The lucky guy

LUCKY 3 modified

Stan worked on the line at GM’s Oshawa plant for thirty years. “Last of the breed,” he says. “Man, look at the news.” Indeed. GM just punted a thousand workers, who will be gone by November. When Stan started there, 15,000 guys crowded the gates. Now there are 3,600. Soon, a third less. “This place is doomed,” he prophecies.

Pensions are one reason, which is why I was talking to the guy. GM Canada has about 30,000 retirees drawing monthly cheques. It also has an unfunded pension liability estimated to be more than $2 billion. That’s despite a $3.2-billion cash gift the company received from the government when GM was bailed out in ‘09. It effectively means most company pensioners today are drawing taxpayer money. Yep, just like civil servants. Except most ex-GM workers get more.

Stan never saved a nickel, has no RRSPs, no TFSA, no investment portfolio and $12,500 in his TD Canada Trust daily savings account earning 0.10%. But he does have a house east of Toronto he paid $220,000 for, plus a wife who works at Loblaws.

But Stan’s one lucky dude. He has a gold-plated pension from the olden days when automakers secretly sweated as the union’s brass swaggered to the negotiating table. He also has a big choice to make. He can collect a monthly cheque until he dies. Or he can commute it – taking over the pension himself with a lump-sum payment. In his case, it will be just under $1 million – some of it rolled into a tax-free registered account, some of it in taxable cash.

“I’m scared,” he said. “I can’t sleep, and now all I do is worry.” That’s normal, I told him. People lacking money worry occasionally about being poor. People who have money obsess about losing it. It’s why rich people never smile.

Well, Stan made his choice finally. He took the money, will have it invested privately and get his monthly allowance that way. Here’s why.

“I don’t trust them.” These are the words of a guy who’s watched the ranks of the employed decimated, seen his company rescued from colossal failure by the government, and knows there’s not enough money in the pot to fund his pension for the next 35 years. In fact, unfunded pension liabilities are a ticking timebomb with the potential to blow up the lives of many unsuspecting people.

For example, Canada Post has an unfunded pension liability of $6.5 billion, which should explain why it’s trying hard to get out of the mail delivery business and laying off armies of people. Across Canada it’s estimated there are $300 billion worth of pensions that public sector workers are expecting that actually have no dollars allocated to them. Some bitter surprises are in store.

Anyway, Stan’s smart. Why even take a chance when you can take the money now?

Then there’s this: “What if they screw up again?” Governments struggling with their own debts and deficits might not be so generous with GM the next time it hits the rocks. Pensioners in Canada could live through the same experience as cops and firefighters have in American cities and states where pension benefits are arbitrarily cut. Already teachers in Ontario have been forced to pay more into their massive pension plan and will be receiving less, just to keep it solvent.

By taking the money and putting it to work, hopefully matching long-term investment returns, Stan will never deplete it and harvest a monthly amount equal to that the pension administrators were promising.

Most importantly he said, “I have to do this for Brenda.” Smart. If Stan took the company pension the way most of his greying buddies are, with its stress-free payments, then died in a few years, Brenda would get a small and temporary survivor benefit. But by commuting the pension amount, Stan’s family owns 100% of the money – forever. If he passes first (“Like that won’t happen…”) then Brenda gets every cent, to support her and help the kids as they get established.

Besides, there couldn’t be a better time for the guy to be doing this, since interest rates have cratered. Low rates make a commuted pension worth more in today’s dollars, since the present value of it rises. If current rates were a couple of percentage points higher then the autoworker’s pension value would be at least $300,000 lower. In fact, his commuted value jumped enough to buy a new RV with the tiny quarter-point bank rate drop in January.

Like I said. Lucky dude.

Finally, Stan can take his wad, invest it reasonably for growth and stability, and end up paying less tax than his pension-collecting pals. That’s because a portion of his income can be deemed return of capital, which means it’s not reportable, keeping him in a lower tax bracket.

Of course, in return for these benefits, he worries. He has to trust someone with his million. And that is the highest hurdle.

203 comments ↓

#1 kabloona on 05.03.15 at 1:31 pm

Good one, Garth.

I recall back when Foreign-Controlled GM was getting bailed-out with Canadian taxpayer cash and Tony (Gazebo) Clement was asked point plank if any bailout cash was going to the GM Pension Fund and he said point-blank, “absolutely not!”

And now they’re abandoning Oshawa and moving their precious Camaro production line to the U.S.A….

Ha-Ha-Ha-Ha!!

#2 whydoweletthem on 05.03.15 at 1:38 pm

How is it not illegal for companies, municipalities, etc to have unfunded pensions. Weren’t they payed for by the people while they were working there? Who stole all this money from them?

That is the real story here. Not trying to get everyone to gamble their money on the open market, when it is at historic highs and surely cannot possibly falter.
The richest time in market history and these companies cannot come up with the money that should be securely locked in a vault somewhere?
The employees paid into those plans, the same as me with CPP. I expect a return on that, not to have it stolen somehow that I don’t quite understand and will be too old to be able to figure out when the time comes.

The ‘everyone for themselves’ mentality just puts easy money on the markets for the pros to deprive you of. If you don’t know what you are doing, you should not be managing your own money!!!! Similar to how if you dont know how to fix a car you probably shouldn’t start learning on your one of a kind classic camaro.

#3 Wooba on 05.03.15 at 1:41 pm

I’ve got a union pension that my employer contributes to on my behalf. This is a trade union, so they deal with the pension, the employer just forks over the money. I think it’s something like $8/hr. If I could opt out of it and get the cash directly to invest myself I would do it in a heartbeat. Is there anyway I can make that happen?

#4 Retired Boomer - WI on 05.03.15 at 1:43 pm

Lucky, and WISe Stan. He gets the CASH as his own, invests it wisely… we never really KNOW where the fortune of the market goes, but with a 100 year history on it, we know -beyond a doubt- it will treat Stan better than the future fortunes of GM.

I envy the dude. While I toiled the last 25 years for the US FED there was no opportunity to take a lump sum payment. I would have in a minute. Combined with our ROTH (tax free savings TFSA style), and our 401K’s (think RRSP here) it would have been a no-brainer!!

Good Luck Stan & Brenda, you actually DID make the proper choice here. That said, have nerves of steel when the market gets a case of the monetary shits for an extended period. This WILL happen bro – don’t panic!!
Think tomorrow, if you croak let’s pass that same advice on to Brenda she needs the same steely nerve.

Who would EVER trust their employer, or their government, or both…with their retirement money? Nobody should, but some of us have little choice in the matter. We chose to work IN government, and I would not change that decision either. Serving people is not a sin.

#5 TurnerNation on 05.03.15 at 1:44 pm

Ate on Leslieville patio. All talk real estate.

#6 Keen Reader on 05.03.15 at 1:46 pm

Big gamble for Stan, but well done for have the guts! Any chance of being offered similar treatment on the PS side?

#7 JO on 05.03.15 at 1:48 pm

great theft from young Canadians and those unborn. Corp bailouts and sweetheart deals for public sector
Deals over the last 2 decades due to the widespread corruption in government. Don’t worry, these scumbags are simply extorting more from all of us via deficits, exploding user fees and eventually even higher taxes and asset seizures to help pay for this. Young teachers and other PS workers are also being robbed to pay for these retiring geezers who get huge benefits for which they paid f all. You got to see the OPG and Hydro one pensions. They rival royalty. And your rate increases are partly due to them hiding their pension and benefits costs into capex

I can’t wait for this whole fraud economy to collapse at the seams 2020-2025 you will see most of these pensioners have everything cut in a period of high inflation and at the worst time possible in their lives

Smart Stan. Good thing you are talking to Garth. But make sure you spread the money around and have some of it into cash flow positive RE and watch your bond exposure

JO

#8 boonerator on 05.03.15 at 1:54 pm

Garth says:
” He has to trust someone with his million”

If he gets as diversified as this blog recommends, he’ll be trusting many people.. Not all of them will have bad judgment.

#9 Vector on 05.03.15 at 1:55 pm

As a municipal worker in Alberta I have the option of accepting a LIRA should I leave and that’s what I’d like to for the reasons outlined above (one in the hand > the promise of two in the bush). However, any time I’m sent a “balance” from APS it excludes my employer’s contribution on my behalf. Would a conversion to a LIRA exclude that contribution? If so, how would that not be theft?

I can’t find any clear information on the matter as, obviously, it’s not in APS’ interest to see contributors withdraw from the fund.

#10 Ralph Cramdown on 05.03.15 at 1:55 pm

GM didn’t sweat the union bosses. As the largest, and the low cost producer, it sat pretty. Ford sweated, and Chrysler quaked in its boots. Pattern bargaining with a union chosen, rotating target meant that any contract that didn’t bankrupt Chrysler would work out fairly well for GM.

Shame about Oshawa, though. Flexible lines, quality awards showing them to be some of the highest quality lines in North America, comparatively well educated workforce with Canadian health care, so why close them? My guess is that the logistics from those plants to parts suppliers further West have just gotten too expensive given Toronto traffic and longer border delays.

#11 ben on 05.03.15 at 1:55 pm

Everyone’s gotta go out and work for the boomers. Back to work everybody…

#12 JRH on 05.03.15 at 1:56 pm

Things are going from bad to worser !!

#13 MaryJo on 05.03.15 at 1:56 pm

DELETED

#14 bill on 05.03.15 at 2:14 pm

Stan – I reckon its better to have cash flow rather than the dubious pension that might or might not be there when you really need it.
so prudent move…

#15 Pete on 05.03.15 at 2:14 pm

Don’t put it into a TFSA, Stan.
A TFSA is a type of account opened through a Bank or other financial institution into which you can ‘place’ a variety of financial holdings (cash, stocks, GIC’s, etc. but NOT precious metals) and not have to pay any tax on the gains that these investments earn.

Here is the unspoken hitch: anything ‘deposited’ into it will be considered to be belonging to the bank (that’s already the way they see the money you have in your account) and subject to the inevitable bank bail-ins, the formula and procedure for which was laid out in a previous federal budget.

As well these TFSA’s allow the banks to record all deposits made into them as a deposit into the bank and therefore it helps the bank’s bottom line, even though the deposited investment might be just a stock certificate in an oil company, and in no way an investment in the bank.

Now, does it make sense why they are pushing so hard to get people to increase their holdings in their TFSA’s.

What a load. — Garth

#16 GeorgeSoonToBeRetired on 05.03.15 at 2:16 pm

Good for Stan, and even better if he finds an ethical and knowledgeable advisor like Garth to help him.

There are so many perils lurking in all this, however.

Those of us about to retire, who even have a lucky choice about commuted pensions, must realize how much poorer the generations following us will be. Fewer pensions, more one-asset strategies about to fail, more and more privatization bullshit that privatizes wealth and makes debt public.

Right wing loons take note – GM’s pension debts will be paid by us taxpayers, one way or another, reimbursement, welfare, tax programs etc….

Contrast that with well managed public pensions (not all are, but most are). OMERS, for one, is now on track to be fully funded by its own members within a few years. It’s a separate corp., able to invest broadly. The governments that pay into it are not on the hook long term. Yes, the employer contributes 50%, but those workers negotiated away higher salaries to get that benefit. Pure capitalist negotiation, nothing wrong about that. Dumbest move public pensions ever made was forced on them by government – back in the 1990s boom times, many stopped contributions for several years because their portfolios were too high – how ridiculous does that sound now!

This is where stuff like an increased CPP or provincial additions to it are essential. Harper and his idiots say no. The people will soon be saying yes, like in Ontario.

Most just don’t have the smarts to invest themselves, and most financial advisors are captive to their underperforming corporations, if not largely incompetent. A CFP designation I have found is one of the least trustworthy labels out there, especially if not fee-based. Few have enough financial literacy to hire fee-based advisors. We can blame them for that, or accept they are human too, and ensure we have broader programs, like improved CPP, to cover them.

Those are the choices we will be facing very soon.
The TFSA will not fill this coming gap. We need political leadership, and quickly.

#17 North Burnaby on 05.03.15 at 2:17 pm

A home sold $2-million over asking in Vancouver wooohoooo!!!!!

#18 ShawnG in TO on 05.03.15 at 2:21 pm

my view is controversial, but I strongly believe defined benefit pension should be illegal.

When private company screw up, the company goes kaput. Everybody get hurt, including the pensioners.

But it’s worse in public sector. Our politicians are in it for the short term. There’s nothing to stop them from promising the moon. What’s the worse that could happen? Get voted out and they have pension for life! But the taxpayers are on the hook Forever.

Pension fund should be legislated to be outside the organization, everyone owns a slice of the fund. Pensioners can cash out anytime into their own retirement account if they feel the fund is not well run.
But the key is, everyone carry the some risk, not just the tax payers.

#19 4 AM Sunrise on 05.03.15 at 2:21 pm

#180 Nagraj on 05.03.15 at 11:04 am
“According to HSBC’s latest global retirement report, 89% of Canadian pre-retirees surveyed say they do not provide financial support to grown-up children.” (BNN 3/5)
The Bank of Mom&Dad might not be as influential as some people think.

Doesn’t this survey contradict the other one that said 40%(?) of virgins bought with a down payment from Mom&Dad? I skimmed the report and I don’t see how they define “provide financial support”. I suspect it means “cover my children’s day-to-day expenses because they can’t/won’t get a job.” (And while this survey is anonymous, some parents still won’t admit to themselves that they’re enabling their children’s mooching.) Parents who give their children a down payment don’t see themselves as “providing financial support”. Noooo, they’re “investing in their future” because RE always goes up just as it did in their lifetimes dontcha know?

#20 Centurion on 05.03.15 at 2:30 pm

Good for Stan, definitely made the right choice.

Time to max out that TFSA if he hasn’t yet!

