Is a Self-Directed IRA right for you? 7 Questions every investor should ask

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By Donnell Stidhum, Self Directed Retirement Plans LLC 

Special to Financial Independence Hub

A self-directed IRA has become one of the most talked-about retirement accounts among investors looking for greater control over how they build wealth.

The appeal is easy to understand. Unlike many traditional retirement accounts that limit you to stocks, bonds and mutual funds offered by a brokerage, a self-directed IRA can provide access to a much broader range of investments, including real estate, private lending, private equity and certain precious metals, provided IRS rules are followed.

But here’s what I tell people during our conversations: having more investment choices doesn’t automatically mean a self-directed IRA is the right choice for you.

Over the years, I’ve seen investors open these accounts because they heard someone made money buying rental properties or investing in private companies. Unfortunately, some discover too late that the flexibility also comes with greater responsibility.

Before opening a self-directed IRA, I encourage people to slow down and ask themselves seven important questions:

1.) Do I understand the investment I’m buying?

This is always my first question.

A self-directed IRA allows you to invest beyond publicly traded securities, but it doesn’t eliminate investment risk. In fact, many alternative investments require even more due diligence because they aren’t traded on public exchanges and often have less transparency.

If you can’t clearly explain how an investment makes money, what could cause it to lose value and how you’ll evaluate its performance, you’re probably not ready to place retirement dollars into it.

Retirement investing isn’t about chasing opportunities. It’s about making informed decisions

2.) Am I looking for flexibility or simply chasing higher returns?

Many investors assume that because a self-directed IRA offers more choices, it must produce better returns.

That’s not how investing works.

The account itself doesn’t create performance. The investment decisions do.

I’ve met investors who have built substantial retirement wealth using traditional index funds. I’ve also met investors who have done exceptionally well with real estate inside a self-directed IRA. The difference wasn’t the account, it was their knowledge, discipline and long-term strategy.

Choose the account because it fits your investment approach, not because it promises bigger returns.

3.) Can I follow the IRS rules?

This is where many investors underestimate the complexity.

The IRS allows a wide range of investments, but it also has strict rules governing prohibited transactions and self-dealing. For example, you generally can’t use IRA-owned property for your personal benefit or engage in certain transactions with yourself or other disqualified persons. Violating these rules can jeopardize the account’s tax-advantaged status.

The rules aren’t designed to discourage investing. They’re designed to preserve the integrity of retirement accounts.

Before investing, understand the rules as carefully as you study the opportunity itself.

4.) Is this investment liquid enough for my retirement plan?

Liquidity is often overlooked.

Suppose your retirement account owns a rental property or a private business interest. Those assets may take months, or even longer, to sell.

That doesn’t necessarily make them poor investments, but it does mean your retirement strategy should include enough liquidity to meet future needs.

A diversified retirement portfolio shouldn’t leave you scrambling for cash because every investment is tied up in long-term assets.

5.) Am I properly diversified?

One of the biggest mistakes I see is concentration.

An investor becomes excited about real estate and moves nearly all of their retirement savings into a single property.

Another puts everything into one private company.

Diversification still matters. Continue Reading…

Early Retirement Healthcare in Canada: What are our options?

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Image courtesy Tawcan/unsplash
 By Bob Lai, Tawcan

Special to Financial Independence Hub

As we are getting closer and closer toward our goal of early retirement, we have been doing a lot of projections, calculations, and planning. While it’s somewhat easy to estimate our income and expenses in early retirement, one thing that has been creeping in the background that we may have ignored over the years is health coverage in early retirement.

To be more specific, what do we do with health coverage gaps in early retirement? Health coverage is one of the critical expenses that everyone must factor into his or her retirement budget.

Fortunately, thanks to universal health care in Canada, healthcare expenses aren’t as scary and uncertain compared to those in the U.S. But what happens to health expenses like prescription drugs, dental care, vision care, and paramedical care that aren’t typically covered by the provincial and territorial health care?

I thought it’d be worthwhile to do some research and find out what our options are.

Please note, this post is based purely on my online research and I will focus on coverage for BC specifically. For those readers who are retired or have done more research on healthcare coverage in early retirement in Canada, I would love to hear from you in the comments section below.

Our current situation

Unlike what many Canadians believe, our universal healthcare system doesn’t cover everything.

When you are working, your employer typically offers extended health benefits, which give you access to extended healthcare options.

Take our family, for example. Thanks to my full-time job, my employer offers extended health care insurance via SunLife. We have three different extended health care options to pick from: Your Choice, Traditional, and Enhanced, with each option covering a different amount of extended health care and each option has different premiums..

