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February 2, 2019
6:55 am
Bill
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promise, just another view, has gotten stronger the older I get. I generally (actually, pretty much always) just shrug my shoulders, mumble something like "well, I'm not sure" when I'm asked for any financial advice by people that are and probably will be in my life for a while. Just take a moment to be sure about to what extent you want to interject yourself actively into your in-laws' financial affairs, consider the possible downsides (are there any upsides, aside from that warm feeling we all get when we are asked to opine on something?). And if yes, you're comfortable with providing substantial financial assistance to relatives, by all means pass on the good info, lots of solid advice, you're getting here.

February 2, 2019
11:07 am
promise
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Bill said
promise, just another view, has gotten stronger the older I get. I generally (actually, pretty much always) just shrug my shoulders, mumble something like "well, I'm not sure" when I'm asked for any financial advice by people that are and probably will be in my life for a while. Just take a moment to be sure about to what extent you want to interject yourself actively into your in-laws' financial affairs, consider the possible downsides (are there any upsides, aside from that warm feeling we all get when we are asked to opine on something?). And if yes, you're comfortable with providing substantial financial assistance to relatives, by all means pass on the good info, lots of solid advice, you're getting here.  

Bill, that's a good idea i am just going in like an information broker at the end of the day they will be the one making the decision. I am going to post there follow up ideas and questions. Look forward for your input as well.

February 2, 2019
11:21 am
promise
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I had a talk with them here are follow up they had from all the great idea that was put forward by Loonie. Appreciate everybody input in to this.

A. They like the idea of holding some US dollar. Given the CDN dollar so low they feel like they will loose during the conversation a lot so they are going to keep an eye on the CDN dollar against US dollar and they will look into purchasing some US dollar. They wanted to know outside of the big 6 banks that might not have the best converastion rate can you recommend good place to convert that has better converstion rate then the big banks

B. They like the idea of putting there emergencey into 1 year Hubert GIC where you can take it out quartley. They also like the idea of doing 5 year GIC laddering given they don't want to keep chasing HISA rates around and they might even get a better rate at the end. This idea might change depending on something they brought to my attention in later points bellow they want all you fine folks to chime in.

C. They are open to the idea of investing and they know they need to the way they seen the inflation around them going up and up. We can't predict the market and given there is a lot of talks about a recession in 2020/2021 what is your take on it for them to invest now or wait it out a bit. I know it's the time in the market not timing the market, it's just based on there past experience they are very cautious.

F. They brought up an idea if it makes sense for them to buy a small property like a condo/townhouse and rent it out. They know the RE market isn't bullet proof investment as the price can go down or up but they feel like there friend who bought a place doing very well in there investment. Given they have the money they can pay off most of the mortgage and there monthly payment would be low. If they go this option one of them are going to start to work full time to start working on saving more money as most of it would be put down in the investment property. My take on it in the last 10years we saw huge property appreciation I told them past performance might not be repeated in the future but they like the idea having a place so they can leave to there daughter in the future. If that's not a good idea buying a place at this point then they don't mind leaving her the money instead of the condo/townhouse.

February 2, 2019
6:03 pm
Loonie
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These are all sensible questions and concerns.
I am not necessarily the best person to respond to them. I know there are people on this forum who know more about particular aspects.
So, I'll just cover the parts I feel i can say something about, and you shouldn't take my remarks as being comprehensive.

A. USD. I don't do these conversions myself. i have some USD left from when I lived in the US, so I haven't done it. But there are people on this forum who do it regularly. Hopefully they can respond. I do know that Hubert posts its conversion rates on its site. I think Peter, our moderator, has some expertise on this. I think he posted something about this somewhere on this site a while back.