#21 Bby Train on 05.03.15 at 2:30 pm

Good Sunady Garth!

#22 W on 05.03.15 at 2:31 pm

Doesn’t he lose the value of having payments indexed to inflation? Isn’t that the benefit of taking it as an annuity?

#23 rk usa on 05.03.15 at 2:34 pm

gee how come no outrage over this guy’s 1 million cash value pension for screwing car together that is all but driving (no pun intended) auto assembly and eventually parts suppliers away from Ontario but everyone goes ape over public sector pensions

I would be interested in how much he contributed

public sector workers must contribute up to 12% of their pay and I believe it is pretty well funded as government and employee contributions are adjusted based on investment earnings

if anyone is responsible for the decline of manufacturing in Ontario and Canada it is semi-skilled workers like Stan

#24 Ronaldo on 05.03.15 at 2:38 pm

#8 ben on 05.03.15 at 1:55 pm

”Everyone’s gotta go out and work for the boomers. Back to work everybody…”

And who do you suppose will end up working for you?

#25 Squirrel meat on 05.03.15 at 2:42 pm

#24 Ronaldo on 05.03.15 at 2:38 pm

#8 ben on 05.03.15 at 1:55 pm

”Everyone’s gotta go out and work for the boomers. Back to work everybody…”

And who do you suppose will end up working for you?
——————————————————-

TFWs

#26 Squirrel meat on 05.03.15 at 2:43 pm

50 way s to leave your employer

Ooo slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just listen to me
Hop on the bus, Gus
Don’t need to discuss much
Just drop off the key, Lee
Get yourself free

#27 FTP - First Time Poster on 05.03.15 at 2:53 pm

Martin Armstrong is on point with the trial balloon Austrailia is currently planning on floating by taxing savings:

http://armstrongeconomics.com/archives/30158

Next stop….Canada

#28 When will they raise rates? on 05.03.15 at 2:55 pm

I understand why he’s scared. I would be too if I was retirement age and investing my entire pension into an all-time high stock market which has never been more over-valued than it is now on a PE ratio basis. Scary indeed.

I wish you all the best Stan.

Why would he buy stocks? A balanced and diversified portfolio has relatively little exposure to the Dow or the S&P, and has proven its resilience even in times of financial stress. GM, on the other hand, tanked. — Garth

#29 ben on 05.03.15 at 2:56 pm

Ronaldo – are you the famous footballer?

Young people will. However I won’t be voting to squeeze the life out of them. I’ll also not be on the same point on the inverted demographic curve.

For example none of my generation have signed a pact demanding we be paid a % of our salary that is to be paid by the next generation. We have defined contribution instead.

Yes we will exist off the sweat of the labourer’s brow but it won’t be the same disgusting pie in the sky figures that are bleeding the young dry.

#30 Ralph Cramdown on 05.03.15 at 3:02 pm

#23 rk usa — “gee how come no outrage over this guy’s 1 million cash value pension for screwing car together that is all but driving (no pun intended) auto assembly and eventually parts suppliers away from Ontario but everyone goes ape over public sector pensions”

Did this guy negotiate free trade agreements? Tear up the Auto Pact (which required the big three to make a car in Canada for every one they sold)? Nope, but now guys like him are expected to compete with Mexican assembly plant workers and Chinese parts supplier workers. While mandarins in Ottawa say he isn’t “productive” enough.

If GM had been forced to build here if it wanted to sell here, it would have figured out a way to increase productivity. If, alternatively, we wanted to cede auto manufacture to elsewhere and focus on more technological, higher-value-added activity, industrial policy could have focused on that.

Healthcare workers and pothole fillers don’t have to worry about their jobs being outsourced to China, so their compensation packages are driven by rather different issues.

#31 the same dilemma on 05.03.15 at 3:04 pm

Our plan is 101 percent funded and I’m still concerned about benefit reductions if I go with the monthly as opposed to lump sum. Funny how non pension types are afraid that they will end up picking up the tab for any shortfalls, while those of us on the receiving end are afraid of having benefits cut later in life when we can’t work. Our plan is well managed but it’s hard to fight demographics and low interest rates. Being part of Gen X makes it more likely that the goalposts will be moved as I near the finish line.

The whinging youth are the same as when I was growing up and Trudeau was busy running the country into the ground, so nothing new there. Why do so many young people fail to grasp the concept that wealth takes time to build and accumulate?

#32 Ralph Cramdown on 05.03.15 at 3:09 pm

#27 FTP – First Time Poster — “the trial balloon Austrailia is currently planning on floating by taxing savings”

Link, please?

#33 crowdedelevatorfartz on 05.03.15 at 3:10 pm

@#17 North Burnaby

“A home sold $2-million over asking in Vancouver wooohoooo!!!!!”
+++++++++++++++++++++++++++++++++++
Then sell your house.

Because if you think price increases like that are sustainable……..you’re an idiot.

#34 Oot der Hoos on 05.03.15 at 3:17 pm

Quote from #16 … is not correct:

“This is where stuff like an increased CPP or provincial additions to it are essential. Harper and his idiots say no. The people will soon be saying yes, like in Ontario.”

—–
My reply is, do not call names. The Feds have a legitimate concern that if 100% of the savings rate is communized and directed to government investment themes then there is no capital available for private investment and that is what causes poverty and unemployment as demonstrated in the history of 100% communist systems. That GM investment was failure, for example.

So we are really discussing the size and direction of investment, not who-cares-most, principles. You are unaware of the intent of the Ontario pension for 2017 and the size, in combination with CPP. It is 100% of all available new capital; ie. all the savings rate.

It is not a good idea to crowd out all private saving and centralise the money. The promised payout of Wynne/Ont. has no net payout for the first 20+ years of the new program. It is all in to gov’t, little out to pensioners. That is the truth of all new pensions and we should be allowed to opt out.

Also, to #4, working OUT of government is service to your fellow citizens, just as IN gov’t can be. That is the nature of capitalism: serve your fellow man and abundance will come to you.

#35 tkid on 05.03.15 at 3:20 pm

How is it not illegal for companies, municipalities, etc to have unfunded pensions. Weren’t they payed for by the people while they were working there? Who stole all this money from them?

Back when most folks put money into those pensions, interest rates were at 6%. Payments promised were based on that rate and guestimated for X decades in the future. Returns from that pension fund would more than make up any payments that would be paid out to retirees IF rates remained at 6% .

But now interest rates are at less than 1%. Returns from the pension fund will not cover the payments promised to retirees. Pension managers have two options: lower the payments so that the return from the pension fund will be enough to cover the payments, or start to withdraw from the pension fun to cover the shortfall.

If pension managers lower the payments the retirees will scream murder. The retirees frequently have no money set aside and have every dime they were guestimated already spent.

Option two it is then! So the pension fund gets smaller and smaller until there is a crisis and either everyone takes a cut now, or the fund only exists for a year or two and everyone gets nothing.

Add in the legally-allowed raids on pension funds (the courts allowed employers to raid pension funds back when the funds were fat and the returns were big and some idiot judge with numbed testicals from sitting on them all day figured interest rates would never ever be lowered) and the situation is exacerbated.

I contribute to a pension fund that ought to be fat, but the latest summary said they were raising the early retirement date just to ensure everyone ‘would get something from it.’ The pension fund ought to be fully funded due to who my employer is. No, I ain’t telling you who I work for. But if my employer can’t maintain the damned pension fund and keep it fully funded, then no employer can.

I always contributed to the pension fund under the paranoid belief that however hard I tried it still wouldn’t be enough, and whatever I was promised wouldn’t happen for reason x and excuse y. Folks scoffed at me when I was younger and told me to stop being so negative. It’s one of those things where I hate, I absolutely despise being right.

I won’t have enough to retire on when it’s my time to turn 65. I figure the government contributions won’t be enough to buy me bread for the month (if they exist at all). I figure the pension contributions might, if I am lucky, to buy me bread for the month. So I make sacrifices now – commuting every other day from Niagara Falls to downtown Toronto for 5 freakin’ hours – so I can put extra into my savings.

I have zero sympathy for anyone who relied on promises made and put nada aside for themself (because they didn’t want to think about it or couldn’t be assed to actually crunch the numbers).

I don’t, however, begrudge the lucky. Luck is luck and there is no telling who it will favour. It just doesn’t favour me – only hard work favours me.

But anyone who starts caterwauling about thieves and promises gets on my freakin’ nerves. Keep it up and I’ll start throwing things at you. Instead, try to either make the best of things or come up with ways to improve your situation. But no more freakin’ caterwauling for the love of my poor nerves.

#36 Freedom First on 05.03.15 at 3:31 pm

I am glad for Stan. I think he made the right choice, he sees the writing on the wall. Pensioners world wide are and will keep getting screwed. Broken promises.

#37 Nora Lenderby on 05.03.15 at 3:41 pm

Remember Nortel.
A long time ago, we had a friend there who was really very upset about the possibility of losing his lifetime job (in his late 50s). Rampant layoffs were the order of the day.
We said, “Take the package! Get your money out now!”
He did, and was glad.

It’s a shame that the devil took the hindmost.

#38 4 AM Sunrise on 05.03.15 at 3:42 pm

#23 rk usa on 05.03.15 at 2:34 pm

You’re dumping on one guy for being a product of his time? Lots of blue collar jobs are considered overpaid in today’s eyes. But that was the way things were back then. I hear anecdotes that the old-guard cashiers at Safeway have it REALLY good relative to the skills required for their jobs, but I’m not going to dump on them for taking advantage of a good opportunity when they saw one.

#39 Shawn Allen on 05.03.15 at 3:46 pm

Understanding Pensions

whydoweletthem on 05.03.15 at 1:38 pm

How is it not illegal for companies, municipalities, etc to have unfunded pensions. Weren’t they payed for by the people while they were working there? Who stole all this money from them?

******************************************
Basically a pension is designed to take money and invest it in a balances way in equities and fixed income and earn say 7% (Garth’s number).

Rules require the liability to be calculated as if ALL the money were invested in safe corporate bonds currently at about 3%.

The requirements of the liability calculation are conservative and almost guarantee an unfunded liability.

When interest rates declined, this created unfunded liabilities.

Typically, and I am sure in the case of GM Canada’s pension, no money was stolen.

If all pension money is invested in safe bonds, then pensions simply don’t work. It would require about 30% of earnings to go into the pension. That’s unaffordable.

#40 Setting the Record Straight on 05.03.15 at 3:50 pm

Buffett Loses A Bet, Fails To Pay… Again

http://www.zerohedge.com/news/2015-05-02/buffett-loses-bet-fails-pay-again

#41 Shawn Allen on 05.03.15 at 3:51 pm

Commuted Pension Values are too generous and should not be allowed.

Stan is going to get his $ 1 million risk free (how he invests it is another matter). The risk that the pot of money won’t grow sufficiently is left with the remaining pensioners and the workers.

If Stan took the pension as designed he would face the risk of GM’s solvency and the risk of the market performance of the pension plan. Commuted values assume there was no such risk and give Stan the an amount of money that fails to be reduced for risk.

This scenario is unfair and results in a death spiral for pension plans when some members can escape risk free when there is a sign of trouble.

Kudos to Stan for taking a wise choice but the pension rules should not allow this.

#42 David McDonald on 05.03.15 at 3:52 pm

Like the retired boomer I had no option to commute my defined benefit pension. On the other hand my pension money was transferred to a trust company so short of total collapse it should be ok.

I remember as a child playing in the family car at the cottage. One of us took the car out of gear and it rolled backwards toward the lake. Fortunately a door was open and it wedged against a tree. Mother was relieved and Father was worried about extricating the car and fixing the door.

Just then a bunch of gigantic (to a child) bikers rolled up. They pulled the car away from the tree and skillfully fixed the hinges of the door. It turned out they were auto workers from Oshawa; great guys who made a big impression on me.

#43 Shawn Allen on 05.03.15 at 3:58 pm

Alberta Government Commuted Values are available

Vector on 05.03.15 at 1:55 pm
As a municipal worker in Alberta I have the option of accepting a LIRA should I leave and that’s what I’d like to for the reasons outlined above (one in the hand > the promise of two in the bush). However, any time I’m sent a “balance” from APS it excludes my employer’s contribution on my behalf. Would a conversion to a LIRA exclude that contribution? If so, how would that not be theft?

I can’t find any clear information on the matter as, obviously, it’s not in APS’ interest to see contributors withdraw from the fund.

**************************************
Vector, I am very familiar with your pension plan and with Alberta Pension Services.

Your commuted value will be FAR higher than your contributions if you have more than a couple of years in the plan.

Alberta Pension Services has web site tools to let you see the commuted value. Or you can phone them.

The commuted value option for your Alberta government pension is not allowed after age 55. To get the commuted value you must quit the job before you turn 55. Most will stay past 55 if they have the choice.

In my opinion the risk that the Alberta pensions will not be fully honored is close to zero. Benefits may be reduced for earnings going forward. But benefits already accrued are very likely to be honored in full. Recent changes to pensions proposed in Alberta (later canceled) included no cuts to pensioners.

#44 Kommie Bob on 05.03.15 at 3:59 pm

“Bitter surprises ahead” …indeed. Today’s youth are super-pissed . The civil service has set them up as indentured slaves for life. These pension plans might have worked in the few years when the pension/worker ratio was 5-1….bit now it’s less than 2-1…..and every one with grade 3 math knows that without a huge slush fund from generally increasing taxation…with the proceeds going solely to the civil service pension schemes…these unfunded indexed liabilities are going to grow until they consume 100% of all revenue.

