B10 | REPORTONBUSINESS O THEGLOBEANDMAIL| SATURDAY,OCTOBER19,2019
DOGBusiness quiz! Shares of
Johnson & Johnson dropped on
Friday after the company: a)
pulled Johnson’s “no more tears”
baby shampoo amid reports that
several babies did in fact cry while
getting their hair washed; b) was
the target of a class-action lawsuit
from consumers who alleged that
“when pulling my Band-Aid off,
several hairs got stuck on the ad-
hesive, causing great physical dis-
comfort and emotional trauma”;
c) recalled one lot – or about
33,000 bottles – of baby powder
after U.S. health regulators dis-
covered trace amounts of asbe-
stos in a bottle purchased online.
Answer: c.
JNJ(NYSE),US$127.70,
downUS$3.63or2.8percentoverweek
DOGFood-delivery apps such as
Uber Eats and Skip the Dishes
may be convenient for consum-
ers, but they’re giving restaurant
investors a bad case of acid reflux.
Units of SIR Royalty – which li-
censes trademarks to Jack Astor’s,
Scaddabush and other dining
chains in exchange for a cut of the
sales – plunged after SIR chopped
its distribution by 17 per cent, cit-
ing an “ongoing decline in ... food
and beverage sales” caused by the
delivery services and other fac-
tors. With same-store sales down
5.9 per cent in the quarter ended
Aug. 25 and showing no signs of
improvement since then, inves-
tors are eating elsewhere.SRV.UN(TSX),$10.60,
down$3.20or23.2percentoverweekSTARA winter parka over a crop
top? Shorts, running shoes and a
metallic silver down jacket? The
models on Aritzia’s website may
not know how to dress them-
selves appropriately for cold
weather, but the fashion retailer’s
stock is looking warm and toasty.
Shares of the Vancouver-based
company surged after Aritzia
posted same-store sales growth of
8.4 per cent for the 13 weeks end-
ed Sept. 1 – the 20th consecutive
quarterly increase – as net in-
come jumped 18.6 per cent. May-
be Aritzia investors could pitch in
and buy the models a sensible
wool sweater?ATZ(TSX),$18.61,
up$2.63or16.5percentoverweekDOGFor IBM investors, the
trend is definitely not their friend.
Shares of the struggling tech giant
skidded after IBM posted its fifth
consecutive quarter of shrinking
sales, as the acquisition of open-
source software provider Red Hat
earlier this year failed to make up
for continued declines in other
parts of IBM’s business. Even as
IBM beat earnings estimates for
the quarter, the revenue miss on-
ly added to concerns that the
stock – which is trading below
levels of nine years ago – will con-
tinue to underperform. Big Blue
investors are blue alright.IBM(NYSE),US$134.09,
downUS$8.67or6.1percentoverweekDOG“Look, under there!”
“Under where?”
“I just made you say underwear!”
The folks at Gildan are in no
mood for jokes after the maker of
underwear, T-shirts and other ba-
sics warned that third-quarter
sales and earnings will be lower
than last year and slashed its full-
year guidance, citing “significant-
ly weaker than expected de-
mand” for imprintable apparel in
North America and “ongoing
softness” in Europe and China.
With Gildan expecting 2019 free
cash flow to be about US$100-
million lower than previously ex-
pected and analysts downgrading
the stock, the stock suffered a
gotchy-pull.GIL(TSX),34.53,
down$11.45or24.9percentoverweekSTARSANDDOGSJOHNHEINZL
JOHNSON&JOHNSON
PASTFIVEDAYS
SIRROYALTYINCOMEFUND
PASTFIVEDAYSARITZIA
PASTFIVEDAYSINTERNATIONALBUSINESS
MACHINES
PASTFIVEDAYSGILDAN
PASTFIVEDAYSA
t 64, William is beginning to
think about how he and his
wife, Vi, will get by when he
retires. Longer term, he wonders
how Vi, who is 10 years younger,
will fare financially after he is
gone.
William, agovernment worker,
earns about $98,000 a year. He
will be entitled to a defined bene-
fit pension of about $1,400 a
month, or $16,825 a year, when he
retires at the age of 68, with a 50-
per-cent survivor’s benefit. Vi is
no longer working. They have two
grown children, some savings and
a mortgage-free condominium
townhouse in a Toronto suburb.
William wonders when he and
Vi should begin collecting Canada
Pension Plan and Old Age Securi-
ty benefits. He says he is willing to
work to the age of 70 if his health
holds up. “Should we sell the
house when I retire and move into
a rental?” he asks in an e-mail. “Is
my wife’s RRSP investment
enough for her?” As well, William
wonders whether their invest-
ment mix is suitable. He plans to
continue saving and investing as
long as he is working. His long-
term goal is to “leave sufficient
money for my wife to live on,” Wil-
liam writes. Their retirement
spending target is $2,500 a month.
We asked Matthew Sears, a fi-
nancial planner and associate
portfolio manager at T.E. Wealth
in Toronto, to look at William and
Vi’s situation.WHATTHEEXPERTSAYS
William and Vi came to Canada in
2000, so they will not be entitled
to full CPP and OAS benefits, Mr.
Sears says.
At 65, William will be eligible
for half the maximum OAS bene-
fit, which is now $613.53 a month.
