Surprise!

surprise1

Ed retired eight months ago. “I was freaking,” he told me this week. “Seriously.”

One problem the former machine-shop owner has: no pension. After all, he was a small-fry entrepreneur his whole life and couldn’t even find somebody in the trade to sell the business to. Second problem: couldn’t sell his house east of Toronto, either. It took almost a year, and then only after the asking had been cut by 25%. Worse, the sole offer was a low-baller.

Third problem? CPP. “I paid into this thing my entire life,” the just-turned-65-year-old says, “and I also had to take shop revenues and pay into the guys’ pensions, too. And this is what I get?”

What Ed gets is $818 a month, which is actually rich by Canada Pension Plan standards. The average payout is $576. And Ed’s wife, Jane, gets zip. She stayed home, raised three boys and did the books for the shop. Nobody every told them about income-splitting, or that you needed decades of earned income to actually get a public pension. They just assumed when you retire, the government gives back some of the taxes you had to fork over.

Which happens. Just not much.

For the record, almost nobody can live on the public teat in retirement. To get the maximum CPP payment of a grand a month, you need to have worked continuously an entire career. No going back to school. No full-out mothering. No screwing off to be a rock star or start a pizzeria. As I mentioned above, the average payout is about $6,000 a year.

Yes, we all get OAS, too. The Old Age Supplement is $541 a month, but the more income you have, the more it’s clawed back. And before too long you’ll have to wait until age 67 to collect.

(By the way, CPP is available at age 60, but you can wait until 65 to get a bit more. Don’t. Every single person hitting sixty should get the app in, and start cashing the cheque. There’s a good chance the qualifying age will be raised in future years. Besides, if you collect for five years and invest the money – and not in GICs – you’ll be ahead.)

As you can see, an average retired couple will collect about $12,000 in OAS and an equal amount in CPP. That’s a grand total of $24,000 annually, which is below the poverty line (the ‘low-income cut off’ in Canada for a two-person household is $29,004.) Maybe you can live on this amount of money, but I sure as hell wouldn’t want to try.

Compare this to the United States, where the maximum Social Security payment is $1,923 a month if you retire before age 63; $2,533 if you wait until you’re 67 (if you were born in 1959 or later); and $3,350 a month if you hang in until you’re 70. It’s now estimated the average American family will be depending on Washington for 70% of retirement income. That’s because, like families here, personal finances are a disaster.

In both countries the bulk of net worth has gone into real estate. In the case of the Yanks, about $6 trillion in net worth was actually lost, thanks to housing. The crash which shaved 32% off average home prices (they’re still down 20%) could not have come at a worse time for 76 million American Baby Boomers. They will simply never recover financially, which means this is the first generation in US history which may well retire in worse shape than that which went before.

In Canada, 72% of us have no corporate pensions. Half of people have no RRSPs, and the half that do have an average of $42,000. As I’ve told you before, 51% of Canadians can’t lay their hands on $10,000 in the event of an emergency. And yet about 75% of Boomers have houses. See the problem?

Some politicians can. F is hosting a chinwag in December to hear what the premiers think ought to be done. One of them (from little PEI) wants CPP benefits doubled – to a max of $23,500 a year (with those 40 years of service), but in order to fund it, also wants contributions to double. That would mean a max of almost $5,000 a year, taking the payroll contribution rate from 9.9% to 13%. (This is split evenly between employers and employees.)

But F and the boys who govern us so munificently are reluctant to up the payments because small businesses are already choked on fees and taxes, and it would take a big bite out of the economy. My hunch is that this proposal is one sick puppy. In fact, the next big CPP renovation may be to make it dovetail with the OAS – with full payments clicking in at 67, two years later than now.

As you probably know, big pension plans everywhere are under pressure, as the population ages, the economy stumbles along and the relative number of working people flatlines, then declines. US states and municipalities have been outright cancelling benefits for the already-retired, and in Canada tons of decent pension plans are being converted into defined-contribution schemes in which retirement benefits are completely uncertain.

This is one of the biggest stories of our time. Barely discussed.

If I were a pensionless Boomer with most of my net worth in a house, I’d be worried. If I were a Boomer’s kid, I’d be worried more. There is only one solution to stave off social collapse 15 years from now, and it is higher personal taxes.

If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.

191 comments ↓

#1 dominion on 10.03.13 at 8:57 pm

Garth, I was wondering if you could talk about the economics of the typical boring condo tower in terms of land cost, development cost and how much profit a typical developer may see?

#2 TurnerNation on 10.03.13 at 8:58 pm

At Blog Dog Lodge #2. Scenery’s great.

#3 Jay on 10.03.13 at 8:58 pm

Define “robust”. 1 mil? 2 mil? 100k?

Where should one ‘aim’ for at 45?