After some calculation, we picked the Enhanced coverage for our family and with this coverage, we pay $78.83 every two weeks, $170.89 per month, or $2,049.58 per year for extended health and dental benefits.

The Enhanced coverage gives us the following extended health coverages:

  • 100% coverage on generic prescription drugs
  • Semi-private hospital room type
  • 100% unlimited maximum, 60-day trip duration for out of country emergency coverage
  • $1,000 per year up to a combined maximum of $1,700 for various paramedical services (i.e. massages, naturopaths, acupuncture, chiropractors, counsellors, etc)
  • $1,500 per year for physiotherapists
  • $400 every 24 months for vision care for adults, $400 every 12 months for children
  • 100% coverage for preventative dental care up to $2,000 for the benefit year, 65% coverage for major restorative, and 50% coverage for orthodontics for a $2,500 lifetime maximum

Since we’re paying for the extended healthcare, we try to take full advantage of our paramedical, vision, and dental benefits every year.

For the most part, we haven’t needed to use the prescription drug benefit. We have used the physio benefits here and there (as in a few years ago when my back was bothering me).

The BC Provincial Healthcare

The Medical Service Plan (MSP) is BC’s health insurance program that pays for required medical services. Here in B.C., the MSP covers the following medical benefits:

  • Doctor visits and hospital stays
  • Maternity care provided by a physician or a midwife
  • Medically necessary surgeries and procedures
  • Diagnostic tests and X-rays
  • Annual eye examination for children aged 0-18 and seniors aged 65+
  • Some mental health services

I believe other provinces and territories have similar medical plans covering similar benefits as well.

When you live in B.C., you are required to enroll in the MSP. Years ago, you needed to pay MSP premiums based on your income. But the premiums were eliminated on January 1, 2020. In case you’re wondering, the MSP is now funded through general taxation. The fact that BC MSP has no monthly premium means it is one less expense to consider in early retirement.

However, as you can see, the BC MSP does not cover things like prescription drugs, dental care, vision care, paramedical care, and physiotherapy. This is where the extended health coverage may be necessary in early retirement.

When it comes to BC MSP, there’s not much you need to do when you retire. To qualify for the BC MSP, you just need to maintain B.C. as your primary residence and the coverage continues automatically as long as you remain a B.C. resident.

Extended Healthcare in early retirement Option 1: Self funding

The easiest way when it comes to extended healthcare in early retirement is to self fund all the different services. So instead of having extended health insurance covering dental care, vision care, and paramedical services, we would simply pay for these services as needed.

The nice thing with self funding these expenses is that most of these expenses like massages, physiotherapy, dental care, and vision care, are considered as eligible medical expenses so we can claim them on our tax return and potentially reduce the tax that we may have to pay.

Right now, since we’re paying extended health premiums, we are having dental, vision, and paramedical services like massage and acupuncture regularly to max out our eligible benefits. If we go with the self funding route in early retirement, perhaps we would reduce the overall extended healthcare expense amount by only spending on what we deem as essential services. For example, rather than going for a massage every month, perhaps we would go every two or three months instead.

Extended Healthcare in early retirement Option 2: Government & private coverages

Although self funding is an option, it might be better if we can get extended healthcare coverage via a combination of government benefits and private extended health insurance.

BC’s Fair PharmaCare

One thing that’s interesting for early retirees in B.C. is that the province offers an income-based drug coverage program called Fair PharmaCare.

Under Fair PharmaCare, all BC residents are eligible if they have MSP coverage and meet the income level requirements. The program covers some prescription drugs, medical devices, and pharmacy services. You can find more about what BC PharmaCare covers here. Basically, Fair PharmaCare is based on your family’s net income from two years ago. You have to pay a deductible first then Fair PharmaCare covers 70% (or 75% if someone in your family was born before 1940). Once you hit the family maximum, Fair PharmaCare pays 100% of the eligible costs for the rest of the year. You can find the family deductible amount here. 

Fair PharmaCare is a good option for early retirees in BC if you need coverage for prescription drugs. In our case, this may not be as important (*knock on wood*).

The Canadian Dental Care Plan

For dental care, early retirees may be eligible for the Canadian Dental Care Plan (CDCP). The CDCP is a Canadian federal government program designed to provide access to affordable dental care for eligible Canadians who do not have access to dental insurance. Early retirees under the age of 65 are eligible if the household income is under $90,000.

