When the Future Becomes the Present.

Thinking about retirement before it happens is just common sense. But what questions should you be asking yourself? While seeking the advice of a professional like a retirement advisor can be helpful, there are a few questions to start thinking about as you begin to plan.

Deciding early what your wants and priorities will be in your golden years will determine the steps you need to take now. Will travel be more important to you than having a house big enough for the whole family to visit? Will you want to live simply and not have several cars and a large house? Of course, wants and desires will change over the years, but having a set plan to begin with is a good idea.

What are your liabilities, income, and expenses? These will be considered when planning your retirement. You need to identify how much money you will need and where it will have to come from.

It is important to identify all possible income sources that will be available to you on the day you retire. Those could include pensions, RRSPs, savings accounts, government benefits, investment property you own, and your home. Keep in mind you don’t want to rely on the Canadian Pension Plan (CPP). The average payout is $20,000 or around $1,300, and is taxable.

If you think you’ve done everything right, life can bring surprises.

Did you know…

About 20% of retirees are found to be still paying for mortgages, while 66% are carrying credit card debt.

Common Financial Woes That Can Prevent Relaxing Retirement

Had to retire early due to a health issue.

A heart attack or a bad back or hip can force people into early retirement. It doesn’t even have to happen to you…it could happen to a spouse and have the same devastating effect. There are a number of health reasons that could keep someone from continuing to work. Don’t rely on disability from the government to cover all your expenses. Make sure you are paying into a RRSP or other investment from an early age so that unexpected illnesses won’t keep you from the retirement you deserve.

Still had unsecured debt.

If you are not aware of your credit card balances, you just might carry that debt into your retirement where you weren’t counting on it still being an expense. It might not have even been a frivolous vacation or an out-of-control spending habit. It’s just the longer you have credit, the more the credit companies will throw at you, so it is best to pay off your balances every month as often as you can.

Still owed on a house and/or investment properties.

Again, retirement can sneak up on you or be forced upon you. When investing in property or managing the mortgage on your primary residence, keep this in mind. A 2nd mortgage might sound fine to pay for an elaborate vacation or to fund a grandkid’s wedding, but you will have to pay it back eventually.

Spent more money before retiring or after retiring than you should have.

People get excited at the prospect of not having to go to work anymore. They see a healthy sum of money in their retirement portfolio and decide they’ve earned a little fun. New cars, expensive vacations, purchasing vacation homes, etc. all will hit your retirement money in a big way. Stick to your retirement plan so your retirement can work for you.

written by MY DLC Marketing team

Bank of Canada Hikes Policy Rate by 25 bps, and Sustains Current Bond Holdings.

Bank of Canada Starts Hiking Rates, Signalling More To Come

The Governing Council of the Bank of Canada raised the overnight policy rate target by a quarter percentage point in a widely expected move and signalled that more hikes would be coming. This is the first rate hike since 2018. In a cautious stance, the Bank announced it was continuing the reinvestment phase, keeping its overall Government of Canada bonds holdings on its balance sheet roughly stable.

The Bank’s press release highlighted the major new source of uncertainty provided by the unprovoked invasion of Ukraine by Russia and suggested that it is a new source of substantial inflation pressure. Prices for oil, metals, wheat and other grains have skyrocketed recently. Moreover, this geopolitical distention negatively impacts confidence worldwide and adds new supply disruptions that dampen growth. “Financial market volatility has increased. The situation remains fluid, and we are following events closely.”

The Bank commented that economies have emerged from the impact of the Omicron variant more quickly than expected. Demand is robust, particularly in the US.

“Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, Canada’s labour market recovery suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.”

Canadian CPI inflation has risen to 5.1%, as expected in January, well below the 7.5% level posted in the US.” Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation increases the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.”

The final paragraph of the Bank’s press release speaks with great clarity: “The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement the policy interest rate increases. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target”.

Bottom Line

The Bank of Canada has made a clear statement regarding the outlook for a normalization of interest rates. We expect a series of rate hikes over the next year. Expect another 25 basis point increase following the next meeting on April 13. The increased uncertainty and volatility arising from the war in Ukraine is front of mind worldwide. Still, it will not deter central banks from tightening monetary policy to forestall an embedded rise in inflation expectations.

The Bank of Canada has postponed Quantitative Tightening, for now, a prudent move in the face of geopolitical uncertainty.

Written by DLC Chief Economist Dr Sherry Cooper

5 Reasons to Invest in a Home Inspection.

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

In fact, there are five reasons that a home inspection might just be the best $300-$500 you ever spend.

It Provides an “Out”

When buying a new house, it is always best to avoid taking chances. While a house may look great on the surface, hidden structural issues such as cracked foundation or roof damage can easily turn into expensive repairs. A home inspection can help reveal any large and/or hidden issues, which can often provide an ‘out’ for the buyer.

If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost a few thousand to replace. Perhaps the seller would split the cost with you? It’s worth asking. If the price cannot be re-negotiated if issues come to light, then it is best to just walk away on the basis that the home will cost you too much in the long run.

Confirms Safety and Structural Integrity

Another benefit of having a home inspection is not only to find issues, but also to confirm structural integrity. During an inspection, the inspector will review everything from the attic to the furthest reaches of the basement and will look for things like mold, holes in the chimney, saggy beams or improper wiring.

Reveal Illegal Additions or Installations

Similarly to determining any safety and structural issues, home inspections can also reveal hidden additions or DIY installations that may cause trouble down the road. If the seller wired the house improperly or used substandard materials, it not only could cost you big in the future but it could even null and void your home insurance should something happen!

Forecast Future Costs

A home is an ongoing expense, much like a car. Unless it is brand new, there will be regular maintenance and updates required to replace things when they become old and inefficient. For instance, water heaters typically last for 6-10 years, the life of a good roof is around 20 years, while furnaces can last up to 25 years. The home inspection report will include an estimate on the remaining life for each of these big-ticket items, which will give you a heads up on future expected costs and provide you time to save for their eventual replacement.

Peace of Mind

Finally and perhaps most importantly, getting a home inspection is important for your own peace of mind. A home is a huge investment, and one that you will be paying off for 20 or 30 years. It is much easier to feel good about your investment after you have gone through a home inspection and you know that the house is safe and that you won’t run into any surprise problems down the road. While a home inspection isn’t free, peace of mind is priceless and a few hundred bucks is worth it!

Written by MY DLC Marketing Team