#4 Smoking Man on 10.03.13 at 8:59 pm

Speaking of F

What the hell if F going to F-en do now?

Monstrous bullish report 416 in TREB. Single Family Homes.

Sales UP a WOPING 30%

For years I have been telling you dogs, via my super human connection to the universal consciousness consolidator that scummy Long Branch is where to buy for the future. Booming here now, you get to the train station after 6:30am all the free parking spots are gone.

3 years ago when I moved here, lots of spots left at 8:30 am.

In 3 years I have seen the community go from lovable toothless, entertaining and interesting scum bags, go to rude, well dressed, boring, feminized males. That means one thing $$$$ is coming.

Best performing 416 hood last month.
W6 ak. Long Branch and Icky Mimico
Days on Market 15= no offers for 14 days, bids on day 15
Over asking 102%
Average price 626k that’s in Sept, wow!!!!!! For shit bungalows on 25×120 foot lots.
Location Dudes.

The up and coming West Beaches kids. Not to late, long way to go to the upside.
Problem is nothing’s for sale south of lakeshore where you wana be.

Kids no matter home much loot you have, don’t let people judge you, judge them, be mentally higher on the mountain than anyone else, while pretending to be the sheep, only them can you make good investment decisions void of pleasing others. Walk around with a stir stick in your mouth and pretend to give a shit, but be a vulture, always on the look out for opportunities. When I moved to scumville was laughed at behind my back at the Golf an Country Club. I quit. Went to some marinas here in the city, same shit kind of people.

Just found the perfect yacht club run by a guy named Boomer, who has the character to have his own realty show, Duck Dynasty who?

I’m signing up.

I’m taken my boat to Boomer in NF NY for winter maintenance prep, shrink wrap and storage. 4 browns. It gets better.

Now get this, next year for 250 + 50 a month I get a slip near the Niagara River. 5 minutes from Seneca where I hang every week end anyway. No brainer.

My only problem will be resisting the urge to get as close to the falls as possible and turn back at the last second. Going to have to get that under control. Not worried about the falls, I got that. It’s the yanks that scare me, they shoot you for almost anything these days.

#5 Ben on 10.03.13 at 9:05 pm

First

Yay

#6 Miley Cyrus on 10.03.13 at 9:06 pm

Not necessarily higher taxes. What we need is far less government. I will take care of my elderly parents. You take care of yours.

#7 timmy on 10.03.13 at 9:08 pm

Concord Pacific Unveils Massive New Vancouver Development Near BC Place

http://www.vancouversun.com/business/commercial-real-estate/Concord+Pacific+unveils+massive+Vancouver/8989658/story.html

Our Moon Man Gregor Robertson has been bought off by developers (his largest campaign contribution was from a developer), who continue to ruin the skyline with these ugly condo towers. These boxes will be selling for $700K. 95% of working stiffs in Vancouver cannot afford these prices. More proof that offshore money is driving this town and that our airhead mayor Gregor Robertson is either stupid or has been bought off by developers. City Hall has kept citizen groups out of these discussions and there has been almost no consultation on this proposed development and similar recent developments. He’s either too stupid to see what a shame this “eco-density” is or he doesn’t care about involving citizens in future developments.

#8 not 1st on 10.03.13 at 9:09 pm

So by that logic, wouldn’t it be better for small business types to not pay into CPP and instead invest that money on their own or dump to an RRSP of TFSA? What is the real reason to try so hard to qualify for CPP in your old age when it barely keeps the lights on.

#9 T.O. Bubble Boy on 10.03.13 at 9:11 pm

If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.

MJ = Michael Jordan?
Michael Jackson?

#10 Non Asian immigrant on 10.03.13 at 9:12 pm

Most of us can go back home and still collect the basic pension which will give us a decent life after we sell everything here
The canadian born people will have to live with the monsters that they created and benefited(?) from:
-inflated RE prices and debt
-unfunded pension plans
-poor medical services
-higher and higher prices for goods and services
-lower salaries

The biggest problems when you live our origin country as retiree are:
-the pension is not indexed to inflation
-the cost of the medical services can be prohibitive if you have to pay that with the pension that you receive from that government

The situation changes if you have a canadian pension since this is much bigger than most of the average pension in many countries.

So, no surprise here.

#11 newbie on 10.03.13 at 9:12 pm

The solution is easy for most europeans…grandparents usually move into the family home..I would never let my parents live on their own in old age…I’m pretty sure most asian nationalities are the same. This is also how people afford bigger and more expensive home…they are shared.

