How much is enough?

babes

Since Thursday I’ve been worried about you. More than usual.

Last week we mashed the public pension scheme after I described plans some politicians have to double CPP payments and premiums in order to stave off a middle-class crisis. It’s the biggest issue of our times. As I said, it’s barely discussed. The potential exists to cave the economy, especially for those now in their 30s and 40s. In fact, it probably will. So I hope you have a plan to take care of yourself.

It was kinda sad to see the debate in the comment section Thursday about whether a wrinklie should take CPP payments starting at 65, instead of 60. (The answer is sixty, of course.) Sad because people reaching the sixth decade of their lives shouldn’t have to sweat about whether they receive $600 a month or $420. In either case, it’s not enough to live on because CPP was never designed to replace your income in retirement (as the US Social Security was). So for those who must depend on it, plus the $540-a-month in OAS (universal at age 65, soon to be 67), it’s a financial failure.

Raising the premiums and doubling the benefits won’t happen soon, if ever. The economy can’t stand it right now. But this won’t save the Boomers, anyway, while doubling the amount siphoned off the paycheques of their offspring. You’re on your own for two reasons. Most people don’t have corporate pensions, while they gamble massively on real estate. Risk on.

What to do?

Boomers should dump houses before the market erodes, and get invested in income-producing assets. Already properties are turning more illiquid in many markets. How do so many people not get this?

For their kids, it’s more complex. Simply put, if you don’t have a robust portfolio by the time you’re 45, you’ll probably live to regret it. The two obstacles to achieving that are financial ignorance and trying to pay off a house. Both are curable.

For example, so long as mortgages remain in the 3-4% range, why throw all your cash at getting rid of one? Unless houses swell in value for years on end (highly doubtful), you’re merely shovelling money into equity which earns nothing. Better to use extra cash flow funding a good portfolio of financial assets promising a better return plus diversification. Remember that without inflation or an expanding economy, real estate is no financial plan. Just a place to live.

How much money do you need to not be old and pathetic? There’s no single answer. Some people live on air. Others want fat incomes for boats and (mature) babes. But by 45 you should have that figured out. The average CPP plus OAS gives $13,680 a year. If you have a corporate pension, add it in. But seven in ten don’t, so subtract the government pension from what you figure you’ll need, then work backwards. And don’t underestimate your income needs. Most retirees spend more than they did as workies.

The average retired person in Canada now grinds through $51,000 a year. If inflation over the next 20 years averages 3%, you’ll need $92,100 to buy the same stuff. If government pensions grow by 2% annually for two decades (they always lag the CPI), then count on $20,300 from the feds. The shortfall is more than $71,000. How much invested money does it take to spit out that, then last for 20 more years? Well, $1.25 million cranking 6% would satisfy the income needs, while preserving the capital, which would degrade over time thanks to inflation. Plus, you’d have some money to leave to your kids or spouse.

To achieve this you’d need roughly $400,000 at age 45, invested at an annual average return of 6% (assuming no new contributions). Then, on your 65th birthday, you’d have $1,282,854. (This does not factor in taxes, which would be nil on unrealized capital gains, and at preferred rates for dividends. Plus you can shelter tax-free within a TFSA, but RRSP money is taxable as income.)

Compare this to what one big US financial company advises: By age 35 you should have saved one year’s salary. By 45, three years of earnings. Five years’ worth at 55 and eight by 65. That means if you’re 45 and earn $90,000, you should have a nestegg of $270,000. Or, as another author/blogger states, your net worth should be 10% of your age times your income. So a 45-year-old making $90,000 needs a liquid portfolio of $405,000.

Okay, so average the three and you get $358,000. Plus your house – because equity earns 0% unless real estate values are growing. And a 6% rate is impossible when incomes are barely moving and mortgage rates can’t fall further. But let’s cut it in half – $180,000 – and assume between 45 and 65 you save and invest like a crazed beaver.

Now, see the problem? A recent CIBC poll found that 45% of people aged 50 to 59 have saved less than $100,000. The survey asked the same folks when they plan on retiring. 63, they replied. And who says Canada’s not a funny place?

A Canadian Payroll Association survey last month found 40% of people spend all, or more, of their net pay. They save nothing. Of working people, 73% have saved less than a quarter of their goal. Half save less than 5% of what they make. About 47% of people nearing retirement have saved only a quarter of the needed amount. Worse, a BMO project discovered 80% of the money in TFSAs – the only place investments can grow tax-free and be cashed in – sits in savings accounts making diddly.

How can all these cash-poor, house-rich people finance their lives without dumping real estate?

Answer: they can’t. And what a market-killer that’ll be.

You ready?

201 comments ↓

#1 father on 10.06.13 at 4:54 pm

surrey municipality going house to house to crack down on ilegal suites with 1500 dollar fines poor buggers that and 26 percent hydro rate increase NO HOUSE FOR YOU

#2 Doug in London on 10.06.13 at 5:17 pm

My question has 2 parts: 1) Wasn’t the increase in payments in 1997 supposed to take care of this problem? Second question: 2) If that increase wasn’t enough (and that appears to be the case) why wasn’t there a more modest increase in payments long before, such as during the boom years of the late 1980s?

CPP premiums increased to keep the plan solvent, not to pass more on to retirees. — Garth

#3 Alero01 on 10.06.13 at 5:23 pm

I would like to see the math curriculum amended to put these kinds of problem-solving questions in front of students. It would be an eye-opener for them (and likely their parents) because the mathematical concepts and theory being taught would applicable to their own lives. It would be a way to get kids thinking about how to fund their future, i.e. post-secondary education, getting a home, paying off a debt, saving a little bit now for a lot much later, while still teaching them about the world of mathematics.

#4 -=jwk=- on 10.06.13 at 5:25 pm

Trick move posting early . I’m on vacation at our condo in Myrtle. Used, 1031 to pay 275k in 2005.worth about 90k today. Don’t worry will never happen in Toronto. Unlike the wimpy us government, Harper will never allow real estate to go down!

#5 Mr. Singh on 10.06.13 at 5:28 pm

I don’t think people in the future will be able to retire, it will become just as common as a single earner household. Living standards in Canada are going to decline precipitously over the next decade. This is the result of the socialist model Canada has. You pay way more into taxes than you ever get back; and whats worse is that the people become dependent on them. There needs to be a shift in society, where people can opt out of government services and not be forced to pay taxes or other government programs like CPP or EI. The tax burden needs to reduced significantly and much of the government services need to privatized or eliminated.

#6 Mr. Reality on 10.06.13 at 5:28 pm

Debt is Slavery

Until people realize this fact and adjust their lives accordingly the self induced suffering will never end.

Mr. R.

#7 Bob on 10.06.13 at 5:31 pm

Garth said : “Okay, so average the three and you get $358,000. Plus your house – because equity earns 0% unless real estate values are growing. And a 6% rate is impossible when incomes are barely moving and mortgage rates can’t fall further. But let’s cut it in half – $180,000.”
——————————————————-
OK, I don’t quite get it. So you are saying that a 45 year old should have $358,000 in a liquid portfolio? Plus you are saying that you should also have some equity in a home – right?

Nope. The house is optional. — Garth

#8 Alberta Ed` on 10.06.13 at 5:34 pm

Interesting that this critical topic didn’t come up on Cross Country Checkup’s on the doubling of Canada’s senior population in the next 25 years. It was also interesting that US House Speaker John Boehner did point out this vast emerging problem in the US (though little seems to be done there, either). Moral: Don’t trust your government to look out for your future.

#9 Liquid on 10.06.13 at 5:34 pm

The average household net worth in Canada is over $400K and is more than that of the US. But a huge portion of our wealth is in the equity of our homes, which doesn’t bode well for us if the real estate market takes a turn for the worst.

Those individuals from the CIBC poll who have less than $100K saved and expect to retire in 10 more years are kidding themselves. Fortunately saving $100K isn’t too hard to do for most people if they make it a priority. I saved almost $100K in the last 5 years. But I also have the benefit of working 2 jobs. My calculations are in line with yours, Garth. I think in order to live comfortably in retirement a single person by age 45 should have at least $250K in liquid assets, and a couple should have at least $400K. Life is what we make of it (^_-) The more seeds we plant today the more fruit we’ll have tomorrow.

#10 ripped on 10.06.13 at 5:39 pm

“Most retirees spend more than they did as workies”

That’s a pile of crap… 65+ go from the kitchen to the recliner and tv to bed… repeat

Sounds like you have an exciting life. — Garth

#11 Uwinsome on 10.06.13 at 5:45 pm

“The average retired person in Canada now grinds through $51,000 a year. If inflation over the next 20 years averages 3%, you’ll need $92,100 to buy the same stuff. If government pensions grow by 2% annually for two decades (they always lag the CPI), then count on $20,300 from the feds. The shortfall is more than $71,000. How much invested money does it take to spit out that, then last for 20 more years? Well, $1.25 million cranking 6% would satisfy the income needs, while preserving the capital, which would degrade over time thanks to inflation. Plus, you’d have some money to leave to your kids or spouse.”
—————————————————–

Garth are you saying that myself and my Spouse should double these amounts? That at 65 me and my Wife are going to need an income of $142,000 (excluding pensions). And we’ll have to have an investment nest egg of $2,500,000?? Plus equity in a house???

Are you 12? — Garth

#12 Doug in London on 10.06.13 at 5:48 pm

A good robust portfolio by age 45? No argument there, it makes good sense. The Federal Government has been screaming at us since the early 1990s to save more, it’s a good thing I wear foam rubber ear plugs and earmuffs or I’d be totally deaf by now. First it was the increase in eligible RRSP contributions in the early 1990s, then reducing the tax on capital gains in 2000, increasing the allowable foreign content in RRSPs later that decade, and last but certainly not least the TFSA in 2009. How many more hints do you need? It’s understandable how low income people could not have taken advantage of these tax saving breaks, but not anyone of higher income.

#13 5 more years on 10.06.13 at 5:48 pm

Hi Garth,

Quick question on $400k at 45 – $400k includes TFSA, RRSP, non-reg accts ?

Tx

Yes. — Garth

#14 Squatter on 10.06.13 at 5:51 pm

Ah! Finally a good pic!
;-)

#15 ripped on 10.06.13 at 5:52 pm

Sounds like you have an exciting life. — Garth

I back packed around the world for two years at under 25… a hec of a lot more fun then over 65.

#16 Uwinsome on 10.06.13 at 5:57 pm

“Are you 12?” — Garth
———————————————
Not 12, but I guess kind of slow. So are the numbers you’re quoting here for couples as well as singles?

With a 40% divorce rate, does it matter? — Garth

#17 zee on 10.06.13 at 6:05 pm

hi

all this time all you have said is that cpp and oas may not be around in the future as they are today…..but the govt is talking of making it better and increasing benefits…..another prediction wrong….

The OAS will not exist in the future as it does now, as the age is being advanced two years. Meanwhile the government is not proposing increased benefits. Gee, all that typing dots for nothing. — Garth

#18 AisA on 10.06.13 at 6:05 pm

“You ready?”

Yes.

#19 Uwinsome on 10.06.13 at 6:06 pm

With a 40% divorce rate, does it matter? — Garth
——————————————————-
Garth you are just a veritable ray of sunshine. We’ll need to save $2.5 M, our house is going to trickle down by up to 40%, then we’re going to get divorced.

Do you know where I can buy a gun?

Did I mention dementia? I forget. — Garth

#20 Marky on 10.06.13 at 6:10 pm

“so long as mortgages remain in the 3-4% range, why throw all your cash at getting rid of one? Unless houses swell in value for years on end (highly doubtful), you’re merely shovelling money into equity which earns nothing.”
——————————————————–
Are you saying we shouldn’t be making lump sums into our mortgages in this day and age and have other diversification and contributing to say TFSA’s?

#21 Policy Shift on 10.06.13 at 6:18 pm

Immigration policy can be adjusted very quickly to address demographic shifts such as a retiring wave of boomers. I agree with other posters here that the Canadian government will not let housing values decline because of the clout of the boomer voting bloc.

