes my articles; I also love that:

  • ·their articles are written by independent financial planning professionals who work in the trenches.  Independent writers mean getting more of the straight goods, more perspectives and more options.
  •    the writers publish for free in the hopes of building their own businesses.  To me, this means more articles from people whose primary job is doing financial and investment planning.  I don’t know about you but I’d rather hear directly from the horse’s mouth (assuming it doesn’t sound like ancient Greek) than from a professional journalist without the financial planning chops or who is trying to summarize the tips someone else is trying to pass along;
  •   they pick and choose each month only the best articles to publish rather than relying on ‘filler;’ and
  •   the articles provide enough depth so that they are useful to people who already understand the basics but don’t overwhelm beginners with jargon and investment-speak.

When looking at other publications, I suggest searching out magazines that offer similar credentials.  On the other hand, watch out for:

  • ·publications that are tied too much to one company or industry.  Alternatively, seek out different publications to both fill in the gaps and to get differing views so you can make your own choices; and
  • complex financial planning case  studies with only one  solution.  Financial planning is a complicated field with many different variables and options.  Some of the case studies seem to dumb things down to only one choice and imply that one size fits all.  This can mean lulling people into doing the same thing themselves and missing out on better options.  It can also give people a false sense of security at times, especially when the financial planning also touches on legal issues.

The Dummies Books 

I am not embarrassed in the least to say that I have a copy of Tax Planning for Dummies on my bookshelf and have read a bunch of their other books on various legal and financial planning topics.  Although their current version on tax planning is a thinner volume that focuses on tips rather than some of the broader issues, I have found that these publications are extremely user-friendly without sacrificing important details.  As well, I have always had a preference for publications that are written in plain speech rather than the stuffy language I recall so well from my university days; in my world, it is definitely possible to explain complex ideas with simple speech.

Pensions BC   

If you are qualifying for a pension paid by the B.C. government, this is the site for you.  It explains how pensions are calculated, when you can start your pension without penalty and your choices when it is time to choose.  I also love the pension calculators (there is a general one where you make the assumptions and another one that uses your specific information).  The annual pension statements people receive in the mail can be misleading, as the potential pension calculated is often not the one that you select at retirement, which can mean some unpleasant surprises down the road, especially if you want  a pension that continues  to pay out for your spouse’s lifetime.  Taking the time to do the specific calculations can give you a far more realistic idea of how big the cheques will be at retirement.  If you aren’t a teacher, nurse, cop, firefighter, public service worker or  civil servant in B.C., your own pension provider might have a similar site, which I suggest hunting down.

Here are a few more things to remember if you do want to do your own pension calculations using the online tools:

  • many pension estimates assume you won’t get a raise between now and retirement.  Using the calculators will allow you to factor in promotions and  cost-of-living adjustments to get  a better idea of the true size of your  retirement cheques;
  • look at joint pensions (i.e. those  that pay out in full or in part until both you and your spouse die), a lot depends on your spouse’s birthdate.  The younger your spouse, the smaller the payment you’ll get, since the pension will likely need to continue paying out longer;
  • a lot depends on you and your spouse’s expected lifespan at retirement when assessing pension options.  If your spouse is not expected to live too long past that point, then perhaps the larger single-life  pensions with a guarantee period (i.e. a minimum number of payments no matter when you die) makes sense.  If you’re the one with bad health or both of you are in good health, then perhaps a  joint  life pension is the safer choice even if it means a smaller cheque while you are both alive;
  • it may be possible to combine some of the different pension choices rather than just choosing a single life pension or a joint pension.  I won’t say too  much more about this for now.  When you get closer to retirement, the people administering your pension can explain  this in greater detail; and
  •   although government pensions are generally indexed, this is not guaranteed going forward.  Accordingly, in some cases, you might want to work another year or so to build in a buffer or plan on doing something else to bring in a few dollars after your retirement party.


I am happy to say that there are likely a ton of other really useful resources out there for those of you who are willing to invest the time and I’m always looking for new ones if you want to pass along any suggestions my way.  Although I don’t expect you to enjoy this sort of thing as much as I do, I am hopeful that you do pick up a few tidbits that can save you money, avoid future problems and generally make you feel more comfortable about your financial planning abilities.

On the other hand, I don’t want you feeling too comfortable!  As I stated way back at the beginning of this article, there are probably some areas where you should probably get professional assistance.  Here are a few guidelines when deciding when to call in the big guns:

  • ·legal work is seldom a do-it-yourself area.  It’s complicated and full of ifs, ands  and buts.  When doing estate planning or divorce work, the advice of a good lawyer, perhaps combined with some tax help as well, can pay for itself many times over;
  • the more money at stake, the more likely that a professional could help;if you’re running your own business, there are a lot more opportunities for a professional team to help the cause; and
  • playing the stock market is a risky proposition.  For many of us, unless we are in mutual  funds, Segregated Funds or ETF, having someone else manage at least some of our retirement cash is worth at least investigating.

Finally, congratulations to those of you who have made it this far and, until we chat again, happy reading!

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