#12 Liquid on 10.03.13 at 9:14 pm

I’ve heard the CPP was always meant to supplement a broader retirement plan and people shouldn’t expect it to be the main source of their retirement fund :)

I don’t think the proposal by the PEI premier to increase CPP contributions will go through either. Right now for anyone making $51,000 a year, they pay about $2350 into the CPP pot, and their employer also pays $2350 meaning the total contribution is roughly $4700. Doubling the CPP contributions and benefits may be beneficial for the employees in a way because of the employer match, but like Garth mentioned this will hit all businesses hard, especially the smaller ones. There is no benefit for companies to pay more into the payroll tax system because companies obviously don’t receive any CPP benefits when their employees retire.

#13 mariecurtispride on 10.03.13 at 9:16 pm

Smoking Man

SHHhhh , stop pimping out long branch or else those condos at Aqua view will be finally sold a year later

#14 T.O. Bubble Boy on 10.03.13 at 9:16 pm

Here’s a fun fact about those BOOMING GTA real estate numbers… they were more BOOMING in 2011:

Sept 2013 = 7,411 total sales
http://www.torontorealestateboard.com/market_news/release_market_updates/news2013/nr_market_watch_0913.htm

Sept 2012 = 5,879 sales (a decade low)
http://www.torontorealestateboard.com/market_news/release_market_updates/news2012/nr_market_watch_0912.htm

Sept 2011 = 7,658 sales
http://www.torontorealestateboard.com/market_news/release_market_updates/news2011/nr_market_watch_0911.htm

Average condo price in the 416 is also interesting:
2013 = $363,149
2012 = $377,422
2011 = $350,146

Will 2012 be the peak Toronto condo price for the next 10 years???
(hint: YES)

#15 JSS on 10.03.13 at 9:17 pm

Um, what is “MJ”?

Marijuana?

#16 AisA on 10.03.13 at 9:17 pm

Oh forget it. Back to beer.

#17 Matt on 10.03.13 at 9:18 pm

Garth thanks for the blog

What are your thoughts on the future of CPP?
Do you like the way it’s going? Would it be better for a small business owner with 30 years of work not to contribute if possible ie: post#8?

Thanks in advance!

#18 T.O. Bubble Boy on 10.03.13 at 9:18 pm

@ #4 Smoking Man on 10.03.13 at 8:59 pm
Speaking of F

What the hell if F going to F-en do now?

Monstrous bullish report 416 in TREB. Single Family Homes.

Sales UP a WOPING 30%

——————–

Or, down from 2011, if you care to look beyond the headline.

#19 Samsara on 10.03.13 at 9:19 pm

I second #3 – Jay’s comment.

What would a ‘robust’ portfolio look like at 45?

#20 TheM on 10.03.13 at 9:20 pm

Good luck getting most people to invest. 75% don’t know anything about it. And 90% of the remaining 25% are convinced it is a ponzi scheme.

I’ll just keep collecting my dividends thanks.

#21 T.O. Bubble Boy on 10.03.13 at 9:21 pm

Speaking to CPP…
Everyone should plan their life to be secure regardless of what happens to these pension programs. Anything else is a giant risk.

And, anyone under 60 should just assume this will be $0 (unless you are a senator).

#22 Kreditanstalt on 10.03.13 at 9:21 pm

On one hand payroll contributions to CPP doubling would “take a big bite out of the economy”?

But “higher personal taxes” are “one solution to stave off social collapse 15 years from now”?

What’s the difference? They’re both taxes: both remove assets directly from the private sector and younger employed and hand them over to government and its well-connected retiree clients.

There is no solution to this except LOWER, MORE REASONABLE LIVING STANDARDS in retirement.

#23 Smoking Man on 10.03.13 at 9:22 pm

#9 T.O. Bubble Boy on 10.03.13 at 9:11 pm
If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.

MJ = Michael Jordan?
Michael Jackson?
……………………….

Mo Jo, stop drinking for one night, I’m sure I can grow some too.

But that’s not going to happen anytime soon.

Funny how the UCC works, I met Boomer today, All Grath talked about tonight was Boomers.

Freaky…

The Universal Consciousness Consolidator is all I’m saying.

#24 CrowdedElevatorfartz on 10.03.13 at 9:23 pm

@#9 T.O.
MJ = Mary Jane

(you are kidding right?)

#25 al on 10.03.13 at 9:26 pm

in the 70s and 80s there was a sharp crime rate increase because of the younger population.

is it possible to have a crime rate increase when geezers run out of money?

like muggings and bank hold-ups?

#26 AgentSmith on 10.03.13 at 9:26 pm

Old people can work at Walmart and man the self check out lines. Like..and give them a broom to shuffle along with eh.

This is getting weird..like how do I tell Pops him and Mom need to get a job at the Loblaws.

What about my Inlaws.. what the hell..they will need to work at Timmy H.

#27 Smoking Man on 10.03.13 at 9:27 pm

#14 T.O. Bubble Boy on 10.03.13 at 9:16 pm

When are you going to learn the Herd don’t look at the fine print, Headlines only.