#22 Retired Boomer - WI on 10.06.13 at 6:19 pm

#6 Very Well said!!

Glad I lived within my income. Glad I started saving for retirement at 35. Dam GLAD I had good luck during my working years for those investments, and didn’t do anything too stupid when markets went down. Glad my wife stuck with me for 40 years, and saved for retirement as well. Glad we both had employers who contributed to those savings plans!

A comment on US social security. It is NOT designed to be lived upon entirely. It was designed as a “supplement” to one’s retirement. Would you want to live on the US social security averages? Yes, you COULD do it, but it would not be a flush life. Some have a company pension which could boost things a bit, but most do not these days.

YOU are responsible for your life, not the government, or your kids! Get used to it.

Do it right, and you won’t have to do it over!

#23 Smoking Man's Old Man on 10.06.13 at 6:19 pm

He should marry one of those and see how long his smile lasts….

#24 timmy on 10.06.13 at 6:21 pm

It’s obvious asset prices, especially real estate, will go down. If the vast majority of boomers don’t have anywhere near these unrealistic amounts saved touted by the financial planning industry, then there will be a lot less money chasing hard goods and they will fall in price.

#25 ripped on 10.06.13 at 6:32 pm

With a 40% divorce rate, does it matter? — Garth

I will agree with that, it totally destroyed me financially.
Way more then a any real estate collapse or stock market crash would.

#26 Goldie on 10.06.13 at 6:32 pm

“The potential exists to cave the economy, especially for those now in their 30s and 40s. In fact, it probably will…”

wait a sec… I thought that you disapproved of doomerism. Not that I disagree with what you wrote , but I am Goldie and you are Garth.

#27 Chad on 10.06.13 at 6:42 pm

Hey Garth, it’d be much appreciated to get references for some of the data points used in this, and other articles.

Specifically your $51k/year in retirement number. It’s in aggregate, sure, but wow, that’s astounding.

#28 Smoking Man on 10.06.13 at 6:57 pm

#6 Mr. Reality on 10.06.13 at 5:28 pm
Debt is SlaveryUntil people realize this fact and adjust their lives accordingly the self induced suffering will never end.Mr. R.
………
No drinking cool aid is slavery, how is loading up on a helock at 3p and using it to bring in 9p, while your tax free single family home keeps appreciating. And deducting your interest from your investment.

Man some of you guys crack me up…

#29 Randy on 10.06.13 at 7:08 pm

Hugh Hefner…..laughing all the way to Heaven ??? haha

#30 jaguar on 10.06.13 at 7:13 pm

Given the levels of Canadian home ownership and the income squeeze some wrinklies might be facing I would not be surprised to see many of them take out the maximum home owner line of credit they can obtain to supplement their expenses. There is an ‘end game’, of course, dependent on interest rates, the amount of equity they can leverage and their own longevity. But the banks might get caught holding the bag if they aren’t reading Garth’s Blog. When push comes to shove and the wrinklies get tapped out they won’t care about their reputations or credit ratings. They will just walk. Try hauling an 85 year old into the courthouse. Judge will say they should not have been so aggressive in the marketplace.

#31 Ralph Cramdown on 10.06.13 at 7:17 pm

#5 Mr. Singh — “Living standards in Canada are going to decline precipitously over the next decade. This is the result of the socialist model Canada has. You pay way more into taxes than you ever get back; and whats worse is that the people become dependent on them. There needs to be a shift in society, where people can opt out of government services and not be forced to pay taxes or other government programs like CPP or EI.”

Hmm, where have I heard this before? Oh yeah, twenty years ago some guy was saying the same thing. And he gave complete instructions on how to opt out.

http://www.amazon.ca/Take-Your-Money-Alex-Doulis/dp/1550227718

At least he’s sensible about it. I hear so many people who know, or ought to know that there’s a whole spectrum of countries from high taxes and services to low, but, rather than moving to the place that suits them, they want the place where they live to change.

#32 Ralph Cramdown on 10.06.13 at 7:19 pm

I found another blog that says (no reference there either): “According to Statistics Canada, median spending by a couple over 65 is about $40,000 a year, and average spending is about $51,000. “

My point. Spending often does not decrease in retirement, unless it as to. — Garth

#33 Unplugged on 10.06.13 at 7:24 pm

Saving for retirement is one piece of the puzzle – the other underlying piece to this all is having enough money and cash flow to save in the first place. Too often now young generations are being sucked dry of everything they earn while expecting to live like rich wealthy influential wanna-be’s. This sort of entitlement is slowly eroding everything beneath our feet. Before we can live like wealthy successful 1 percentiles we need to actually become 1 percentiles and the road isn’t easy. I think there are many opportunities to increase success in a career working with what we already have on hand – too many people don’t realize these opportunities. All roads lead to success unless you hit traffic along the way.

#34 Obvious Truth on 10.06.13 at 7:29 pm

Most here are wondering how the average spending is 51k. Do my 70 year old parents have 1.25M?

No. They have defined benefit pensions. Not too long ago everyone had one. One of those with 40 years in is easily worth 30 to 40 grand.

Most people gave this up long ago.

They saved too. Didn’t touch rsp till 69. They for sure spend more now and still pay cash.

Hugh is definitely in the more camp.

If you don’t have at least 450 000 by 45 you can kiss retirement goodbye. It will never happen. Unless you have a defined benefit plan of course.

#35 Smoking Man on 10.06.13 at 7:29 pm

Book Update

It’s going bad, started off as a satirical self-help success manual and has transformed into a wine induced trip into the darkest places in the universe.

Plus it’s wired when I’m writing here, I hit them out of the park all the time. But without the instant gratification of posting to a live audience I can’t do it. My work sucks has no flow and does not make sense.

The Smoking Man character is now trapped on planet Weballcansee, paranoid that everyone he has ever know can read his mind thus destroying the gift of lying removing all advantage from the game of collection.

He’s made a lot of enemy’s on the trip and they are closing in. The real story behind the story is the author telling it, a well mannered, clean living, lovable chap is now transforming into the diabolical character of his invention. It’s addictive, it’s making him crazy.

It’s so much fun.

#36 Bill on 10.06.13 at 7:38 pm

A house as dead equity? Anyone else implementing the Smith Manoeuver?

I would not touch it. — Garth

#37 Daisy Mae on 10.06.13 at 7:46 pm

“How much is enough?”

****************

That guy never has enough…. ;-)

#38 Andrew on 10.06.13 at 7:49 pm

Solution = boomer cull

#39 TnT on 10.06.13 at 7:52 pm

I don’t get it…

Is having a million dollars and a house paid off something that is common for Canadians at 65?

There’s only 422 000 millionaires in Canada

How many of these are retired millionaires with their houses paid off?

#40 Longevity on 10.06.13 at 7:56 pm

Imagine saving for retirement if it is possible to live to 160…

“Dr. Roizen has controversially speculated that by 2023 one of the 14 areas of aging research might see a breakthrough that will allow us to live until 160 with the same quality of life we enjoyed at age 45.” from
http://www.mauldineconomics.com/frontlinethoughts/the-road-to-a-new-medical-order

#41 earlybird on 10.06.13 at 7:57 pm

I swear to god this blog has some of the best thoughts and info out there….keep it coming, and thanks a million!!!

#42 Nemesis on 10.06.13 at 8:08 pm

How much is enough?…

Indeed. What a splendid rhetorical.

I certainly know what the JohnnyRoccos of ThisWorld would say….

http://youtu.be/HWa6vsXOKAU

BonusZen: TheMansionWest LivePartaySoundTrack [‘BackInTheDay’-NoS**t/ImpeccableSource]

http://youtu.be/AfK1IPLpcqs

#43 KommyKim on 10.06.13 at 8:15 pm

RE: #5 Mr. Singh on 10.06.13 at 5:28 pm not be forced to pay taxes or other government programs like CPP or EI. The tax burden needs to reduced significantly and much of the government services need to privatized or eliminated.

Yes… Because privatized is always so much cheaper. That’s why dental care, cable TV, etc is so damn cheap. And look at the USA and how dirt cheap it is to stay in a private hospital.

#44 Paul on 10.06.13 at 8:20 pm

“How can all these cash-poor, house-rich people finance their lives without dumping real estate?

I asked that same question to my inlaws today who are in that position. Answer…reverse mortgage. Their not moving..period.

It unlocks only a third of equity, and interest multiplies the debt. No solution there. — Garth

#45 gtrz4peace on 10.06.13 at 8:22 pm

Mr Singh, in comment #5 — I almost never comment on the blog but simply cannot believe your comment. The EU nations with well-regulated Democratic Socialist Capitalist models are doing SOOOO much better than the US specifically BECAUSE the type of privatization your describe DESTROYS Democracy and “the middle class”.

This is eloquently addressed by Robert Reich in his new movie, “Inequality For All”. If you like privatization so much Mr. Singh, please move to the US where you can enjoy all of the lovely privatization all of the time — and by the way, “Obamacare” is NOT the same as having real national healthcare.

Canadians are lucky to enjoy a system where the best of Democratic Socialism joins with well-regulated capitalism and this is precisely why Canada weathered things so well thus far.

Good luck in the US, Mr. Singh.

#46 Cow Man on 10.06.13 at 8:27 pm

Garth:
I don’t doubt anything that you state. So we know people aren’t going to change their life style until it is too late. Therefore according to your points, houses will be on sale like two day old white bread, and people will be living in the streets?

I would suggest that the ballot box will say not. The governments will just reallocate wealth. Inheritance tax will return. Taxes on those above the median will escalate and the party will carry on. Those of us who plan and save will just lose it upon death or before. That is the way socialism works. We are a socialist country. Todays PC’s are yesterdays socialists.

#47 ripped on 10.06.13 at 8:38 pm

Average life expectancy for men in Canada is 67.5, so don’t worry to much about it.

Especially when the average working age is till 65.

#48 detalumis on 10.06.13 at 8:41 pm

It’s very easy to know what you will need, just start tracking your expenses on a spreadsheet ten or fifteen years before you retire. The 51K number is misleading, it’s actually about 40K for what you what call true current consumption for a 65+ couple, the rest of the amount includes stuff like income taxes or gifts.

A senior couple can have close to 40K in income and pay no income tax, on paper they look “low income” they can play the poor-poor-pitiful-me-card to keep those entitlements coming but they actually have more disposable income than many other people in the country would.

#49 Snowbush on 10.06.13 at 8:55 pm

http://www.cnbc.com/id/101089982

#50 [email protected] on 10.06.13 at 8:59 pm

Reading about divorce and retirement savings, what if your other partner doesn’t save as much as you do? I don’t think any two people see eye to eye on this topic?

#51 IM in C on 10.06.13 at 9:00 pm

Looking at the attached photo, all I see is a dirty joke. cackle cackle !!

#52 Freedom First on 10.06.13 at 9:06 pm

No offense Garth, but if people are having a difficult time
in saving for the future, I would like to put it an a way that may make it easier for some to understand, you know, speaking like a layman and not a financial adviser.

Now, a new formula, which is to be used to follow the diversification, balance, liquidity ratios/% that Garth recommends. It is extremely simple: The $$$ that Smoking Man puts into smoking, use for RRSP’s as per Garth’s rules of usage, should max out the RRSP’s for most people quite easily. The $$$ that Smoking Man uses for drinking, should be used for RE, when the time to buy is right. Down payment would be large, however, saving these $$$ and paying cash is even better and should only take a few years to accumulate. Next, the biggie, the $$$ Smoking Man spends on gambling, which is the guaranteed accumulated losses, should easily cover the TFSA investments, unregistered accounts, all other investment assets, as well as the recommended cash holdings. Depending on your income, simply use the ratios/% which Garth outlines regularly.

#53 ripped on 10.06.13 at 9:07 pm

#49 Reading about divorce and retirement savings, what if your other partner doesn’t save as much as you do?

Speaking from commonlaw experience…

half MY house, half MY pension, half MY savings

I pay child support until finished college

#54 [email protected] on 10.06.13 at 9:08 pm

> Snowbush reading that article mentioned families have increased their cash holdings.

Worst thing you can do?