C. Stock markets. It's a crystal-ball question as to when to invest, as I think you realize. Depending on how much they are willing to put in, they might consider doing it in stages. This spreads out the risk a bit. Certainly a major "correction" is possible. Need to remember they are looking at the long term here. They MUST have nerves of steel to ride out a correction, keep their eyes on the longterm, or they will get scr*wed just like they did last time. If they can't do that, they simply shouldn't get into the markets. It's not enough that they are nervous because of what happened before; they must act on another strategy in order to avoid it happening again - assuming capitalism doesn't sink so far as to self-destruct.
They could add a couple of funds at a time if that makes them feel more comfortable. This is often recommended for people who are just starting out and don't have much money to put in. However, you don't know which ones are going to succeed first, so it may defeat the purpose. Need to keep an eye on any fees. There are others on this forum who are more knowledgeable about where best to set up an investment account.
In the interests of honesty, I should perhaps say that I am not a stock market investor. I believe strongly that it's a long term investment, as I said earlier, and I feel I'm too old for that. I don't expect to be here in 25 years, which I feel is the minimum, in order to be fairly safe. And longer is even better.
It's a bit of a finer point, but anyone who invests in dividend stocks outside of registered account should be made aware of the "gross-up" factor. This means that while income tax on said dividends is low to non-existent for low income earners, CRA inflates the income by an additional 38%, so that your marginal tax rate can go up. You can read about this elsewhere. May affect any benefit entitlements. Income in RSP/RIF/TFSA is not grossed-up.

F. Real estate. They have to be really careful about chasing yesterday's news. This may be what happened to them with their previous stock investments. Suggest they do some reading in the field of behavioural economics so that they don't repeat their mistakes. It's great that their friend has made money on real estate, but that is up til now; the issue for them is going forward.
Look at the Ottawa market. The major industries are government , NGOs, universities, and some technology - as far as I know. If we get another right wing government (and every one of them seems to be more draconian than the previous these days), jobs will disappear in Ottawa, and the real estate market will likely suffer. If you buy real estate somewhere else, you have the problem of servicing it from a distance. In addition, I don't think real estate as an investment is necessarily a good project for people who are aging, because of the issues of managing it.
These are people who appear to have never owned property of any kind, and I'm not sure they realize what they are getting into in terms of the responsibility and phone calls in the middle of the night, dealing with bad tenants, etc. They might get lucky, but they might not. Do they know anything about how to choose a property, construction, are they handy with tools, do they own tools?, do they want to deal with pest control, etc? Perhaps their daughter could take on some of this responsibility if this is the way they really want to go.

I see red flags, however. First is the fact that they seem to be basing this on what someone else achieved in the past. and on a fantasy of leaving it for their daughter, who may not want it anyway and would have to sell it. Second is the possibly unrealistic view of the responsibilities involved. Third, to me it doesn't make sense to buy a place and rent it out while you yourself are still paying rent in after-tax dollars (to the extent that they pay taxes). Some careful arithmetic is required here, and must include costs of maintenance and property taxes, income tax on rental income, future capital gains when and if the property becomes a burden to manage (since it's not their principal residence), outflow for their own rent, etc. Further, you should not base a decision to return to full time employment on the need to maintain a rental property. If you want to go back to work FT, great, but not just in order to support real estate investment. Again, really should look at behavioural economics research which explores, among other things, how people sabotage themselves.
If they're going to buy property, then, in my opinion, they should live in it to get the best bang for their buck - avoid capital gains, roof over heads, avoid tax on rental income, avoid personal rental increases). If they are determined to buy, they could perhaps take in a student to help pay for it, if convenient and feasible.
The other problem is that, given their overall situation, buying property would seriously affect their ability to diversify their investments. It's a lot of eggs to put in one basket, it can be volatile, and it will cost you money in terms of income tax. I'm not saying it's a terrible investment. It's ideal for people who are handy, have tools and know how to use them, enjoy this sort of thing, own their own home, are not worried about a real estate crash, etc. (The news these days is full of stories about possible real estate crashes.) It might still be good for them, but there are some very serious issues that need to be looked at. If they had twice as much money behind them, I would be more inclined to say "yes" because it wouldn't be such a large portion of their funds.