These facts are apparent to the young people of today…as it is obvious that it is the same fat cat elite civil servants and dependent unionists that make up Canada’s 1% are also collecting those full pensions and are double dipping the job pool so that new grads can’t get their first job….even when they are expected to pay more in taxes and accept fewer services in order to support a sub-set of greedy parasites that will keep their boots nailed to the floor unless they’re stopped….or there’s a mass extinction event that only kills off the double dippers and GM worker types that continue to demand subsidies for pensions that make no sense to anyone who asks for the answer to and age old question “How did we let this happen in the first place?” Seems to me that the politicians who agreed to these wacko ‘collective bargaining’ schemes couldn’t think one minute past their time in office.

I smell a revolution of irony setting up….young socialists storming the gates of the union castles they were trained to admire.

#45 Shawn Allen on 05.03.15 at 4:01 pm

Question…

W on 05.03.15 at 2:31 pm

Doesn’t he lose the value of having payments indexed to inflation? Isn’t that the benefit of taking it as an annuity?

*****************************************
That benefit has been fully accounted for in the commuted value calculation.

#46 kommykim on 05.03.15 at 4:05 pm

RE:Across Canada it’s estimated there are $300 billion worth of pensions that public sector workers are expecting that actually have no dollars allocated to them. Some bitter surprises are in store.

Except for MPs’ pensions, since they make the “rules” for themselves.

No they don’t, actually. The pension plan is designed by an outside body. — Garth

#47 David on 05.03.15 at 4:06 pm

Go on, take the money and run.

I’m curious how many of his colleagues will be wise enough to make the same choice.

#48 Setting the Record Straight on 05.03.15 at 4:08 pm

“The governments that pay into it are not on the hook long term. Yes, the employer contributes 50%, but those workers negotiated away higher salaries to get that benefit. Pure capitalist negotiation, nothing wrong about that. ”

Nothing to do with capitalist negotiations. At the very least the wage payer must be subject to going bankrupt, when they price themselves out of the market.

Politicians are office renters. They could never represent taxpayers.

The problem is the existence of Unions in the public sector.

Even FDR did not support a unionized public sector.

#49 kommykim on 05.03.15 at 4:09 pm

RE: #2 whydoweletthem on 05.03.15 at 1:38 pm
How is it not illegal for companies, municipalities, etc to have unfunded pensions.

Because the companies lobbied the Government to allow their pensions to be underfunded, and the CONs said, “What a great idea!”

#50 VanIsle Retiree on 05.03.15 at 4:15 pm

I would really like to know how Stan can call some of his income from his LIF (the pension money) return of capital. I am in the same boat, so this would be most useful information.

Where did I say that? — Garth

#51 PM on 05.03.15 at 4:22 pm

What does today’s balanced portfolio look like?

I’m currently using this one: http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf

Still good today?

#52 Shawn Allen on 05.03.15 at 4:26 pm

Not Really

For example none of my generation have signed a pact demanding we be paid a % of our salary that is to be paid by the next generation. We have defined contribution instead.

Yes we will exist off the sweat of the labourer’s brow but it won’t be the same disgusting pie in the sky figures that are bleeding the young dry.

*****************************************
Defined benefit pensions are designed so that an average worker and his employer put enough money into the plan during working life to generate the pension through investment gains. There is NO intention that a future generation supplement this in any way.

It has often TURNED out that contributions were inadequate as investment returns were lower than expected. But that was never the intention.

Young people today exist mostly from the benefits of investments made long before their birth. Investments in agriculture, factories, highways, buildings, the internet, all forms of communication, power plants and on and on. GDP gets produced from labour and capital. I suspect capital is the larger contributor. All installed capital and the accumulated knowledge base of humans is a gift to each new generation. You’re welcome!

#53 Andrew Woburn on 05.03.15 at 4:30 pm

#27 FTP – First Time Poster on 05.03.15 at 2:53 pm
Martin Armstrong is on point with the trial balloon Austrailia is currently planning on floating by taxing savings:
http://armstrongeconomics.com/archives/30158
Next stop….Canada
=================

I assume Armstrong sleeps on a mattress on the floor to make sure there’s nothing under the bed. I consider him to be a complete waste of time. He doesn’t even tie his endless shrieks of doom to any source material.

Yes, the Australian government is considering taxing banks on their deposits as an alternative to hiking their capital requirements, which might lower bank profits even more. Here’s the real story.

http://www.afr.com/news/politics/tax-on-bank-deposits-in-federal-budget-20150328-1m98oi

#54 Bobs ur uncle on 05.03.15 at 4:38 pm

#16 GeorgeSoonToBeRetired on 05.03.15 at 2:16 pm

Most just don’t have the smarts to invest themselves, and most financial advisors are captive to their underperforming corporations, if not largely incompetent. … Few have enough financial literacy to hire fee-based advisors. We can blame them for that, or accept they are human too, and ensure we have broader programs, like improved CPP, to cover them.
***

Fair to say you will get broad agreement here that the majority of people are financial simpletons. But I doubt that you would get broad agreement on additional government assistance to help them in their old age – cause that’s just commie craziness.

Practically speaking, either we up the assistance now, or let more and more folks enjoy their cat food soufflés. And the latter definitely increases the numbers of people who have nothing left to lose – not exactly encouraging stable and safe communities. Not how I would like to see it play out, but seems we’re headed that way.

#55 Marquis de Sale on 05.03.15 at 4:39 pm

How is it that Dean Del Porkchop gets a $100,000 a year pension for life and he is a criminal?-even though the judge was wrong. Canada Post owns their deficit and the Gov’t owns Canada Post. Suck it up buttercup!

#56 Retired Boomer - WI on 05.03.15 at 4:45 pm

Let us ask for several years of modest “deflation” to off-set the 70’s years of “inflation.”

Several years of NO social security benefit increases, no automatic inflation adjustments to salary, or benefits during this period of “deflation.”

Since I have NEVER seen this kind of world, what might it look like?

Would RE values continue to swell? How about an increasing interest rate to off-set the rate of “deflation”?
Borrowers would be paying down debt, or might they increase debt because “the value of money” perception?
I Can’t gauge the mental gymnastics, but interesting speculation. No, I haven’t had anything to drink (yet).

Several public pensions (certain city county workers, and a few trade unions) pensions HAVE cut member’s benefits.
Teamsters are quite likely the next big union to see an “adjustment” in benefits.

Looking down the road Boomers are likely to see another benefit slap, you too Gen X, and you TOO Millenial’s.

We all gonna get hosed now…

#57 Detalumis on 05.03.15 at 4:54 pm

GM survivor is actually 2/3 for life, so not “small and temporary”. That’s one of the reasons the unfunded numbers are so large, they may have to pay out for 50 years. The 30 and out guys often have 40 something year old spouses.

Not his plan, he says. — Garth

#58 Obvious Truth on 05.03.15 at 5:05 pm

You nailed it Stan and Brenda. It takes a while to get used to but once you know you can go it alone the freedom and self worth you inherit is mind blowing.

This is hard earned money. You will never have to think about GM again.

I wish you and your family the best.

#59 pinstripe on 05.03.15 at 5:09 pm

I did get my ears filled on my last R&R to the west coast (Vancouver and Victoria). The entire talk was by the old geezers expressing how the fed and provincial politicians are messing with the well being of all Canadians. Corruption is involved at all levels of government. the trust and confidence in their policies is not only at zero but is also dipping below the zero line.

harpo is being manipulated by big money and does what he is told. The bail-in law is scaring anyone whospends some time researching the effects of it. the terrorist bill is pure scare mongering. bank fees are continuously going up and now the trend is to force people to use electronic transactions on all their purchases. the debt load at the fed, prov, muni, and personal level is massive. the global economy is in a bigger mess too. Europe is already offering zero interest on money. no one with authority can be trusted any more. it is sad.

in alberta we have a helluva mess with prentice and the pc lap dogs. alberta has gone through the biggest boom in history and now we find out that there is no money in the pot. we are broke, and in debt with billions of dollars owing. Tuesday we have an election. I hope the pc’s get a minority at best.

we are in an era now that no one is willing to trust the government on any issue.

#60 Ralph Cramdown on 05.03.15 at 5:14 pm

#29 ben — “[…] none of my generation have signed a pact demanding we be paid a % of our salary that is to be paid by the next generation. We have defined contribution instead.”

Your generation is getting hornswoggled.

There is nothing wrong with defined benefit pensions that can’t be fixed by mandating that they remain fully funded. Previous generations of workers, public or private sector, didn’t demand that the pensions be unfunded, mere promises. That was a decision of management, and government. Now that it didn’t work out so well, they want to throw out the baby with the bathwater, and undo 200 years of financial progress.

Think Stan would have ended up with this much wealth if he’d been in a typical employer-match defined contribution plan giving him a choice of a number of high fee mutual funds and the obligation to rebalance, or market time, himself? Unlikely. Unless he was a gambling fool, he’d HAVE to invest more conservatively than a pooled risk pension plan as he got older, and fees would kill his returns regardless.

Check YOUR plan’s performance in 30 years. You’ll see.

#61 Canadian Bureaucrat on 05.03.15 at 5:24 pm

Stan’s family owns 100% of the money – forever. If he passes first (“Like that won’t happen…”) then Brenda gets every cent, to support her and help the kids as they get established.

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

Which is exactly why canadian real estate will never drop.
There it is folks.
Sheesh.

#62 ? WTF ? on 05.03.15 at 5:29 pm

Why would any corporation want to set up shop in Canada? They have to pay their workers to much money because the real estate is over priced.

#63 The lucky guy | Realties.ca on 05.03.15 at 5:34 pm

[…] Source: http://www.greaterfool.ca/2015/05/03/the-lucky-guy/ […]

#64 Ralph Cramdown on 05.03.15 at 5:53 pm

Ah, so the “tax on savings” proposed in Australia is actually a bank deposit insurance premium.

Like the one already charged in Canada:
http://www.cdic.ca/ForMI/eFiling/Documents/PremiumRates2013.pdf

And in the US:
https://www.fdic.gov/deposit/insurance/assessments/proposed.html

Is Martin Armstrong a fool, or does he play his readers for fools? Does it matter?

#65 lala on 05.03.15 at 6:19 pm

Another Sunday, another reason for lala to be happy as I don’t have to work tomorrow. How many of you people feel sick tonight because you got to work tomorrow? Fear is such an unpleasant emotion so fight it. Spent the money and enjoy your life, live for the moment like lala does. Dont be the richest guy in graveyard and don’t forget, life after 65 have no quality. How old are you Garth.

#66 ben on 05.03.15 at 6:22 pm

Ralph Cramdown – come on we know why most of these funds were made defined benefit. Because they didn’t add up. If they add up make ’em defined contribution.

Just another part of the intergenerational apartheid.

#67 ben on 05.03.15 at 6:29 pm

Ralph – although I’ll add – if it’s fully funded from *their* contributions (and not by taking the wages of the next generation of workers to “catch up”) then I have no problem with this.

I do have a problem when govt is cutting, employers are keeping wages low and pensions are paying a fortune. Really they should reflect reality – if the growth doesn’t come then you can’t get an extra slice of nothing without someone else loosing out.

#68 Rebecca on 05.03.15 at 6:43 pm

Now here is a dilemma that millennials won’t have. We already know that our employers and our government will give us next to nothing for retirement.

#69 Russ L on 05.03.15 at 6:43 pm

Ralph Cramdown on 05.03.15 at 3:09 pm
#27 FTP – First Time Poster — “the trial balloon Austrailia is currently planning on floating by taxing savings”

Link, please?
*******************************

Hi Ralph,

The info came from this wingnut econo site.
Check the May 3 blog entry.

http://armstrongeconomics.com/armstrong_economics_blog

Martin Armstrong’s tenuous grasp on credibility has now fully released. — Garth

#70 Mithan on 05.03.15 at 6:51 pm

Finding a decent investment guy to trust is the biggest hurdle, especially here in Regina. Every single one I have seen gives me a “fund” full of Mutual Funds. I request ETF’s, they stare blankly at me, then go back to some Mutual Fund on the computer screen that has shown about a 5% return over the last 10 years, with another 3-5% probably going to themselves.

Maybe one day I will find somebody decent.

Or maybe I am asking for too much.

#71 Smoking Man on 05.03.15 at 6:53 pm

Entrepreneurs never retire. Wondering how good old Stan felt screwing car parts together in his prime then into old age.

The prize, a lousy million bucks. Was your freedom worth it.

I know being who I am, I’m one bad bet form total financial distruction. At 55 sure I should go safe, but for what.

Yesterday I got a sliver in my knuckle, I had the option to get a set of tweezers and yank it out. But I decided to watch my body, my atoms destroy it. Right now that little piece of wood is getting it’s ass kicked. A dome of puss is eating it.

No thinking, just let it happen..

Making money works the same way, you got to get your mind right, and just watch it happen.

Happy Retirement Stan.

#72 PM on 05.03.15 at 6:54 pm

Defined benefit pensions aren’t sustainable because the nature of industry changes. As globalization shifts production all over the planet and technology changes the labour required (e.g. the auto industry is massively automated compared to 40 years ago) the number and, more importantly, wages of current workers funding a plan drops making it a nightmare to keep up with past promises. It’s simply too hard to make 40 year bets and stay afloat.

Now here is a dilemma that millennials won’t have. We already know that our employers and our government will give us next to nothing for retirement.

That’s not true. We just won’t get cradle to grave care. You need to take charge of your own finances as loyalty is dead. The up side of that is that in a hot job market you own your employer nothing. Want to take a new gig with an extra $15K and a signing bonus? Do it, you’re not losing a lifetime of pension vesting.

#73 Rexx Rock on 05.03.15 at 6:58 pm

You never know?One day,the federal and provincial goverments will take what you accumulated in your pensions and say we need to buy Canadian 10 year treasurey’s our Canada bonds.So if you accunulated over $100,000 dollars you may only make $2000 a year.Can you really trust the goverment,they spent over 20 billion on a useless forever war.

