Need some Financial advice

[holdfast]

i miss the days of having $30k+ in my savings account. gotta love making $120/month interest off money that i could withdraw at any time

 

you can make lump sum payments on your mortgage each year and the amount depends on the bank. im with ING direct (by far the BEST bank to deal with) and they allow you to pay off 25% of the principal each year with no penalties which is much higher than the normal banks.

 

why havent you put this money down on your mortgage already???

 

Three years ago that's exactly what I wanted to do. I retired with a Severance of 1,000 per year of service, 25,000. Here's the Kicker, it had to be Registered or I lose half just in taxes before I even get it. Off to see the Financial manager through the Military. Told her what I wanted to do, pay mortgage with the 30,000. So we GICd it in 10,000 x 3 in case I needed it in case of Emergency. Scary when you get out of a job for 25 yrs and working there before the day you married the Wife and a move to Saskatchewan to a city I never been before. The plan was Mortgage would be payed by the end of the 5 year term. Mortgage at 3.2 percent, and ING GIC of 4% made Wife happy. Last year after some coaxing we decided to go with Mutual Funds. BIG MISTAKE.

 

I want to pay this Mortgage as soon as Possible. In less than 6 months we have lost 25% roughly 1/3. That's one year I have to pay the Mortgage 10,000 to pay the Principle. I look at as 10,000 out of pocket, plus another 10,000 because we added another year= 20,000 so far. This is why. Do I get out now, or hope that I will make it up by next year. My pension check is paying the Mortgage and I'm working for the rest of the Bills. It would be Wonderful if that Pension check goes to us instead of the Bank vacuum. I'm 50yrs old and I will lose that pension to Canada Pension at the age 65. That really sucks.

Edited January 30, 2009 by holdfast

[danc]

I'm a member of the -35% club too.

 

Unfortunately you've been given some bad advice Rob. Mutual funds are not a short term investment. Yours is a textbook example of just why that is. I think that you probably talked to a salesperson rather than a financial adviser.

 

Here's what I'd do. Leave the money right where it is. Keep working to pay the bills and the mortgage. Yea, I know it sucks, but you're only 50. In three years, the house is paid off, and I'll bet that that $20,000.00 is worth a bunch more than that. So in three years you'll be mortgage free, have a nice chuck of change in the bank, and a happy wife. Not such a bad deal if you ask me.

 

Whatever happens, I wish you luck and prosperity.

[Tarzan's Jane]

I don't know Holdfast....but I feel your stress....not fun. I guess you need to ask yourself how much more are you willing to lose- because you will. Perhaps leave a bit and take out the rest and put it into a high savings account...and what will be will be.

 

As we know....life is full of could haves and should haves.

 

All the best.

[Dnthmn]

Here is the big question, is it a must for the mortgage to be paid of or is it more about having less money going out every month?

 

Someone else already mentioned the line of credit option to replace a mortgage. They can be set up as "Interest Only". Switch your mortgage to one of those and even at 4% your required payment will be like $100 a month. I know that this will not pay down the principle...I'm getting to that.

 

Split the difference from what you would have been paying on the mortgage and put half in RRSP/GIC and the other half goes to making life a little easier for you and the missus. Take your bigger than usual income tax refund and slap it on the principle amount of $30K. Based on your stating that $10K was a years worth of Mortgage payments This will free up about $350 a month for you and let you save about $4K a year.

 

Meanwhile sit on your current investments until they recover enough for the Wife to agree to let you pull them.

Edited January 30, 2009 by Dnthmn

[DT10Sam]

Hi Holdfast,

 

I have had my RRSP's with Scotiabank now for 10 years to watch it do nothing but lately loose just over 10,000.00. I was told by the bank back 10 years ago that my RRSP's would grow to a nice nest egg. Well they have been wrong on this one and panic set in and I switched it over to a GIC for a 5 year term. Right now I am pleased knowing that I am getting 4% which seems better than loosing any amount of money. I certainly did not make anything in those 10 years but watch it go up 1,000.00 and then down 800.00 then up 2,000.00 and then next quarter do down 2600.00 a continual roller coaster ride of hope, that is hoping to make some money on your investment.