#55 Snowbush on 10.06.13 at 9:09 pm

Five years after the crisis, families are hoarding cash

http://www.cnbc.com/id/101089982

#56 Habbit on 10.06.13 at 9:16 pm

Hi Garth. I am not sure if the suggestion to double the CPP is to save the boomers. Best guess is if rates do double anytime soom boomers benefits won’t increase. What we do know is that most people boomer or others don’t save enough for retirement even with the benefits of RRSP’s TFSA’s and dividend tax credit. I suspect the fact that people don’t save enough given the tools they already have is that they spend too much and save too little if anything. (or their wages are too low) Regardless, the intention of doubling the contributions and therefore the benefits is to try to ensure people are not eating dog food or dependant on others. I am not sure if we can ask employers to double their contributions. I’ll leave that to others who understand better than I the repercussions, to debate. As a side note, what is the average wage in Canada? It has been noted on this blog that the average familly income is just over 70K. With 2 full time working people that puts the wage at what $18.00 bucks an hour? Just sayin who can save on that type of income. It’s like watching TV and you see the average familly home and lifestyle. Nowhere near reality. When we have, it seams we get disconnected from the realities of the working class. Some are suggesting that families take on more responsibilities for their elderly, sick and disabled. I remember well as a boy my grandparents living in a three storey duplex with uncle Bill, 3 kids, an aunt and uncle and their 2 kids and some others. 1 small bathroom and a large kitchen. ( and great grand dad too)They built this damn country after lots of em went and got their asses shot off so they thought it would be the war to end all wars then did it again. Lots of entitled people now making a living of the sweat of the working poor. Sorry about the rant but really

#57 FATHER on 10.06.13 at 9:21 pm

garth you should have put your head instead of hugh’s

#58 Ralph Cramdown on 10.06.13 at 9:26 pm

#46 ripped — “Average life expectancy for men in Canada is 67.5, so don’t worry to much about it. Especially when the average working age is till 65.”

It’ll be cold comfort indeed when you’re 75 and broke to know that you outlived most of the shorties you hung with in the maternity ward.

An average 65 year old today can expect to live past 80. There’s a big difference between life expectancy at birth and life expectancy for someone who’s managed to survive to a certain age already.
http://www.lifeinsurancecanada.com/life-expectancy-calculator

#59 Almost retired on 10.06.13 at 9:31 pm

We are always hearing about how Social Security is going to run out of money.

How come we never hear about Welfare running out of money?

#60 Retired Boomer - WI on 10.06.13 at 9:45 pm

#51 FREEDOM FIRST

Nice idea, except Smoking Man is a fictitious character.

He has previously so stated.

#61 Renter's Revenge! on 10.06.13 at 9:45 pm

Found this on Bloomberg, thought you guys and girls might enjoy it:

http://www.bloomberg.com/news/2013-10-06/new-american-economy-leaves-behind-world-consumer-of-last-resort.html

“Another theme is that U.S. companies are increasingly repatriating production from China and other emerging markets, which lured it with cheaper labor costs.

Fifty-four percent of U.S. manufacturers with sales topping $1 billion are planning to or considering bringing back factory-lines from China, up from 37 percent in February, the Boston Consulting Group said Sept. 24, citing a survey of 200 executives. It projects that with Chinese wages and benefits rising 15 percent to 20 percent a year, the cost of operating in China will be the same as staying in the U.S. by 2015.”

Can Canada say the same? No, I didn’t think so.

Can the Brad Lambs of this world see how this works? A reversion to the mean in the housing market in the US brought a reversion to the mean in their labour market, which is bringing about a reversion to the mean in their economy!

#62 young & foolish on 10.06.13 at 9:47 pm

Disingenuous post ….

According to these projections, the majority of Canadians will all be eating cat food before too long. We will become Cuba North. Drastic!

Do you believe it?

#63 young & foolish on 10.06.13 at 9:52 pm

Just look around … how many 45 year olds do you know with half a million in liquid assets? Oh, I know, it’s all those “waiters” lining up for their inheritances.

That’s the point. Most people are screwed. The favoured few who come here – and heed – can do better. — Garth

#64 ripped on 10.06.13 at 9:57 pm

#57 Ralph Cramdown

I guess your link is from an insurance company trying to sell insurance.

Here’s stat’s Canada…

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/health26-eng.htm

#65 And you can become rich! on 10.06.13 at 9:57 pm

Investing in condominiums : strategies, tips and expert advice for the Canadian real estate investor
By: Persaud, Brian, 1980- | Year of publication:: 2011. | Publisher:: J. Wiley & Sons Canada,

#66 [email protected] on 10.06.13 at 10:05 pm

>ripped ok your handle makes perfect sense now!

there will be a need for an equalizer in the future between the oldies with goldies and the oldies with much less.

increased taxing of your hard saved rrsps and tfsa?

possible?

#67 Cici on 10.06.13 at 10:07 pm

Absolutely not! (ready, that is)

And apparently, I can’t even afford wine anymore (remind me, why do I find this blog so much fun already?). Not that wine was even a big chunk of my budget anyways.

Hmmm. Just spent 260$ on boyfriend’s birthday (nice dinner for two out and a party chez nous with all of his best friends), but I still haven’t got him a physical, material, wrappable present. Yet I’ve already gone overboard and above and beyond my means, so he is just going to have to settle for sexual favours this year instead. I think he’ll appreciate my frugality.

#68 Cici on 10.06.13 at 10:08 pm

He’s getting sex coupons for Christmas too.

#69 Observer Person on 10.06.13 at 10:10 pm

#7 So you are saying that a 45 year old should have $358,000 in a liquid portfolio? Plus you are saying that you should also have some equity in a home – right?

Nope. The house is optional. — Garth

This is an interesting discussion unto itself and we should talk about it more. Over the long term, home ownership has been shown to just keep track with inflation, so it’s not necessarily a hedge against inflation. But then – define “long term.” Equity is an “it depends” issue — if you don’t owe the bank more than you can pull out, if you don’t require the equity to live on (for which you have to sell and THEN what), etc. Rent or own, you will have housing costs. If you keep your ownership costs about the level of a decent rental in the area you want to settle, then you can project your expenses. (Bearing in mind that rent is often more predictable than ownership — and definitely more even for cash-flow budgeting.) These days though, housing ownership costs, the amount mortgaged, are very high compared to rentals and owners may at some point get stuck with negative equity and high monthly payments (in the early years, most of that interest, too – which doesn’t build equity).

So the word ‘equity’ all by itself is not a magical incantation, though realtors utter it as such. Look at it in the broader context of place, time and your own financial picture. Equity dollars are the same as every other type of dollar except you can’t get them out of the bank the same day.

#70 Observer Person on 10.06.13 at 10:13 pm

“Most retirees spend more than they did as workies”

During the first part of retirement, very often – travel, fun, expensive hobbies, grandkid gifts, etc. All the things they didn’t get to do before. But at some point that tapers off, perhaps sharply. Health problems, reduced mobility and ability to pursue all the hobbies, greater awareness of the need to make the money last … expenditures go down.

#71 Trading Naked on 10.06.13 at 10:13 pm

#10 ripped
[i]Sounds like you have an exciting life. — Garth[/i]

The retirees I know of are BORING people. Sitting around watching TV all day, or puttering about in the garden, are low-cost activities. Classes at the seniors’ centre are cheap, too. That is, if you can drag a wrinklie into one – some of them are so set in their ways that they can’t be bothered to try anything new.

Kind of makes me wonder if the Zoomers are for real, and will therefore need the kind of dough Garth is writing about, or if it’s just a marketing ploy/label to pressure Boomers into increasing consumption.

#72 Retired Boomer - WI on 10.06.13 at 10:14 pm

#57 Ralph Cramdown & #63 Ripped

You guys are saying the same dam thing.

IF you were born in 1950 male average age EXPECTATION was 66.

If you ATTAINED age 66 you could expect to live another dozen years.

Most deaths occurred in the younger years back aways, medical science has improved longevity.

If you are born TODAY you can expect to live til 80.

Ripped, if you want to check out at 67 have at it.

#73 cowtown cowboy on 10.06.13 at 10:15 pm

It’s good to know that we are in the ballpark; wife and I are both 45 in November, we have about $450k invested with a $100ish-k loc against a $600k house with about a 325k mortgage.
We didn’t really start saving until we were both about 30 and we took some lumps along the way in the markets; ‘cough’ Nortel, and a few junior O&G’s that I’d rather not talk about. The S&P has historically returned 9% but I usually factor in a 8% return and based on my savings rate I should have around $2.5 -$3 million when I plan to retire at 61. Maybe earlier if a few things fall into place. I recently asked my F.i.L. what they spend in retirement and he told they are spending about $200k/year….so much for an inheritance :-(
Everyone’s needs will be different, and everyone will adjust their spending as their circumstances warrant, but if you start by 30 and diversify and stay with it, people should be OK, oh and screw the boomers!

#74 Observer Person on 10.06.13 at 10:21 pm

#11Garth are you saying that myself and my Spouse should double these amounts? That at 65 me and my Wife are going to need an income of $142,000 (excluding pensions). And we’ll have to have an investment nest egg of $2,500,000?? Plus equity in a house???

Are you 12? — Garth

Hey let’s be nice. People trip up over all kinds of things when figuring this stuff out. Anxiety clouds the mind.

If you know what your household is living on, you reckon your starting nest egg based on that household income. If your pre-retirement income (however it’s made) supports the two of you, then your post-retirement income figured as a percentage (say, 85% – more, less, depending on how you want to live) would be expected to support the two of you.

Put another way, either 1 or 2 people can live in a 1-bedroom apartment. (Assuming they share a BR tho I guess there could be a pull-out in the LR!)

Rent, utilities, phone will be the same for 2 as for 1. Food will be a little more. Clothes, hobbies etc. Double the cost for entertainment tickets, some aspects of travel etc. But you’re not paying double rent. And you might have 1 less car. And so on.

#75 Spaccone on 10.06.13 at 10:22 pm

I feel grateful to be sitting on liquid a little over 3/4 mil in my very late 30s. If my parents stayed back in the home country (average income of the region $20,000) I couldn’t dream of this. Unfortunately or not, I changed my life/working style as I could not take sitting in a “cubicle” or Toronto office anymore and didn’t see major resource-draining events any time in the near future (ie relationship, marriage, car etc). And the way I carry myself–nice guy, understated, no car, haven’t shopped for clothes in a couple of years–won’t get the attention of Toronto chiquitas anyways. So now I’m pretty much at poverty-level work income for several years now and for the near future by choice so I can have more flexibility for travel or just doing nothing. I know it’s a good amount on one hand, but not much for these times on the other hand (esp. if I let a GTA princess make me buy a McMansion…which I’d like to say is not very likely but…)

#76 Victor V on 10.06.13 at 10:24 pm

Rival bids drive price of Leslieville home $113,000 over-asking

http://www.theglobeandmail.com/life/home-and-garden/real-estate/rival-bids-drive-price-of-leslieville-home-113000-over-asking/article14656966/

‘There’s a huge pool of buyers [shopping] in the $500,000 to $650,000s,’ says agent

=============================

The property virgins are still at it.

#77 Observer Person on 10.06.13 at 10:27 pm

#20 I agree with other posters here that the Canadian government will not let housing values decline because of the clout of the boomer voting bloc.

Boy there’s a lot of faith in this government. Not smart enough to prevent a massive bubble, and yet smart enough to keep it from bursting.

What about the governments of Ireland, Spain, UK, USA etc. They have Baby Boomer voting blocs too. They wanted to stay in power, too (or their ruling parties did). Did that prevent their housing crises?

#78 aprilNewwest on 10.06.13 at 10:27 pm

#45 Con Man. So you think Canada is different from all the other countries where Real Estate has gone bust…….don’t
think so……

#79 Dan on 10.06.13 at 10:28 pm

#66 Cici on 10.06.13 at 10:07 pm
Absolutely not! (ready, that is)

And apparently, I can’t even afford wine anymore (remind me, why do I find this blog so much fun already?). Not that wine was even a big chunk of my budget anyways.