#74 Timmh on 05.03.15 at 7:09 pm

And many companies are making record profits, yet they want to screw workers out of their pensions.

#75 Harbour on 05.03.15 at 7:12 pm

Wish I had a million to trust with someone.

#76 Millmech on 05.03.15 at 7:14 pm

How much would he get per month,Garth?

#77 young & foolish on 05.03.15 at 7:19 pm

what do you guys think pension funds are invested in?
yeah, you guessed right … “balanced & diversified”

it’s either “debt or equities” any way you slice it …

#78 Ret on 05.03.15 at 7:28 pm

Part of the pension underfunding is that defined benefit pension promises were made on the basis of many factors including:

a) higher long term interest rates than we now have
b) that the average life expectancy would be 75 years of age.

a) Doesn’t look likely for years
b) Has not happened. Ontario teachers, for example, are living much longer -approx. 80 years for males and 84 years for females.

The Ontario Teacher Pension Plan had to make changes to keep solvent and did so.

One point to ponder. All things being equal, if a female lives roughly four years longer, why does the male get the same pension as her? Obviously, he is being discriminated against statistically.

#79 Line Worker on 05.03.15 at 7:32 pm

Very disappointed Garth!

I am an auto worker just a couple month short of my 30 years.

I am one of the younger ones so my commuted value is higher than most. I have seen many of friends retire and no one has gotten any ware near $1,000,000.

In fact after taxes on the CV few people walk away with much more than $500,000. I also believe Invested correctly this sum could provide a comfortable but modest retirement.

Please don’t exaggerate the numbers, it is not only misleading but destroys your credibility.

Hate to break it to you, kid, but I’ve seen a bunch. — Garth

#80 young & foolish on 05.03.15 at 7:38 pm

“A balanced and diversified portfolio has relatively little exposure to the Dow or the S&P … ”

oh yeah?

Yeah. Of 60% growth assets, about 21% is US, of which 13% is large cap companies, in C$ and US$. — Garth

#81 AfterTheHouseSold on 05.03.15 at 7:42 pm

Pension Benefits Guarantee Fund (PBGF)

“Established by Ontario government to provide protection to Ontario members of private sector DB pensions.”

My understanding of this fund:
Offered by one province only, Ontari-owe. Like we can afford this!
Was used for partial payment of Nortel pensions

Was/is this fund used to pay GM pensions?
Does this fund not create moral hazard as companies walk from their obligations?
Is there any way for Ontario to extricate themselves from this fund?

Garth, could you please comment on this fund. Thanks.

#82 randy on 05.03.15 at 7:48 pm

#15 Pete. What a load— of TRUTH. There are some that realize GT followers are being herded to the slaughter.

Bank bail-ins? Seriously? That’s so 2013. Surely you have a new mythical apocalyptic bombshell for us. — Garth

#83 Guy on 05.03.15 at 7:51 pm

Good move Stan, as long as it is invested wisely. Safe investments will keep working long after he’s dead.

Not a lot of people know where their pension money is invested. It could be in the hands of a dart throwing chimpanze!

#84 Jordy on 05.03.15 at 7:52 pm

Went through the same process some years back, agonized over it at the time, but there was no way to over look the additional control and diversification away from a single company in a single industry that you hope will make it long term. Has turned out well and the other surprize I got was a refund of 20k of room on rrsp contribution space that the company plan was using, so I topped that up with severance. Turned out great, way ahead now….. take the money and run :-)

#85 Ralph Cramdown on 05.03.15 at 7:56 pm

#67 ben — “I do have a problem when govt is cutting, employers are keeping wages low and pensions are paying a fortune. Really they should reflect reality – if the growth doesn’t come then you can’t get an extra slice of nothing without someone else loosing out.

So check out the recent returns of big pensions funds like CPPIB, Ontario Teachers, CALPERS and OMERS. They are generating good growth on their large pots of money. The problem isn’t low growth, the problem is that some workers were promised a cookie by employers which didn’t want to set aside a cookie to fulfil the promise. After 30 or forty years of work, some people are trying to renege on their promises.

Besides, the time honoured way of screwing pensioners isn’t by by stopping their cheques, it’s inflation.

#86 X on 05.03.15 at 8:00 pm

re #50 – The investment products provide the ROC.

No. The non-registered portfolio does that. — Garth

#87 young & foolish on 05.03.15 at 8:03 pm

“Across Canada it’s estimated there are $300 billion worth of pensions that public sector workers are expecting that actually have no dollars allocated to them. Some bitter surprises are in store.”

Yup, look at Greece today and gaze into your future …

#88 Jonathan on 05.03.15 at 8:03 pm

People thinking that public sector pensions are the big problem are just incredibly economically ignorant and short-sighted.

The CPP pension board, for example, has made some smart investment choices, increased premiums wisely (thank you, Paul Martin!) and looks solvent until at least 2070. This is exactly the kind of management advantage you get with public sector pension plans properly run, with very low built in fees.

Contrast that with many private sector plans, run by the ilk of Conrad Black and other execs dipping into the gravy train at the expense of the workers. Underfunded, relying on taxpayer dole to bail them out while the top brass make out like bandits.

This is just another way the top wealthy 1% are working to guarantee themselves 50% or more of all wealth, by impoverishing the shrinking middle class.

I don’t know about some of the more neocon blog dogs here, but I do NOT want to wake up living in the northern equivalent of Baltimore or Ferguson.

But make no doubt about it. That is EXACTLY where we are headed. Two decades, tops.

Unless we recognize, as we did after the Great Depression and WWII, that the wealth and well-being of our fellow citizens is truly our own. Fairness is everything.

We are running at high speed from such ideas these days, however.

The way we are going, you will be wanting to own firearms in your homes pretty soon.

#89 Sluggo8 on 05.03.15 at 8:09 pm

TFSAs count as Tier 1 capital and help when measuring a bank’s strength and collateral for lending. Just like the IMPP, which was introduced as a temporary measure, both now primarily are in place for the benefit of the banks and securitization of debt. TFSAs still rock.

The question that should be asked is why has the limit increased? To get votes, shore up the banks balance sheets or help out ivestors?

Because we spend too much time on nutbar tinfoil theories and not enough on retirement. Nobody will ever touch your TFSA. — Garth

#90 young & foolish on 05.03.15 at 8:15 pm

“If GM had been forced to build here if it wanted to sell here, it would have figured out a way to increase productivity.”

We don’t own our markets any more, the 1%ers re-organized it to benefit capital (and you get more trinkets made in Bangladesh). Haven’t you heard ??? Socialism is bad for you and leads to poverty. Just ask Fidel.

#91 Joe2.0 on 05.03.15 at 8:22 pm

States bank rates 0% or soon to be negitive.
States cutting thousands of jobs.
States low home ownership.
States horrible GDP numbers.
States in a bad state.

#92 GM Worker on 05.03.15 at 8:27 pm

#76 Line Worker on 05.03.15 at 7:32 pm

Very disappointed Garth!

I am an auto worker just a couple month short of my 30 years.

I am one of the younger ones so my commuted value is higher than most. I have seen many of friends retire and no one has gotten any ware near $1,000,000.

In fact after taxes on the CV few people walk away with much more than $500,000. I also believe Invested correctly this sum could provide a comfortable but modest retirement.

Please don’t exaggerate the numbers, it is not only misleading but destroys your credibility.

Hate to break it to you, kid, but I’ve seen a bunch. — Garth

………………………………………………………
Hey Garth:

I think you must confusing us with MPs or Hydro workers. No one I know got a million dollar buyout and I have also seen a bunch.

MPs cannot commute pensions. Hydro workers, at least the ones now retiring, often have seven-figure pension values. And I know from experience there are colleagues of yours in the same circumstance. — Garth

#93 Shawn Allen on 05.03.15 at 8:28 pm

Strange claim

Sluggo 8 claimed: TFSAs count as Tier 1 capital and help when measuring a bank’s strength and collateral for lending.

*****************************************
A TFSA is a registered account. If you buy investments within a TFSA the investments do not belong to the bank they are yours.

If you own bank common shares in a TSFA then yes those are tier 1 capital of the bank that issued them.

If you buy certain types of bonds or preferred shares issued by a bank it is possible that in the extremely unlikely event of financial trouble at the bank then your bond or pref share could be converted to bank common shares.

This has nothing to do with the TFSA but would be a feature of what you bought within the TFSA.

The avoid even this remote possibility simply don’t buy these type of bank bonds or pref shares in your TFSA or anywhere else.

Investing always carries some risk. You can always come up with a reason not to do something. You can convince yourself it is too risky to leave the house if you wish.

Have at it. You can’t die if you never live. That is no reason not to live.

#94 Sluggo8 on 05.03.15 at 8:34 pm

Garth, nutbar or not, house prices in Vancouver are up 79% in the last 5 years. That’s a $993k tax free gain that circled the bowl on a house that sold for 1.258 million 5 years ago. What would your balanced portfolio have returned in the same time frame? Your thesis is correct when all the variables are stable, but they’re far from it and policy decisions have just as much to do with the misallocation of capital flooding the sector as do interest rates, foreign buyers and the bank of mom and dad.

So buy a house and have no income. Good luck. — Garth

#95 Interstellar Old Yeller on 05.03.15 at 8:36 pm

Stan, you are a lucky guy (Brenda too, by extension.) You’ve made the right decision to take control of things and not depend on the pension to do right by you. Learn everything you can about personal finance so you can be an informed partner with your advisor in managing your nest egg. Congrats!

#96 Al on 05.03.15 at 8:39 pm

The new “art of negotiation”. You want $1 million for your house? Here, take $1.5 million !

#97 Republic_of_Western_Canada on 05.03.15 at 8:42 pm

#28 When will they raise rates? on 05.03.15 at 2:55 pm

I understand why he’s scared. I would be too if I was retirement age and investing my entire pension into an all-time high stock market which has never been more over-valued than it is now on a PE ratio basis. Scary indeed.

I wish you all the best Stan.

Why would he buy stocks? A balanced and diversified portfolio has relatively little exposure to the Dow or the S&P, and has proven its resilience even in times of financial stress. GM, on the other hand, tanked. — Garth

Why would he not buy stocks? If you think things will be going sideways or down, write covered calls on your dividend-paying shares. Or short Bunds. Or buy puts.

Not having exposure to the Dow or S&P means not owning U.S. stocks. (Or be 100% in cash, or in German stocks which are overpriced too). Fine, time to get back into Cdn energy stocks anyway.

#98 young & foolish on 05.03.15 at 8:43 pm

“Of 60% growth assets, about 21% is US, of which 13% is large cap companies, in C$ and US$”

Sure, small caps, mid caps, large caps, here, in the US, and then over seas … all equities. I really want to believe, but I’m afraid everything’s over-bought …. especially over the last few years of declining interest rates?

Stocks are a proxy for the economy. Sad when young people fear the future. — Garth

#99 Nodebt on 05.03.15 at 8:47 pm

Can someone please answer this?
Say you got 1 million to invest, Garth says balanced and diversified portfolio. Why not buy 20 great stocks that pay dividends and grow ? Say 5% of each stock. I understand if one stock goes bankrupt you have lost 5%
But I’m not talking about buying crappy stocks, great ones! Appreciate anybody’s feed back, thx

All your money in one asset class is a recipe for heightened risk and volatility. Why would you want that? — Garth

#100 amazon girl on 05.03.15 at 8:49 pm

Garth, Canada Post Pension liability is roughly 5.6
Billion now, just want to give you a update.
Garth do you see the same scneario for Canada Post
in the near future? Thanks

#101 Railroad worker on 05.03.15 at 8:59 pm

I remember one of our head union members telling us at a meeting that he’s known a bunch of guys from CN and CP railways that have done exactly what this guy is planning to do. Pretty much every case they’re money guy had lost the majority of it and they’ve ended up regretting their decision.

Lemme guess. Mutual fund salespeople? ‘Friends’? Relatives? Bad choices do not change the fact that commuting a pension has tangible benefits. — Garth

#102 omg the original on 05.03.15 at 8:59 pm

VANCOUVER HOUSING FEVER TO SPILL OVER INTO VICTORIA

Mark my word, as grotesquely over valued as Victoria already is, prices are going to ramp up over the next year.

Victoria real estate agents have been hard at work pitching the idea that we are having a spill-over effect from Vancouver.

Drive around close in areas (Oak Bay, Fairfield, James Bay, even Vic West) and its a sea of “sold” signs.

Prices in the close in areas of Victoria are up 5 to 10% year over year and houses priced at market are selling in days.

I have talked to two people in the last week that are about to sell – their realtors are telling them to increase their asking price based on the hot market and not take offers right away to entice multiple offers.

At a coffee shop I overheard a mother panically explaining to her daughter that they need to be more flexible on pricing – they just need to get in so they do not get left behind.

Panic buying will hit Victoria – people will have to get in at any cost.

The HERD is marching in Victoria.

The only thing that will put an end to the great Canadian housing bull is a meaningful increase in interest rates.

Any by that I mean a 3 to 4 percent increase. And that will not happen for 2 to 5 years.

#103 omg the original on 05.03.15 at 9:10 pm

#100 Nodebt
Why not buy 20 great stocks that pay dividends and grow ? Say 5% of each stock. I understand if one stock goes bankrupt you have lost 5%
—————————–

Over the long run stocks beat the crap out of all classes of investment. And by long run we are talking decades not a 10 year period.

So why not buy only stocks and let it ride? Answer the follow yes and its a good strategy for you.

1) you are investing the money for the long term – more than 10 to 15 years

2) when your stocks crater by 30 to 50% you will not panic and sell out. Ask people that sold in 2008/09 how that has worked for them.

3) when your stocks go up 50% you will not sell out thinking you will time the market by buying back in when they fall – Ask people that sold in 2012 how that has worked for them.