You can be sitting on the sidelines your stats on a piece of Cardboard by Union Station. Yelling, RE Armageddon.

People will think your nuts, after all it’s a Peter Mansbridge world.

#28 CrowdedElevatorfartz on 10.03.13 at 9:28 pm

The Canadian govt has been offering RRSP’s for how many years? and the sheeple ignore them.

The Canadian govt introduces TFSA’s 5 years ago….and the sheeple ignore them.

Time for a compulsary contribution plan a la Australia?

Because , lets face it, the average Canadian/American/ Joe Sixpack slob lives for today, not tommorrow.

90 % of my aquaintances have ZERO savings and the other 10% have govt jobs/pensions that they truly think will be there forever…………

Sheeple to be vultched when the time is right.

#29 Jsan on 10.03.13 at 9:30 pm

For those hoping to get into the market but are discouraged by the never ending media cheerleading about the booming housing market, do not be dismayed.

The longer this bloated whale drags on, the better the bargain you will get down the road. When it blows it will BLOW!!!!

#30 Paul on 10.03.13 at 9:30 pm

Mr. F, please double the yearly contribution limit to our TFSA. Cant save everyone but at least help those who are trying.

#31 Paully B on 10.03.13 at 9:34 pm

Hi Garth,

Was your site hacked? Lots of weird typos and grammar errors.

Just looking out for you.

Thanks

The site displays correctly for me. Do not know what you refer to. — Garth

#32 jj on 10.03.13 at 9:37 pm

@ #119 Retired WI Boomer on 10.03.13 at 11:08 am from Yesterday – I know I’m late, I’m a gen x’er so I sleep in ok?

To your question the answer is No I do not remember the “Nifty Fifty” bcd in the 1960′s? First off that was over a decade before I was born and secondly, even doing a quick search on ““Nifty Fifty” bcd” yielded almost nothing on it so I don’t even know what that is.

I know very well about the trends you mentioned, but those trends turned into Bubbles and that is the key difference.

A low percentage of trends end in disaster. What typically ends in disaster is calling tops or bottoms, or worse yet blindly following trends without managing your position(s).

Very few trends end in bubbles, look at the history of trends. For that matter even IF you were riding a bubble when the trend changes you GET OFF the trend or play the new trend in that direction be it long / short. Or just sit it out if your not sure what the trend is, hey there are trendless markets you know.

By the way the trendless ones are typically the better or best ones to wait for a new trend to breakout!

PE ratios mean nothing in these markets today and I would pay no attention to them at all.

That and the consumer confidence index, another complete waste of time and only reflects what the stock market is doing (trending). Watch how the consumer confidence index falls and rises based on the previous months stock prices. Why do I need another indicator like that when I can just look at what the stock market is doing. Completely useless.

I agree with you that Indexing is the way to go. I have been burnt in my day buying individual stocks and will not do it again (when I first played around in this game 4 years ago).

Watching trends is not speculation at all. Trying to catch falling knives or stopping rockets is pure speculation (calling tops/bottoms).

I may be young, or at least younger than you, but the markets have made me wise wise.

I wished all gen X’ers like me learned the financial game, cause my generation would not be a F.. as it is now.

#33 Retired WI Boomer on 10.03.13 at 9:39 pm

Forget the portfolio value at age 45. What’s going to be most important is:

1. Do I have $500K to – $1MM saved up at age 60?

2. Where is my DEBT level ?

3. Do I have any pension other than a defined benefit plan
at work.

4. Based on the answers when CAN I stop working?

5. When do I want to stop working?

Everybody has a different “number” to these questions. There is NO wrong answers just some better / worse forecasts.

#34 Lily Joe on 10.03.13 at 9:40 pm

MJ = Mary Jane = Marijuana

The feds are allowing certified farmers to grow it for Medicinal Purposes.

Another note, I pay close to 900 a month for Fed income tax. Should I not have my employer deduct it and invest this in an RRSP and pay the difference in the Spring??? Thoughts?

Should I become a certified Marijuana Farmer as a small business?????

#35 Nemesis on 10.03.13 at 9:51 pm

…”…almost nobody can live on the public teat in retirement.” – HonGT

Well! WTF? Even after fudging their expenses?

[email protected]

OurHost excepted. Natch.

How many here know what the BeardedOracle does with his residuals? [Hint: it’s beyond magnanimous].

NoteToSmokingMan: No TeaBagging allusions, please.

#36 Mr. Reality on 10.03.13 at 9:51 pm

Its called managed contraction. The funny thing is defecit spending does not allow for our society to deleverage and reduce our expensive quality of life. Deflation will be a reality for a generation.

Japan has taught the world many lessons.