The CDCP covers a variety of dental services:

  • Preventive care like cleanings
  • Diagnostic services like exams and X-rays
  • Restorative treatments
  • Surgical removal of tumours and cysts

Now, the CPCD will only cover over 100% of eligible dental expenses if the adjusted family net income is lower than $70,000. If your family’s net income is between $70,000 and $90,000, you will need to cover the co-payment portion.

Private Health Insurance Options

Another option is to go through private health insurance. This might make sense for our household to cover out-of-pocket costs for dental care, vision care, and paramedical services. If I look at our past extended health expenses over the last few years, I noted that we have spent anywhere between $5,000 and $8,000 (most of these expenses were reimbursed by our extended healthcare plan). Therefore, for our household, it may make sense to utilize the private health insurance option rather than self-fund these expenses.

Based on the market rates I found during my research, the average monthly premium per person is between $60 to $150. This is a wide range because the monthly premiums are based on your age. For someone in their 40s, the premiums are between $60 to $80 per person.

Again, these are the average ballpark figures. The actual cost will depend on age, health, location, and the level of coverage you choose.

For the most part, private health insurance options in Canada are offered by SunLife and Manulife.

SunLife’s private health insurance is called SunLife Health Insurance and there are three coverages – basic, standard, and enhanced. All of them are very similar to what my employer’s extended health offers (not a surprise since my employer uses SunLife). The per month cost, however, seems to be much higher than what we currently pay ($411.27 per month for the enhanced plan or $4,935.24, more than double the amount we’re paying under my employer’s extended health plan).

Manulife’s private health insurance is called Manulife Health Insurance and offers different plans, including Flexcare Plans and Guaranteed Issue Enhanced. 

For both SunLife and Manulife, the cost of the extended health insurance plans varies depending on the coverage. However, from what I can find, the per month cost for our family is much higher than what we are paying right now.

Continue private health insurance via an existing employer plan

Interestingly, both SunLife and Manulife offer options to convert a group employer plan to an individual plan. Basically, if you’re leaving an employer group plan, you can do the conversion within 60-90 days without medical underwriting or testing.

This means we can convert our existing SunLife group extended health plan to an individual plan without answering any medical questions, health exams, and pre-existing conditions are covered.

Now, if you miss this 60-90 day window, you will need to face medical underwriting, higher premiums, or exclusions for pre-existing conditions. Obviously, this is not very desirable.

The group to individual conversion is highly attractive for us once we are in early retirement. I will need to follow up with my company’s HR team to find out more information without raising too many red flags… another option is to contact SunLife to find out more information.

Our current strategy for healthcare in early retirement

Looking at the different options available, here’s our current healthcare strategy when we retire early: Continue Reading…

Cognitive Decline and your Finances

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By Michael J. Wiener

Special to Financial Independence Hub

One of the talking points of financial advisors is that even if right now you’re able to handle your own investments, tax planning, and other aspects of personal finance, you may face cognitive decline later in life.  The implication is that maybe you should get a financial advisor now before it’s too late.

The challenge here is that many people who hold themselves out as financial advisors are little more than sellers of expensive mutual funds.  Some might even be inclined to take advantage of your cognitive decline to churn your account and generate excess fees.

What you may need is a good financial advisor.  Some financial advisors are excellent.  They range from those who charge by the hour for “Advice Only” to those who manage your investments directly for you.  However, if you’re in cognitive decline, it won’t help to just get the occasional portfolio checkup.  The advisor would have to directly manage your investments.  But it’s hard to get this type of advisor without at least a million dollars invested.

If you do meet an advisor’s asset threshold, you’re still faced with the dilemma of determining whether you’ve found a good advisor.  One strategy is to reduce the size of the problem.  The more guaranteed income you have, the less important your investments become.  If you or an advisor mangle your investments, having a higher guaranteed income will be valuable.

Here are three possible ways to increase retirement income:

1.) Delay the start of CPP and OAS

The formula for increasing CPP and OAS benefits if you delay their start is quite generous.  Any delay up to age 70 gives you more money per month.  The fact that these benefits are indexed to inflation is very valuable.

2.) Buy an annuity

Typically annuities are not indexed at all, but you can get one whose payments increase annually by a fixed percentage, such as 2%.  Buying annuities isn’t as beneficial as delaying CPP and OAS, but it does create more guaranteed income to protect you from yourself in the case of cognitive decline.

To reduce inflation risk, you could wait until later in life (but not too late!) to buy an annuity.  One strategy might be to buy more than one annuity at different ages.

3.) Work somewhere that offers a defined-benefit pension

This option is certainly more extreme than the other two, particularly if you would have to change careers.  But if it’s something you don’t mind doing, a defined-benefit pension takes away many retirement worries.

