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FP Explains: How does Purpose Investments' new Longevity investment fund work and is it right for you? – Financial Post

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The Longevity fund is unique, and so are you. It’s also getting a lot of media coverage and its launch is a good excuse to review your retirement income strategy. We run the numbers

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Many financial planners run financial plans based on the expectation of returning four or five per cent, but Purpose Investments’ new Longevity fund is designed to pay a 65-year-old a lifetime income of 6.15 per cent, based on the total amount invested with some inflation protection.

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Whether you are tempted to buy into this fund, it is a good time to think about the risks it is trying to mitigate. And a good excuse to review your own retirement income strategy. The thing to ask yourself is: What are the risks to my retirement income planning and do I have them covered?

The Longevity fund is trying to eliminate three retirement income risks: longevity risk, or the risk of outliving your money; inflation risk, or the cost of goods and services rising faster than your income; and sequence-of-return risk, which means that poor returns in early retirement force you to spend your capital faster.

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In general, sequence-of-return risk is not well understood or demonstrated in financial plans. The accompanying table does a good job illustrating the risk.

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The top row of the table shows what happens when you draw $7,000 annually from an initial investment of $100,000, earning seven per cent each year. The initial $100,000 remains intact. This is how most financial planning software illustrates retirement projections and is likely how most people think. The problem is that investments never earn the same return year after year.

The bottom row demonstrates sequence-of-return risk. Investment returns are poor in the early years and the $100,000 becomes $83,150 after 10 years of drawing $7,000 annually. Notice the average return is still seven per cent.

Now, before you jump into the Longevity fund, you’ll need to know that it doesn’t guarantee anything, but Purpose Investments have had the product actuarially tested and say there is a very good chance it will deliver as promised.

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What makes it so confident? It says it only needs to earn 3.5 per cent to pay investors 6.15 per cent because they are doing something called “risk pooling.” Think of risk pooling in this simplified way: Investors deposit their money into one pot and the investment growth of all investors goes into another pot.

For the first 15 years or so, your 6.15-per-cent withdrawals come from your capital pot. Once your capital has been depleted, your 6.15-per-cent withdrawals will come from the combined growth pot of all investors.

Do you see what is happening? Investors are sharing the retirement income risks with the other investors in the fund. If you die early, you will receive any capital that is left, but your investment growth stays in the growth pot to fund other investors’ retirement. Conversely, if you live a long life, investors who passed before you will be contributing to your retirement income.

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There is no doubt this fund will appeal to retirees who put safety first, but there is another group of retirees who are more investment or probability focused. They will likely want to know what rate of return they need to earn to match or beat the Longevity fund.

As an example, investing $500,000 in the Longevity fund at age 65 is expected to provide an annual income of $30,750 for life, with a possible income increase. The table below shows how long $500,000 will last earning various interest rates and drawing $30,750 annually.

The zero-per-cent return shows how long a 65-year-old can expect their capital to last. This is the point at which the Longevity fund relies on the growth pool to continue to make payments.

The bottom row of the table represents a retiree investing on their own, earning five per cent. The $500,000 should last to age 98, but will it? I used an average rate of return of five per cent and didn’t take into account sequence-of-return risk. If market returns are low in the first few years, the $500,000 will not last to age 98.

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I have also assumed a constant draw of $30,750, while the Longevity fund suggests it will be able to increase that amount over time.

In addition, if you invest on your own and markets are down, will you still confidently, without worry, continue to annually withdraw $30,750 from your investments? The retiree in the Longevity fund will.

Two things quickly come to mind when thinking of alternatives to the Longevity fund: life annuities and delaying Canada Pension Plan and/or Old Age Security to age 70.

A $500,000 life annuity will make guaranteed annual payments for life to a 65-year-old male and female of $28,919 and $26,650, respectively. Females receive a lower payout because they live longer, so the $500,000 has to last longer. Based on the annuity results, it may be that females will derive the greatest benefits from the Longevity fund.

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I haven’t compared delaying CPP and or OAS to the Longevity fund, since it is a highly individualized comparison, but you should do so if considering the fund.

Other planning-oriented questions you should ask yourself include:

Do you want to have your basic lifestyle needs secured for life? Does your CPP, OAS and possible pension do that? If not, maybe having some of the Longevity fund will fill the gap.

Are you 65 and have health issues? Maybe the Longevity fund is not for you.

Are you holding bonds or cash in your retirement portfolio? Does it make sense to replace some of your bonds with the Longevity fund?

Knowing you only have so much time on this planet, how do you want to spend your money? Do you want a steady income from now until death or do you want to spend more and do more while you are younger and healthier? If the latter, you may want to limit or avoid the Longevity fund.

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Although you can make additional withdrawals from the fund, it is not a good idea. Remember, you are leaving your returns in the fund. Plus, once you’ve drawn all of your capital, in about 15 or 16 years, you can’t draw more than what the fund distributes.