Hmmm. Just spent 260$ on boyfriend’s birthday (nice dinner for two out and a party chez nous with all of his best friends), but I still haven’t got him a physical, material, wrappable present. Yet I’ve already gone overboard and above and beyond my means, so he is just going to have to settle for sexual favours this year instead. I think he’ll appreciate my frugality.

.Do You have a sister??

#80 young & foolish on 10.06.13 at 10:29 pm

“It’s obvious asset prices, especially real estate, will go down.”

Hmmm …. sounds like deflation.

#81 MarcFromOttawa on 10.06.13 at 10:31 pm

#63 Ripped

Doesn’t your link show that the average life expectancy for men is 79?

#82 Ben on 10.06.13 at 10:31 pm

I’d just love to know how you think +anyone+ under 35 can do this?

Real estate is 400K more than it was for their parents. There’s your saving, right there. Gone for the kids. If they try to avoid it they pay a fortune in rent. And get low rates. Plus 6% per anum – not likely medium term!

The only way those targets add up is when you fold in defined benefit (otherwise known as intergenerational theft).

#83 Sydneysider on 10.06.13 at 10:33 pm

It would be more useful to quote the median. In the US, median retiree spending – in the US, about $31K pa [http://www.forbes.com/sites/janetnovack/2012/02/14/why-you-might-need-less-retirement-income-than-you-think/].

The same article points out that this is about 79% of the spending of working people median.

#84 meslippery on 10.06.13 at 10:36 pm

Habbit # 55
First good canned dog food costs more than canned
people food.

My point is $18.00 per hour in my line of work = 1999
and is hard to find in 2013

#85 Fed-up on 10.06.13 at 10:42 pm

I’m fast approaching age 45 and let’s be totally serious. How many people or couples that you know in that age bracket have saved anywhere near that much poke? $450,000? I know many that owe that much or far more, but saved up and invested? Nahhhhhhhh.

Even with no mortgage on it, I’m so glad that I sold my albatross I mean home.

#86 ripped on 10.06.13 at 10:43 pm

#65

I’m just having fun being the contrarian tonight.

I don’t regret having seen the world in my 20’s though.

I see retired people today and it looks to be a pretty simple existing lifestyle.

I don’t blame them though, there old.

They can spell, too. — Garth

#87 Ralph Cramdown on 10.06.13 at 10:45 pm

#63 ripped

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/health72a-eng.htm

#88 Neddie on 10.06.13 at 11:01 pm

Garth recommends not paying off a 3-4% percent mortgage and investing the money instead for a higher return.

If it were so easy wouldn’t the mortgage lenders do the same (instead of lending out their money at 3-4%)? Or are the mortgage lenders all chumps?

#89 sideline sitter on 10.06.13 at 11:04 pm

love these posts, Garth.
makes me feel good about my numbers.

#90 ripped on 10.06.13 at 11:10 pm

#86

What are you going to be doing if/when you hit 80?

Not a he$$ of a lot, I’ll guarantee you that.

Enough of the save save save millions crap for the fragile day when you can’t spend it anyways and your off spring end up spending it.

Enjoy it while you can.

#91 Waterloo Resident on 10.06.13 at 11:12 pm

I’m not sure about Canada’s crisis, but here are numbers of America’s debt crisis in a way that you can easily understand:

http://money.cnn.com/2013/10/03/news/economy/debt-ceiling-default/index.html

Federal Revenue: $2,902,000,000,000
Federal Budget: $3,803,000,000,000
New Debt: $901,000,000,000
Current Debt excl Unfunded Obligations: $16,800,000,000,000
Debt including PV of Unfunded Obligations: $62,000,000,000,000
Proposed Annual Budget Cuts: $120,000,000,000

Remove 8 zeros and make it a household budget:

Household Income: $29,020
Household Spending: $38,030
New Debt on Credit Card: $9,010
Credit Card Balance: $168,000
Debt including IOUs to Friends & Family: $620,000
Proposed Annual Family Budget Cuts: $1,200

#92 dienekes on 10.06.13 at 11:14 pm

Is that guy ever in anything other than pajamas?

#93 Cat Stevens on 10.06.13 at 11:19 pm

Myself and wifey are both teachers in Ontario and have pensions. Is there any point in maxing out our RRSPs?

#94 Ronaldo on 10.06.13 at 11:29 pm

#20 Policy Shift –

”Immigration policy can be adjusted very quickly to address demographic shifts such as a retiring wave of boomers. I agree with other posters here that the Canadian government will not let housing values decline because of the clout of the boomer voting bloc.”

And just how do you suppose that the government is going to prevent housing value declines. I would think that supply and demand will determine housing values just as it has done in the past not including any other unpredictable events like we had in the early seventies with the oil crisis.

#95 recharts on 10.06.13 at 11:32 pm

This is bullshit! The house was intentionally listed low. I can probably show hundred of situations like this.

Rival bids drive price of Leslieville home $113,000 over-asking

http://www.theglobeandmail.com/life/home-and-garden/real-estate/rival-bids-drive-price-of-leslieville-home-113000-over-asking/article14656966/

‘There’s a huge pool of buyers [shopping] in the $500,000 to $650,000s,’ says agent

================

It is cyclical, every time they suspect the market is turning for worse they start a new wave of bullshit like above
This season we heard “bidding wars”, “asian HAM”, and “increasing rents”
These were the three main scarecrows that the RE agents used this season
The “HAM” and “the rates are increasing” somehow died, they were used a lot last year.

Increasing rent is going to dies soon as well, that wast the purest bullshit ever.

It is interesting to see how they use media to promote this. No wonder why most of the shitty newspapers we have in TO are dying. By publishing this they will kill their chances to even reincarnate in online editions, mostly because they lose credibility.

#96 Bob Rice on 10.06.13 at 11:32 pm

Hey folks, this post is on behalf of my parents, who are about to sell their home and rent. They’re in their 70s and I want to buy them a book on fixed-income investments geared toward retired people. They want to eventually speak with a financial advisor but want to educate themselves prior to meeting with someone.

I (they) would greatly appreciate a simple, clear book recommendation. Thank very much in advance.

#97 Ronaldo on 10.06.13 at 11:40 pm

#24 Ripped –

”With a 40% divorce rate, does it matter? — Garth

I will agree with that, it totally destroyed me financially.
Way more then a any real estate collapse or stock market crash would.”

Totally agree. Like an instant 50% drop in your asset values (if your lucky) and little hope of recovery. And keep in mind that over 70% of breakups are initiated by women. There’s a very good chance that the bigger the retirement pot gets, the greater the chance of having to split it and at the worst time in your life. Maybe that’s why people live for today and to heck with tomorrow with statistics like that.

#98 KommyKim on 10.06.13 at 11:51 pm

RE: #87 Neddie on 10.06.13 at 11:01 pm
Garth recommends not paying off a 3-4% percent mortgage and investing the money instead for a higher return.

If it were so easy wouldn’t the mortgage lenders do the same (instead of lending out their money at 3-4%)? Or are the mortgage lenders all chumps?

The risk of you & CMHC defaulting on the mortgage warrants a return of 3-4%. The risk of investing in a balanced portfolio of stocks and bonds warrants a 7-10% return.
So no, they are not chumps, just risk averse.

#99 Pierre on 10.06.13 at 11:55 pm

Funny this is matching:
http://www.thereformedbroker.com/2013/09/16/here-we-go/

A retiring couple that wants to spend $8,000 per month over the next 20 years, above and beyond social security, needs a starting portfolio value of $1.3 million (assuming a 6% annual rate of return). And yet a large number of affluent or even wealthy households fail to grasp this concept, opting for near-term “stability” while jeopardizing their lifestyles in the years and decades to come.

#100 Cici on 10.06.13 at 11:58 pm

@ #78 Dan

.Do You have a sister??
_______________________________________________

I have a very big (and very hairy) big brother, and guess what?!! He likes boys ;-) However, I’d warn you in advance–he’s not very generous.

#101 Nemesis on 10.07.13 at 12:10 am

@dienekes/#91

Yes. But, trust me on this…

You don’t want to know.

#102 Smoking Man's Old Man on 10.07.13 at 12:20 am

#49

Don’t worry the legal system will make sure the non- saver is rewarded. In fact if their living expenses are higher than yours even if frivolous (because you are a saver) Then by our judicial systems logic, they need a bigger slice of the pie for day to day expenses.

I paid cash for my house, my spouse contributed 1/6 of the value, common law she got half ( her name was on the title, mistake #1) I worked full time, she stayed home because she didn’t like people telling her what to do, mistake #2) Had 7 figures in my portfolio, once when the divorce lawyers on both sides know this your screwed, they will drag things out as long as possible, one particular month I got billed $15,000 ( for only one month)

Once your finished with all that your spouse can apply for half your cpp pension for the years you co-habited, so if she/he didn’t work or worked less than you, that will be split equally as well.

That’s was all under Common Law, Marriage….. Forget it!!!

#103 TheRealTruth on 10.07.13 at 12:27 am

Nice.

No mention of the GIS top up = $1200 per month per couple

No mention of illegal suite income (x2 in Surrey) = $1800 per month

Now a couple that retires with a paid off house gets $3000 per month to start. Then add to that OAS.

Doesn’t look like a doomer scenario to me..

#104 old but not grumpy on 10.07.13 at 12:29 am

Ripped – I don’t know where you live, but where I live I have a lot of friends over 65 who get more than their age in back-country and/or downhill ski days every winter, and spend summers road and mountain biking, triathlons, white water canoeing, hiking, backpacking, and of course travelling the world. I don’t TV set at their homes.
Maybe you should go outside and play, after you figure out how to read the StatsCan ‘life expectancy at age 65’, which shows men should expect 18.5 more years and women 21.6.

#105 Christopher Lackey on 10.07.13 at 12:36 am

$51,000 a year? On what? Leased vehicles? Trips to vegas? Credit card interest? Iphones? $500 rip-off telecom bundles? Yes,welcome to Canada. The home of modest lifestyles and frugality

Oh yeah, I forgot. Keep your mouth shut. Don’t share the secret. Live below your means, and invest your excess capital in the companies paying dividends and making craploads of money off the majority who pays into all this madness. As much as you want to help others, if everyone did that it would all come crashing down, right?

#106 As Is Old Man on 10.07.13 at 12:40 am

If most people will have only CPP + OAS in the coming decades then expect massive price deflation to match incomes. Canada is an extremely wealthy country – there will be no mass freezing as we have more than enough energy. There will be no mass starvation as we have more than enough food. The average Canadian in the future will continue to enjoy the lifestyle of the average Canadian today. Nothing to worry about, unless you want to achieve or maintain an above average lifestyle…

#107 Nemesis on 10.07.13 at 12:47 am

Apologies to those confined to MobilePlatforms re: prior link to Barkays/SoulFinger… the following brief extract should circumvent the DigitalMilleniumCopyRightAct’s nefarious blockade of your iApples/SamSungs; & as an added bonus, you also get to enjoy Ottawa’sFavouriteSon…

http://youtu.be/CXj8qt9S60U

NoteToRalph: It really was like that. For the most part.

PS to Nosty: I’ve been thinking about you all week… you know why; the link I would have chosen – if it existed – would have been to Katherine Hepburn’s cameo in Spielberg’s, “Always”… but no-one has yet thought to segment/upload it. BelieveMe. I looked. Condolences. It’s a HardRowToHoe, Nosty – I am so sorry.

PPS to SM: the more you do it the easier it gets… keep at it.

#108 Julie on 10.07.13 at 12:52 am

Pensions…….how about 1 million dollar per worker govt pensions. How are those going o be funded? Raise taxes to 80%? How about cutting the size of govt and cutting taxpayer FUNDED govt worker pensions. Private sector workers dont get million dollar pensions.

#109 Entrepreneur on 10.07.13 at 1:14 am

When playing sudoku the figures have to put in be a certain position for the game to work.

Was anyone taught about graphs and correlations. Take a graph of financial greed of people and take a graph of climate change. Do they relate?

Any other graphs and correlations. How about small business and savings? What about families and savings?

