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October Newsletter - How much do you leave behind?

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It’s hard to put a number on. Most parents with kids and grandkids and/or charities would like to leave something but the question is how much and what would this leave for them to live on?


Said differently the question is how much can I spend in my retirement so that a) I don’t outlive my money and b) There is something left.


Most people don’t consider these questions in any kind of detail. We would all like to leave something behind from a life’s work but how much?


Let’s take the example of our friend and client “John”. John is 71 and has two adult children and one beautiful 6-year-old granddaughter. John wants to leave an inheritance but doesn’t know how much and at the same time doesn’t want to compromise his retirement.


As a starting point to the conversation, we discussed how much is appropriate to be paid out. John thought that 10% of his assets would be a reasonable number. In his case, Jonn’s net assets, before tax were about $1,000,000. As a ballpark measure, if he could leave 10% of that or $100,000 that would be a good number. In order to preserve that amount in future, we considered a Universal Life Insurance policy that would guarantee at least that value for the inheritance.


For a $10,000 premium annually for 10 years, or 10%, John was able to get an immediate death benefit of close to $200,000, not the original $100,000. 15 years down the road, the death benefit grows to be more like $250,000 along with a cash value of roughly $50,000.


This means that during retirement, John can spend $900,000 of his saved assets without worrying about what his kids will get on his departure. This is a significant arrangement. Think about it. If you have $1,000,000 in net assets. Your beneficiaries will ultimately benefit to the tune of $250k and the original 10% investment is now significantly more valuable to them.


Even in the short term, should the unlikely happen and John were to get hit buy a bus, his total estate value is much higher as a result. The death benefit on day one will be much more than the 10% of the original $1,000,000 in total assets.


The net effect is to quantify two things. First is an established base value for your ultimate estate and second, to quantify how much money you have for yourself in retirement. Planning for the inevitable is a smart strategy. Call us if you want to learn more.


How are the Markets ?


For most of this year we have been ringing the bell on all those things that continue to propel the markets. Low inflation, low interest rates and low unemployment. None of that has changed. They are all drivers of a healthy economy and therefore healthy equity markets. We have also said that in as much as Donald Trump is an unattractive character, who has inconsistent policies, he can’t really do much on his own, for now, to negatively impact the positive forces as sited above. And so, it seems that the 10-year bull market is still intact.


Markets historically have a tail wind toward year end. The two most difficult months of the year, namely September and October are behind us and have given us new highs in both Canada and the US. We are currently building our thesis for 2018. Stay tuned.