  1. Purpose Investments founder Som Seif.

    The FP’s Stephanie Hughes talks Longevity and innovation with Purpose founder Som Seif

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    FP Explains: Everything you need to know about investing in split shares

  3. Robinhood is one online broker trying to gamify investing.

    A question for do-it-yourself investors: What’s your edge?

Do you want to leave money to your spouse or children? How will the Longevity fund affect your estate?

Are you hesitant to spend your retirement savings? The Longevity fund may psychologically give you more freedom to spend.

If your financial planner is projecting four-per-cent returns, have you restricted your lifestyle? Ask your planner if you should switch to the Longevity fund and draw a larger income to enjoy a bigger lifestyle. I am not suggesting there is anything wrong with using a four-per-cent return, but questioning your planner will lead to an interesting and informative discussion for both of you.

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There is a lot more to unpack with the Longevity fund and if it is something you’re interested in, Purpose Investments has a good question and answer page. Finally, the Longevity fund is unique and so are you. This is not a fund to blindly purchase. Make sure to put in the time to explore what it may or may not do for you.

Allan Norman, M.Sc., CFP, CIM, and Real Wealth Management specialist (RWM), is a fee-only certified financial planner with Atlantis Financial Inc. and a fully licensed investment advisor with Aligned Capital Partners Inc. He can be reached atwww.atlantisfinancial.ca or alnorman@atlantisfinancial.ca

This commentary is provided as a general source of information and is intended for Canadian residents only.
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My Favorite Investment Writing of 2022

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With 2022 coming to a close, it’s time for my annual tradition of gathering my favorite investment writing of the year. I started this tradition in 2017, and have continued it ever since (2018, 2019, 2020, 2021).

However, unlike previous years, 2022 was painful for investors of all types. Stocks fell, bonds fell, and crypto really fell in the worst market environment since 2008. And, though this year was difficult for all of us, the silver lining is all the great investment writing that came out of it. With that being said, I present my favorite investment writing of 2022:

The first piece on this list was technically written in February 2021 (and featured on last year’s list). However, given its accuracy and level of foresight, I thought it would be the perfect way to start this year’s list as a reminder of how far we’ve come. If there’s one line that I will never forget it’s:

Eventually, everyone figured out that Galileo was right. Eventually, everyone will figure out that Cathie Wood isn’t. And it won’t take as long either.

Yes Drew. It didn’t take long at all.

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Morgan remains my favorite writer in finance because he is one of the few people that can make me re-evaluate my most cherished beliefs. In this piece he challenges our reliance on data and logic by demonstrating why people don’t always behave as rationally as we think they will. Filled with beautiful stories and counter-intuitive insights, this is another Morgan Housel classic that you won’t want to miss.

While I don’t agree with everything that Ben Hunt writes (he can be too bearish for me at times haha), I recognize that he is one of the best thinkers in our industry. In this post, he provides a brief history of financial markets during the era of declining interest rates and how 2022 flipped everything on its head. If you want to have a better understanding of monetary policy and how people respond to interest rates, this is the piece to read.

Sometimes I read a Josh Brown piece and can’t perfectly describe what it’s about, only that you have to read it. This is one of those pieces. In it, Josh walks you through the last few years in markets and explains why everything seems to have taken a sudden 180. Though there are some things that you weren’t suppose to see, thankfully, this piece isn’t one of them.

I love it when a writer provides a simple rule of thumb that makes my financial life easier. In this piece Katie does just that. Using her rule, you’ll be able to quickly calculate out how much you need to save for retirement based on how much you want to spend (each month) in retirement. Not only is this rule practical, but Katie explains it in a fun and relatable way. For anyone who wants great financial tips from one of my favorite people in the industry, look no further than Money With Katie.

With all the bullshit that there’s been in the investment industry over the past few years, this piece from Benn Eiffert is a breath of fresh air. Though Benn is mostly known for being an expert on volatility, he demonstrates his overall investment knowledge wonderfully in this scathing takedown of an industry that has, unfortunately, conned so many. While there’s a lot of bullshit in the financial world, thankfully, you won’t find any in this piece.

While many writers will discuss risk within your portfolio, far fewer think about it with regards to your income and your career. In this piece, Chris Keith teaches a lesson that took me a little too long to learn—diversification shouldn’t stop with your investments. While owning a mixture of income-producing assets can work wonders, having a mixture of different income sources is equally, if not more, important. If you want to learn how to be a little more anti-fragile with your finances in the future, read this.

Jack Raines is the fastest growing financial blogger that I’ve ever seen and this article helps explain why. In it, Jack explains the six types of wealth and why they are all important to your life. Though only in his mid-twenties, Jack writes with the wisdom of someone decades older. Don’t just take my word for it though, read this piece and find out for yourself.

Another young blogger that has taken the financial world by storm, Kyla Scanlon is the go-to person for understanding what’s happening right now in the markets and the economy. In this piece she defines a term that was since co-opted by many others—the vibecession. While she is mostly known for her TikToks, Kyla’s sometimes quirky and always insightful writing is not something to be overlooked.