A bad game of sudoku but it can be corrected by being smart consumers…as a whole.

#110 Freedom First on 10.07.13 at 1:14 am

#59 Retired Boomer WI

Yes, I know SM is a fictitious character. So is my #51 comment:)

#111 cynically on 10.07.13 at 1:23 am

#44 gtrz4peace – How do you know how well-regulated the EU nations are? Socialists like you are sheep as long as your government of the day is giving you all the “freebies” you want and you call it democracy. It has nothing to do with democracy and the truth is the US is more democratic than Canada and her mother country, the UK. What is happening in the US today is democracy in action! I don’t like it and you don’t either I’m sure but this is democracy as these are elected representatives in their democratic system. I’m sure it wouldn’t happen in Canada as we are far over-represented with MPs and totally unrepresented in the Senate but that’s our democracy. Canada’s capitalism may be well-regulated but there is not a lot there to regulate as we are a resource society, not a manufacturing one to any extent therefore you shouldn’t be so smug in your criticism of another country with a population ten times ours and its concomitant problems. Let’s correct our own shortcomings and then maybe we can beat our breast and make the case you are making.

#112 broadway skytrain on 10.07.13 at 1:33 am

36 big hammy billions on for BC/AB gas, maybe…
could it be a rabbit from a hat and possibly keep van prices pumped???

Malaysia’s state energy company, Petronas, is pressing ahead with plans to invest $36 billion in B.C.’s natural gas sector.

Malaysian Prime Minister Najib Razak lauded the “gargantuan” investment Sunday as Canadian Prime Minister Stephen Harper arrived for a summit of Asian leaders.

plans to build both a liquefied natural gas plant ($9 to $11 billion) in northwest B.C. near Prince Rupert and fund TransCanada’s building of a pipeline ($5 billion).

The pipeline would transport gas from northeastern B.C. for export overseas to Asian markets.

Last year, Petronas invested $6 billion to purchase Calgary-based Progress Energy.

There are also major upstream investments in gas wells and other facilities

#113 Mean Gene on 10.07.13 at 1:44 am

Maybe ditching mandatory retirement so long ago was a bad idea. Workers knew they were being booted out the workplace at 65 and HAD to have a good retirement plan in place, no dicking around upgrading houses in their 50’s or thinking about working after retirement.

#114 Onthesidelines on 10.07.13 at 1:45 am

“You ready?”

Ready for what? Don’t own realestate now, have no interest in owning it when I’m even older. What do I care if prices go down.

Don’t care if mortages go up, down or sideways. Will never get one anyway.

Yields on government bonds is what interests me. What do you predict the yields will be on 10 year crown backed bonds by 2015-16?

#115 Jane 24 on 10.07.13 at 1:58 am

Garth this formula may have worked well in the past but there are some problems with it today. Factors working against big savings are:

1. High cost of living in urban areas
2. High cost of rent or home ownership
3. Cost of children and childcare made worse by the trend to late marriage
4. Cost of student loans and higher education extending into later life.

I know many younger people who don’t get through university, pay off the student loans and established in their careers until 35. Then they marry and have some children and then they are indeed 40 but they haven’t wasted their money, it is just so hard to pay these bills in 2013.

They don’t have work pensions so need to make their own pot and then just as they get going, their own parents start to need financial help.
It is not that folk spend all their money Garth, it is just that today there is often no money to spend, the bills take it all.

When I am home in Italy I see these multi-generational families and homes with stress-free folk living in them and I do think that will be the answer or many. A change in retirement patterns.

#116 broadway skytrain on 10.07.13 at 2:00 am

just a random lux condo in myrtle beach – OUCH! – why so cheap? no economy ???

10/05/2013 Listed for sale $274,900

04/21/2011 Sold $173,000 -66.4%
01/03/2007 Sold $514,900 —

#117 VanPerfecto on 10.07.13 at 2:06 am

The perfect storm for Vancouver Real Estate has arrived. Looks like the default is a done deal. I would of thought all those rich Republican would be upset with their stock holdings about to be slaughtered. Guess it means nothing to them
http://www.bloomberg.com/news/2013-10-07/a-u-s-default-seen-as-catastrophe-dwarfing-lehman-s-fall.html

#118 Tony on 10.07.13 at 2:18 am

Re: #45 Cow Man on 10.06.13 at 8:27 pm

Canada would also have to bring in a “gift tax”. The demise of housing in the future in Canada will likely be huge property tax increases well above the inflation rate thus capping any future gains and ensuring losses in real estate.

#119 Buy? Curious? on 10.07.13 at 2:37 am

Boomers! Don’t listen to Garth! Stay in your homes! Don’t be scared into selling into a falling market!

Garth, why are helping the most selfish generation in the history of humankind?

http://www.youtube.com/watch?v=qW23hpGLy78

#120 Fed-up on 10.07.13 at 2:42 am

@#92 Cat Stevens on 10.06.13 at 11:19 pm

Myself and wifey are both teachers in Ontario and have pensions. Is there any point in maxing out our RRSPs?
——————————————————————————————

Dear Mr and Mrs. Stevens,

You’re welcome.

Yours Truly,

The taxpayers and and losers in the private sector.

#121 Tony on 10.07.13 at 2:46 am

Re: #72 cowtown cowboy on 10.06.13 at 10:15 pm

By age 61 you’ll be holding nothing but worthless American dollars. Good luck on your retirement.

#122 Victor on 10.07.13 at 3:18 am

These numbers are way too high for retirement.
OAS/GIS is around $15,000 a year indexed.
And many single retired persons can live on this sum in a rented apt, shared rented apt or mortgage-free home.

Seniors are not spending $51,000 a year.

Live with some seniors for a month and track their spending – it’s alot less. The consequences of seniors receiving OAS/GIS income of $15,000 and requiring $51,000 would be very evident.

#123 Victor on 10.07.13 at 3:27 am

#90
Dear Waterloo:
The state is not like a household. The US (like Canada) has existed for long period with deficits and accumulated debt, it has taxing power, it has its own sovereign currency. Finally net govt debt = net non-govt saving. In other words, Uncle Sam’s debt is held by Grandma’s savings bonds.

It’s double entry accounting.

#124 SGIP on 10.07.13 at 3:41 am

#44 gtrz4peace on 10.06.13 at 8:22 pm

Thanks for day post

…..

Harper and Jim are calling a snap federal election this spring or fall 2014

To try to get aHead of housing crAsh

P.s. Harper o. The download. Google ray Novak his tween. Now with second highest job In Canada
O
O
O

#125 Julie on 10.07.13 at 4:20 am

http://www.cdhowe.org/ottawa’s-pension-gap-the-growing-and-under-reported-cost-of-federal-employee-pensions/16001

Cdn fed employee pensions in 2011 227 Billion. This does not even count provincial and city pensions.

This is a nuclear bomb waiting to go off. How many of you private sector workers are looking forward to 80% tax rates so pencil pushers can own condos and houses in Cabo, Cancun, Phoenix and Palm Springs? I know… I’ve met them. Almost every cushy Cdn I meet in a warm place…..is a fat cat Cdn Govt Retired Pencil Pusher. Not firemen or teachers or nurses. Useless Pencil Pushers. Remember that as they continue to raise taxes, fees and levies.

#126 Fortune500 on 10.07.13 at 6:09 am

Liquid, the ‘average’ net worth might be $400,000 but what is the median net worth of Canadians? That average statistic has been getting a lot of radio play lately, but it is pretty meaningless. How many ultra high networth households are skewing that number?

A number of recent studies put Canadian household median net worth at more like $180,000. I think we should be starting there …

#127 devore on 10.07.13 at 6:22 am

#61 young & foolish

Disingenuous post ….

According to these projections, the majority of Canadians will all be eating cat food before too long. We will become Cuba North. Drastic!

Do you believe it?

Don’t be stupid. Just because some/many/most people are screwed, doesn’t mean you have to join them. Life always goes on, no matter what. You can choose to be average or ordinary, or you can choose to strive for better. But we already know what you’re going to do.

#128 maxx on 10.07.13 at 6:46 am

#21 Retired Boomer – WI on 10.06.13 at 6:19 pm

Bingo….however, for most, there will be no chance to do it over.
So much tougher to sell RE now, with the trend worsening going forward, more low-paying jobs and far more difficult to make a lateral move in the case of job loss.
Also, way too many don’t understand that how you spend is as critical as what you save. The two are complementary and how you spend can boost your wealth immensely.
Garth hit the nail on the head with “save and invest like a crazed beaver”. It’s the only workable hope going forward.

Unless you have a deep belief in winning the lottery.

#129 maxx on 10.07.13 at 7:09 am

#43 Paul on 10.06.13 at 8:20 pm

“How can all these cash-poor, house-rich people finance their lives without dumping real estate?

I asked that same question to my inlaws today who are in that position. Answer…reverse mortgage. Their not moving..period.

It unlocks only a third of equity, and interest multiplies the debt. No solution there. — Garth

….I’d love to see their progeny prance around the living room upon learning that they must kiss their inheritance good-bye. Ownership and control of their house indeed….and lord help them if they have unexpected expenses pop up. When will fools understand that there is no free lunch?

#130 recharts on 10.07.13 at 7:17 am

Rival bids drive price of Leslieville home $113,000 over-asking

http://www.theglobeandmail.com/life/home-and-garden/real-estate/rival-bids-drive-price-of-leslieville-home-113000-over-asking/article14656966/

‘There’s a huge pool of buyers [shopping] in the $500,000 to $650,000s,’ says agent

================

And below you what what our shitty media will never publish

http://www.dinkypage.com/243366

I posted just what sold under 90%!!
Note that the first two properties in that table sold for a “whopping” 66% of the initial asking price and some of them have been on the market for AT least 174 days (that is how long ago I started collecting stats!)

#131 maxx on 10.07.13 at 7:25 am

#48 Snowbush on 10.06.13 at 8:55 pm

Interesting link.
When in the U.S. earlier this year, I spoke with someone who said that they were saving all that they could and had zero confidence left in the economy.
As long as we have central bankers who ease and suppress, people should save and invest (very cautiously) like crazed beavers.
It seems that central banks are entrenched only to service banks, big business and RE. They appear to have zero interest in the health of the real economy nor the resulting well-being of those working within it.

#132 Ralph Cramdown on 10.07.13 at 7:41 am

#114 Jane 24 — “Garth this formula may have worked well in the past but there are some problems with it today.”

The formula tells how much money you need, not how easy it is to save it. We have a tendency to think that prior generations had lower expenses and easier real investment returns, but a lot of things were more expensive back then, and easy real returns have never looked easy at the time.

“When I am home in Italy I see these multi-generational families and homes with stress-free folk living in them and I do think that will be the answer or many.”

Warning, creepy: http://www.expocity.ca/
What’s the commedia dell’arte character for an infantilized adult son still living in the basement in Woodbridge?

#133 Willy on 10.07.13 at 7:49 am

Hey Garth, do you really think a 6% drawdown rate during retirement is realistic? That has a pretty high probability of being depleted in 20yrs, and for many, retirement could be longer. The old “rule of thumb” was always 4%/yr, with some resources suggesting even lower than that is appropriate if you want to ensure against drawdown of your initial capital.

It’s been realistic for twenty years. — Garth

#134 John Smith on 10.07.13 at 8:13 am

Michael Hlinka on the future of condos in Toronto :

http://www.cbc.ca/video/news/audioplayer.html?clipid=2408420530

#135 frank on 10.07.13 at 8:15 am

You can always sell your house, bank a couple of hundred thousand, move to a small town, get a part time job, and rent until you die. Living within your means also applies to a person 65. All is not doom and gloom.

#136 NYCer on 10.07.13 at 8:31 am

Good post. Finally a benchmark. I feel a bit better now since I am more than halfway to the $400k asset (liquid right now since I don’t own a house and renting in a prime location) and about to turn 31.

I agree that $51k per year is a decent lifestyle for retirement as I plan on spending that much per year when I retire.

Thanks!

#137 Penny Henny on 10.07.13 at 8:32 am

Most retirees spend more than they did as workies._ Garth
FAIL.