Family help

Another alternative to getting a financial advisor is to get help from younger family members.  I’ve gone to a lot of trouble to learn how to invest, manage taxes, and run the rest of my personal finances.  I’ve been passing this knowledge along to my sons in small steps.

A time will come when I’ll start showing them how my finances work in preparation for when they might have to start helping.  This feels natural for me, because once my wife and I are gone, they’ll get what’s left anyway.

Not everyone has family members whose intelligence and morals they trust enough for this kind of help.  But if you do, they can help protect your finances from your mistakes.

The financial advisor path

A good financial advisor is likely to benefit you most when family assets are complex.  But you still have the challenge of figuring out whether a financial advisor is good and honest.  I feel like I have the knowledge to judge an advisor’s competence, but you almost have to know how to do it yourself to be able to judge an advisor. Continue Reading…

Retirement Spending: Why Spending your Savings is the Hardest Part of Retirement

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AlainGuillot.com, via ChatGPT

By Alain Guillot

Special to Financial Independence Hub

I have an unusual retirement problem. I have more money than I’ll probably ever spend.

For most of my adult life, retirement spending was never something I worried about. Saving was.

Like millions of people, I spent decades training myself to save every extra dollar. I invested consistently, avoided unnecessary purchases, resisted lifestyle inflation, and watched my retirement accounts grow year after year.

Today, at 59 years old, I am financially independent.

Ironically, I’ve discovered that spending money is far more difficult than earning or saving it.

I don’t need to work another day in my life, yet I continue working because I genuinely enjoy what I do and I don’t know what to do with myself if I don’t have this daily activity called work. Meanwhile my investments continue to grow faster than I can realistically spend them.

The problem isn’t that I don’t have enough money.

The problem is that I no longer know how to spend it.

And it turns out I’m far from alone.

Retirement Spending is Harder than Saving

A recent Corebridge Financial survey found something surprising.

  • Fewer than one third of retirees feel comfortable withdrawing money from their retirement savings.
  • Seven out of ten retirees say it’s very important that their nest egg never shrinks.
  • Thirty-eight per cent admit they deliberately avoid spending money simply to preserve their savings.

Think about that.

People spent forty years saving for retirement…

… and once retirement finally arrives, many refuse to spend the money they worked so hard to accumulate.

That seems irrational.

Until you realize we’ve spent our entire lives being rewarded for saving.

We train ourselves to Accumulate, not Decumulate

Every paycheque teaches us the same lesson.

Save more.
Invest more.
Increase your net worth.
Watch the graph go up.

Personal finance books celebrate growing investment balances.

Financial news celebrates higher account values.

Net worth becomes the scoreboard.

Then retirement arrives and suddenly we’re expected to reverse decades of conditioning.

Instead of accumulating wealth, we’re supposed to slowly spend it.

Psychologically, that’s an enormous shift.

For many retirees, watching their investment account decline — even if it’s exactly according to plan — feels like failure.

My Retirement Spending Problem

When I imagined retirement in my Twenties, I assumed I would eventually spend money on expensive things:

A luxury car.

A larger house.

Designer clothes.

Fine dining every night.

None of that happened.

I live in Montreal, where owning a car would mostly be an inconvenience.

I have a comfortable apartment that suits me perfectly.

My wardrobe is simple. A good polo shirt lasts for years.

My favorite hobby is salsa dancing, and the best dance floor in the city is … free.

I eat out regularly, but because my cholesterol is high, my doctor has encouraged me to follow a mostly plant-based diet. Ironically, eating more healthily often costs less than dining out. And when I go out to eat, I go to small neighborhood restaurants to encourage the local owners. The waiters know me, the owners know me, and I feel at home.

I already take two international vacations every year.

Beyond that, I honestly don’t know what else I need.

The result?

My portfolio keeps growing because my spending simply hasn’t caught up with my savings.

Retirement Spending doesn’t mean Spending Carelessly

Many people hear this discussion and think the solution is simple:

“Just buy more stuff.”

I disagree completely.

Financial freedom isn’t permission to become a reckless consumer.

It’s permission to make choices based on happiness rather than necessity.

The goal isn’t to maximize spending.

The goal is to maximize fulfillment.

Sometimes that means spending more.

Sometimes it means spending exactly the same while feeling less guilty about it.

Better ways to Practice Retirement Spending

If you’ve accumulated more than you’ll likely spend, consider investing in experiences rather than possessions.

Some ideas include: Continue Reading…

Canadian Bank Dividends vs Tariff Risk: Are TSX Bank Stocks still Safe for Income Investors?