 

Well the roller coaster ride has ended with a maintenance repair of 10,000.00 and now I am pleased that I do not have to watch the markets take more of my investment. I guess it is a lesson learned and I am sure that it is not over yet. I am finding out most of my friends that have investments are reporting similar occurrences over longer period of time. It hink the GIC route is the way to go certainly not eating away at what I have.

 

Best regards,

Sam

[SlowPoke]

While it's true that you only lose when you sell, it's not always a bad choice. I sold to stop the bleeding (not as early as I should have) and will reinvest on the steady uptrend. I have some time on my hands thankfully.

[BigSmallie]

The reason most people don't make any money on mutual funds is they sell when things are down and buy back when things look great.....the opposite of what you should be doing. How many people bought Nortel

 

GIC's aren't without risk either........With GIC's yes your princpal is secure and if you can reach your goals by earning 4% then that is great but you don't gain purchasing power. You investments might be growing but your just keeping pace with inflation and not actually gaining any purchasing power. For non-RSP GIC's your actually not keeping pace with inflation once you factor in taxation so you are actually losing purchasing power. In the short term GIC's can look great but if you have a 10+ year time horizon mutual funds make more sense.

It's always best to sit down with a professional and figure out your goals first and then make investment choices instead of the other way around. Chat with 2 or 3 professionals if it helps to see if there is a general consensus. Investment planning is but a small part of Financial Planning......

[River Rat]

......selling stock at a loss and putting it into real estate at a loss is risky business. Figure out what invest you feel will rebound faster ....the stock and funds market or the real estate market and invest in that.

 

Your property value is WAY down and likly impossible to seel now anyway. Your RSP value is also WAY down but really easy to sell.

 

Try to get a handle on what you fell will rebound faster and invest in that. Where will you get the most bang for your injured buck ?

 

RR

[lookinforwalleye]

Even tho I know how men feel about premature withdrawal, I'd pull it out now Holdfast. Put it in a savings account for awhile to earn some interest.

 

Joey

 

 

yes the old buy high sell low strategy that`s a good way to stay broke a long time, the cost of living will eat any measly interest you will get from a savings account.

For what it is worth you are not alone my RRSP account has taken a huge hit if I was to sell everthing now and put it into a GIC or something I would never recoup the loss. If you have lost 10K how long do you think it will take to get back earning 0.25 or.0.50 percent?

For those that are patient there are tremendous bargains available now in the market

 

Talk to a professional, fishing forum=fishing advise!

[LeXXington]

I think everyone is in the -30% club. too late to change now.

 

I would go kick the FA for the bad advice. "Last year after some coaxing "

 

Make sure you never deal with them again, and for everyone reading never rely 100% on a FA advice do your homework.

 

No one knew how bad it would be but Mutal funds are long term not short term.!!!

[ozaibak1]

I would say if you need the money and want to be on the safe side, take it out now. If you can afford some risk and time, hold on to it. My feeling is this economy is gonna get A LOT worse before it gets better.

[rob v]

Are you loosing more sleep over loosing the $10K or the opportunity to gain it back ?

 

If you're loosing sleep over your investments and you're not worried about kissing the $10K good -bye then sell the mutual fund, pay down the mortgage and when your mortgage is paid - start putting that money into an investment.

[cram]

If you need the money, best to pull it out. You can't count on this market recovering. You may kick yourself if/when it does, but you certainly can't count on it. LOTS (not most, but lots) of economists predict this thign is going to get worse.

 

Have you done the math on what you're actually saving in $$ if you pay the mortgage down now instead of the normal 3 yrs of payments? Most mortgages are front-weighted with interest and back-weighted with principal , so you may not be saving that much.

[ch312]

i still dont understand why all of this money hasnt been put on your mortgage yet?

 

i have a 4 year mortgage for my home after putting down almost a 40% down payment. any extra money i have goes to the mortgage to pay it off quicker to save interest pay it off quicker.

 

focus on the mortgage and paying that off first. having $25k in GIC's is pointless when you have a mortgage to pay off. the money you make off of those will just cover the interest on your mortgage for the year so you wont really make any money off of your GIC. put all the money you can on your mortgage to pay it off and then think about putting money into various accounts to make interest off them.