4) when stocks do nothing for a decade like they did from 1999 to 2010 you will not get frustrated and sell out. Long periods of low stock returns are usually followed by a catch-up period.

5) Do you have balls of brass – that is, can you sleep at night with the above volatility.

Most people are not Vulcans and are ruled by emotions rather than logic, so should go the route of a balance portfolio.

#104 Linda on 05.03.15 at 9:10 pm

#9 Vector: If you get the option to grab your cash & run, I’d say do it. I have a DB plan, but did not grab the cash before I turned 55 (once you turn 55, you can’t grab the cash as per my plan rules). And what do you know – the Alberta government began an attack (halted, for now) with Bills 9 & 10 to make all pensioners pay more, get less & work longer to boot. For those who were not paying attention, Bill 10 pertained to private, not public, pension plans. It was far more draconian than Bill 9, which was to have modified public pension plans in Alberta.

Hindsight – had I had the slightest idea that the government was planning to change the pension plan rules I’d have grabbed my money & run before I turned 55. Too late now….. As for those who are doubtless saying ‘gold plated pension plan’ keep in mind it is plate, not solid gold. And like every other pension plan in Canada, the rules & the pay out can be changed at any time, too bad if it isn’t enough to live on when those changes take effect. Or horror of horrors, the plan goes bankrupt or the company paying it goes bankrupt. Yes, there are pensioners in Canada who have received the grim news that their DB pension is no more, so they are reduced to living on CPP, OAS & now qualify for GIS. So much for the ‘golden’ years…..

#105 Linda on 05.03.15 at 9:14 pm

Hi Garth,

My sis is a sometimes Liberal supporter. She told me she’s had a robo-call and then an email today from the party.

Apparently, tomorrow at 1 p.m. Justin Trudeau will announce what is supposed to be some kind of game changing policy idea for more fairness for the Canadian middle class.

Keep your ears open; it may be fluff, or may be something worth blogging about.

#106 Yuus bgin Haad on 05.03.15 at 9:15 pm

So, where’s Buzz when we really need him?

#107 Cici on 05.03.15 at 9:15 pm

#42 Dave McDonald

Wow, great story…and the best post in the Comments section tonight.

#108 45north on 05.03.15 at 9:17 pm

Retired Boomer: I toiled the last 25 years for the US FED

I saw you as an elevator repair guy.

Ralph Cramdown: Did this guy negotiate free trade agreements? Tear up the Auto Pact (which required the big three to make a car in Canada for every one they sold)? Nope, but now guys like him are expected to compete with Mexican assembly plant workers and Chinese parts supplier workers. While mandarins in Ottawa say he isn’t “productive” enough.

I’ve heard the auto workers criticized because they don’t start their own car companies. I don’t know but in my mind Toyota, Mazda and Hyundai represent an effort at the national level.

Nora Lenderby: Remember Nortel.

Nortel management betrayed its shareholders and employees. Its competitor Cisco survived and dominates telecommunications.

#109 omg the original on 05.03.15 at 9:20 pm

Jonathan on 05.03.15 at 8:03 pm
People thinking that public sector pensions are the big problem are just incredibly economically ignorant and short-sighted.

The CPP pension board, for example, has made some smart investment choices, increased premiums wisely
————————-

People are concerned with the “gold plated” public sector pensions and benefits (and wages in general) as they are completely out of step with the private sector.

Public sector compensation packages are reducing the ability for government to fund programs – so you get $120K/year teachers and nurses but reduced school programs and healthcare infrastructure.

Yes I know somebody will say there are no $120k/yr teaches/nurses – but when you add 20% gold-plated benefits to the high seniority base salary that the number you get.

By the Way – the CPP is not a public sector pension – its a pension provided to all employed Canadians – private and public sector.

#110 A Yank in BC on 05.03.15 at 9:21 pm

Took lump-sum myself in 2008. Seemed like a no-brainer at the time.. and sure enough, the company went through bankruptcy three years later. I am a lucky guy too.

#111 Republic_of_Western_Canada on 05.03.15 at 9:25 pm

#100 Nodebt on 05.03.15 at 8:47 pm

Can someone please answer this?
Say you got 1 million to invest, Garth says balanced and diversified portfolio. Why not buy 20 great stocks that pay dividends and grow ? Say 5% of each stock. I understand if one stock goes bankrupt you have lost 5%
But I’m not talking about buying crappy stocks, great ones! Appreciate anybody’s feed back, thx

All your money in one asset class is a recipe for heightened risk and volatility. Why would you want that? — Garth

Because that one class could have a return far and above any combination of all others over certain time periods. When ‘volatility’ does threaten, then you can change classes or park in cash. Or take advantage of it and short Bre-X.

Lots of warning was around before shares tanked last Fall, explicitly and most notably from Carl Icahn. Cashing out and writing calls was an obvious play. No need to lean into BBB bonds at a time when everybody was yapping about interest rate increases.

At 7 figures though, you could afford some exposure to short-term high-yield bonds. And to keep your powder dry for good deals with 100K just in cash.

#112 Sluggo8 on 05.03.15 at 9:41 pm

#93 Shawn Allen

The majority of deposits that go into TFSAs go into low interest rate savings accounts at the banks. This counts as Tier 1 capital. It was a bonanza for the banks, particularily in 2009. It’s also called a Savings account which the bankers lobbied hard for even though it was originally dubbed the Tax Free Investment Account. Optics.

#113 Doug in London on 05.03.15 at 9:47 pm

One of the reasons many companies, including GM and Canada Post, have unfunded pension liabilities is because of greater automation or in the case of Canada Post less revenue as more mail is delivered electronically. It has resulted in fewer workers to produce the same number of goods or services, which consequently means fewer employees paying into the pension plan. The company in turn tries to cut costs by staff reductions, so even less people are paying into the pension plan and the problem worsens itself. There’s no easy solution here so, as Garth said, some bitter surprises are coming.

Stan did the right thing by taking the money and running, no doubt about that. Only a fool wouldn’t do so.

#114 Jonathan on 05.03.15 at 9:54 pm

#110 omg the original

Sorry, you seem to be one of the anti-public sector types who just don’t get it.

I used CPP as just a great example of what can go right in big pension plans, and many public sector plans do exactly that – good management, low fees, innovative investing, with premiums that are enough to cover costs down the road. (Most people still think the CPP is underfunded and headed for disaster – not true, just more hype from neocon types – like you?)

You said:

“People are concerned with the “gold plated” public sector pensions and benefits (and wages in general) as they are completely out of step with the private sector.”

So being competently managed = “gold plated”?

Are you really that stupid, or are your standards just that low?

Or why don’t you have the backbone to say what you really mean – too many private sector pensions are run by irresponsible crooks and/or incompetents!?

Try it, be brave – just speak the truth!

Every public sector worked pays at least half of that pension value in all cases I know of. That alone is often more than private sector workers contribute in whole, and many, many public sector workers make less than private sector in similar roles. Most good private employers also match RSP contributions.

In addition, public sector workers get nothing by way of stock options, warrants etc…

The main public sector pension plans that might be at risk are the ones that have been meddled with, almost entirely by CONSERVATIVE politicians.

Is that any wonder?

#115 Obvious Truth on 05.03.15 at 9:57 pm

#102

Think they would rather keep the money ?

Wonder why?

#116 young & foolish on 05.03.15 at 10:00 pm

“Stocks are a proxy for the economy. Sad when young people fear the future. — Garth”

Thanks … now I feel like a wus!

#117 John in Mtl on 05.03.15 at 10:10 pm

Where’s the logic in this, or what’s hiding under this rock…?

At your usual financial institution, when you choose different portfolios (bank financial “products”) to invest in your TFSA, the bank (or caisse here in QC) first assesses your investor “profile” and absolutely won’t let you invest in medium or med-high risk portfolios if your profile shows you will lose sleep or quality of life from doing that.

In a way they are “protecting you from yourself”.

YET, yet they’ll let you blow your brains out on a house/mortgage…

So for one investment strategy they protect you, but not for the other. Now why is that, what is it to them if you invest wisely or poorly; or are they afraid you’ll make money or blame them if you don’t?

#118 Shawn Allen on 05.03.15 at 10:19 pm

Savings Accounts are NOT Tier 1 Capital.

Sluggo8 on 05.03.15 at 9:41 pm
#93 Shawn Allen

The majority of deposits that go into TFSAs go into low interest rate savings accounts at the banks. This counts as Tier 1 capital.

*************************************
No, it don’t.

Capital refers to equity and debt investments in a bank, not to its deposits. Deposits are liabilities but they are not part of a bank’s capital and most certainly not part of Tier 1 capital.

Post a link to back up the claim.

Also when TFSA are mentioned on this site, it is not with the intention of filling it with savings accounts.

For over 50 years the RRSP has been around and no one seemed confused by the fact that the S stands for savings. People seemed to understand that one could invest their savings. Maybe people were smarter 50 years ago than today. Some days it sure feels like it.

#119 Ralph Cramdown on 05.03.15 at 10:46 pm

#120 Shawn Allen — “Maybe people were smarter 50 years ago than today. Some days it sure feels like it.”

50 years ago, someone with a basic knowledge of mechanics, electricity, plumbing and carpentry could fix or maintain most of the important devices in his life, or supervise those he hired to do it. If not, a family member could likely help. Not that there weren’t idiots back then.

Since then, every system/device has gotten an order of magnitude more complex, with the addition of radio, computers, software. We’re all specialists now, and are generally forced to rely on other specialists whose work we don’t understand.

As well, the country had separated banks, trusts, investment dealers and insurance companies. With the banks having swallowed two of the other three and become the dominant advertisers in the financial sector, few customers understand the intricacies.

How many people know that each bank has a separate investment dealer arm, but if you walk into a bank inquiring about investments, that the bank employee is generally motivated to (and only licensed to) sell you high fee bank mutual funds rather than refer you to the brokerage side, and has no fiduciary duty to you, only to respect the Know Your Client rules for suitability?

And of course, the banks have gotten smarter. Long gone is the banker’s 3-6-3 rule (borrow at 3%, lend at 6% and be on the golf course by 3’oclock). Now the bank’s computers scan your transactions and predict how price sensitive you are, offering your mortgage renewal at what it guesses to be the optimal time and terms to extract maximum value from you.

People may not be stupider, but far fewer are generalists, and the system they’re playing against has gotten more complex, and smarter.

#120 kommykim on 05.03.15 at 10:49 pm

RE:112 Republic_of_Western_Canada on 05.03.15 at 9:25 pm
All your money in one asset class is a recipe for heightened risk and volatility. Why would you want that? — Garth
Because that one class could have a return far and above any combination of all others over certain time periods.

That one class could also have a return far BELOW any combination of all others over certain time periods, which is what Garth was getting get.
Only a fool refuses to diversify.

#121 Ardy on 05.03.15 at 11:00 pm

Great news.

GM must pay the full pension benefits, unless they declare bankruptcy. I doubt they will be doing that for a billion dollars here and a billion dollars there.

They are spending more than that in share buybacks.

#122 meslippery on 05.03.15 at 11:17 pm

#30 Ralph
Healthcare workers and pothole fillers don’t have to worry about their jobs being outsourced to China, so their compensation packages are driven by rather different issues.

What do you think the temporary foreign worker program was all about?

You will work for what we pay or we will insource your work.

#123 Centurion on 05.03.15 at 11:20 pm

Can this man afford to buy a condo and maintain his lifestyle?

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/can-this-man-afford-to-buy-a-condo-and-maintain-his-lifestyle/article24227779/

#124 Sluggo8 on 05.03.15 at 11:28 pm

#120 Shawn Allen

http://www.eliteadvisors.ca/tax-free-savings-accounts-good-or-bad-20140529/

RBC posted Tier 1 rate on TFSA deposits
http://dollarguide.ca/index/product/74/

I believe Garth previously mentioned something about how many people just park their investment/savings cash in low interest savings accounts pushed by the banks instead of another vehicle that yields better returns.

#125 Ardy on 05.03.15 at 11:31 pm

GM will be offering commuted values or annuities through an insurance company to all current retirees in the future.

They already did so for salaried retirees in the US, and are in negotiations with the UAW to offer the same to hourly employees.

The changes will come to Canada as well.

GM wants to remove pension liabilities from their balance sheet and focus on their core activities.

They will pay the insurer a large payment today, to set themselves up for the future.

#126 Marco on 05.03.15 at 11:32 pm

I always find it interesting that boomers get slammed by Millennial’s because of defined benefit plans, that they apparently had everything “given to them” and messed it up for the rest of us.

Let it be known that I’m a Millenial. The world isn’t roses and unicorns so get over it. Sulking won’t get you shit. Going on your anti-corporate rant doesn’t, hasn’t and won’t work. Boomers did some really amazing things for our world and like every other generation since the inception of humans (whenever you believe that occurred doesn’t actually mean anything), they made some really bad mistakes. Learn from it, don’t make the same mistakes and be a little more disruptive.

If you see a problem, find a solution. We are in the most capital rich epoch. Think about it. Work hard (yes, like a dog if you have too), make smart choices and invest like the cash is your child. You’ll have more money than any defined benefit plan could ever provide for you and your family.

If it doesn’t work out in the end know that you tried your best. And never forget, the world isn’t roses and unicorns.

#127 Craig on 05.03.15 at 11:33 pm

Stan could be in for a sizeable tax bill on his lump sum pension. If you go to the tax website ey.com you’ll see that the marginal tax rate on $1,000,000 is 49.53 % for residents of Ontario. If Stan has any RRSP room left he can shelter some money and get a tax rebate for it. Also he can shelter $2,000.00 in an RRSP for every year worked at GM before 1996 ( eligible retiring allowance) but does not get an up front tax deduction for this money. This amount and the TFSA amount is only going to be a small percentage of his lump sum. Unless Stan has a lot of RRSP deduction room left or is allowd to take this buyout over a number of years, the taxman will be sending him a Christmas card.