Mr R

#37 souvereigninternational on 10.03.13 at 9:52 pm

more about issues with pensions here:

http://www.theautomaticearth.com/Finance/your-pension-is-under-attack-from-all-sides-heres-10.html

#38 Marginal on 10.03.13 at 9:55 pm

From one of the authors of the “Millionaire Next Door”, there is a guideline for net worth benchmarks depending on age (obviously there are other factors involved….read the book for details).

“Simply stated your household’s net worth should equal 10% of the age of the main breadwinner times your household’s annual realized income [adjusted gross income is a good substitute]. In short it is 10% X Age X Income = Expected Net Worth”

http://www.thomasjstanley.com/blog-articles/163/How_Wealthy_Should_You_Be.html

#39 Seven Stars and Orion on 10.03.13 at 9:56 pm

Hmm, 5 years to get robust and another 10 before before social upheaval cometh. Great, another sleepless night running the numbers in my head.

#40 Ralph Cramdown on 10.03.13 at 10:04 pm

The one thing about well run pension plans — and most of the big ones are — is that they actually DO all of the things, all the time, that even the most cognizant, well-meaning individual investors only do some of, sometimes.

– They don’t get hornswoggled into high fee investments with poor risk/return prospects
– They manage their costs, which are very low
– They diversify worldwide and by asset class
– They take the long view and invest systematically
etc. etc.

They’re not all well funded, but that’s a different issue entirely. They do well with the money they DO receive to invest.

Most individuals, on the other hand, are dismal at investing for their future. They don’t know how much to save or how to invest it, and so end up supporting a vast horde of salesmen, marketers and analysts in the financial industry. They’d probably be far better off with a larger, government run defined benefit pension plan, or even a defined contribution one. But the financial industry will lobby governments to allow people the “choice” of which high-fee, underperforming product to put their defined contribution deductions in to.

#41 T.O. Bubble Boy on 10.03.13 at 10:08 pm

@ #24 CrowdedElevatorfartz on 10.03.13 at 9:23 pm
@#9 T.O.
MJ = Mary Jane

(you are kidding right?)

———————

Yes – totally joking… just seeing who the pot smokers on this blog are!

#42 Notta Sheeple on 10.03.13 at 10:14 pm

#6 Miley Cyrus on 10.03.13 at 9:06 pm
“…….Not necessarily higher taxes. What we need is far less government……”
=========================

I’m guessing the CEOs of AIG, J.P. Morgan, Bank of America, all the other snake oil producing Wall Street thieves who brought the financial world to its knees in 2008 would probably support your ‘less government’ position.

“…Too Big To Fail, Too Much Influence To Jail…”

Where would AIG, JP Morgan, Bank of America, etc. be today without the support of their regulatory-hating, ‘freedom-loving’ (freedom to be played like banjos) uneducated GOP/FOXNews addicted/Tea Party wannabes who can’t balance a cheque book much less a computer mouse in their hands.

#43 T.O. Bubble Boy on 10.03.13 at 10:14 pm

@ #3 Jay on 10.03.13 at 8:58 pm
Define “robust”. 1 mil? 2 mil? 100k?

Where should one ‘aim’ for at 45?
————————————–

45? I’d say $1M+, and more if there isn’t a paid off house.

By 60, you want a mortgage-free house and $2M+ outside. Average Canadian lives to 80-85, so you’d better have $2M to support $100k/year and some left over.

And, don’t count RRSP at face value, as it will be taxed as you withdraw… take 30%-40% off. Look to Garth’s books for some interesting ways to pull RRSP $$$ out with minimal tax.

#44 jj on 10.03.13 at 10:15 pm

Actually, they should get rid of CPP and OAS altogether and at the same time eliminate all income taxes under 100k.

Here come the flames…

#45 calgaryPhantom on 10.03.13 at 10:18 pm

Do a post about how much an average earner be worth.

At 25, 30, 35, 40,45.

I know every one is different with different circumstances. But it would be nice to know these numbers based on average.

#46 Smoking Man on 10.03.13 at 10:18 pm

#13 mariecurtispride on 10.03.13 at 9:16 pm
Smoking Man

SHHhhh , stop pimping out long branch or else those condos at Aqua view will be finally sold a year later
………………………………………….

I love long branch, If I was in Oakville, Or bayview and Lawrence, ya, I could get invited to parties. I can hang with the movers and shakers, been there done that.
B..oaring………

Out grow that long time ago.

I got my toothless guy, with the epileptic wife who’s making me kill my x mass train blinking lights. He knows I leave my empties, wine bottles by the side door every Wend.

He cleans em up for me, where else, what can you get such free service. Oakville, Ha.

This place is a writers paradise…….

I love it.