Ben wrote a lot of great posts on the housing market this year, but this was my favorite because it addressed the elephant in the room—luck. Given that purchasing a home is likely to be the biggest financial decision of your life, luck plays an important role in such transactions. Ben’s piece is useful in this regard because it highlights how this plays out in the real world. If you are in the market for a house (or will be soon), this is the piece to read.

I love when Michael Batnick does posts like this because there are so few writers that can take the 40,000 foot view and summarize it in such a succinct and insightful way. This piece is no exception. In a year where there are many lessons to be learned, Michael drops 20 of them with ease. My favorite is:

Diversification is the only answer to an unpredictable future. If everything is working, you’re not really diversified.

Amen, Michael. Amen.

Last, but not least, we have The Crypto Story from none other than Matt Levine. Matt is the best daily writer in finance, which means that he tends to write about things that happened in the last 24 to 72 hours. However, with this piece Matt created an evergreen epic that dives into the history of crypto and how its future might unfold. While this piece clocks in at around 40,000 words, Matt’s simple way of explaining such complex topics make it an easier read than you might expect. Don’t miss out.


I hope you enjoyed this year’s annual review. Happy investing and thank you for reading!

If you liked this post, consider signing up for my newsletter.

This is post 324. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data


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Ontario Teachers’ Announces Appointment of Sustainable Investing Leader Anna Murray

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TORONTO, Dec. 6, 2022 – Ontario Teachers’ Pension Plan Board (Ontario Teachers’) announced that Anna Murray has been appointed to the role of Senior Managing Director and Global Head of Sustainable Investing effective December 5.

Working within Total Fund Management, Investment Division, Ms. Murray will play a leadership role in supporting Ontario Teachers’ long-term plan to create a lasting, positive impact while creating value for members. By working closely with senior leaders and investment teams across the organization, she will execute on the fund’s ambitious climate strategy and net-zero targets, advance its approach to impact investing and oversee corporate governance activities including proxy voting and public company engagements. She will also oversee the continued integration and assessment of Environmental, Social and Governance (ESG) opportunities and risks in the investment process.

“Sustainable investing is a key part of Ontario Teachers’ strategy as it generates positive, real-world impacts while supporting long-term value creation for our members. We look forward to Ms. Murray and her team helping us meet our impact-related commitments, as well as continue to evolve our approach and build on our leadership in sustainable investing,” said Ziad Hindo, Chief Investment Officer.

Ms. Murray has extensive experience leading and developing sustainability strategies. Most recently, she was the Global Head of ESG for Sun Life Capital (SLC) Management where she was responsible for integrating ESG risk management and value creation practices into investment decisions and management across the firm’s global investment platform. She also worked as Global Head of ESG with BentallGreenOak, SLC Management’s real estate investment manager and a globally recognized provider of real estate services.

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Ms. Murray is Co-Chair of the Principles of Responsible Investment (PRI) Real Estate Advisory Committee and of the Environmental Committee at the Pension Real Estate Association (PREA). She also serves on the Board of Directors for the Responsible Investment Association and the Canada Green Building Council. She has been named one of the Top 100 Women in Canada by the Women’s Executive Network, Top 40 under 40 and one of Canada’s Clean50, which recognizes sustainability leaders who have made exceptional contributions to the clean economy. She holds an international MBA from the University of British Columbia and a law degree from York University with a focus on environmental justice and sustainability.

About Ontario Teachers’ 

Ontario Teachers’ Pension Plan Board (Ontario Teachers’) is a global investor with net assets of $242.5 billion as at June 30, 2022. We invest in more than 50 countries in a broad array of assets including public and private equities, fixed income, credit, commodities, natural resources, infrastructure, real estate and venture growth to deliver retirement income for 333,000 working members and pensioners.

With offices in Hong Kong, London, Mumbai, San Francisco, Singapore and Toronto, our more than 400 investment professionals bring deep expertise in industries ranging from agriculture to artificial intelligence. We are a fully funded defined benefit pension plan and have earned an annual total-fund net return of 9.6% since the plan’s founding in 1990. At Ontario Teachers’, we don’t just invest to make a return, we invest to shape a better future for the teachers we serve, the businesses we back, and the world we live in. For more information, visit otpp.com and follow us on Twitter @OtppInfo.

Media Contact:
Dan Madge
Phone: +1 (416) 419-1437
Email: media@otpp.com

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Record investment in MB highways in store for 2023

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MLA for Turtle Mountain, Doyle Piwniuk, says he’s looking forward the New Year as one full of accomplishments.

“I’m very optimistic, we have a very big year going forward provincially,” he explains.  “We’re looking at economic development, reconstructing of more highways, like Hwy 23 in the region, and we have more highways to fix.  Going forward in 2023 there will be a record investment in our highways.”

“It’s also going to be a good year for the Turtle Mountains area too because of the opportunities at the International Peace Garden and the economic development in the different communities. I believe we are going to have a very bright 2023,” adds Piwniuk.

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“On behalf of my family to your family, I want to wish you a very merry Christmas and a happy New Year,” he shares.  “And, any time you want to get ahold of me please contact info@dolyepiwniuk.ca or you can call our number at 204-552-0130.”

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