If William begins drawing bene-
fits while he is still working, part
of the benefits would be clawed
back because his income would
be above the threshold of $77,580
a year, the planner says. Ideally,
William would defer drawing gov-
ernment benefits until the age of
70.
Each year William is a resident
of Canada will give him an addi-
tional year of credit toward the
OAS residency requirement. Plus,
for each year William defers his
OAS benefit past the age of 65, he
will get a 7.2-per-cent increase in
his benefit. These two points com-
bined make a big difference: At 65,
with 20 years in Canada, William
would get OAS of $306.77 a
month. At 68, he would get
$428.98, or nearly 40 per cent
more. At 70, he would get $521.50,
or 70 per cent more, Mr. Sears
says.
Next, the planner looks at Wil-
liam’s CPP benefit, estimated at
$544.29 a month at the age of 65,
or 47.14 per cent of the maximum.
If William continues working past
65 and contributing to the plan,
he can defer his CPP and thereby
increase his retirement benefit,
the planner says. Deferring CPP
would add 8.4 per cent a year to
the benefit up to a total of 42 per
cent.“By compounding the addi-
tional working years and the ben-
efit increase from deferral, Wil-
liam’s CPP benefit would rise to
nearly 78 per cent of the maxi-
mum benefit if he retires at age 68
and nearly 85 per cent if he works
to age 70,” the planner says.
Mr. Sears recommends Vi also
delay takinggovernment benefits
to the age of 70 if possible. “Of
course, for both of them to delay
CPP and OAS may be difficult if
they don’t have the cash flow to
support their lifestyle expenses,”
the planner says.Vi and William’s retirement
spending goal is $2,500 a month,
less than they are spending now.
After subtracting loan payments
and savings from their current
outlays, they’d need about $3,150
a month to maintain their life-
style, the planner says.
Mr. Sears ran a projection to
Vi’s age 95 assuming an invest-
ment return of 3.5 per cent a year,
an inflation rate of 2 per cent, and
that the couple defer OAS and CPP
to the age of 70. Once Vi begins
collectinggovernment benefits at
70, they have surplus cash flow,
which is invested in a tax-free sav-
ings account. The planner as-sumes that they continue to live
in their current home and that
lifestyle expenses fall by 25 per
cent after William dies at 95.
The result: They can maintain
their current lifestyle of $3,150 a
month to Vi’s age 95. They could
spend up to $3,300 a month, but if
they do, Vi will have drawn down
all of the assets in her registered
retirement savings plan by the age
of 70, he says. At that point she
would begin collecting CPP and
OAS benefits. By the time William
dies at 95, they will have accumu-
lated $112,000 in the tax-free sav-
ings account, which Vi can draw
on to her age 95 to cover her cash
flow requirements. She would
still have her house to fall back on.
Finally, Mr. Sears looks at the
couple’s asset mix. They have 7
per cent in cash, 36 per cent in
fixed income, 28 per cent in Cana-
dian stocks or stock funds, 23 per
cent in U.S. stocks and 6 per cent
in international stocks. Based on
their risk capacity and tolerance, a
better balance would be 20 per
cent cash, 40 per cent fixed in-
come and 40 per cent equities di-
versified geographically, the plan-
ner says.
It will be important for Vi and
William to maintain a fair degree
of liquidity in their portfolio be-
cause they will need to draw on it
heavily from William’s age 68
(when he retires and they have
only his pension income) to his
age 70, when he begins collecting
government benefits, Mr. Sears
says.SpecialtoTheGlobeandMailWantafreefinancialfacelift?E-mail
[email protected].
Somedetailsmaybechangedto
protecttheprivacyofthepersons
profiled.GLENNLOWSON/THEGLOBEANDMAILStayingflexibleonwhentotakeCPP,OAS
Deferringpayments
wouldbeespecially
helpfulforcouple
entitledtoonlypartial
benefits,plannersays
DIANNEMALEY
FINANCIALFACELIFT
EachyearWilliamisa
residentofCanadawill
givehimanadditional
yearofcredittowardthe
OASresidency
requirement.Plus,for
eachyearWilliamdefers
hisOASbenefitpastthe
ageof65,hewillgeta
7.2-per-centincreasein
hisbenefit.Thepeople:William,64,andVi,
54Theproblem:Whentobegin
drawingCPPandOASbenefits.
WillVihaveenoughmoneyto
liveonfortherestofherlife?Do
theyhavetherightinvestment
mix?Theplan:DefertakingCPPand
OASbenefitstotheageof70if
possible.Targetaportfoliothatis
60percentcashandfixedin-
comeand40percentequities.Thepayoff:Aclearviewofhow
theirfinancialfuturewillunfold.Monthlynetincome:$6,240Assets:Bankaccounts$11,500;
hisRRSP$11,305;herRRSP
$85,000;estimatedpresentvalue
ofhisDBpension$182,280;
residence$450,000.Total:
$740,085Monthlyoutlays:Propertytax
$295;homeinsurance$30;
utilities$225;condomainte-
nance$285;transportation$430;
grocerystore$600;clothing$70;
carloan$315;gifts,charity$130;
vacation,travel$300;dining,
drinks,entertainment$200;
personalcare$30;doctors,
dentists$100;drugstore$220;
life,disabilityinsurance$65;
phones,TV,internet$165;RRSPs
$830;hispensionplancontribu-
tions$395.Total:$4,685.Surplus
of$1,555goestosavings.Liabilities:Carloan$11,500CLIENTSITUATION