#128 Keith on 05.03.15 at 11:41 pm

In order to have enough money to retire, the following criteria must be met:

1. You need to put aside enough money
2. For a long enough period of time
3. At a high enough rate of return
4. At a low enough level of risk
5. At as low a cost as possible.

This is why the DIY and defined contribution reality of most workers in Canada will fail. It requires knowledge, education, serious self discipline and patience to build up a seven figure sum of money that can throw off enough income to fund a working middle class retirement. The investment industry is a hindrance to many with high fees being a serious drag on returns, as well as difficult and confusing investment options for most people.

The best pension fund in Canada could be the CPP. It has a good track record of investment returns, low costs (0.35 percent) and access to private capital deals, which are not available to most investors.

The CPP should have been set at 50% of the average of the highest five years of earnings in a career, capped at 100k in earnings, AND funded properly to achieve this for all workers in the long run. OAS could be offered on a means tested basis, and anyone who wanted more income in retirement would still have the option of investing privately to supplement their public pension.

Even patient disciplined people are getting killed on fees in Canada. Most people you talk to are not prepared to fund their retirement. The government must intervene when the private sector fails. The CPP is a very well run scheme, actuarially sound through the entire baby boom demographic. Raise the contributions. Increase the benefits. Spread the risk of retirement income amongst millions of contributors. It’s common sense, so no politician will do it.

#129 Jeff B on 05.03.15 at 11:49 pm

I had the same decision to make as Stan when I left BCE before age 55. Leave it there and get a paltry pension from it at age 65, or take it with me and try to get a better return -and- have it pass in full (though taxed) to a beneficiary. I would never give my $$ to someone else to manage, so I went the self-directed route.

When I left BCE, it, along with a few other blue-chippers, were petitioning the gov’t to relax the threshold at which a company had to begin making up a pension deficit, from -5% to -10% if I recall correctly. Imagine how that sped up my decision.

#130 Retired Boomer - WI on 05.04.15 at 12:00 am

#109 45 North

Well… working for the FED did have its ‘ups and downs’ but, not the elevator repair guy.

So, now it is a different world, yet this world-view is much more fun!

#131 devore on 05.04.15 at 12:03 am

#2 whydoweletthem

The money wasn’t stolen from the pension. It’s just that the contributions, based on expected returns, are not sufficient for actual returns. In most cases where such pensions operate, the employees are union, and increasing contributions means renegotiating the union contract. The pension contribution rates are set there, and good luck changing them. Unsurprisingly, the employees don’t care, in their economic ignorance and entitlement, they apparently expect the tooth fairy to come up with the difference.

#132 Retired Boomer - WI on 05.04.15 at 12:08 am

#94 NOT 1st

Why would you attempt to ‘earn’ 4% on your investment portfolio?

Most retirees with a $1 Million portfolio would be looking to spend around 4% plus their government pogy to live each year.

A balanced portfolio has historically earned MORE than 4% a year, and you can invest the excess earnings thus giving your income that needed ‘inflation’ boost each year.

While we all ‘know’ prices go up, so do taxes, insurance, the cost of replacing a car, and health costs.

Welcome to life in geezerland!! 4% is not a win here!

#133 Nagraj on 05.04.15 at 12:12 am

Courtesy of Our National Broadcaster (re-edited by Nagraj) “Canada’s version of Hogewey village recreates ‘normal’ life”:

A Dutch village lives in what seems like The Truman Show. Few residents realize it’s a care home for people with severe dementia. Similar facilities have sprung up around the world. Most notably in Canada, which has several – comparatively large – dementia villages, Toronto, Vancouver and of course Ottawa. But, some are concerned these dementia villages are tricking patients into believing a false reality.

Patients who realize something is amiss, like one Garth Turner, could become upset and slightly paranoid . . .

The council said sometimes it may be best to evade and give partial answers.

#134 not me on 05.04.15 at 12:28 am

Lucky? Extremely. Smart – not so much. 30 years of golden salary and benefits and Stan ends up with $12k???? At least one would think the bailout (courtesy of tax payers), which by the way extended his golden employment for another decade or so, would serve as a wake up call to start putting away at least something for the future cuz that dream job may not always be there. But no, not even then did Stan wake up and smelled the roses. 30 yrs at a job requiring little skill, job that can be done for way less in Mexico and Stan wants people to feel sorry for him Cuz he lost that golden parachute? Oh wait he still have a job till November after which he’ll probably end with a nice severance package followed by EI. Talking about entitled. But Stan don’t you dare to break a nail

#135 not me on 05.04.15 at 12:32 am

Continue … getting of the couch looking for a job in a real world. You know the couch in your brand new RV you know the one that you could afford due to the pension winfall. Man I feel sorry for you.

#136 lee on 05.04.15 at 12:56 am

Pensions are great if you are assured they will be there when you retire. Otherwise, they are just a lifetime of sleepless nights like the rest of us.

#137 Bobby on 05.04.15 at 1:27 am

For #103 OMG, let me guess, you are a realtor.

Yes, there are lots of sold signs here in Victoria, but it is all in the $400-700k range. I’ve been out looking at houses and many are sitting on the market for ages. Have a look at the actual sales data, days on market and sale price. You will see many are selling for a lot less than asking. Moreover, many are on their second or third listing, all at reduced prices.

Have a look at Bcassessment.ca. You will see selling prices and assessed values. Realtors say that info is meaningless, unless of course the sale price is less than the assessed value.

If you want a true feel for the market, do your own research. Don’t ask a realtor. Remember for them, prices always go up.

#138 Victoria Real Estate Update on 05.04.15 at 1:49 am

#103 omg the original

“VANCOUVER HOUSING FEVER TO SPILL OVER INTO VICTORIA”

Are you a realtor? You probably would’t admit it if you were.

“Mark my word, as grotesquely over valued as Victoria already is, prices are going to ramp up over the next year.”

Based on what? Sounds like a realtor’s (threatening) pitch.

Realtors (and others who would gain financially from rising prices in Victoria) have been saying that since 2010, yet prices have done nothing but fall.

So far in 2015, Greater Victoria’s SFH average price for January, February, March and April is down compared to the first 4 months of 2014. Prices are falling in Victoria, despite record-low interest rates.

“Victoria real estate agents have been hard at work pitching the idea that we are having a spill-over effect from Vancouver.”

It sounds like you know a lot of realtors. Perhaps you’re one yourself. Just an idea. Again, you probably wouldn’t admit it if you were.

They’ve been using that pitch since 2010. We all know what direction prices in Victoria have gone since then (down, in case you didn’t know).

“Drive around close in areas (Oak Bay, Fairfield, James Bay, even Vic West) and its a sea of “sold” signs.”

That isn’t an accurate gauge of SFH sales in 2015 compared to Victoria’s long-term average.

Fact: So far in 2015, SFH sales across Greater Victoria are significantly below Victoria’s long-term average (2007 can be used as an average year for SFH sales in Victoria.)

“Prices in the close in areas of Victoria are up 5 to 10% year over year and houses priced at market are selling in days.”

Again, SFH average prices are lower in the first 4 months of 2015 compared to 2014.

“I have talked to two people in the last week that are about to sell – their realtors are telling them to increase their asking price based on the hot market and not take offers right away to entice multiple offers.”

You’ve talked to two people… and that’s how you gauge Victoria’s market. Interesting.

“At a coffee shop I overheard a mother panically explaining to her daughter that they need to be more flexible on pricing – they just need to get in so they do not get left behind.”

Really? Coffee shop chatter? You rely on (selected) chatter to determine the strength/weakness of the local housing market. That sounds solid.

“Panic buying will hit Victoria – people will have to get in at any cost.”

This sounds like a realtor’s dream. You heard it Victoria, get in while you can.

Warning: realtors told Victorians to “get in at any cost” in 2010. Since then prices have fallen more than 10% and this is only the beginning.

Ask some of Victoria’s underwater mortgage holders how much they regret following that advice in 2008, 2009, 2010, 2011, 2012, 2013 or 2014.

“The HERD is marching in Victoria.”

The only HERD that is marching in Victoria is the underwater mortgage herd as they march together in Victoria’s buyer’s remorse parade.

If you buy now, you can join them in a year.

“The only thing that will put an end to the great Canadian housing bull is a meaningful increase in interest rates.”

Realtors keep saying this.

Again, prices in Victoria have fallen more than 10% since 2010 despite emergency interest rates. This shows how weak Victoria’s market is.

5 year rates have fallen significantly since 2010, yet prices in Victoria have continued to fall.

If emergency interest rates can’t stop Victoria’s price decline, what will?

“Any by that I mean a 3 to 4 percent increase. And that will not happen for 2 to 5 years.”

Did you hear that at a coffee shop too?

Fact: It hasn’t taken rising rates for prices to fall in Victoria since 2010. Prices will continue to fall even if rates don’t rise.

Rates will rise.

#139 Mark on 05.04.15 at 2:58 am

“The majority of deposits that go into TFSAs go into low interest rate savings accounts at the banks. This counts as Tier 1 capital. “

Hell no! Tier1 capital is basically common equity, preferred shares, etc. Not borrowings from customers (sometimes called ‘deposits’).

GM must pay the full pension benefits, unless they declare bankruptcy. I doubt they will be doing that for a billion dollars here and a billion dollars there.

Inflation will eventually destroy pension liabilities (and the value of pensions). The real problem is when indexing is involved, whether explicitly (ie: an indexed cash payment), or implicitly (ie: healthcare benefits).

The big problem with many pensions out there is that they’re primarily invested in asset classes that benefit from lower interest rates. For example, many plans have been piling into what effectively amounts to REITs. The root of the problem is that its sheer fantasy that someone can work for 30 years, only put aside 10%-20% of their income for each of those 30 years, and have that grow to being enough of an asset base for another 30 years of paycheques. The math is broken as the economy is simply incapable of such growth rates and investing in riskier assets cannot work for anything but a relative small and sophisticated cross-section of the population.

#140 Mark on 05.04.15 at 2:59 am

BTW everyone, thanks for the prayers. My typing hand is feeling a bit better tonight, and made good progress on the auto repairs today.

#141 Ben D. Over on 05.04.15 at 7:21 am

Mr. Turner

Pete (post #15) does remind me that the Harper Regime pushed through their “Economic Action Plan Budget” of 2013 which included a Bank Bail-in plan.

At the time their were numerous issues in the bail in plan that (as far as I can recall) were never publicly clarified.

For example, in the event of a bank bail in, they said that certain bank liabilities would be permitted to be rapidly turned into capital assets by the banks, thus “saving” the banks.

I do not recall any clarification being provided by the Harper Regime (other than vague statements) as to what “certain bank liabilities” meant.

Perhaps you should consider explaining to people exactly what the Harper Regime gave to the banks and how it might affect taxpayers, savers, investors, and mortgage holders/property owners? And Canadians in general?

That topic was exhaustively covered here more than a year ago. There is no ‘bail-in’ provision that will affect any depositor or bank client, now or ever. — Garth

#142 MSM-free Zone on 05.04.15 at 7:44 am

“…..People lacking money worry occasionally about being poor. People who have money obsess about losing it. It’s why rich people never smile…….” – Garth
_________________________

Au contraire…….Air Canada’s CEO, who just had his pension (ANNUAL pension, not total pension) doubled to over $3/4 million per year in order to skirt restrictions the federal government imposed on Air Canada executives in 2013, when it granted funding relief to give the airline more time to repay a $4.2-billion deficit in its pension plans, is smiling A LOT these days.

Wait ’till someone tells him the future of his entire Defined Benefit Pension is in jeopardy (…insert sarcasm).

#143 Ret on 05.04.15 at 8:03 am

#106 “the middle class”

Please define “middle class,” Mr. Trudeau.

#144 Concerned Ontario Dad on 05.04.15 at 8:18 am

Hello Mr. Turner,

You will be having more site visitors today, as many parents such as myself will be keeping our children at home, to protest the outrageous sex education program of the immoral Liberal government.

It is horrible what that woman-loving premier is trying to do to our children! Teaching children about body parts and that homosexuality exists is an affront to us all, and is flushing morality down the drain in this province!

Not for me and my offspring. When I want my kids to learn about sex, I will do the responsible and morally upstanding thing.

I will direct them to your website to properly learn about moist virgins and house horniness.

When they want to know about body parts, like what a “dick” is, I will tell them to read any post by Mark or Smoking Man.

Thank God, in the federal election we will have Stephen Harper to vote for, not these provincial perverts and their BFF Justin Trudeau. When Mr. Harper righteously puts on his lipstick and mascara in the morning, and tells John Baird not to dare mention anything about his sexuality (and we won’t even talk about Tony Gazebo), that is the sign of true moral leadership, exactly what Canada needs.

Please come and join our protests this week if you can, Garth.

(If you want to wear some chaps and ride in on a Harley, that would be yummy! Oops, forget I said that, okay?)

http://www.theglobeandmail.com/news/toronto/ontario-parents-set-to-stage-student-strike-over-sex-ed-material/article24230225/

#145 Oot der Hoos on 05.04.15 at 8:31 am

To #88 Jonathan

Are you aware CPP pays nothing if you die before the prescribed age? You and family might get nothing from your savings.

It is an annuity.

I got nothing when my wife died.
I knew she would likely get nothing.
So we did not want an annuity.

GET IT !?!!!!

You got sold on the FDR communal promises because it fits your selfish wants.

It is not how I wanted to invest our savings.
It is central planning.
It is not good for everybody.

I do not know what will happen with the monster KWynneOntario. A new 2017 pension tax is starting.