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TSInetwork.ca

Canadian banks have long been core holdings for investors seeking dependable dividend income. For retirees and other income-focused investors, their established businesses and regular dividend payments can make them an important part of a long-term portfolio.

Tariff uncertainty, however, creates a new question. If trade restrictions hurt Canadian businesses, slow hiring and weaken consumer spending, could those pressures eventually put Canadian bank dividends at risk?

The answer requires looking past daily stock-price movements.

A bank stock can fall sharply without its dividend being in immediate danger. Dividend safety depends more on the bank’s earnings, capital strength, loan quality and ability to absorb credit losses.

For conservative investors, the better question is not whether tariffs will make TSX bank stocks rise or fall next. It is whether the financial foundations supporting those dividends remain strong.

How Tariffs can affect Canadian Banks

Tariffs generally do not hurt a bank in the same direct way they can hurt a manufacturer or exporter. Banks are affected because they lend money to the businesses and households operating in the wider economy.

The chain can look something like this:

Tariffs and trade disruption → pressure on businesses → weaker economic activity → more financial stress among borrowers → higher loan losses → pressure on bank earnings → potentially slower dividend growth.

Businesses exposed to tariffs can face several challenges. Imported materials may become more expensive. Export demand can weaken. Supply chains may need to be reorganized. Companies may also delay hiring, expansion or major investments when future trade rules are uncertain.

Those pressures can eventually reach bank customers.

A business with falling sales may find it harder to repay a commercial loan. A worker who loses a job or sees income growth slow may have greater difficulty making mortgage, credit-card or line-of-credit payments.

Banks prepare for some of these risks by recording provisions for credit losses, which reduce current earnings to reflect loans that may not be fully repaid.

Tariffs can also influence inflation, interest rates, business investment and consumer confidence. As a result, different parts of a bank’s business can be affected in different ways.

The economic effect is not hypothetical. In its July 2026 outlook, the Bank of Canada said Canadian economic activity had been affected by U.S. tariffs and trade-policy uncertainty, while exports remained on a lower path than before the tariffs were introduced. (Bank of Canada)

That does not mean tariffs automatically threaten Canadian bank dividends. The more important issue is whether trade disruption becomes severe enough to significantly weaken borrowers, increase credit losses and reduce bank profitability.

Falling Bank Stocks don’t necessarily mean Dividends are Unsafe

One of the biggest mistakes an income investor can make is treating a falling share price as proof that a dividend is in trouble.

Stock prices react quickly to expectations.

Investors may sell Canadian bank stocks because they expect a recession, rising unemployment, higher loan losses or slower earnings growth. Tariff headlines can also increase uncertainty and make investors less willing to own economically sensitive stocks.

Those fears can push a bank’s share price lower well before there is a serious problem with the dividend.

Dividend sustainability works differently. It depends primarily on whether the bank continues to earn enough money, maintain adequate capital and absorb credit losses while still funding its dividend.

A bank can therefore experience substantial market volatility and continue paying a well-supported dividend.

There is another reason investors need to separate price risk from dividend risk: a falling stock price automatically increases the dividend yield when the dividend itself stays unchanged.

The basic formula is:

Dividend yield = annual dividend ÷ share price

Suppose a stock pays $4 in annual dividends and trades for $100. Its yield is 4%.

If the price falls to $80 while the dividend remains $4, the yield rises to 5%.

That higher yield may look attractive, but it does not automatically mean the stock offers better or safer income. Sometimes a rising yield simply reflects growing investor concern about future earnings or financial risk.

A conservative investor should therefore ask two questions: Why has the yield increased, and are the fundamentals supporting the dividend still healthy?

Canadian bank dividend yields should never be judged in isolation.

5 Signs a Canadian Bank Dividend remains well supported

No single financial ratio can guarantee bank dividend safety. A stronger approach is to examine several indicators together and, importantly, watch how they change over multiple quarters.

1.) The Dividend Payout Ratio remains Manageable

The dividend payout ratio measures how much of a company’s earnings are being distributed to shareholders as dividends.

If a bank earns substantially more than it pays out, it has more room to deal with weaker profits before the dividend itself comes under pressure.

Investors should avoid treating one payout-ratio percentage as a universal dividing line between “safe” and “unsafe.” Instead, look at whether earnings continue to cover the dividend comfortably.

The trend also matters.

If the payout ratio climbs quickly because earnings are declining while the dividend stays unchanged, that deserves attention. The bank may have less flexibility if conditions deteriorate further. Continue Reading…