CAN I AFFORD TO RETIRE?Written by Peter F. Baigent CFP, CLU, CHFC, RFP
First Published Fall 1990 Almost every day I get asked, "Can I afford to retire?" Although we have very sophisticated computer programmes to answer these questions, we must first ask client "How much do you need coming in every month, in today's dollars when you retire"? This gets everyone squirming at thought of having to do some budgeting, to determine answer to that question. I guess budgeting conjures up thoughts of early years, when pennies had to be pinched and planning was a necessity. I do not feel budgeting is necessary at retirement, but an analysis of your cash requirements will be necessary in order to determine when you can retire. This is rather a hypothetical cash flow estimate.To further complicate problem, most people think in after tax terms as they are used to a take home pay cheque. At retirement, you usually have to remit your own income tax payments directly, whereas previously they were deducted at source. There will be a lot less deductions at retirement. You no longer have to pay Canada Pension or Unemployment Insurance, Union dues or most group insurance costs. But, you need to base your calculations on gross income. How much you will need at retirement depends totally on your lifestyle. A good financial planner will tell you if your figure is realistic, but standard of living is yours to decide. Henry David Thoreau, famous American philosopher in his book "On Walden Pond", speculated that one could subsist by living in a pine box in a forest near pond. Although example is extreme, it makes point about lifestyle. It will be different for each person. What is suitable for me may be
| | Warning - This Lease Might Explode Any MinuteWritten by George A. Parker
Mike Caringi, owner of a small New Jersey business that sells pumps, found himself facing a gut-wrenching dilemma last summer. Should he continue paying $ 1,500 each month for essential telecommunications services he no longer receives and for leased equipment he claims was never installed? Or, should he stop making payments and face a potential lawsuit from firm that financed equipment under a ‘hell or high water’ lease? Mr. Caringi’s company is one of several thousand small companies around country reeling from bankruptcy of Norvergence, a reseller of telecommunications and Internet services. At core of quagmire facing Mr. Caringi and others is that Norvergence succeeded in getting customers to sign separate lease and service contracts that provided its services. When Norvergence abruptly shut its doors, it left thousands of its customers scrambling to replace telephone and Internet services while obligated to shell out over $ 200 million in lease payments to Wells Fargo Financial, CIT and 30 other leasing companies over next five years. How can you protect your company from being victimized in a similar situation? Certainly, most transactions involving equipment leased in connection with a related service carry some degree of risk. You can reduce that risk by taking certain precautions. First, where possible, avoid leasing equipment when equipment is proprietary to a service. The chances are that you will be stuck with equipment if service provider fails. Make sure that leased equipment has an underlying value that justifies lease. By doing a present value calculation of all payments owed under lease agreement and comparing that value to fair market value of equipment, you can see whether lease value is reasonable. Check to see whether equipment is used by similar service providers, in case you need to switch services. Finally, make sure you can resell leased equipment in after-market, if necessary. As a last resort, you may be able to cut your losses by having ability to buy-out equipment from leasing company to be resold to someone else.
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