#47 Marginal on 10.03.13 at 10:20 pm

“There is only one solution to stave off social collapse 15 years from now, and it is higher personal taxes.”
—————————————————————-
What?? No increase or return to previous corporate tax rates? Canadian corporate tax rates are lower than many other countries.

http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx

Not if you like having a job. — Garth

#48 Big Sexy on 10.03.13 at 10:22 pm

Garth or others,

Do you know of any way I could opt out of contributing to the CPP? Or is my money going to fund people with no investments?

#49 B on 10.03.13 at 10:25 pm

Like Jay (#3), I also think about how much is needed to retire. Obviously, it totally depends on what I think my needs will be. It would be helpful to continue this conversation and if you marked up some examples it would be helpful.

#50 Marginal on 10.03.13 at 10:25 pm

#32 Paully B on 10.03.13 at 9:34 pm

……Amazon interns at the single malt again!

#51 Cici on 10.03.13 at 10:28 pm

Ok, Garth. I’m adding the chorus of the confused who are begging you to define exactly what a “robust investment portfolio by age 45” consists of.

Please let us know before we jump off a cliff by putting the entirety of our meagre savings into real estate.

No, but seriously. I need to bring this to your attention, because of some of us who aren’t quite clown enough to jump in at the top of the RE bubble are struggling to put what little we do have into savings in the hope of a poverty-free future. And we are resilient, because we’ve been waiting a longtime, having thought that RE values were overvalued as far back as 2003.

So, we don’t the over a million needed for a real stock portfolio, nor do we have close to a million needed to attract an advisor willing to settle for 1%. As average middle class wage earners, do we give up and join the maxed-out credit-happy masses, or do we eat catfood and settle for GICs in the hope that we will one day be able hit the magical jackpot needed for investment success?
Sorry for sounding frustrated and confused and scared, but hey, this part of my reality.

#52 Notta Sheeple on 10.03.13 at 10:29 pm

Actually enjoying SM’s postings tonight.

#53 valyrian_steel on 10.03.13 at 10:31 pm

Wife and I are 41. We are fortunate enough to bring home about 10k monthly combined. We live quite nicely on $2500. The $7500 extra kicking around at the end of the month goes straight into such things as dividend paying stocks, ETFs, REITs, and I just bought 30k of bank preferred stock paying me 6% . I think our portfolio is “robust” enough that we won’t be working in our 50’s.

#54 Cici on 10.03.13 at 10:36 pm

#41 Seven Stars and Orion

I hear you. And I’m in the exact same place. Oh well, the only thing we can do is buck up, stay away from debt and too much wine, and keep plodding along like faithful donkeys. Who knows, if we don’t come out on top, hopefully at least won’t come out at the very bottom?

#55 Catalyst on 10.03.13 at 10:39 pm

Higher taxes is NOT THE ANSWER, getting some control over government spending is the answer.

Just from the last year:

– senate expense scandals everywhere
– $500 to install pencil sharpener
– $500K to MLSE to promote NBA allstar game
– $175 Million to buy 250 water damaged homes in alberta from unlucky people

And I work in the private sector selling IT products. The government every March the government buys 30+million of computers/servers/software it doesn’t need then pays us to store it in the warehouse for them all year. They do this because if they don’t spend their budget then their budget will be reduced, so they spend every penny and ask for more the next year.

Taxpayers need to revolt against what our government has evolved into. The ‘conservatives’ are just as bad as the liberals you just pick your poison. With liberals you get funding for afro centric gay transgender party of zimbabwe and with conservatives you get 30 year old jets and helicopters.

Spending is out of control and no one seems willing or capable to stop it.

#56 Smartalox on 10.03.13 at 10:44 pm

So is there a set number of years one has to contribute in order to max your CPP payments? I’ve been making contributions since I was 12, about 30 years ago – can I tap my CPP in 10 years?

Seriously though, I’m watching my parents (81 and 75) struggle to make ends meet on just CPP and OAS. It’s not easy, and I’m faced with having to limit the amount of ‘help’ that I can give, for fear of jeopardizing my own retirement.

#57 Cici on 10.03.13 at 10:45 pm

To anyone who was wondering how much savings should be had by age 45, here’s what a quick Google search brought me:

“According to Fidelity Investments, which recently released age-related retirement saving guidelines, you should save your annual salary by age 35, three times your salary by age 45, and five times your salary age 55. By the time you turn 65, you should have eight times your annual salary saved up.”

She shoots, she doesn’t score, she goes back to trimming the fat out of her budget.

Logic, discipline and rigour can be a real bummer sometimes.

Hmmm, maybe I should just cultivate some MJ. I do have a green thumb :-)

#58 Shea on 10.03.13 at 10:53 pm

#40 Marginal said Simply stated your household’s net worth should equal 10% of the age of the main breadwinner times your household’s annual realized income [adjusted gross income is a good substitute]. In short it is 10% X Age X Income = Expected Net Worth

I was very humbled by this calculation. I thought my wife and I were kicking ass and taking names when it came to our savings rate. No one we know saves as diligently as us. I was shocked when this calculation came within a few thousand dollars of investment portfolio value.

