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[Somalina]

GETTING PERSONAL CANADA: Learning To Spend Rather Than Save

 

 

By Monica Gutschi

Of DOW JONES NEWSWIRES

 

TORONTO (Dow Jones)--Canada's baby boomers have begun turning their focus to spending rather than saving.

 

The first wave of that key demographic bulge is set to turn 65 next year, and many, if not most of them, will retire. That means they'll stop contributing to the Canada Pension Plan, their company pension plans, or their Registered Retirement Savings Plans, and instead, begin to live off those assets.

 

For this cohort, and those coming up behind them, the key concern now is how to take their savings and spend it wisely: first of all, to maintain a certain lifestyle, and secondly, to last for what could be several decades.

 

"A lot of people don't even know where to start," says John Tracy, vice-president of managed investments and wealth planning at TD Waterhouse. "The truth is, until you have a conversation about what your expectations are, (it's) really hard to build plans around what those retirement needs are."

 

Indeed, a recent study by industry consultancy LIMRA found that even Canadian retirees who have worked with a financial adviser and drawn up a financial plan still feel they needed more help learning about these issues. For example, 46% of the retirees who had Registered Retirement Savings Plans had yet to convert them into other products. Even though 76% said their advisers discussed how to make their investments last a lifetime, 53% said they could have used more help with that issue, and even though 83% said their advisers discussed the types of products available to draw down income, 51% still didn't fully understand their choices.

 

Crucially, a goodly chunk of retirees didn't know how to estimate their retirement income nor how to estimate their retirement expenses, regardless of whether they'd worked with an adviser. In fact, the survey showed that only half of advisers estimated the amount of expenses the retiree would have, or recommended a dollar amount or percentage that would be withdrawn annually on a sustainable basis.

 

Part of the problem, says Tracy, is that everyone's situation is different.

 

"There is no cookie cutter here," he says. A typical retirement plan will determine non-discretionary, or basic expenses, and ensure there is guaranteed income to cover them. It can take a bit more risk--and therefore potential growth--on products to provide the extra income for non-essential expenses. And it will include insurance where appropriate to guard against risk.

 

But what is considered an "essential" expense depends on the individual and their lifestyle, Tracy notes. For some it may be as basic as food and shelter while for others, a golf-club membership may be non-discretionary. Health issues and family history are other variables that can influence retirement income and expenses.

 

None of that can be determined without a lengthy and detailed discussion, Tracy says.

 

Those on the verge of retirement also need to deal with changing expectations on investment returns, Tracy says. Where once advisers may have used an annual 8% return as a rule of thumb, the market volatility over the past decade has thrown that out the window. "I'm not sure people's expectations over future returns have quite caught up with reality," he says. Among the lessons learned from the recent market crash is that those Canadians approaching retirement need to "start getting more defensive and focus on capital preservation earlier," he says, as they aren't likely to have the time to rebuild any portfolio value lost in the past few years.

 

According to the LIMRA study, retirees spent about 58% of their income on basic expenses, another 7% on health-care and long-term care costs, and were setting aside 9% for future expenses and medical costs.

 

-By Monica Gutschi, Dow Jones Newswires; 416-306-2017; monica.gutschi@dowjones.com

 

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[Showqi]

Communist Laos set to open stock market this week

 

BANGKOK - Communist Laos is set to open a stock market Tuesday, hoping it will attract capital to its largest enterprises and thus boost the economy of one of the world's poorest nations.

The Lao Securities Exchange, headquartered in the capital of Vientiane, will debut with shares offered by just two state-owned enterprises — Electricite du Laos Generation Company (EDL), the country's major energy enterprise, and the Banque Pour Le Commerce Exterieur Lao, official Lao media said Monday. Foreign participation will be limited.

The exchange has been set up with aid from South Korea 's own stock market while neighbouring Thailand also offered assistance.

"There's a twofold reason. The exchange will allow an alternate source of capital other than banks and allow public participation in the growth of the economy," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore. "A broad capital market will certainly help economic development."

But she said that it would take some time for foreign equity to flow in. "You just can't do that by opening up a stock market," Tan said.

The Vientiane Times, a state-run newspaper, quoted a securities executive as saying that foreign individuals will be able to buy a maximum of 3 per cent of shares issued by EDL while foreign companies and institutions will be able to purchase up to 10 per cent.

Hinphet Chanthalansy, deputy director of BCEL-KT Securities, said a number of foreign enterprises, especially Thai power companies, have expressed interest in EDL. He said shares in the company were oversubscribed by foreign investors during the recent initial public offering.

The newspaper said exchange officials say foreign ownership had to be limited to keep the inflow and outflow of foreign currency stable, one of the main drivers behind a steady and strong Lao kip.

Foreign investors trading on the Lao exchange must use Lao kip for all transactions.

The Lao government has committed to keeping the value of the kip within a 5 per cent range this year. The kip has increased in value against the US dollar in recent years but depreciated against the Thai baht.

 

http://ca.finance.yahoo.com/news/Communist-Laos-set-open-stock-capress-2390462075.html?x=0