There is no guarantee how these funds are invested. Governments change.

CPP has a public investment record, but it is not for me, and the one in USA got spent like general tax revenue.

Never surrender control to a central authority. Look after your extended family locally.

#146 Westcdn on 05.04.15 at 8:53 am

I have a hard choice tomorrow as to how I vote in Alberta. Parties lose by making stupid comments – such as “math is hard” and “look in the mirror”. As much as I think Prentice has a reasonable plan I think it is time to let the NDP gut the province just to bitch slap the PC arrogance. I am no fan of NDP governments but they will spill the beans of the previous administration plus you are almost guaranteed to win with the public service on you side.

I have been bearish on Alberta in the short term based on oil prices. I wish I had struck on my prediction that the market wanted $55 us WTI but such is sticking your neck out. Personally, I have been selling personal investments over the last 6 months. My personal loans were too high at 200% based to income and I am over 60. The good news is that with low interest rates even a 0.25 interest rate increase will add $10 less to my interest payments – God bless low interest rates.

For public service, I look at this site for information on Preferred Shares http://www.prefinfo.com/ I like him – watch the redemption dates! You may have to register.

I was surprised by the amount of income tax I owed due to my RIF withdrawals. Being single, I pay more income tax than when I was married and working however I don’t have CPP and EI deductions. Don’t worry Millenniums; boomers with good pensions will pay high income taxes. We just have to make sure those that flee our country get zero public benefits.

Stan is lucky but I also find those who are 5 plus years older than me really hit a sweet spot. All my life, I have tailed these people and they have blocked me from exceeding them. Welcome to the games of the entitled – I am 60.
Where is “Alberta is Finished”? Maybe this post will bring him out of the woodwork.

#147 José on 05.04.15 at 8:58 am

walk away?

http://business.financialpost.com/personal-finance/mortgages-real-estate/you-can-walk-away-from-your-mortgage-if-you-live-in-alberta-but-should-you

#148 NoName on 05.04.15 at 9:24 am

the unlucky guys

“Mr. Hoyes said his clients over age 60 typically accrued their debts over years of borrowing as they put children through school and lend them money to get established in adulthood or care for elderly parents. Some end up insolvent because they borrow to lend money to their adult children, who then cannot repay the debt.”

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/growing-number-of-seniors-account-for-ontarios-insolvency-filings-study/article24236617/

#149 Shawn Allen on 05.04.15 at 9:28 am

TFSA Deposits are not Tier 1 bank Capital

Sluggo8 on 05.03.15 at 11:28 pm
#120 Shawn Allen

http://www.eliteadvisors.ca/tax-free-savings-accounts-good-or-bad-20140529/

RBC posted Tier 1 rate on TFSA deposits
http://dollarguide.ca/index/product/74/

****************************************
Nor are any deposits Tier 1 capital.

The second link above talks about Tier 1 deposit interest rates .

Tier simply means “level” or category.

A Tier 1 or level 1 deposit has NOTHING to do with Tier 1 bank capital.

Good research Sluggo but you jumped to an incorrect conclusion.

#150 Nagraj on 05.04.15 at 9:33 am

#146 Concerned Ontario Dad

made me realize that I myself am a concerned Ontario grandfather (I’ve only been a grandfather since the 15th of April)

(but I don’t look it) (yet)

(thank God)

The only error in your post, # 146, is that you forgot to mention Harper’s cheap wig.

I also have a question for you: what do you make of Calgary cowboys? And their voting intentions tomorrow?
(And may I point out to you, re JT, that wimmin do not consider effeminacy a crime. Au contraire, the wimmin knows that effeminacy in a male is, at worst, cute, and at best a sure sign of supreme sensitivity.)
[And may I close with yet another of my late Dad’s old world dicta – “Remember son, they all smell alike in the dark.”]

#151 cowtown cowboy on 05.04.15 at 9:34 am

Garth:

What are these pension thingy’s of which you speak???

#152 Dog Bowl on 05.04.15 at 9:41 am

“The problem with the world is that the intelligent people are full of doubts while the stupid ones are full of confidence.” ~Charles Bukowski

#153 Ralph Cramdown on 05.04.15 at 9:58 am

#147 Oot der Hoos — “You got sold on the FDR communal promises because it fits your selfish wants.”

FDR was a poser. He just stole the idea from that other notorious pinko, Otto von Bismarck.

http://en.wikipedia.org/wiki/Otto_von_Bismarck#Social_legislation

#154 Major Slashing on 05.04.15 at 9:59 am

Many public sector workers actually think that they are part of the ruling elite. It’s aĺl attitude.

“We are your overlords “

#155 Realitybytes on 05.04.15 at 10:24 am

30 years of a middle class wage, then a high 6 figure handshake. All for grunt work.
I was born 20 years to late.

#156 Realitybytes on 05.04.15 at 10:25 am

And I forgot the extra o.
Shoot me.

#157 Squirrel meat on 05.04.15 at 10:56 am

Ah that old gasbag Muldooney

http://www.theglobeandmail.com/globe-debate/real-leadership-is-about-transformation/article24236420/

#158 Mike T. on 05.04.15 at 11:01 am

#148 Westcdn on 05.04.15 at 8:53 am
I have a hard choice tomorrow as to how I vote in Alberta

if the people that own and operate the oil and gas companies do not change, nothing else will change

so, nothing will change
don’t get your hopes up

unless this is the first time you participate in an election, you have been let down before

it’s going to happen again

it is more important to look at what DOES NOT CHANGE before and after and election

the magicians are using mis-direction to keep you focused on the theatre portion of politics while the real power lies elsewhere

Gwyn Morgan is more influential than any ‘premiere’

#159 Ralph Cramdown on 05.04.15 at 11:11 am

#141 Mark — ” The root of the problem is that its sheer fantasy that someone can work for 30 years, only put aside 10%-20% of their income for each of those 30 years, and have that grow to being enough of an asset base for another 30 years of paycheques.”

10-20% is a pretty big range. The difference between those two savings rates is going to be night and day.

If you work for 30 years with salary increasing 4% for the first 10 years and 2% thereafter, and you save 18.15% every year (including employer contributions) and your investments earn 7% nominal the whole time, you can retire on 70% of your final year’s salary, indexed at 2%, and you’ll run out of money 30 years later. The math works.

Questions: Is it really realistic to only work 30 years these days? Is 7% nominal too high? Is it obvious that in order to continue shooting for 7% returns even 20 years into retirement, you’ll need to be in a pooled plan? Would the contributions of those who contributed but died early help lower your necessary savings rate, or ensure you a continued income even if you’re long-lived?

The math and actuarial tables have been around for hundreds of years.

#160 Boomtown Boomer Rat on 05.04.15 at 11:17 am

#30
Healthcare workers and pothole fillers don’t have to worry about their jobs being outsourced to China, so their compensation packages are driven by rather different issues.
————–
Only partially correct. If you can’t move the work to China, you bring the worker here.

#161 Charlotte Elizabeth Diana on 05.04.15 at 11:30 am

Such trifle worries for the little people.

#162 Made in BC on 05.04.15 at 11:31 am

Across Canada it’s estimated there are $300 billion worth of pensions that public sector workers are expecting that actually have no dollars allocated to them. Some bitter surprises are in store.

+++++++++++++++++++++++++++++++++++

Appreciate the honest information. But what is govt supposed to do now? Tax the private sector into the stone age so retired public servant wrinklies can retire down south comfortably?

#163 Squirrel meat on 05.04.15 at 11:47 am

Ah real leadership.. learned in a toilet.

http://www.leadershipnow.com/leadingblog/2015/04/cleaning_the_toilet_can_make_y.html

http://www.theglobeandmail.com/globe-debate/real-leadership-is-about-transformation/article24236420/

#164 Auusie Bob on 05.04.15 at 11:52 am

DELETED (Anti-Chinese)

#165 Valleyboy on 05.04.15 at 11:52 am

Just clarifying.

You state Stan can end up paying less tax than his pension collecting pals. Wouldn’t he have to put his Million into an RSP as thats how pensions are usually claimed. So how is Stan further ahead. Wouldn’t he have a short few years to roll this Mill into a rif and pay higher taxes on it. 10 years he moving 1 mill so about 100 000 k a year he would have to claim or move.
I’m clueless on this stage of life for canadians.

Could you explain how you would be much more ahead than a pensioner that just pays minimal tax over 20 -30 years rather than Stan who has to roll it over to a rif in a small amount of years?

Great topic for another post. I would love to learn more about this.

Pensions are commuted into a non-taxable portion and a taxable one. Retirees can draw return of capital from the non-registered account, which is not considered reportable income, while their sheltered assets grow by an equivalent amount. Thus a retiree can often structure affairs to pay less tax than a person who starts collecting a pension cheque which is 100% reportable. — Garth

#166 Pre-Retiree on 05.04.15 at 11:54 am

The CPP pension board, for example, has made some smart investment choices, increased premiums wisely (thank you, Paul Martin!) and looks solvent until at least 2070. This is exactly the kind of management advantage you get with public sector pension plans properly run, with very low built in fees.

Contrast that with many private sector plans, run by the ilk of Conrad Black and other execs dipping into the gravy train at the expense of the workers. Underfunded, relying on taxpayer dole to bail them out while the top brass make out like bandits.

_________________________

Exactly. Look at HOOPP for example, with a 17.71% return last year. They are 115% funded.
They have had a 10-year return of 10.27%, and a 20-year return of 9.98%. Try to achieve that on your own.

#167 Pre-Retiree on 05.04.15 at 11:54 am

Previous comment above mine was from #88 Jonathan.
Sorry for the omission.

#168 Bottoms_Up on 05.04.15 at 11:56 am

#15 Pete on 05.03.15 at 2:14 pm
——————————————-
Are you feeling OK?

You are telling me that my TSX stock holding (XIU.to) that I hold in my TFSA is going to be confiscated by a bank? Well in this case, I guess it would be Questrade that would have to confiscate it then, because my TFSA account is with Questrade.

#169 Pre-Retiree on 05.04.15 at 12:02 pm

#129 Craig:
Stan could be in for a sizeable tax bill on his lump sum pension. If you go to the tax website ey.com you’ll see that the marginal tax rate on $1,000,000 is 49.53 % for residents of Ontario. If Stan has any RRSP room left he can shelter some money and get a tax rebate for it. Also he can shelter $2,000.00 in an RRSP for every year worked at GM before 1996 ( eligible retiring allowance) but does not get an up front tax deduction for this money. This amount and the TFSA amount is only going to be a small percentage of his lump sum. Unless Stan has a lot of RRSP deduction room left or is allowd to take this buyout over a number of years, the taxman will be sending him a Christmas card.
__________________________

True that. He is now looking at investing $500,000, not the 1 million previously quoted. It is still a significant amount of money but still, everything is now half…

Uninformed comment. All commuted RPPs pay a substantial portion (normally 60% or better) into a LIRA or other tax-free account. This is not reportable income, of course, and does not lift a recipient into a sky-high tax bracket. The remainder is taxed as income. The net result is a tax load of perhaps 15% on the total package. This can be reduced further by using available RRSP room. — Garth

#170 Bottoms_Up on 05.04.15 at 12:05 pm

#35 tkid on 05.03.15 at 3:20 pm
—————————————
Why don’t you quote some facts?

Such as well-managed public sector pension funds are growing at 7% per year (over 10 years) and 11% per year (over 4 years)?

http://www.investpsp.ca/en/invt-performance.html

#171 Oot der Hoos on 05.04.15 at 12:08 pm

To #155

Bismark is not old enough an example if you want history.

The Roman Empire paid pensions to favourites and taxed everyone to make it happen.

Caesar Knows Best was the top TV show at the time.

#172 Made in BC on 05.04.15 at 12:14 pm

You said:

“People are concerned with the “gold plated” public sector pensions and benefits (and wages in general) as they are completely out of step with the private sector.”

So being competently managed = “gold plated”?
++++++++++++++++++++++++++++++++

If public sector pensions are managed so well why are Federal Pensions alone 300 billion in the hole? I wonder how red the muni and prov pensions are.

Just saying…

#173 Bottoms_Up on 05.04.15 at 12:15 pm

#62 ? WTF ? on 05.03.15 at 5:29 pm
———————————————–
Canada (Ontario in particular) has a very competitive corporate income tax rate. Combined with an educated and healthy population, this makes for good rationale for opening up shop here.

But I agree, employees must be paid a living wage, and we are a fairly small country population-wise, and these can be negatives for investment.

#174 Squirrel meat on 05.04.15 at 12:28 pm

More careers for ex-MPs… writing self-help columns…weird.

http://www.theglobeandmail.com/report-on-business/careers/career-advice/life-at-work/i-was-seen-at-a-bar-the-same-day-i-called-in-sick/article24213498/

#175 Jeff in Moose Jaw on 05.04.15 at 12:33 pm

#71 Smoking Man

Wondering how good old Stan felt screwing car parts together in his prime then into old age.

The prize, a lousy million bucks. Was your freedom worth it.

——————————————————–

Been thinking about this for most of the morning…. its a good question.

#176 Victor V on 05.04.15 at 12:51 pm

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/growing-number-of-seniors-account-for-ontarios-insolvency-filings-study/article24236617/

In addition to having the highest payday loans outstanding, the review found people over 60 also had the highest unpaid credit card balances at the time of their insolvency. Credit card debt for those over 60 averaged $33,355 per person, compared to $28,006 for debtors aged 50 to 59, and $21,491 for those 40 to 49.

Insolvent seniors also have the highest unpaid tax bills owed to the Canada Revenue Agency. Mr. Hoyes said many seniors are surprised to discover they owe money at tax time on their pensions and other income sources, because they were accustomed to having ample tax automatically taken off their paycheques while they were working.