So if this calculation is a good measure then we are just getting by, while most of my friends and family are kinda hooped? Sad.

#59 T.O. Bubble Boy on 10.03.13 at 10:55 pm

iShares cleans up in the Morningstar ETF awards. Vanguard also leads in many categories, and Schwab is starting to win a few as well:

http://advisor.morningstar.com/products/conference/brochure/ETF-Award-Winners.pdf

#60 WesternEnt on 10.03.13 at 10:56 pm

#50
The only way i know to opt out of cpp is to not be paid a salary. This would be possible if you own a company and you opt to pay youself via dividends versus salary. The tax implications are approx the same due to integration from CRA. As an aside, if you have or control more than 40% of a company, you can stop paying EI. Downside is you cant collect it.

#61 KommyKim on 10.03.13 at 11:01 pm

RE: #50 Big Sexy on 10.03.13 at 10:22 pm
Do you know of any way I could opt out of contributing to the CPP? Or is my money going to fund people with no investments?

Why would you opt out? (You can’t anyway) It is a well managed “fund”. The more you contribute the more you get out. There is a yearly cap on contributions, so the “rich” are NOT subsidizing the “poor” as far as CPP is concerned.

RE: #46 jj on 10.03.13 at 10:15 pm
Actually, they should get rid of CPP and OAS altogether and at the same time eliminate all income taxes under 100k.
Here come the flames…

Yes, here they come. What a dumb idea! The majority of people would blow all their cash today and have nothing left for retirement leaving them on welfare.
At least with taxes (funds OAS) and mandatory CPP, they will have paid SOMETHING for their future retirement.

#62 Retired Boomer - WI on 10.03.13 at 11:09 pm

#33 JJ

You must be near the age of our son he’s 38.

I can’t disagree with anything you have said. I do watch the PE ratio’s especially if I am buying an individual stock, which I do from time to time. (Mostly “fun” money).

As for trends, I watch the “big picture trends” like in 2006-2007 when it seemed in the US anybody who could fog a mirror got a RE loan.

By March 2008 I went from 80% stocks to 90% Gov Bonds 10% Commercial inv grade bonds. By 12/31/2008 I was down a bit but not near the slaughter of those still in stocks. I went back into stocks in late Feb 2009 with my normal allocation. Do you call that a “trend” or common sense?

Right now large stock 73% tilt, light on Bonds 20% til rates move up. REIT’s have about 7%.

I will look again at years end for re-balance & consolidation as the better half retires then. Who knows what will happen in the next few months? Like to keep a fat cash reserve in case stocks blow up, about a years worth of frugal spending.

As a Gen X’er you probably haven’t amassed that where-with-all but, it grows quite fast if you don’t screw with it.

Here’s hoping the Trends go well, and you have the fortitude to stick it out, you WILL be rewarded.

#63 Jan on 10.03.13 at 11:09 pm

More re pumping on global in damp city.
Chris Campbell said, Canadians love to buy,maintain and renovate houses.
Money is super cheap and should be till at least 2016 hence its a great time to buy. LOL….they never will quit

#64 HDJ on 10.03.13 at 11:11 pm

What if the government stopped taxing OAS and CPP payments? That would help struggling retirees.

#65 Infused with Opiates on 10.03.13 at 11:17 pm

“What Ed gets is $818 a month, which is actually rich by
Canada Pension Plan standards. The average payout is
$576. And Ed’s wife, Jane, gets zip. She stayed home,
raised three boys and did the books for the shop.
Nobody every told them about income-splitting…”

What, he never had an acountant??

8 not 1st – CPP is kinda like an indexed annuity, so you would think it would be a good piece of an overall
pension plan. But with the higher contributions, the
return looks dismal.

I dont think a self-employed person can avoid CPP unless
they set up a corporation and pay themselves dividends
only.

#66 Obvious Truth on 10.03.13 at 11:18 pm

# 36 mr. Reality

Just having this conversation at home today. Taxes, bills and cost of living keep going up and wages down.

Both know our money system wasn’t built for this. CBs are united in their fight for inflation. They won’t stop till they get it.

Once again. A house will cost you way more than any appreciation you get. This home investment thing is a joke. Wait till your wife doesn’t like the place anymore. Shel spend 100 grand in a blink and both of you will keep saying it’s an investment. Ever put new shingles on a roof? New driveway? Garage doors? Doesn’t sound like an investment to me.

Who’s betting Republicans and Democrats both get their wants on spending. Boehner will throw tea party under the bus after they do the dirty work. Bubble districts will get money on each side to help offset sequestration. Everybody wins.

