Your Interview

2. What are the most important or valuable investment decisions a single person in her early 30's could make?

John Podlewski: That’s a great question first off. I think what needs to be assessed is when do you want to retire and what lifestyle do you want in retirement? We use what’s called an independence number. So if you made $50,000 a year today in your 30s, what could you live on at 60-65? 50 per cent of your income, 75 or 100 per cent? And then we adjust it for your inflation at that period of time and if you do or you do not want to count on government pensions. That calculation is the most important factor in making that decision because a lot of people invest with no road map and most importantly, no destination. Without the road map and destination it’s almost futile to keep an investment discipline in place.

I have just begun my career after graduation and have recently moved out with my boyfriend.

Between us there are credit card and OSAP debts. While we are trying hard to reduce the debts we do not want to wait until the debts have been paid off to start investing, especially in our retirement.

What strategies would you suggest for people in our situation? Specifically, what kinds of investments should we turn to, in addition to RRSPs?

Thank you.

John Podlewski: The investment world to me is like everything else, it requires a discipline and how that discipline is created is based upon a risk tolerance. I can’t answer that, not knowing this couple, however I would say balance is the key word and as they’re paying off their debt they should be saving on a consistent basis, even if that means a couple of hundred dollars a month at a dollar cost averaging scenario, in to a well managed portfolio.

1. How is debt associated with student lines of credit and student loans looked upon?

2. Massive debt for professional students (Physicians, Dentists, Optometrists) is almost unavoidable. Would you recommend to start saving for retirement while paying down this debt, or just paying it down first then worrying about retirement?

John Podlewski: Well I have to kind of answer that question tongue-in-cheek because I don’t know the entire situation. But I have to say the key factor here is balance. Yes you have to pay down your debt but if your investments are earning a great rate of return and of course in the last five years in our country we’ve had a great run with the natural resources at the helm and there have just been rates returns out there so you have to assess that at the same time you’re making that decision. But I really truly believe that if you balance yourself with paying off your debt and saving for the future you can not regain the years you’ve lost in your compounding values so even though people have a huge interest in either paying off their mortgage or paying off their debt, you’ve gotta keep consistent with saving because the old rule 72 states that if take your interest rate and divide by 72 it shows you the length of time it takes for your money to compound and double therefore if you’ve got a 12 per cent return somewhere your money’s doubling every six years. If you give up one year that compounds against you in the future to that doubling effect, you’ve lost a lot of money.

I'm in my mid-30s and have no savings whatsoever because of circumstances beyond my control. I have some credit debt.

Is it too late to save meaningfully for retirement?

John Podlewski: I think it’s never not a good time to save for retirement. I think you always have to save for the future. I think sometimes, you know, as a populace we’ve been spoiled and don’t go out and make the additional monies that we can. Very few people will go out and take a second job to fund their future and their retirement. If you don’t have it in hand, maybe it’s time to take on a small business or maybe it’s time to go out and get another job two or three nights a week and invest that money properly and have that retirement. You know a lot of people cry the chicken little syndrome whereas they could go out and fix the problem that they have just by getting other income in the household.

I am a 26 year old with no debt and 2 degrees. I have little financial education. I participate in a defined pension benefit through my employer and still invest about $3600 a year in a private RRSP.

I'm not sure what the 'rule of thumb' is for saving and a secure future, especially how much money to save to achieve a suitable down payment and when/if to become a homeowner.

What percentages/ratios should i be using to buget my income to increase my future wealth potential and asset accumulation ability?

I feel like i'm 'missing the boat' on financial management strategies that other people are in the know about!

John Podlewski: I like to go to what every third party consumerist advocates and ten per cent has really been the bench mark and that’s what every person should really adhere themselves too. Ten per cent right off your paycheque.

Do you recommend debt consolidation through your mortgage? When is it good to do this and when is it not?

John Podlewski: I absolutely recommend it because first off you’re gonna get a single digit, consolidation, secondly you’re gonna amortize that over 25years which is gonna give you the lowest possible monthly payment you can have in this country and finally with that low payment you will free up those dollars and take a portion of that and apply it directly to the principle and there’s no way mathematically, that’s absolutely irrefutable. It’s the best way to do it if you have the equity in your home.

How much does one reasonably need to have saved for retirement. I started saving late due to divorce, poverty and student loans.

What is a ballpark figure for retirement in eighteen years.

John Podlewski:
Again the general answer is spot-on. You need to know when it is you’re going to retire and what is you can handle for retirement and then you need to work backwards to see if you can actually handle the cost of that.

Under what circumstances and timelines do the credit reporting agencies (Equifax,Trans Union, etc.)start ADDING points to one's credit rating rather than taking them off?

Yes, I know they advise paying bills on time, etc. but once you have a bad credit rating and you are trying to improve it, how long does it take the credit agencies to catch up and start improving your rating?

John Podlewski: She’s discussion the BEACON score program and it takes some time, especially if you’ve gone through an insolvency of any kind — that’s seven years before that clears up. But if you maintain your payments and you maintain paying off you know, on a prompt schedule usually you can see things change every 3 — 6 months. I would add to that, that uniquely enough the more operating lines of credit you have that you are paying on time, the quicker that BEACON score will rise.

I am 53 years old and concerned about retirement income. I will be receiving Canada Pension Plan benefits as I've worked since 1972 and Old Age Security at 65. I also have a small government pension accessible at 65. What are the pros and cons of starting an RRSP at this late stage? Also, if I wanted to discuss this with someone, who's the most reliable source -- bank, investment firm, insurance firm?
Thanks.

John Podlewski: First off, again I don’t think there’s ever a bad time to save. Especially if she’s going to RRSP it, there is a tax deduction every year, she may have a huge carry forward in her RRSP where she could take what I like to call positive debt, which she could take a loan out from her local lender or bank should it be and able to get a massive tax deduction for this year and take that money and pay off that loan. She needs to go to somebody who is a full-service broker, who has both an investment license and an insurance license who can assess all her needs.

I work for the Government and will get a good pension when I retire. My spouse works but will not get a pension other than her CPP. We are in our early 40's. We have a house and owe $150,000 on the Mortgage at current amourtization will be paid off in 10 years. We currently have approx $30,000 RRSP. We have stopped contributing to the RRSP in favour of paying off the house.

Is this a good strategy? or should be deflecting more towards the RRSP.

John Podlewski: I’m going to have to assume that his wife doesn’t make the same income as he does, which she would be a great candidate to put RSPs in her name since she’ll be taxed less at retirement, so there’s a feather in his cap for that. Once again I’m all about balance where I think it’s great that they want to pay off that home but they need to focus on what is that they’re going to get out of retirement? What do they want out of retirement and will those pensions actually deal with those retirement goals? That’s what needs to be assessed. You know I’d hate to have a family go through life, pay off a house, get to retirement, have grandchildren want to come visit and Christmas and all of a sudden they’re in an apartment. Why? Because they made that house the goal of life and not becoming financially independent to whatever it is they consider financial independence.

Is there an age bracket where it is no longer feasible to buy a house? I am 44 years of age and my husband is 49. Due to a previous foreclosure of a home, we're both terrified to get into the housing market but have heard it's better to own than it is to rent.

John Podlewski: I always tell people that ask me that question, would you write a cheque for somebody else’s investment and watch them live high on the hog?

Host Bob Sudeyko: You mean like renting?

John Podlewski: Yes. I don’t think there’s ever a bad time to own but whatever the issue was in their past, hopefully the lesson was well learned not to have it happen again. And so as I tell all people in the seminars I do across the country, you have to decide your wants and needs and don’t overbuy.