Spending actually drops in retirement.
http://www.bogleheads.org/wiki/Surveys_of_retirement_spending

#138 Pr on 10.07.13 at 8:33 am

#10 ripped That’s a pile of crap… 65+ go from the kitchen to the recliner and tv to bed… repeat

Sounds like you have an exciting life. — Garth

If you live your life like is no tomorrow from 18-35 years old, you will probably be very peaceful by 40 and 65 even more.

#139 sad b'turd on 10.07.13 at 8:36 am

Like your Blog Garth, and this one:

http://www.stonekettle.com/2013/10/deadlock.html

I like the commenting rules, should apply here (with regional modification)

“A note about commenting: This post is getting much wider than normal play. As usual when such things happen, Stonekettle Station begins attracting a certain frothy spittle-flecked yellow-eyed element.

As such, commenting on this post is in full moderation and will remain so.

I will reiterate for the slow people: read the commenting rules before attempting to post. Read them.

Some additional guidelines:

– This site is not Yahoo! This site is not The Blaze. This site is not YouTube. Don’t act like it is. If you can’t help but behave like a nasty fifteen year old with a behavioral disorder, then bugger off back to 4-Chan and stop wasting my time.

– If you attempt to engage in any form of delusional booger-eating ala Birtherism, 911-Trutherism, Oh No Socialism with or without included Nazis, if you mention The New World Order, or something you heard from Glenn Beck, Rush Limbaugh, Ann Coulter, Michael Savage, Alex Jones, or any TV Preacher, your comment will not post. Period. This is non-negotiable. Likewise if you use the term “Chicago style gangsterism” or any similar show of asshatery. You’re welcome to believe whatever goofy nonsense you like, but I don’t have to give you a platform for it. Shove off.

– I’m not handing out free mental healthcare here, it’s not my job to fix either your insanity or your stupidity. That’s your problem, I won’t allow you to make it mine.

– Yes, yes, you got me. I’m a terrible, terrible person, what with my penchant for murdering babies, my horde of tofu eating sycophants, and my callous disregard of your brilliant conversational gambits. Boo hoo. Your fury warms my flinty black heart. Write you congressman or take it up with Jesus, but you’re not going to post here.

Hope that clears things up. Regards // Jim”

#140 Dan on 10.07.13 at 8:41 am

#99 Cici on 10.06.13 at 11:58 pm
@ #78 Dan

.Do You have a sister??
_______________________________________________

I have a very big (and very hairy) big brother, and guess what?!! He likes boys ;-) However, I’d warn you in advance–he’s not very generous

Damn it figures my luck, But then again how old is he. lol

#141 sciencemonkey on 10.07.13 at 8:52 am

Investing question:

I do self-directed investing, with the once a year rebalance approach.

Each paycheque, my company takes 5% from my paycheque, matches 5%, and adds it to my RRSP. The investments are through an advisor who has mutual funds and some money market and high interest account stuff. The mutual funds have high MERs but no load. At the end of the year all the investments are sold and the cash is transferred to my self-directed RRSP.

I am planning on adding another 10% of my pay (so a total of 15% of my pay and 5% match from company) to max my contribution and make up some unused RRSP room. (I know there also is the option of a PAC, but I don’t need the money quickly since I do once a year rebalancing. The best discipline for me is for the money to already be taken out of my paycheque.)

My question is, should I have those monthly investments go into mutual funds, or just into a high interest account? If they go into mutual funds, I get cost-averaging and exposure to growth throughout the year, but the main downside is there might be volatility to the low side when it comes time to sell it all at the end of the year.

#142 Buy? Curious? on 10.07.13 at 8:58 am

George Carlin on Boomers!

So true.

http://www.youtube.com/watch?v=o1Sal6N5OiE

#143 Smoking Man on 10.07.13 at 9:00 am

Calling all tree huggers., disappointed Bob Geldoff, played pink in the wall had come out and said, all humans will be dead by 2020

You see its man made global warming silly.

http://wattsupwiththat.com/2013/10/03/the-2013-ipcc-ar5-report-facts-vs-fictions/

#144 Hefner is No Match for the Bearded Mystic Oracle on 10.07.13 at 9:05 am

#56 Father

“garth you should have put your head instead of hugh’s”

The bearded mystic oracle , all knowing, all wise, all seeing, financial crystal ball gazing sage, denouncer of parliamentarian peckerheads and peckerettes, fierce opponent of the real estate propagandists, NYTimes bestselling author, financial tea leaf reading visionary without equal, lone voice of reason crying out in the financial wasteland of Canada, has his own troop of busty Amazons that bathe and protect him. Mr. Hefner is no match for our fearless leader.

#145 Rob on 10.07.13 at 9:50 am

Hey Garth. Got a question.

We have a home worth 650k. Who knows what it will be worth in few yrs after the market goes haywire. I don’t plan to move for many many many years. Paid it cash.

My question is would it be better to keep it mortgage free or pull out the cash and invest and use the investment to pay down the mortage and hopefully gain some?

#146 Spaccone on 10.07.13 at 9:52 am

#114 Jane 24

“When I am home in Italy I see these multi-generational families and homes with stress-free folk living in them and I do think that will be the answer or many. A change in retirement patterns.”

Yes, and (especially in the South) somebody is usually milking somebody* at some point in time or expecting to. Most of the current and younger generation is getting by on the savings of the older generations. Whereas the older generations saved to the point that the average Italian has more net wealth than Germans, the current generations don’t know what the word means. Many are ******* lazy and could not even fathom working like those of us who are children of emigrants do in the West. Many of the older generation haven’t worked for decades. You have towns full of retirement age unproductive people (my grandmother who died recently lived on my grandfather’s pension for 3 decades after he died in the 80s).

One big saving grace is the lower cost of living, try getting an authentic, fresh out of a woodburning oven authentic pizza in Toronto for $4. Try renting a room for $350/month. Try renting an apartment starting from about $490-$560/month (these are not outliers).

* grandparent, cugino Americano, childless uncle, government etc…

I know because most of my family is still in the deep South of Italy (some spread around the North and Europe). So far South that Naples is the North to us, lol.

#147 2CntsCdn on 10.07.13 at 10:12 am

Great post. An excellent basic retirement needs road map that makes sense and is easy to understand. Us readers can juice it up or down depending on extra cushion comfort needed (or possible future inheritance scenario’s). Either way …. an over mortgaged (and value now max-ed) money sucking house will bleed this whole plan. This will wake up a lot of people. Maybe even some of the un-wake-ables. I know about 6 friends I’m going to send this to.
thanks

#148 economictsunami on 10.07.13 at 10:15 am

Some friends of ours (also at least one family member) have failed to make pre retirement adjustments to their spending, investments/ savings prior to their retirement.

Now that they are retired, they appear blinded by the wealth effect and past price growth of their hard assets; most notably their home.

They have also given very little thought to life expectancy and possibly outliving their nest egg.

We have another ten years before retirement and are implementing small changes in spending; while devoting the next decade to pairing back the clutter of over consumption.

Exercise good judgement in actually realizing and protecting your imagined profits, by always selling your winners first…

#149 Buy? Curious? on 10.07.13 at 10:41 am

Notice how the two out the 10 women that are of colour in the picture are either pushed to the side or standing a the back?

Typical Boomer.

Here’s a clip about what to expect from Boomers over the next few years.

http://www.youtube.com/watch?v=6vi3NFt7pOc

Are you always a prick, or just Mondays? — Garth

#150 Toon Town Boomer on 10.07.13 at 11:01 am

http://www.thestarphoenix.com/Start+understanding+poverty/8975949/story.html

#151 Wilbur on 10.07.13 at 11:12 am

Garth, do you have a formula to use if you want to retire earning ex number of dollars at say age 55. How much you would need to have saved so, you can live off the investment income without touching the actual portfolio.
I wanted to leave that for my kids…

#152 Buy? Curious? on 10.07.13 at 12:15 pm

My apologies, Garth. Sometimes I get a little carried away.

(I guess this is how Smoking Man feels)

I will turn down the prickishness dial to 4 or 5. I don’t want to get banned.

http://www.youtube.com/watch?v=C1Zp7vfyew8

#153 Louis on 10.07.13 at 12:31 pm

#7 Garth said : “Okay, so average the three and you get $358,000. Plus your house – because equity earns 0% unless real estate values are growing. And a 6% rate is impossible when incomes are barely moving and mortgage rates can’t fall further. But let’s cut it in half – $180,000.”
——————————————————-
OK, I don’t quite get it. So you are saying that a 45 year old should have $358,000 in a liquid portfolio? Plus you are saying that you should also have some equity in a home – right?

Nope. The house is optional. — Garth

—–

I don’t get the logic here. Surely 358k$ + some equity is better than 358 and no equity.

Also you say equity earn 0%, but what about the contribution it does to your housing cost ?

– I have a 500k$ house fully paid. My housing cost are around 10k$/year (tax+maintenance).

– I rent the same house, 2k$/month. My housing cost are around 24k$/year.

So my 500k$ equity is reducing my housing cost by 14k$/year so that’s a 2.8% return in after tax money.

Could you get a better return someplace else with the 500k$… probably. But you can’t say that equity give you notting.

#154 :):( Ying Yang on 10.07.13 at 12:34 pm

Top Photo is definitely Smoking Man.
Smoking Jacket, smoking a cigar, with smoking hot-ties. Smoking Man still has his balls and his hair. Now that’s the way to roll old man. Which one is the wife?

P.S. Give up on the book, nobody reads paper anymore! Kindle time, digital publishing!

#155 Doug in London on 10.07.13 at 12:42 pm

@Observer Person, post #69:
That idea makes the most sense, and is exactly what David Chilton (author of the Wealthy Barber) said. In retirement you don’t or shouldn’t have mortgage payments and various other expenses like employment expenses, and don’t drive as much (no more commuting) so cars last longer. In those first years of retirement, you do spend a lot but less as time goes on. The average 80 year old retiree doesn’t spend that much.

#156 Ralph Cramdown on 10.07.13 at 12:43 pm

OK kids, here’s your daily Χ (chi):

http://www.ritholtz.com/blog/2013/10/endogenous-sources-of-volatility-in-housing-markets-the-jointbuyer-seller-problem/

People who are buying and selling a home in the same city tend to buy before they sell in a hot market, and sell before they buy in a cool one. “Duh,” you say. But that means 1/2 the listed inventory (for these participants) in an up market, as the other half is shadow and not yet listed, whereas it’s all listed in a slow market.

These guys have actually measured the effect, in L.A. through two booms and a bust. They found that traders make up 20% of sales in a bust but 40% in a boom, and because of that and the way they list, they amplify market movements which could be caused by, oh, I dunno… HAM?

#157 live within your means on 10.07.13 at 12:45 pm

#66 Cici on 10.06.13 at 10:07 pm
Absolutely not! (ready, that is)

Yet I’ve already gone overboard and above and beyond my means, so he is just going to have to settle for sexual favours this year instead. I think he’ll appreciate my frugality.
,,,,,,,,,,,,,,,,

LOL

#158 Canadian Watchdog on 10.07.13 at 12:46 pm

Iranian official says Canada shielding bank fraud suspect

Radio Zamaneh – Iran's deputy chief of police announced today that the Canadian government is refusing to cooperate in arresting Mahmoudreza Khavari, the former head of the Melli Bank of Iran. Ahmadreza Radan added that documents have been provided to Interpol regarding Iran’s charge of bank fraud against Khavari and a red alert has been put out for his arrest.

The Mehr News Agency reports that Radan said the Canadian government is refusing to hand over Khavari. Radan added that the Canadian government has been informed that it has no excuse in refusing to hand over Khavari and “in regard for their own credibility, they should hand over Khavari to Iran so that he can face the charges against him.”

In September of 2011, Khavari flew to Canada just days after whistles were blown over a $3-billion fraud involving Iranian banks, with Melli Bank at the top the list.

(2011) Scandal-plagued Iranian banker is now believed to be staying at his $3 million home in Toronto’s affluent Bridle Path neighbourhood.