Personally, I think it works best for people who buy a home early, live in a location with a diversified economy, have the house paid off by 40 or earlier, then start buying additional property(ies) with the money they used to put into the mortgage. By then, they have developed some know-how as regards property. If you just want a cash cow, you might be better off with "eligible" Cdn dividend stocks, as others have suggested; they require no maintenance and they never get bedbugs! sf-smile They do come with volatility, but, then, so does real estate. And that brings me back to the principle of buying an assortment of ETFs that are invested in different markets and rebalancing them periodically, to minimize volatility risk.

If what they are looking for is a stake in the real estate market, there are other vehicles they might also consider. These could include REITs, mortgage funds, second mortgages, becoming a realtor, etc. I am not advocating any of them, but there are others on this forum who know more about hem than I do.

If what this process is revealing for them is that they really really want to own property, then we should look at that separately perhaps. If it's one choice among several options, then I advise caution. I must say, they seem somewhat adrift. They only just retired, were happy with parttime jobs, volunteering, and simple living in rental accommodations; and now they want to buy a rental property and one wants to work fulltime again?

Whether or not they buy real estate, I think getting a fulltime job would be a great idea, though, given their fairly limited financial cushion.

I hope that's helpful, and that others offer their expertise.

February 3, 2019
5:53 am
Loonie
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Another way of attacking the problem, other than starting with "risk", is to look at income streams and how to build an acceptable retirement income.
I'll try to get back to that after we hear from other contributors. I think it's important. For homework, in addition to what I've said they might look at Daryl Diamond's book on retirement income - get the second edition. 2014. I know people don't always want to do the reading, but, ultimately, if you want to protect yourself, no amount of advice, however well-intentioned, will suffice. You have to do the learning yourself.

In the meanwhile, please ask them to contact CPP and have CPP send them a report on their estimated income from CPP at age 65. When we get that information, we can work on the income streams. It may take a few weeks to arrive, and it will not be completely up to date - they never are. You should ignore whatever it says for "survivor benefit" as that is only a maximum and almost never attained or anywhere close. We'll worry about that part later. You can also ask them to try to calculate something for you on the phone, but I have found that answers are not consistent. It's only a guide at the best of times.

February 3, 2019
7:39 am
gicjunkie
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To be quite honest, I have not read all of the contributions to this conversation, but I did note that one option offered regarding protection of resources is US currency. Here is a website ,(knightsbridgefx) in case it hasn't been mentioned here before, that apparently offers better exchange rates than your bank, but delivers the money directly to your US bank account in Canada or the USA. I have not as yet used this service, nor am I endorsing it. Do your due diligence prior to using them.

https://www.knightsbridgefx.com/how-it-works/

February 3, 2019
10:20 am
promise
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Loonie said
Another way of attacking the problem, other than starting with "risk", is to look at income streams and how to build an acceptable retirement income.
I'll try to get back to that after we hear from other contributors. I think it's important. For homework, in addition to what I've said they might look at Daryl Diamond's book on retirement income - get the second edition. 2014. I know people don't always want to do the reading, but, ultimately, if you want to protect yourself, no amount of advice, however well-intentioned, will suffice. You have to do the learning yourself.

In the meanwhile, please ask them to contact CPP and have CPP send them a report on their estimated income from CPP at age 65. When we get that information, we can work on the income streams. It may take a few weeks to arrive, and it will not be completely up to date - they never are. You should ignore whatever it says for "survivor benefit" as that is only a maximum and almost never attained or anywhere close. We'll worry about that part later. You can also ask them to try to calculate something for you on the phone, but I have found that answers are not consistent. It's only a guide at the best of times.  

Thanks Loonie for the response. I will await to hear from other contributors as well and hope to working out on what would be the best options for the income streams for them.

