Canadians are blessed with a host of social programs. While often taken for granted, the Canadian social safety net is how we keep a rough break from turning into abject misery. Canada’s web of social benefits, that we can access when we really need them, is a true cornerstone of our society.

Employment insurance, welfare, public housing, universal health care and public pensions were all just dreams a couple of generations ago. One only needs to read a Charles Dickens novel to get a depiction of what used to happen when illness, old age or poverty knocked at the door.

In spite of the dramatic progress of our social programs, a lot of people have taken the view that their public pensions are not really worth investigating. Some believe that the pensions will not be there for them when they get old enough to collect; others have become convinced that their public pensions will all be clawed away by some form of taxation.

There is some truth in the worry. It is a significant and growing challenge to fund public pensions and there is, at a certain income level, a clawback of old age security. But funding challenges aside, the public pensions exist and they are certainly worth some investigation.

Consider a retiring couple who are both entitled to the full pension benefit under Canada Pension Plan (CPP) and the full benefit under Old Age Security (OAS). These folks would be entitled, at age 65, to a combined monthly benefit of $2849.92. This annual $34,199.04 benefit is indexed to inflation.

While there is a good chance that both these people are not entitled to the maximum CPP benefit; and that OAS will be clawed back when individual income exceeds $66,335, both will be entitled to some form of benefits. It’s worth finding out what part your public pension will play in your retirement planning.

If still not convinced that CPP and OAS will be very important, you might consider how much capital you would need to generate the equivalent of your public pension entitlement. A couple entitled to $34,199 of CPP and OAS would need to set aside at least $900,000 to create a similar indexed income stream. Certainly there are very few of us who would ignore $900,000 of savings yet there are many of us, when it comes to retirement planning, that seem determined to ignore public pensions.

The clawback of OAS is a big reason why many people have been paying less attention. The clawback encourages the view that you will just lose OAS to tax so why bother. It is true that if you are one of the retirees with a large pension, there is very little you can do about losing your OAS. The rest of us, however, have an opportunity to plan around, and possibly avoid, the OAS clawback.

If you are interested in finding out more about integrating your public pension benefits into your retirement planning, consider attending one of our “Social Security 101″ seminars. Just send an e-mail to my attention; I will put you on our events e-mail list.

Alan MacDonald is an Investment Advisor with Richardson Partners Financial Ltd. Alan helps investors with over $500,000 of assets make smart decisions about money. For more information please visit alanmacdonald.ca or e-mail Alan at Alan.Macdonald@RichardsonGMP.com

In my experience, capital markets tend to fluctuate between extremes of fear and greed; and it seems pretty clear that fear rules the day right now.

Consider the 2009 RSP season, which just closed recently. Normally, the season sees a huge flow of money into equity mutual funds. But this year is a dramatic exception: compared to last year, mutual-fund RSP deposits are estimated to be down more than two-thirds, by some 68%. And of the relatively paltry $1.8 billion that did flow into mutual funds this year (compared to last year’s $5.5 billion), only some $400 million found its way into stock- or bond-based funds. The other $1.4 billion all went into short-term money-market funds.

It’s been a tough year for equity mutual-fund investors, and these figures show it: they’re voting with their feet. The steep stock-market declines of the past twenty months have persuaded most investors to seek out alternatives; and this drop in deposits is a pretty good reflection of what’s going on in all the capital markets. Investors, both retail and institutional, are waiting on the sidelines – waiting for the moment when they feel the time is right to return to stocks.

They’re not wrong to feel discouraged. The economic outlook right now is pretty bleak, and there seems to be no end to the bad news. Many publicly traded companies will not survive this turmoil; the wounds to their businesses will prove fatal. The values of shares in those companies will be destroyed, their customers and market shares going to their competitors. The weak will fall, and only the strong will survive.

Strange as it may seem right now, though, we have to remember that, in spite of recent events, markets WILL recover over the coming years. Granted, the challenges are enormous. Investors, not surprisingly, are clamouring for bailouts and government interventions, which they see as the magic bullet that will fill their pockets again. But experience tells us that these are not the forces that will truly end the crisis. Government intervention may be a necessary stop-gap measure, but what will truly lay the ground-work for a sustained recovery is simply the natural forces of the market at work.

A good example of this is the price of oil. With so much going on in the market as a whole, relatively little attention has been paid to the falling price of oil. We know it wrought devastation in the oil patch, causing cancelled drillings and a build-up in inventories, all meaning much less activity in resource based industry or related businesses. Yet low oil prices are a huge boost to the economy. The estimated stimulus that lower oil prices will give consumers is almost three times the combined value of the interventions of the U.S. and Chinese governments.

What’s more, lower fuel prices aren’t like government incentives, bureaucratic and often poorly aimed. They’re more like lower taxes, putting dollars directly into the pockets of businesses and consumers.

Of course, cautious investors are still justifiably scared. Swings in asset prices have been devastating, and anyone who hopes to buy in faces a daunting task: bear-market bottoms are notoriously hard to spot. If you’re attempting that kind of timing, remember the one true constant of all bear markets: the largest number of investors will leave at the bottom. The mutual-fund flows of the past year certainly reflect that truth.

Alan MacDonald is an Investment Advisor with Richardson Partners Financial Limited. Alan helps investors with over $500,000 of assets make smart decisions about money. For more information please visit alanmacdonald.ca or e-mail Alan at Alan.Macdonald@RichardsonGMP.com

Richardson Partners Financial Limited is a member of CIPF.

The business owner or incorporated professional faces a world of complexity. Share structures, holding companies, individual pension plans, insurance contracts, and payrolls are some of the issues needing to be addressed.

In the midst of all these, the business owner or professional has to attend to their day job as well. Delivering value to your customers is more important today than ever before. Yet the complexity of your company’s financial affairs must be dealt with.

It’s a job that is impossible to do on your own, so you hire professional advisors. An accountant for your taxes and bookkeeping, a lawyer for your corporate and trust structures, an insurance agent for your protection and perhaps an investment advisor for your savings and cash holdings.

Communicating with these different professionals presents another challenge – how do you know that the advice you receive from these different channels is optimized across the different disciplines?

Recently, I spoke to a dentist who had her insurance agent approach her with the idea of setting up an individual pension plan. It sounded like a great opportunity to increase retirement savings and get more of the company earnings into her personal name. The only problem – her income is mostly in the form of dividends, limiting the amount that could go into the plan. She is left trying to decide between the two strategies, her agent and accountant await her decision.

This type of situation is not unusual. The business owner is, in effect, asked to become a part time expert in financial affairs rather than focussing on their core business.

The “Advice Integrator” is a communication tool designed to help you and your advisors create the optimal plan, given your circumstances and preferences. The “Advice Integrator” is a simple and effective communication tool that does not require you to sever your trusted professional relationships or spend hours becoming an expert.

If you are a business owner or incorporated professional interested in learning more about how this system works, why not attend one of our seminars.

March 26th: We will be hosting a lunch seminar (12:00 PM-1:15PM) and an afternoon session (5:00PM – 6:15PM).

Please contact Iain Davidson at 613-788-8012 or iain.davidson@RichardsonGMP.com to reserve your spot.

Alan MacDonald is an Investment Advisor with Richardson Partners Financial Ltd. Alan helps investors with over $500,000 of assets make smart decisions about money. For more information please visit alanmacdonald.ca or e-mail Alan at Alan.Macdonald@RichardsonGMP.com

Richardson Partners Financial Limited is a member of CIPF.

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