An Iranian banker who resigned and fled to Toronto amid a multi-billion dollar embezzlement scandal also has ties to a bank blacklisted by the UN Security Council, which alleges the bank has financed Iran’s nuclear missile activities…

Here in Canada, the scandal-plagued banker has owned property for at least a decade and is now believed to be staying at his $3 million home in the affluent Bridle Path neighbourhood...

In other words, Canada has become a safe haven for currupt bankers and gov't officials.

#159 beach girl on 10.07.13 at 1:43 pm

Well I intend to get what the government owes me for employing people for 25 years. I owned 2 companies, but there has to be a salesperson, and that was me.

I will claim my CPP at 60, also will still own my rentals which are safe and secure, as the 2 morons I gave birth to, will continue this cash flow. Or they are out.

No free ride here honey. Love Ma.

Diversification is the key.

One has to have at least 5 flows of income, minimum.

#160 dosouth on 10.07.13 at 1:48 pm

It’s really too bad that the first time home buyers and the real indebted probably will never read this article. Probably too bad that the Real Estate boards will have already prepped for a reply to this. Market deflation is inevitable but at what speed and at what cost?

http://business.financialpost.com/2013/10/07/mounting-mortgage-debt-is-puttingour-national-economy-at-risk-cities-tell-stephen-harper/

#161 Mister Obvious on 10.07.13 at 1:50 pm

#144 Rob

You might stand a ghost of a chance of having Garth answer a question within this forum if you provided more information.

So, you have a free-title home worth $650K that you refuse to sell regardless of what the RE market may do.

What other assets do you have? How old are you and in what part of the country do you live? Are you anywhere near following the ‘Rule of 90’? How much longer do you plan to work? Are you married? Does your wife work? Got kids? How old are they?

Everyone is vastly different when it comes to planning a financial path. If you’re serious about investing money borrowed against your house you should contact the man directly.

#162 jess on 10.07.13 at 1:58 pm

and then there r those cds contingent deferred swaps

Foundation and Donor Sue Over Failed Deal
October 4, 2013
By Ry Rivard
The University of Arizona Foundation and one of its major donors had a stake in a “sham” offshore tax shelter that the U.S. government later cracked down on, they say in a recent court filing. Now, they are both in federal court accusing a bank that helped set up the deal of defrauding them….
Read more:
thttp://www.insidehighered.com/news/2013/10/04/u-arizonas-foundation-had-stake-offshore-tax-shelter-suing-donors-financial-advisers#ixzz2h3XLEc1p
=
contingent deferred swap or CDS
http://www.justice.gov/usao/nys/pressreleases/April10/boltoncharlessentencingpr.pdf

From approximately 1998 through 2002, E&Y had a group– known initially as “VIPER” for “Value Ideas ProduceExtraordinary Results,” and later as “SISG” for “StrategicIndividual Solutions Group” — that designed, marketed, and implemented high-fee tax strategies, including tax shelters that purported to eliminate, reduce, or defer taxes on significant
income or gains.
BOLTON owned a group of companies (the “Bolton
companies”) involved in implementing two E&Y tax shelters during
the period 1999 through 2002. In brief, the shelters purported
to allow wealthy individuals to pay a percentage of their income
in fees to E&Y, the Bolton companies, and other participants in
the transactions, rather than paying taxes to the IRS.
==========================
THE CDS STRUCTURE
http://www.rothcpa.com/archives/001356.php
=
http://www.irs.gov/pub/irs-drop/n-02-35.pdf
Tax Avoidance Using Notional Principal Contracts
Notice 2002-35
http://taxprof.typepad.com/taxprof_blog/2005/10/miers_law_firm_.html

#163 Ralph Cramdown on 10.07.13 at 2:08 pm

#157 Canadian Watchdog — “(2011) Scandal-plagued Iranian banker is now believed to be staying at his $3 million home in Toronto’s affluent Bridle Path neighbourhood.”

I was all ready to object that there’s nothing available in the Bridle Path anywhere near that price (then or now), but it appears that the ahem slums at the far south of that neighbourhood do indeed trade for such low prices. My apologies for the thoughtcrime.

“In other words, Canada has become a safe haven for currupt bankers and gov’t officials.”

No argument there.

#164 jess on 10.07.13 at 2:15 pm

Obviously we will examine our engagement and our financing of the Commonwealth, which is quite considerable, to make sure that we are wisely using taxpayer dollars and reflecting Canadian values,” Harper said.

Tax avoidance: Canada-Barbados tax deal loopholes revealed
http://www.cbc.ca/news/canada/tax-avoidance-canada-barbados-tax-deal-loopholes-revealed-1.1913228
http://www.oecd.org/countries/barbados/50053228.pdf
http://www.eoi-tax.org/jurisdictions/BB
base erosion profit shifting
=======

Top Malaysian Politicians Use Offshore Secrecy
By Aidila Razak, Kuek Ser Kuang Keng, Wong Teck Chi and Steven GanApril 8, 2013, 6:00 pm
http://www.icij.org/offshore/top-malaysian-politicians-use-offshore-secrecy-singapore

https://www.globalwitness.org/category/regions-and-countries/malaysia

#165 Smoking Man on 10.07.13 at 2:20 pm

#153 :):( Ying Yang on 10.07.13 at 12:34 pm
Top Photo is definitely Smoking Man.Smoking Jacket, smoking a cigar, with smoking hot-ties. Smoking Man still has his balls and his hair. Now that’s the way to roll old man. Which one is the wife?P.S. Give up on the book, nobody reads paper anymore! Kindle time, digital publishing!
……………..
Dude you gave me a great idea, I start writing it on my blog, hook the suckers and just as I get to 7/8 part of the story where the climax is. Put up a pay wall.

Hahaha

#166 Old Man on 10.07.13 at 2:22 pm

I retired early in life at age 44, more or less; for wine, women, and song in life, but freedom to do what I wanted when I wanted was at the top of my list. Yes get CPP and OAS, and what a joke that has turned out to be, but have capital assets to buy me enough to pay all the bills to live well. I should have married a young woman that was an only child whose family had big money to inherit, as that alone would have been a greater booster shot in the arm that no doctor could ever give. Forget this guy called Hugh Hefner, as it is all an illusion, as he has no love for any woman just a showman that should have become a Real Estate developer to con you all into buying a condo at the top of the market.

#167 spaceman on 10.07.13 at 2:23 pm

Assuming interest rates stay at 3 % (which they will not), floating a humougous mortgage, and investing makes sense, but what happens when the average smuch has to refinance at 6 or 7% ? Then you pay thru the nose. Therefore paying down the mortgage now has the potential for a compond 6% savings on that money later.

Makes sense to me.

Because you did not think it through. Grow money now at very good after-infation returns while mortgage rates are at rock-bottom. Pay down the mortagge principal if/when rates rise from a larger pool of capital. — Garth

#168 recharts on 10.07.13 at 2:28 pm

OK kids, here’s your daily Χ (chi):

http://www.ritholtz.com/blog/2013/10/endogenous-sources-of-volatility-in-housing-markets-the-jointbuyer-seller-problem/

People who are buying and selling a home in the same city tend to buy before they sell in a hot market, and sell before they buy in a cool one. “Duh,” you say. But that means 1/2 the listed inventory (for these participants) in an up market, as the other half is shadow and not yet listed, whereas it’s all listed in a slow market.

These guys have actually measured the effect, in L.A. through two booms and a bust. They found that traders make up 20% of sales in a bust but 40% in a boom, and because of that and the way they list, they amplify market movements which could be caused by, oh, I dunno… HAM?

Makes a lot of sense but..which one is it right now hot or cool ?
Judging by the prices we are in hotter territories but judging by inventory we should be in cooler territories.

#169 Mister Obvious on 10.07.13 at 2:35 pm

#150 Wilbur

“Garth, do you have a formula to use if you want to retire earning ex number of dollars at say age 55. How much you would need to have saved so, you can live off the investment income without touching the actual portfolio. I wanted to leave that for my kids…”
————————————-

You’ve got altogether the wrong idea Wilbur.

Let’s say you’re filthy rich. Then you could put all your money in ING direct at 1% (fully taxable). 10 Million would gross you a cool $100,000 per year. (Your capital would still be loosing against inflation but there should still be something decent left for the little gaffers when they come of age).

But a person that wealthy probably did not get that way by thinking in terms of no-risk capital and guaranteed safety. Your question and indeed your
very presence on this blog leads me to believe you are not of that ilk.

While you were getting on with your life the world changed under your feet. Western society pulled so much wealth forward in the last two decades we are now in a time where capital must be risked to earn anything at all. Its going to be that way for quite a while. If you are near my age that means forever for all practical purposes.

Actually, it’s good news. That’s how capitalism is supposed to work. Duly diligent investors seeking productive companies to place their capital. Taking reasonable but not foolish risk, diversifying and balancing over time.

That’s the new path forward. You must get used to it. Your portfolio WILL be ‘touched’. Guaranteed. It will rise and fall like the tides. Mine has been doing just that for decades.

You will have some years of measly or even negative growth, some mediocre to average years and some absolute banner years. You will be in for the long haul.

You will also be wise to find a trusted advisor who really knows and loves money management and profoundly understands psychology. Both yours as well as the market’s. Someone who sees investment as an art form and is honest to a fault. Look long and hard for that person then get with the new reality.

(Hint: He or she will not be flogging mutual funds in a glass walled office at the bank)

#170 OffshoreObserver on 10.07.13 at 2:42 pm

@Bob Rice:

“The Little Book of Common Sense Investing,” by John C. Bogle (He created Vanguard and was an early proponent and provider of ETFs (“Exchange Traded Funds”))

#171 James Bond in Gold Finger on 10.07.13 at 3:12 pm

Garth what’s your call on the US defaulting next week?
I know you always say the US will never default, but could it be different this time?

No. — Garth

#172 Pr on 10.07.13 at 3:15 pm

Here we go again! –

News.
Economic policy of all-out offensive Marois government:

Individuals are entitled to a tax assistance for green renovation that will take the form of a tax credit to which 111.5 million will be spent.

#173 Coho on 10.07.13 at 3:16 pm

How can all these cash-poor, house-rich people finance their lives without dumping real estate?

Answer: they can’t. And what a market-killer that’ll be.

You ready?

There you have it. Most boomers will need to dump their real estate to fund retirement. The early sellers will come out way ahead and the early buyers will pay big time at the inflated prices. As time goes on and more boomers realize they need to dump their houses, prices will drop and the exchange (as in who comes off the deal better) between the buyer and seller will equalize.

#174 Coho on 10.07.13 at 3:24 pm

Of course the message is that it is the peoples’ fault there is not enough money for retirement. The middle class is being decimated and at the same time it is expected to produce scores of financially independent millionaires. Buying power has been slashed big time during the past few decades. It takes two incomes to fund a household and still, many people go backwards each month.

Average people leading simple lives are being told they expect too much, while ever increasing wealth winds up in the hands of the few.

Yes some people are financially irresponsible, but the majority are very much so and are fighting a losing battle.

#175 James Bond in Gold Finger on 10.07.13 at 3:43 pm

#170 James Bond in Gold Finger on 10.07.13 at 3:12 pm
Garth what’s your call on the US defaulting next week?
I know you always say the US will never default, but could it be different this time?

No. — Garth
———————————————————
How can you be so bluntly sure. You said the Fed would taper and it didn’t. Maybe a surprise default is coming too??
This could collapse the system as we know it.

Then you’d better hurry to Costco before they run out of Cottonelle. — Garth

#176 Old Man on 10.07.13 at 3:45 pm

My daddy was a VP for a chainstore operation in Canada, and went to the Chicago trade show in the 1960’s to spend $millions for the company. Yep, he was invited to the big Playboy Club for an evening, and was given a gold key pass. Guess what? Playboy opened a club in Montreal, as was about 16 years old and he gave it to me with a wink and a nod while I was in highschool; my mom would have flipped out.

Now in Quebec at that time nobody cared about laws as it was the wild west, so I went late at night because all started at 11:00 PM and went to 4:00 AM, so with my gold key was seated, and this was exclusive with a band and the works. I will never forget how I was served my drinks, and the bunny hostess would go down on her knees to show me something; hey what can I say as my gold key was issued from Chicago, so got special attention as a VIP.