#177 bdy sktrn on 05.04.15 at 1:05 pm

#177 Jeff in Moose Jaw on 05.04.15 at 12:33 pm
#71 Smoking Man

——————————————————–

Been thinking about this for most of the morning…. its a good
—————————
don’t waste too much time thinking about it as it is a thing of the past.

i feel for the majority today, who after a lifetime of slaving away (many at jobs worse than auto assy) who then get a handshake full of sweet nothing.

of course they must pay for the pensions of the laziest swivel servants too. Someone has to retire early in florida!

#178 Sonny on 05.04.15 at 1:18 pm

The WTF moment of the day:

Metro Vancouver real estate board warns demand outpacing supply

http://www.vancouversun.com/Metro+Vancouver+real+estate+board+warns+demand+outpacing+supply/11027605/story.html

#179 Linda on 05.04.15 at 1:27 pm

So, Justin Trudeau is announcing right now:

-monthly tax-free payments of $490 to all families of 4 in the $90,000 income range

-repealing Harper’s increase OAS change from 67, back to 65

-reduced tax bracket on the middle class from 22% to 20.5%, with an increased tax bracket for those earning over $200,000

-is hinting loudly about other goodies to be announced in the months ahead

This will certainly change the conversation for many.

Tax free money given by cheques each month is a lot more ‘real’ for most working families than the illusion of ‘possible’ tax savings if you can ever find another $4500 yearly to put into a TFSA……

…assuming you can put any $ into a TFSA anyway. Way too many cannot, certainly not at the new level.

Home run? Time will tell. But looks like junior has smacked a double, anyway.

This will change public sentiment – real money in your pocket versus potential money is always going to sway opinion.

He was a little awkward, but came across smarter than the last time I saw him on tv.

#180 Nuke on 05.04.15 at 1:29 pm

any chance Stan may lose out on other benefits such as extended health care. Of course if he has rolled every dollar over and is investing wisely, this might be a red herring.

On another note, those in the last few years working for a firm or government with a defined benefit plan are making out like bandits. i.e. the amount the employer has to set aside to fund the earned pension benefit is massive (as per Stan’s commuted value) even with employee contributions (usually 9% of income)

#181 Smoking Man on 05.04.15 at 1:46 pm

#177 Jeff in Moose Jaw on 05.04.15 at 12:33 pm
#71 Smoking Man

Wondering how good old Stan felt screwing car parts together in his prime then into old age.

The prize, a lousy million bucks. Was your freedom worth it.

——————————————————–

Been thinking about this for most of the morning…. its a good question.
…………

I’ve been think about a really big one. I have now figured out how God punishes the UN faithful.

First he traps your 19 year old mind in a 55 year old arthritic broken body. Never let’s my mind catch up.

He let’s you book a trip to Vegas in June. Then you discover the biggest party week of the year is taking place while you are there.

That’s why I hate the basterd.

http://electronic.vegas/edc-week-las-vegas-calendar-guide/

#182 Pre-Retiree on 05.04.15 at 1:48 pm

About commuting a pension, I think I would hire an actuarian to do the very careful calculations for me if I was considering to go this route:

This is one rule for example:

MAXIMUM TRANSFER VALUE
In many cases, the maximum transfer value imposed by the Income Tax Act (Canada) will prohibit the full value of a defined benefit entitlement from being transferred to a LIRA. Regulation 8517 provides a factor based on age that is multiplied by your annual benefit (there is a table for factor according to age).
Because this factor does not take into account the value
of additional benefits such as indexing or early
retirement features, the maximum transfer value is
often less than the true cost of the benefit provided.
This creates a problem since a portion of the commuted
value may not be transferable and must be taken into
income as a lump-sum taxable amount.

Of course a portion of the pension is sheltered and a portion is taxable. Duh. Your little campaign here today is amusing. — Garth

#183 Derek R on 05.04.15 at 1:56 pm

#83 Guy on 05.03.15 at 7:51 pm wrote:
Not a lot of people know where their pension money is invested. It could be in the hands of a dart throwing chimpanzee!

Hey, respect where it’s due! By all accounts, the average dart-throwing chimp has a better track record than the average active fund manager!

#184 bdy sktrn on 05.04.15 at 1:59 pm

here’s a realtor anecdote from the 604;

my buddy is a ‘sometime’ realtor. sometime heavy equip/crane operator/truck driver and my regular tennis partner.

no sales/listings in a few years. he’s based in the fraser valley where it has been slower than the city.

in the last few weeks – bam – three deals done with another on the go.

one in particular typifies the 604 mindset.
langley, 5ac w house+mobile home, near town, flat ALR land.
ask was 1.3. sold in a few days.
next day an oldtimer (greek?) calls up with 1.4 in cash for immediate deal.
a week later (today) the old guy is looking for the new buyers info, he wants to give them 1.4+

someone just made 100k in a week.

#185 bdy sktrn on 05.04.15 at 2:02 pm

http://www.vancouversun.com/business/affordability/Metro+Vancouver+real+estate+board+warns+demand/11027605/story.html

METRO VANCOUVER – Buyers continued to snatch up homes in Metro Vancouver last month, and realtors are warning that the region’s real estate demand is outpacing the supply.

The number of all types of residential property sales last month was up 37 per cent over April 2014 to 4,179, according to the Real Estate Board of Greater Vancouver. Meanwhile, the number of new listings was down 0.9 per cent compared to a year earlier.

“The supply of homes for sale today in the region is not meeting the demand we’re seeing from home buyers. This is putting upward pressure on prices, particularly in the detached home market,” Darcy McLeod, the real estate board’s president, said in a news release.

“It’s a competitive and fast-moving market today that is tilted in favour of home sellers.”

A total of 12,436 greater Vancouver homes are currently listed for sale on the Multiple Listing Service, down 0.5 per cent from March’s numbers and 19.8 per cent since April 2014.

Meanwhile, the so-called benchmark price for a typical residential property in Metro Vancouver now sits at $673,000, according to the real estate board. That’s an 8.5-per-cent increase over a year ago. The benchmark price for a detached home is set at $1.079 million, up 12.5 per cent over April 2014.

===

#186 young & foolish on 05.04.15 at 2:08 pm

Bill Gross and many others suggest the end of super cycle in equities is coming to an end. Just another doomer?

How about that 7% return with balanced and diversified?

#187 Fred Smith on 05.04.15 at 2:19 pm

1Mil cash out is definitely a sweet deal. Try get a pension like that now a days.

Can put that in income + growth producing investments and live comfortably in that paid off house.

#188 Mr. Pink on 05.04.15 at 2:30 pm

walk away?

http://business.financialpost.com/personal-finance/mortgages-real-estate/you-can-walk-away-from-your-mortgage-if-you-live-in-alberta-but-should-you

———————————————————-

WOW

“At the time it seemed cheaper. I didn’t want to spend money on rent. But now I think I can find something cheaper to rent,” says Francis, who asked that his last name not be used.

He bought the home for $175,000 with a five per cent downpayment but still owes $150,000 on his mortgage. He says the market for his home has collapsed in his town and a realtor just told him the best price he could expect is $75,000.

“This town is mostly about mines and now the gold price is down. The town is dead,” he said, frustrated about his situation. He’s also out of luck, if he wants to walk away, because his loan is backed by Canada Mortgage and Housing Corp., the Crown corporation that controls a majority of the mortgage default insurance market.

Since the loan is “under water,” his bank would be left with a shortfall that CMHC would have to cover. The Crown corporation would likely sue him for any losses it has to cover, so if he has any assets, CMHC will go after him.”

#189 Mark on 05.04.15 at 2:36 pm

“and your investments earn 7% nominal the whole time”

Unrealistic for an economy that only grows at 3-5% nominal at best (ie: real GDP of 1-3% + 2% inflation). Which was the main assumption I was attacking. Much of which is likely to be captured by labour in the future as dependency ratios go through the roof.

Not unrealistic at all for a balanced and diversified portfolio with exposure to many economies and asset classes. — Garth

#190 turn of the tide on 05.04.15 at 2:44 pm

Garth,

You’re about to save another couple of lives here. We’re both 36, finally finished payment our massive amounts of student debt. Were looking into RE, but no more.

We have nothing else. For a peon like me, wanting to enter a diversified portfolio… How much do I need to save before it starts making sense to invest?

What should I do with my 1st 5K or 10K in savings? Break it up in different investments or since it’s such a small sum, better to put the whole thing in a single ETF first? How do we have-nots start playing this game? Thank you and best regards.

#191 Nerf Herder on 05.04.15 at 3:12 pm

#147 Oot der Hoos

There is a survivor benefit for CPP…. you should really look into this.

It’s not the full CPP amount, but if your wife was paying into it – you and your children would receive a monthly amount.

#192 TurnerNation on 05.04.15 at 3:28 pm

Go to Google image search and search for:
Spirit Airlines CEO.

A ringer for F.

Saw him on CNBC

#193 Preacher on 05.04.15 at 3:29 pm

Good one Garth, but I just wanted to add this to your post:

Ontario Teachers’ Pension Plan posted its first funding surplus in 10 years …

The plan was 103% funded as of Jan. 1, with a preliminary funding surplus of just over $5-billion.

LINK: http://business.financialpost.com/news/fp-street/ontario-teachers-pension-plan-posts-first-surplus-in-10-years

” Vote for me and I’ll set you free ” said the preacher.

#194 Shawn Allen on 05.04.15 at 3:30 pm

Realistic Return

Mark on 05.04.15 at 2:36 pm
“and your investments earn 7% nominal the whole time”

Unrealistic for an economy that only grows at 3-5%

nominal at best (ie: real GDP of 1-3% + 2% inflation). Which was the main assumption I was attacking. Much of which is likely to be captured by labour in the future as dependency ratios go through the roof.

********************************
How does the dividend play into that?

#195 Pre-Retiree on 05.04.15 at 4:02 pm

#184 Of course a portion of the pension is sheltered and a portion is taxable. Duh. Your little campaign here today is amusing. — Garth
_________________________

Garth, I respect your opinions or I would not read your blog. However, this is not a campaign and it is not amusing. Commuting a pension is an irrevocable decision that has a lot of consequences in one’s life. My simple point, and you would agree with this I think, is: it may be a valid option for some, but not for everyone.
Someone contemplating commuting their pension needs to do their homework, and calculate out the scenarios, in order not to get nasty surprises. A vanilla solution does not apply to all. Maybe it works for Stan, then great. Maybe it does not work for other people.
Caveat emptor.

#196 Keith in Calgary on 05.04.15 at 4:42 pm

Ahhhhhh……..the upcoming election/s.

Well, Trudeau #2 has my vote……and I voted in the advance poll here in Calgary for the NDP yesterday.

I have been a life long conservative, and to this date, the majority of the values I hold true are still conservative in nature. But the conservatives amongst our elected officials are few and far between. Dare I say it, they are no more. Or at least I cannot see any I agree with nor would vote for.

It is time for change…………..maybe these other parties can do some good. At least Trudeau isn’t going to throw me in jail on 420 like that asshole Harper and his thugs in blue.

So, I am voting for the person who is going to give me the biggest piece of the pie to get my vote…….

#197 JunkieMan on 05.04.15 at 4:48 pm

#198 Keith in Calgary Dont vote Liberal read a little on Justin Trudeau voting history actual stances on issues and who his handlers are(a lot of them are ex Goldman Sax people, he is Harper 0.5.

#198 Bottoms_Up on 05.04.15 at 4:50 pm

#189 Fred Smith on 05.04.15 at 2:19 pm
——————————————————
A million bucks? That’s $2800 per month for 30 years.

Not a whole lot of money to live on (especially 1, 2 and 3 decades from now), and also isn’t this amount equivalent or close to what Social Security pays in the USA?

More like $6,000 a month forever if you invest it. — Garth

#199 Anti-Liberal on 05.04.15 at 5:55 pm

Trudy just lisped through another rant about striking down the TFSA.

#200 Mike S on 05.04.15 at 5:58 pm

“More like $6,000 a month forever if you invest it. — Garth”

You are right of course, but not the entire 6K can be used for consumption. Some money should be reinvested to keep up with inflation, after all 6K in 10 years, is not the same as 6K now …

#201 Oot der Hoos on 05.04.15 at 6:08 pm

To #193 Nerf Herder

#147 Oot der Hoos
There is a survivor benefit for CPP…. you should really look into this.
It’s not the full CPP amount, but if your wife was paying into it – you and your children would receive a monthly amount.

Thanks for mentioning that to help me.

I do not qualify because she did not work in her later years due to chronic weakness and the CPP rules say bye bye to all your money if you do not work into old age, sick or not (3 of your last 9 years of life, at least).

I could have invested our money my way, private business or other ideas, and done better. However, I did not wait for the belittling socialist gravy train. Instead I worked harder for my wife and family. I was blessed by God. Caesar can keep what is Caesar’s.

#202 Doug in London on 05.04.15 at 8:38 pm

Personally I never liked pensions, they tie you down and kill your flexibility. Companies like pensions because people stay because they want that pension when they retire, after paying into it all those years. The problem is they keep many people in companies where they are just dragging their asses, day after day, where if they weren’t tied down they would go elsewhere that their services could be better used. We need more worker mobility, not less, in today’s economy. I worked at a company where you HAD to join the pension plan whether you wanted to or not. Luckily I got out before 10 years when my money would have been vested and I couldn’t get it out so easily. What goes around comes around, companies forced these pensions on employees and now are living with the consequences. In companies like GM it would be better to get rid of the pension plan, divide up the assets so the amount you get is based on years service, and be done with it.

#203 NewWorldParty.org on 05.05.15 at 12:16 pm

Union workers are part of the elite 1%, by screwing you:

Read:

How Unions Screw You and Everyone Else
http://www.newworldparty.org/2008/11/unions.html