February 3, 2019
10:24 am
promise
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gicjunkie said
To be quite honest, I have not read all of the contributions to this conversation, but I did note that one option offered regarding protection of resources is US currency. Here is a website ,(knightsbridgefx) in case it hasn't been mentioned here before, that apparently offers better exchange rates than your bank, but delivers the money directly to your US bank account in Canada or the USA. I have not as yet used this service, nor am I endorsing it. Do your due diligence prior to using them.

https://www.knightsbridgefx.com/how-it-works/  

Thanks gicjunkie. Since they have are customer with Tangerine and I noticed Tangerine offer USD account as well and there GIC rate for 1 year GIC on USD account is 3%. Do you know anything better then that rate of 3% out there?

February 3, 2019
8:47 pm
gicjunkie
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The Tangerine US dollar GIC rates are the best I have seen anywhere in Canada.

Do you know that foreign currency GICs are not CDIC insured? Maybe it doesn't matter to you.

February 3, 2019
11:18 pm
Loonie
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gicjunkie said
The Tangerine US dollar GIC rates are the best I have seen anywhere in Canada.

Do you know that foreign currency GICs are not CDIC insured? Maybe it doesn't matter to you.  

I think it's fair to say that gicjunkie is our resident expert on rates across the country, having discovered some obscure ones, so I would trust that.

Agreed that none of the financial institutions that are insured by CDIC will cover USD deposits - and that includes all the Big Banks. The only jurisdiction that I know of and that is accessible is the Manitoba credit unions. They are all covered by the Deposit Guarantee Corporation of Manitoba, Manitoba http://depositguarantee.mb.ca/home/ . Hubert would be an example.

I would look on buying USD, in this case, as currency hedging, not as an investment where you planned to gain a lot through interest. The main point of buying is that you think the Cdn dollar might do worse against the USD.

There is no problem with also getting the higher rate with Tangerine, as long as you understand that it will not be insured and are OK with that. This needs to be weighed against the reason for doing it in the first place. If your goal is to avoid big problems with the Cdn dollar, then why would you put it in a Cdn bank, uninsured? Said bank is more likely to tank when Cdn dollar tanks. You can answer this any way you wish. I'm just flagging it for consideration.

There are other ways of hedging, such as buying US-denominated stocks or funds. Perhaps others can comment on those if that is of interest as I don't know a lot about it. This strategy could possibly be combined with buying some ETFs, but you need some input from someone other than me on that option.

February 4, 2019
5:34 am
Loonie
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There is another discussion going on about USD rates here:
https://www.highinterestsavings.ca/forum/gic/us-gic-rate/

February 5, 2019
12:22 pm
promise
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gicjunkie said
The Tangerine US dollar GIC rates are the best I have seen anywhere in Canada.

Do you know that foreign currency GICs are not CDIC insured? Maybe it doesn't matter to you.  

Yes I read that doing my research that foreign currency GIC aren't CDIC insured given these folks they won't have a lot of money in USD when the time comes to convert that won't be a huge concern but it's good you brought up as a heads up.
What I would like to pick your brain on what is best rates you seen out there when it comes to GIC laddering?

February 5, 2019
7:38 pm
Loonie
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I assume, with the laddering question, that you are asking about Cdn dollars.
You can use this chart as a starting point. It is updated regularly.
https://www.highinterestsavings.ca/gic-rates/

You can also check the promos list for limited-time specials.

Rates change frequently.

You need to ask yourself/them how many fiancial institutions you are willing to deal with and how many you need to deal with in order to be fully insured. They also need to decide if it will be in joint or individual accounts. Then it will be easier to decide where to put it.

I feel, and I think many others on the forum feel, that we don't want a plethora of financial institutions to deal with. We are willing to make small sacrifices in rates for the sake of simplicity. There are some, however, who will go to any length to get a better rate and don't mind having lots of accounts. Your folks need to know where they stand on this question.