#177 James Bond in Gold Finger on 10.07.13 at 3:53 pm

#172 Coho on 10.07.13 at 3:16 pm
How can all these cash-poor, house-rich people finance their lives without dumping real estate?

Answer: they can’t. And what a market-killer that’ll be.

You ready?

There you have it. Most boomers will need to dump their real estate to fund retirement. The early sellers will come out way ahead and the early buyers will pay big time at the inflated prices. As time goes on and more boomers realize they need to dump their houses, prices will drop and the exchange (as in who comes off the deal better) between the buyer and seller will equalize.
——————————————————–
No, they’ll be getting reverse mortgages.

#178 Canadian Watchdog on 10.07.13 at 4:01 pm

#162 Ralph Cramdown

Bridal Path Listing (core area) Data

#179 jess on 10.07.13 at 4:07 pm

http://www.dailymail.co.uk/news/article-2443660/Dubai-building-worlds-largest-man-lagoon-stretching-40-hectares.html

world expo 2020
how much infrastructure spending does one need to spend to host?

#180 Doug in London on 10.07.13 at 4:39 pm

How can all these cash-poor, house-rich people finance their lives without dumping real estate?
Answer: they can’t. And what a market-killer that’ll be.
———————————————————-
Makes sense to me, it seems like a very likely outcome. What I wonder is, why don’t any economists or other analysts see this selloff coming?

#181 Retired Boomer - WI on 10.07.13 at 5:14 pm

#140 Science Monkey

Transfer to mutual funds, or ETF’s.

I use only “Index Funds” in the mutual funs where there is no active manager, and a few ETF’s. My annual costs are from .05% per year to the costliest at .55% per year. No front or rear “loads” either. This is self-directed by an idiot -me.

I do have 100K of my portfolio with a decent investment manager, my experiment as to which perform better, the passive /Index approach -idiot operated, or the active professional.

The experiment should end 12/31/2013. Thus far they are close after expenses.

#182 Coho on 10.07.13 at 5:23 pm

If the goal of individuals should be to derive interest and/or return on their investment to fund retirement then why can’t the Bank of Canada, if it is in fact the bank of the Canadian people, distribute the interest it collects from Canadians back into the economy?

Why don’t we take profits from ‘our bank’, which appears to be very profitable, as we are told to from our investments? Or, at the very least, can we not suspend interest payments to our central bank to fund systems sorely lacking in capital?

Instead, I’ve read that estimates as high as 30% of taxes collected go to service the debt we have to our ‘own bank’. How is it that our bank lends us money with no backing behind it, yet sees fit to charge interest which is choking our economy and forcing cutbacks to systems people depend on? Some people are making off like bandits at our expense.

Of course almost every nation has a similar central bank set up, and those that don’t are demonized and targeted for invasion.

#183 ripped on 10.07.13 at 5:25 pm

#103 old but not grumpy

I don’t regret taking 2+ years under 25 and traveling the world one bit. It’s the highlight of my life bar none.

Yes you can try going throughout the Pacific on small fishing boats from Samoa, Fiji, Tahiti, New Hebrides, to New Caledonia.

Hitchhiking over North and South New Zealand Driving and living in an old Holden panel van around Australia, working on a railway in the outback.

Trekking through out South East Asia, India and Nepal, Burma, climbing rice terraces in the Philippines

Living in nepa huts from one village to the next, eating rice and fish or dog depending if your by the ocean or inland.

Beating off big black pigs in the Golden Triangle while taking your morning dump, etc, etc, etc.

So many places to mention, but what a time!!!

Don’t stub your toe or get a blister at 65 though cause your done. Stick to your 10 day Hawaii trip, you’ll most likely make it back.

#184 Angus McAeneas on 10.07.13 at 5:29 pm

Regarding the finance minister from PEI who suggested CPP changes.
This guy (Wes Sheridan) has invested $4,000,000 of PEI’s Canadian equalization payments in a geolottery scheme. Betting at the track is much more profitable.

PEI’s economy is 0.0075% of Ontarios GDP. If Flaherty spent $500,000,000 on a similar scheme he would be tossed!

#185 Spiltbongwater on 10.07.13 at 5:47 pm

Why can the people with all house and no money just call Alpine credits or some of the other home equity lenders out there. I hear the radio ads all the time, if you want vacation, renovation or need some extra cash, $60, $600, $600,000? just call Alpine credits. “Making your home equity work for you,…Alpine Credits”

#186 Franco on 10.07.13 at 6:08 pm

How can the average retiree go through $51,000 a year when the average income today is $45,000 or so? I am not retired and I do not spend anywhere near $51,000 dollars and I make above the average income and still do a few expensive things, like vacations and so on.

#187 :):( Ying Yang on 10.07.13 at 6:08 pm

Smoking Man use this photo for your cover on the digital book. Doesn’t matter what the book is about it will sell!

#188 Smartalox on 10.07.13 at 6:27 pm

@ Doug in London #154:

The average 80- year old doesn’t spend much in retirement… until they start to require additional medical care, at which point the costs accelerate at a mighty pace.

It’s not so bad if you can live in your own, paid off home, but if you have to pay for live-in support, or hospice care, the costs are high. And that’s just for aging, forget about disease.

#189 Nosty in LaLaLotusland on 10.07.13 at 6:33 pm

#106 Nemesis — “Condolences. It’s a HardRowToHoe, Nosty – I am so sorry.” — Thanks Nemesis, and to others who expressed similar sentiments.

Mom finished with her sack of clothes (physical body) a few nights ago and, as such, has proven the reality of the continuation of life to herself (each will do that), plus there are no such things as soul mates, soul twins, the establishment or near death experiences, as life always continues.

There are adventures in the hidden, or other worlds (where she is now), but the preceding are simply inventions of the mind, none of which carry any water.

#142 Smoking Man — “You see its man made global warming silly.”

Hey SMan, if Geldof is into the hoax of GW, he should try living under 17 Manhattans, the amount of ice in the North. Apparently, the South has more. Tax the sheeple more, they’re suckers for punishment!

#190 Canadian Watchdog on 10.07.13 at 7:00 pm

Google trends for consumer proposals in Canada soars in October.

P.S. Don't type consumer proposal or anything related to debt into Google. Your searches are tracked and profiled that can effect your credit, insurance rate, etc.

#191 Smoking Man on 10.07.13 at 7:09 pm

#186 :):( Ying Yang on 10.07.13 at 6:08 pm
Smoking Man use this photo for your cover on the digital book. Doesn’t matter what the book is about it will sell!

…………………………………………..
Dude when I code, my stuff is prefect don’t crash. Every word of code is perfectly spelled, every period and this ; don’t know what that is called.

I am excepting the same perfection in writing , I’m not even close.

The thing I want the most is the most out reach, people have problems making loot, not me, they put together perfect word combos together effortlessly. Not I, every sentence is a struggle.

No amount of schooling can ever fix that. I’m dyslexic.

It is what it is, I might try talking to a mic that records the words. But under no circumstances will I ever hire a ghost writer.

Won’t be me.

#192 Toronto_CA on 10.07.13 at 7:38 pm

#185 Franco on 10.07.13 at 6:08 pm

That’s for a couple. You can’t quite divide in half to see what you’ll need though if you’re single. Maybe about 75%-80% of that if you’re an average single retiree?

#193 Smoking Man on 10.07.13 at 7:46 pm

#188 Nosty in LaLaLotusland on 10.07.13 at 6:33 pm

May the Force be with your mom.

#194 Smoking Man on 10.07.13 at 7:53 pm

#170 James Bond in Gold Finger on 10.07.13 at 3:12 pm
Garth what’s your call on the US defaulting next week?
I know you always say the US will never default, but could it be different this time?

No. — Garth
…………………………………………….

Normally I would agree with Garth on this one, but and this aint official what better way to decimate the challengers to the status quo, The Tea Party, to default, cause a whole lot of pain, guaranteeing they will be crushed next election.

#195 jess on 10.07.13 at 7:56 pm

Greek former minister Tsochatzopoulos guilty of fraudBBC News ‎- 12 hours ago
The contracts related to the purchase of German submarines and Russian missile systems for the Greek navy, the court heard. As well as …

http://www.bbc.co.uk/news/world-europe-24428355

#196 dosouth on 10.07.13 at 8:00 pm

#183 Angus McAeneas on 10.07.13 at 5:29 pm

Regarding the finance minister from PEI who suggested CPP changes
————————————-
PEI, really? That province is a whole different story regarding any and everything political, financial, relatives…, period. You shouldn’t really go there in comparisons, really, better yet, just don’t even go there…..

#197 Cici on 10.07.13 at 8:03 pm

Garth, if you don’t post soon I’m going to have to do something practical and productive–like housework or something…Please save me from my kitchen and get that blog online ;-)

Half an hour. Go put on something nice. — Garth

#198 Shammi on 10.07.13 at 8:07 pm

Anybody living in Vancouver or lower mainland will be in negative equity positions before 2016. There is no logic behind the inflation to housing where people are asking 1 million plus for dog kennel housing. There will be a major collapse all across the lower mainland. Housing prices the way they are or dreamt up are simply not sustainable. It’s a complete joke anywhere in Scamcouver. Major real estae scam of the 21st century.

#199 Keifer on 10.07.13 at 10:43 pm

The US should be downgraded either way. It either defaults on its debt and get downgraded, or it increases it’s debt proving its inability to pay from revenues and gets downgraded. Unfortunately after S&P was sued I will hazard a guess there will be no downgrades until its too late. Even normally quiet China has now expressed concern.

http://www.independent.co.uk/news/world/americas/get-your-fiscal-house-in-order-china-warns-us-as-superpower-expresses-concern-for-13tn-of-investments-8864935.html

The US may find that it is the lending ceiling that should be the real worry. Why lend to an entity who has a risk of political default, or alternatively defaults by paying in ever diminishing dollars. Default is 100% certain, the only question is how to deal with it, which hopefully is not dumping treasuries.

#200 HHalifax on 10.08.13 at 11:41 am

Garth wrote:

“Most retirees spend more than they did as workies.”

Not true. The cost of employment to the individual is quite large including wardrobe, childcare, commuting, networking, education, self-improvement, and all sorts of other inputs is done out of necessity to keep one employable. Every study I have seen decisively shows that retirees mostly spend less.

Unless they’ve mortgaged and debted up, but that’s a different issue of consumer choice unrelated to working life necessity.

Share those studies with us. — Garth

#201 HHalifax on 10.09.13 at 8:26 am

~20% less with caveats this study only looked at spending including debt patterns which, as we know, are on the rise.

http://www.urban.org/UploadedPDF/411130_expenditure_patterns.pdf

Just because some seniors are overspending does not mean they should. That’s a credit imbalance, not a post-retirement need. It also ignores spending caused by post-retirement earning. Just because retirees currently spend $51,000 per yer each does not mean they should.

With more of a focus on essential expenditures:

http://www.russell.com/CA/downloads/retirement/spending_patterns_in_retirement_client.pdf

You’ll also get another shock:

http://www.imf.org/external/pubs/ft/wp/2013/wp13191.pdf

http://www.mrrc.isr.umich.edu/content.cfm?pageid=2013_rrc_meeting_agenda_and_papers

The 2008 financial crisis illustrated one thing: when forced to, people consume less. Yes, a number of elderly, especially in pay-for-your-own-medical USA, are working more after retirement, but often this is seen as funding higher levels of consumption than is necessary. Seniors are actually encouraged to over-consume through discounts at everything from movie theatres to bus fares.

Perhaps the most detailed study:

http://www.nber.org/papers/w9586.pdf?new_window=1

This study illustrates that seniors actually spend less than even their non-working related costs.

What really concerns actuaries and some of these researchers is not the pension income sufficiency for comfortable needs in Canada, it’s:

1) Housing costs
2) Unexpected, non-covered medical costs

If you base your analysis on a glib $51,000 per senior, you’d be wrong.