Retirement Planning 101

1 The Reality…. Tens of millions baby boomers closing in on retirement Number of North Americans age 65+ projected to grow 21% in the next 10 years Pensions playing a smaller role Savings rates at an all time low Social Security and stock market uncertainty Increasing life expectancy

2 The Future is Uncertain Future 1: Lottery Retirement Future 2: Welfare Retirement Today

3 The Goal is Certainty Be realistic about your retirement expenses Identify sources of funds for retirement income Develop an income strategy Match expenses to income Evaluate the risks

4 Risk Management is key Investment Risk Longevity Risk Withdrawal Risk Encroachment Risk Taxation Risk Inflation Risk Health Cost Risk

5 Variables What we cant control Stock markets Interest rates Inflation Currency What we can control Our behavior Asset allocation Which investments will create income Navigating the tax brackets What we defer for tax purposes Initial and ongoing investment recommendations Investment costs

6 Longevity 0% 25% 50% 75% 100% Male Female At least one spouse Age Probability Probability of a 65-year-old living to various ages

7 Basic Expenses What are your current expenses? Will they be the same or different in retirement? Housing Food (2 x 3 x $6 x 365 x 25 = $328,500 for food!!) Transportation Healthcare costs Taxes (income and property) Other bills (insurance premiums, credit cards, educational loans)

8 Discretionary Expenses How will your lifestyle and income needs change? Travel Entertainment Hobbies Club memberships Gifts for others Gifts for yourself

9 Inflation Today10 Years20 Years30 Years 0% $50,000 $100,000 $150,000 $200,000 $50,000 $67,196 $74,012 Source: New York Life Investment Management LLC, The hypothetical example is for illustrative purposes only and assumes a 3% annual rate of inflation and annual retirement expenses of $50,000 at the start of retirement. How inflation rates can impact purchasing power 3% 4% $90,305 $109,556 $121,363 $162,170

10 5 Common Retirement Mistakes Not contributing or participating in a plan Not contributing early or enough Improper asset allocation Miscalculating retirement needs Cashing out too early

11 Power of Compounding

12 Compounding with regular additions

13 Improper asset allocation Too conservative Concentrated in company stock Conventional wisdom: subtract your age from 100 to find the % of assets to invest in stocks. For example, a 70 year-old could have 30% invested in stocks (of course subject to return objectives, personal tolerance for risk etc.)

14 Historical Returns US Small Company Stocks: 13.4% US Large Stocks: 11.0% Canadian Stocks: 10.1% Canadian Bonds: 7.4% 5-year GIC: 7.0% Treasury Bills: 5.9% Canadian Inflation: 3.8% Source: Morningstar. CDN$ Returns Jan 1950 – June 2009

15 20s30s40s50s60s70s80s90s Cover cost of living; get out of debt Save for home, childrens college education; protection for family Save for retirement Two Phases of Retirement Planning Retirement Saving ? Retirement Spending

16 Variable Investment Math Ann Ret % Source: Buying Time – John Wiley & Sons Sequence of returns during the growth and savings phase arent as important…

17 Accumulation Math Value $196,715 Source: Buying Time – John Wiley & Sons $100,000 Investment $196,715 At the end of a given period, the dollar value of an account will be the same, regardless of the order in which the returns came…

18 Withdrawal Math Value $100,000 Source: Buying Time – John Wiley & Sons $100,000 Deposit $7,000 Withdrawn Annually $117,986 $83,150 However, during the withdrawal period, it can have a dramatic impact if you experience negative years earlier on. In this scenario, there is a difference of $34,836 or 42% between the high and low account values after 10 years.

19 Investment Withdrawals Source: New York Life Investment Management LLC, This chart shows the results of withdrawing different inflation-adjusted amounts each year. The hypothetical example assumes a $500,000 balance and a portfolio comprised of 50% stocks, 40% bonds and 10% cash. Each withdrawal rate is adjusted for inflation by 3% per year. Rates are based on a hypothetical return rate of 6.3% derived from 8% for stocks, 5% for bonds and 3% for cash. This example is for illustrative purposes only and does not represent the performance of an actual investment. There is no assurance that similar returns will be achieved. Withdrawal Amounts 9% = $45,000/yr. 8% = $40,000/yr. 7% = $35,000/yr. 6% = $30,000/yr. 5% = $25,000/yr.

20 Protect your nest egg How to calculate retirement income Add Estimated annual social security benefits (CPP, OAS) Projected annual pension benefits Withdrawal from investment savings (i.e. 4-6%) As you increase your withdrawal rate, you increase the probability of prematurely running out of savings

21 Probability of meeting income needs 100% Bonds 75 Bonds 25 Stocks 50 Bonds 50 Stocks 25 Bonds 75 Stocks 100% Stocks 4%83%93%94%90%85% 5%52%67%74%73%68% 6%23%33%44%51% 7%8%11%20%29%35% 8%2%3%7%15%22% Withdrawal rates over a 25-Year retirement Source: Morningstar.

22 Protect your nest egg How to calculate the size of retirement savings needed Need $50,000 annual retirement income $10,000 annual social security payments $20,000 annual pension benefits Need $20,000 [$50K – ($20K - $10K)] from your nest egg Divide annual dollar amount needed by annual withdrawal percentage amount Savings Required = $20,000 / 4% = $500,000Savings Required = $20,000 / 4% = $500,000

23 10 steps to successful estate planning 1.Designate a team of professionals 2.Draw up a household balance sheet 3.Understand your life insurance needs 4.Draw up your will 5.Establish power of attorney for property 6.Establish power of attorney for personal care 7.Minimize taxes and administration fees 8.Keep track of accounts and important information 9.Review and update regularly 10.Let someone know

24 Non-Financial Considerations Where will you live? How will family impact your plans? How will your spend your time? Will work enter into your plans? What will you do that is fulfilling, meaningful and purposeful? What needs to be in place to maintain your sense of well- being? How will you deal with health issues? What plans do you have for maintaining your physical and mental well-being?

25 Contact your financial advisor regarding… Preserving capital and protecting assets Creating income in the most efficient manner Minimizing taxes (income and estate) Growing capital Managing overall risk Business succession Establishing a cost efficient and tax efficient transfer of wealth (spouse / estate) Addressing philanthropic and / or gifting objectives Trust planning

26 Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed by Goodman & Company, Investment Counsel Ltd. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. Should you require such advice, we strongly suggest that you speak with your investment advisor. This document is not to be distributed or reproduced without the consent of Goodman & Company, Investment Counsel. Dynamic Funds is a division of Goodman & Company, Investment Counsel Ltd. Important Information

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