If you are planning on retiring and you have a defined-benefit pension with your employer, you have more than just the typical 2 options on how you want to handle your pension money.

Most think that they are limited to either:

• Leaving it with your previous employer and having them pay you for the rest of your life, or

• Commuting the pension (cashing out in a lump sum)

This is where option number 3 comes in - a “Copy-cat Annuity.”

What is a Copy-cat Annuity?

A copy-cat annuity mirrors your employer’s pension plan, dollar for dollar.

When you go with a copycat annuity from a Canadian insurance company, it has to be exactly what your employers pension plan offered you.

You get the same pension for life, instead of being paid out by your employer for your life (risky in cases of your employer going bankrupt), the insurance company is the one who pays you for the rest of your life.

There is also the chance when you get a copycat annuity, the insurance company can possibly provide you a bonus “surplus cash”. This is surplus money that your employer sends the insurer, which isn’t needed in order to fulfill the copy-cat annuity.

Copy-cat Annuities are not the same as a commuted value option:

Unlike when you commute the value as a lump sum and invest the money. A copycat annuity will be paid to you for life and is professionally managed by the insurance company.

Notable features of a Copy-cat annuity:

• Matches your pension exactly

• Possible lump sum of surplus cash

• Professionally managed by insurance company

• Same income guarantees if you pass-away for your spouse or another beneficiary

If you are considering a copy-cat annuity for retirement or are unsure if your employer has a Defined Benefit Pension Plan - let’s chat!

-Riley

Global equity markets started the week in negative territory but ended up ticking higher over the week ended September 9th. The Bank of Canada raised rates by 75 basis points (“bps”) during the week to 3.25%. This was the fifth consecutive rate increase. The S&P/ TSX Composite index moved higher, led by the Information Technology sector. In the U.S., the S&P 500 Index showed a gain, seeing broad gains across all 11 sectors. Yields on 10- year government bonds in Canada and the U.S. finished higher over the week as well. Oil prices rose higher at the beginning of the week when OPEC+ decided to cut oil production in its September meeting however, those gains were reversed as concerns rose about slowing global economic growth. Oil prices ended the week largely unchanged.

Global equity markets declined over the week ended August 26, 2022 as investors waited for the Fed’s speech at the Jackson Hole economic summit. Fed Chair, Jerome Powell, emphasized that their primary focus remains on bringing down inflation and their policies could be in place for some time yet. The S&P/ TSX Composite Index declined again due to the Information Technology sector as well as the Health Care sector. The S&P once again felt weakness in the Communication Services sector, dragging it down. Oil and gold prices moved higher this week as did yields on 10 year government bonds in Canada and the U.S.

I hear many reasons why “now might not be the right time” for someone to start investing/ saving or working on other aspects of their financial plan. I understand that some people may have loans or debts they are working on paying off, a big purchase on the horizon or some think they are young and have time on their side. We can create a budget that allows for both saving and other goals or obligations such as debt or ongoing bills. Some of the common phrases we hear as advisors is from people that come into our office and say, “I wish I would have started 10 years ago”, “I should have listened to that advisor 10 years ago”, “I wish I would have met you 10 years ago”. I’ll tell you what, you and I are here now so lets get to work!

 If we are looking at getting your financial plan started, we don’t have to start by saving hundreds or thousands a month. You also don’t have to have a lump sum of cash sitting in the bank before we can talk. The important part is to just get STARTED! We can start by building good savings habits with monthly contributions that fit your lifestyle and grow your plan from there.

The power of starting to save earlier in your life can have a big impact down the road. Consider the following example:

Investor A starts at age 25 and invests $2,500/ year for 40 years. Using a modest 4% annual rate of return, by the time investor A is 65 years old, they will have accumulated $247,066.

Investor B starts at age 45 and invests $5,000/ year for 20 years. Using that same modest 4% annual rate of return, by the time investor B is 65 years old, they will have accumulated $154,846.

Investor A will have accumulated about 60% more than investor B! Even though the two investors have invested the exact same total amount of money over their respected timeframes. How exactly is this possible you may ask? Well that’s the power of compound interest. Letting your money work for you over a longer period of time and soon the interest that you earn, earns interest as well.

It all starts with a conversation with your advisor. Get the wheels in motion today!

-Dillon

Global equity markets moved lower, giving back a portion of last week’s gains for the week ended August 19, 2022. The S&P/TSX Composite Index was pulled down by a weaker Information Technology sector this week. In the U.S., the S&P was largely brought down by poorer performance in the Communication Services sector. A big portion of these drops were felt due to the sharp decline in Facebook parent company, Meta. Relief at the pumps was still felt as oil prices moved lower while yields on 10 year government bonds in Canada and the U.S. rose over the week.

Global equity markets pushed higher for the week ended August 12, 2022. Markets have been rallying thanks to data showing that inflation has started to slow. The S&P/TSX Composite Index advanced, pushed by the Energy and Materials sectors. In the U.S., the S&P 500 Index finished higher, benefitting from the Information Technology sector. Oil and gold prices both rose over the week. In fixed income, 10-year government bonds in Canada and the U.S. also moved higher.

Has Inflation Peaked?

-In the U.S., inflation for July ended up below estimates, giving hope that the rise in inflation might be nearing its peak.

-The U.S. inflation rate was 8.5% in July, below the expected 8.7% and the incredibly high 9.1% in June.

-Lower prices of fuel helped to ease inflation however, food and shelter costs still rose throughout July.

-This positive inflation news heightens expectations that we could see some moderations of future interest rate hikes.

Here at Brady Wealth Strategies we help our clients build, grow and protect their wealth and assets. Along the way to achieving this, one of our main goals is to help educate and support existing and new clients. That is why we have created this blog to share our thoughts and ideas regarding the financial planning landscape to help facilitate conversations with your advisor.

We will have posts featuring market updates, investment and insurance strategies, explanations of different investment and insurance products as well as general educational pieces to make sure you are informed and up to date regarding your financial plan. If there is ever an idea or topic posted here that interests you or you want more information on, our advisors are always happy to have a conversation. Head over to our team page to reach out today!

-Brady Wealth Team