 

im 23 and my house will be paid off in february 2010

 

i plan on using the extra money to buy a triplex and pay that off quickly as well with at least $3k/month mortgage payments. by the time im 35-40 ill have that rental property paid off and likely another one, my current house rented out, and a new home with property paid off. income from at least 6 tenants. now THAT is a retirement plan

 

my goal in life is to retire young and rub it in the faces of those who have doubted me!

[Kirk]

You need to speak to a financial advisor. Get one and spend time informing him of your whole financial scenario and your goals.

 

Selling your stocks guarantees your loss, as opposed to holding and waiting for the eventual upturn, which is the advice I received.

 

Most of the decision is based on your risk tolerance, which if it is zero, then you should pay down your mortgage.

[fishinggeek]

Well, there's not a lot I can help you with as far as investments go but I can tell you one thing. Having a mortgage free home is very nice but, don't let the dream of being mortgage free rob you and your wife of your happiness today.

 

Keep healthy, don't live above your means and you'll be a happy dude.

 

Roy, this is probably the best advice I've ever heard. Unfortunately we cannot undo time but hopefully the future holds some prosperity, even if the prosperity isn't financial.

 

Holdfast, not sure there are many financial advisors willing to do quality work on 20K, and for the ones that are, be wary as they are probably paid by the folks who own the product they recommend to you. To me, Roy's advice is first and foremost. After taking his advice and making sure you take care of yourself in non-financial terms, I'd likely paydown my mortgage, depending on what (if any) penalty there is to do that. In order for it to be worthwhile to not paydown your mortgage, you'll have to earn returns above your mortgage rate after tax and adjusted for risk (and add any pre-payment penalty, if any). That's a huge mountain to achieve, especially when adjusted for risk. It might be wise to save your time and stress (and maybe future disappoint), and just put it on your mortgage.

[doubleheader]

I can't speak for Canada but I can guarantee you this, the optimistic outlook for the US is the market goes nowhere in 2009. Pay your mortage and you eliminate the interest you would have paid. It's a no brainer.

[BigSmallie]

That's a $600 interest savings and no chance of ever recovering the $10,000? I don't think that is a no brainer.......

[Guest steel'n'esox]

My mortgage has been paid now for three years, I sacrifized needed home renos, etc. to do so even though its a nice feeling there will be other needed things that will still suck up your money, child education plans, home renos vehicles etc. The most important thing you will ever have is your HEALTH, bar none money you have or dont have is not worth stressing over. STRESS is the silent KILLER. Go out and fish and take your mind off your mortgage, and the economy which blows things out of proportion to get listeners and sell newspapers.

[workwear]

hasnt anyone seen the uprise in preciuos metals........silver alone has jumped up in 6 months to over 11 dollars....thats close to 30% rise from last summer when this whole debacle began......buy preciuos metals!!!

 

 

and when i mean buy this i mean to buy the bullion...the physical stuff.....silver is projected to hit a 100 bucks.....gold projected to hit 3k.....i would rather buy the silver better return i think

 

in september when i had a quizzy qasy feeling bout the market i went out and converted my whole portfolio into silver bullion.....im up bout 15% from my intial investment........a gamble yes....but so far IM WINNING....bout tomorrow no one knows....

alot of talk bout the banks.....they are in deep doo doo ....i know of one particular bank that has been allowed....to fib on there balance sheet and to hold off on the info for a little while...eventually they will have to come clean...

 

hear say perhaps...ill never know for sure...

but i do have a feeling this is gonna get much uglier

 

buy silver!!!!

 

 

think bout it

 

 

 

could be an option

[fishinggeek]

That's a $600 interest savings and no chance of ever recovering the $10,000? I don't think that is a no brainer.......

 

Playing devil's advocate, I'm not sure that's the entire story, for a few reasons:

 

-Leaving it in the market, Holdfast exposes these investments to risk, and they have a chance of going to zero. Paying the mortgage, at least nominally, is risk-free.

-Since residential real estate is inherently less risky than mutual funds (and probably have very low covariance), and since he'll be less financially leveraged, he'll almost surely reduce his overall portfolio risk.

