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Planning for your future, and beyond

Anthony Maiorino, of RBC Wealth Management, says most investors put off estate planning 'as long as possible.'

FRED LUM/THE GLOBE AND MAIL

LONG-RANGE PLANNING

Planning for your future, and beyond

A well-invested portfolio is only part of the picture when it comes to overall financial security for you and your family

Marlene Habib

Imagine outliving your savings, suffering a crippling injury that leaves you unable to work, or dying and leaving loved ones laden with debt.

When it comes to financial security, there's little room for error, especially if you're the one in charge of investing for your family's future. All the more reason to take stock of your cash, property and other assets, and get a plan in place - or re-examine an existing one - to cover your living, retirement and estate tracks.

Many people tend to put off making changes to their planning in good times, but the current global economic slide is changing attitudes, says Anthony Maiorino, vice-president of high net worth services for RBC Wealth Management.

"It's particularly important at times like this when people are looking at their financial futures and doing a reset, if you would, of where they are and where they need to be, that they consider planning along all assets, whether it be from a retirement perspective, which is what people generally think about, [or] estate planning, which people tend to put off as long as possible," Mr. Maiorino says.

Cary List, a certified financial planner (CFP) and president of the Financial Planners Standards Council, stresses the importance of looking beyond your portfolio - mutual funds, bonds and the like.

"It's no longer so much about that - it's much bigger," Mr. List says.

"It is important for people to step back and say, 'What is it I'm trying to accomplish?' Certainly a well-invested portfolio is a part of the picture, but it's a small part. . You need to focus on the reality of everything you want to do."

The global economic downturn has made it clear that "the vast majority of Canadians who need a financial plan either don't have one or, worse, think they have one and they don't," says Ted Rechtshaffen, a CFP and head of TriDelta Financial Partners in Toronto. "The big issue is they confuse investment advice with a financial plan."

It's never too early to take control of your financial future, and never too late to make changes that reflect shifting economies and circumstances, says Robert McCullagh, a Calgary-based CFP with the independent firm Benefit Planners Inc. and a financial planning instructor at Mount Royal College.

While the strategy for a 25-year-old would differ from that of a 40-year-old, both situations would vary from a 60-year-old's. "Everyone is different, but I do think it's so important that people focus on their life goals and not their financial goals in isolation," says Mr. List.

"Don't start with money; start with your life," he adds. "Assess your debt load. Are you getting married, are you looking to retire at a fixed age, and how much would you need to do all that? What about if you get hurt?

"Looking at the next generation, ask yourself, 'Am I going to have an estate passed on to the appropriate people with the least tax implications as possible, and what are the pieces of that puzzle on that journey?'"

Mr. McCullagh says he coaxes clients off the "I want this now" idea and onto thinking 20 or more years down the road.

"Often we need to slow our clients down who want immediate gratification in their financial plan," he says, stressing that even if you put your financial and estate stakes in the hands of a professional planner, it's prudent to keep on top of things, and keep the dialogue flowing.

"When things change in your life - be it a job change, which is prevalent in today's world, a family change, a new partner, a birth, dealing with the stress of children, parents, the world changing - take the time to really digest what you talk about with your planner. You need to open your statements; this is your money, you need to be engaged in what the outcome can be."

Where to start on the road to financial planning success?

"Take stock of where you're at today; that's the first step in terms of a financial plan," says Mr. Rechtshaffen. You need to determine:

* What you own.
* What you owe and what the terms are on what you owe.
* What you spend.
* Whether, in the next five years, anything major is going to change - "it's a bit of a crystal ball."
* What you want to do now and in the future.

The importance of each depends on where you are in life, Mr. Rechtshaffen says.

"If you're 70 and you've built up reasonable wealth to the point that given your lifestyle, you will never outlive your money, the issue tends to be mostly about what you want to do with the rest of your life and what you want your legacy to be," he says. In some cases, that means "encouraging the person to spend more money on themselves, and [the discussion] tends to be a lot more tax-driven and estate planning-driven. Whereas if somebody is 35, usually it tends to be a lot more focused on debt and debt repayment . [and] on doing more career-wise in the future.

"If I talked to a 35-year-old about taxes, likely they don't care that much," Mr. Rechtshaffen says. "If I talk to a 70-year-old, they care an awful lot, usually."

Generally, the older you are, the more complicated the financial plan, the experts say. But one big question most people want answered is: 'Will I outlive my money?' says Mr. Rechtshaffen. "We see a lot of people who have nothing to worry about financially but are cutting back tremendously because they feel they will outlive their money."

Financial planners have tools to determine whether a person's plan will help keep him or her in the comfort zone. For example, Mr. Rechtshaffen's company, TriDelta, has an online tool that predicts a person's estate value, based on actuarial tables, tax rates and other information.

"A lot of people . are missing being able to do more with their lives than they have because they have been afraid to spend," he says.

"They're missing helping kids and grandkids more. . They could have made a much bigger difference than they have with their church, synagogue or a charitable organization."

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