If you give me their answers to these questions, and also a breakdown of how much they want to ladder and whether it is from non-registered, TFSA or RSP, I will make more specific recommendations - if they want to do it right away.

February 5, 2019
8:30 pm
gicjunkie
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promise said

Yes I read that doing my research that foreign currency GIC aren't CDIC insured given these folks they won't have a lot of money in USD when the time comes to convert that won't be a huge concern but it's good you brought up as a heads up.
What I would like to pick your brain on what is best rates you seen out there when it comes to GIC laddering?  

I am a big fan of laddering. Depending on how much you have to invest and how much you want to have accessible, divide the funds into 5 parts, have something maturing annually and use the charts and promos sections on this site to determine where you want to invest. Even the accessible portion can be split up between a high interest savings account and places like Hubert Financial's 1 year cashable escalating GIC. A lot depends on where you are located. I don't know if you mentioned it here. Duca has a great 5 year rate @ 3.75%. Ganaraska's 4 year rate is 4% . These are Ontario CUs. Just check them out. Oaken has good rates also. Depends on your comfort zone, needs, etc.

February 5, 2019
10:52 pm
stoidi
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promise said

Yes I read that doing my research that foreign currency GIC aren't CDIC insured given these folks they won't have a lot of money in USD when the time comes to convert that won't be a huge concern but it's good you brought up as a heads up.
What I would like to pick your brain on what is best rates you seen out there when it comes to GIC laddering?  

Google some laddering examples. Like:
https://www.rbcroyalbank.com/investments/gic-laddering.html

After 5 years all your money is in a 5 year GIC and all at the highest rate for that year...a blend of best rates of the 5 years.

I use Oaken, Hubert, and Accelerate. Depends what you are laddering, TFSA, RRSP or non registered. And stay away if the FI you are using does not have an associated savings account. For me best online entry for non-registered is Oaken, best over the phone for TFSA and Non Registered is Accelerate, and best online for Non Registered, TFSA and RRSP is Hubert.....but Hubert is two steps to set up annual pay and no auto renewal at maturity....second step is chat or email.

February 6, 2019
2:21 pm
promise
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stoidi said

Google some laddering examples. Like:
https://www.rbcroyalbank.com/investments/gic-laddering.html

After 5 years all your money is in a 5 year GIC and all at the highest rate for that year...a blend of best rates of the 5 years.

I use Oaken, Hubert, and Accelerate. Depends what you are laddering, TFSA, RRSP or non registered. And stay away if the FI you are using does not have an associated savings account. For me best online entry for non-registered is Oaken, best over the phone for TFSA and Non Registered is Accelerate, and best online for Non Registered, TFSA and RRSP is Hubert.....but Hubert is two steps to set up annual pay and no auto renewal at maturity....second step is chat or email.  

Thanks stoidi, this is helpful info.

February 6, 2019
2:34 pm
promise
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I heard from Loonie his stance regarding the Real Estate for my in-laws they were looking to get more information from people with expertise or who can add to this discussion.

I know the forum is long people might not read the whole thing but let me focus on one topic they would like to get input on:

They are age 50 and 55 they are currently renting $1000 which is a great deal for where they live given they have been in the same place for a while and the landlord doesn't increase there rent on them given they are very good tenants and he tries to keep them around. The question they have is given they don't have a place they can call their own and they have one daughter they would like to leave the place for and she is willing to help them look after the place if they decide to rent the place out. They currently both of them combined have saved around 500K. They live in Ottawa and the daughter lives in Oshawa. They are open to get a place anywhere in between if need be.

February 6, 2019
2:48 pm
Loonie
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So, just to clarify, their question now is...?

February 6, 2019
2:58 pm
promise
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Loonie said
So, just to clarify, their question now is...?  

They are basically weighing the options of buying a place vs getting back into the stock market but more conservative. They wanted to hear from other contributors that have expertise in those fields.

February 6, 2019
3:22 pm
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OK, I'll be quiet for now! lol

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