-His gains will be subject to taxes if he did realize some, even if it's registered whenever he withdraws it, but the interest savings on a mortgage is not taxable.

-Securities have costs, like management fees in mutual funds, that he'll have to pay over the time he stays invested. Paying down a mortgage does not have these commissions or trailer fees, though it may have a penalty depending on the contract.

-Paying down the mortage will give him instant cost savings that are compounded over time. Waiting in the markets to realize a gain diminishes some of this time value of money.

-Securities are very complicated. It is difficult for even large institutional investors to make money and they have the scale and expertise that us retail investors do not. It'll be much less stressful to paydown the mortgage, all other things being equal.

 

Certainly it's not a no brainer to pay down the mortgage, but it surely is not a no brainer to go the other way. I cringe when some investors are too naive with the markets, thinking that they'll be refunded any losses over time. This may or may not happen, but the opportunity costs can be high even if it does.

[Fisherman]

I don't know if I'm 100% accurate on my reading of his situation, however, I went through the same scenario when I left the CF 13+ years ago. The severance package has to be rolled into a RRSP or be fully taxed up front. So, if he did put it into a RRSP to postpone the taxman, I believe he's still better off to leave it where it is and pay the mortgage down by using other means, pension, work, whatever. If he cashes out the package now, he stands to get wacked big time on tax, at 30%+ so he looses another 7-8K to the taxman. I don't have a crystal ball and I'm defitnitely not an optimist, but, I believe things will slowly start moving forward and upward towards the end of this year. I would think that by the time he gets rid of his mortgage in 3-5 years through other means, his loss will have come back, maybe not 100%, but pretty close.

[holdfast]

Thanks for all your opinions guys. I kind of re-m evaluated my situation. Seems I had 20,000 in unregistered funds and 20,000 in an RRSP. Somewhere along the way 10,000 of my planned downpayment to end the Morgage next year ended in an RRSP. Presently Ive lost 8,000 between the two of them and its still loosing.

 

So I locked in 17,500 in a 3.5% GIC for two years. Ill gain half of what I lost and I know I ain't going to lose anymore. Ill only get taxed on the interest gained. The Planned 10,000 that I don't have will be made up of paying off my Mortgage an extra year. Now the 20,000 RRSP which is now at 14,000 I will not touch and hope that it rebounds. Well see what the Royal Bank is made up, of although I think they're like the Criminal Oil and Big three Car companies. Make Millions while the costomer suffers

 

My Big Lesson here is that we should of stuck with what we originally done with the SSIP Financial Manager when I retired. Everything was in ING and protected.

 

Thanks again guys

Edited February 1, 2009 by holdfast

[Moosebunk]

Young people reading this thread who are evaluating their own possibilities and considering investments should know that, the best investment one can make with any excess money is an investment in themself, not in any bank or institution, but in their education and career. Because the only thing that makes financial crisis easier to handle, is having excess finances to handle any crisis.

Edited February 2, 2009 by Moosebunk

[camillj]

Holdfast,

 

That sounds like a plan that will work for you. It may not be the MOST exciting way to play, but it sounds like the way that will allow you to sleep at night .. and it sounds to me like a very reasonable strategy ... if you want to 'play' why not mess around in a 'trial' account ... then you can keep track of what mighta-coulda-woulda been ....and maybe you'll kick yourself or maybe you'll thank your lucky stars ... truth is nobody knows ... I can guarantee you that there will be alot of money made and alot of money lost by people taking their chances over the next little while ... and frankly despite what many will tell you, if you are generally conservative (and it sounds like you are) ... this is a reallllllllly good time to stay that way.

 

The good news is you are in extremely good company as a very large majority of the soon-hoping-to-retire crowd have had to reassess their plans and goals...and conservative thinking of those long in the tooth is looking like a very sound strategy.

 

The better news is that the sun will rise again tomorrow morning and good things will happen ... the key is making sure you have the will and the strength to participate when you see it happening the way you would feel comfortable participating. And dont let anyone tell you otherwise.

 

Besides, NEVER forget .. its all really only numbers on pieces of paper ... and there lots of ways to find your peace without staring day and night at those numbers...and there are lots of ways to help yourself and others that are not directly related to the almighty dollar.