Think 400k is enough by 45. Can double twice by 65 and maybe a bit more. Those with less than 100 won’t be able to pay property taxes on a house.

Save your money!

#67 Elmer on 10.03.13 at 11:21 pm

Move to Belize, Thailand, or Montenegro. $24,000 a year (which by the way you’re still eligible to collect even if you don’t live in Canada) will be enough to live very comfortably in those countries. Why would any retiree choose to stay in cold gloomy Canada?

#68 young & foolish on 10.03.13 at 11:22 pm

“PE ratios mean nothing in these markets today and I would pay no attention to them at all. ”

Hmmmm …. it’s the only value meter available to investors … without it, you are sailing without a compass

“But the financial industry will lobby governments to allow people the “choice” of which high-fee, underperforming product to put their defined contribution deductions in to.”

True, but when most people end up destitute (as Garth is suggesting), will the lobbying be enough, or will we see a significant change? Necessity is a powerful driver.

#69 Cici on 10.03.13 at 11:28 pm

#4 Smoking Man

LaSalle Yacht Club?

Got any advice for an absolute beginner who wants to learn to sail?

Oh, and about the Falls – Don’t drink and boat drive and you should be OK. As for Americans, they’re a nice bunch. Just don’t trespass on their property or talk politics with them and everything should be A-OK.

#70 not 1st on 10.03.13 at 11:31 pm

I think I might be part tea partier, cause after what I have seen on the political and business stage in the last few years I believe that we should give as little of our money to the govt as possible cause they will always squander it and essential services remain underfunded anyway.

#71 Babblemaster on 10.03.13 at 11:32 pm

Garth, all these facts and figures you’ve highlighted only point to the dire situation we would be in if housing was allowed to correct significantly. Flaherty doesn’t want a housing correction. While he want’s to slow things down, he, and his cohorts, will do everything possible to prevent a housing correction. So, that means that interest rates will not be going up for a loooonng time. Think Japan.

#72 BIg Sexy on 10.03.13 at 11:32 pm

# 60, 63, and 64.

Thank you for the info. I can think of many reasons to opt out/get out of paying in it. The main ones are a) I can get a better rate of return if the money goes in my TFSA and is invested eisely, and b) I’m 25. In 40 years, this “well-managed fund” will have run out of money due to being sucked dry by the populace and/or underfunded. They do it in the US, nothing stopping Canada from doing it as well.

#73 Ronaldo on 10.03.13 at 11:35 pm

#9 T.O. Bubble Boy – M.J. = Mary Juana

#74 DonDWest on 10.03.13 at 11:37 pm

Simple solution to this problem:

-Tax the unearned baby boomer housing wealth at 100%.

-Remove income taxes entirely.

By taxing speculative housing gains at 100%, the government is able to fund all it’s crap without having to take a single cent out of people who actually work for a living.

#75 Uh Oh Canada on 10.03.13 at 11:38 pm

There’s nothing wrong with working past retirement age. I know an accountant and naval architect who are in their seventies and still working, even though they don’t need the money. Instead of being teased, they are valued in their areas because of their experience. I think North Americans need to evaluate what we call ‘retirement.’. Most men go back to work because it’s better than dying from boredom.

#76 WesternEnt on 10.03.13 at 11:38 pm

#64,
I cant agree more with the concept that the average person needs to be forced to save. I dont agree the returns on cpp are that good. I dont have the numbers but i am sure they are out there. Initially cpp was underfunded due to low percentage contribution requirements. The was changed in the 90s and we now contribute more to make up the shortfall.

If you have the ability to opt out of cpp via a corp and paying yourself dividend as well as the discipline to invest the difference i think you will come out ahead. If you would just end up spending the difference, stick with cpp.

#77 Brew on 10.03.13 at 11:41 pm

Robust Portfolio at age 45 equals $250,000.

Then using the rule of 72 and an average annual return of 7% you would have $1,000,000 at the age of 65.

Then if you draw down 4% per year ($40,000) you should expire with some money left.

Brew

#78 Happity on 10.03.13 at 11:54 pm

Jim Rogers Warns US Stock Investors “Be Careful… You’re In A Fool’s Paradise”

#79 Joe on 10.03.13 at 11:54 pm

Do we owe the baby boomer generation a thank you for screwing up their finances so badly and then asking their kids and grandchildren to step in for them? I am really pissed of when reading articles like this one. It is already hard enough as a 30 something family to make ends meet and now we’re being asked to bankroll the excesses of the previous generation. Well thank you f***ing no!

#80 Beck on 10.03.13 at 11:58 pm

#55 valerian steel
Where do you live on $2500 mo?
Rent for a too hot, too small, too loud condo $3100
Food $2000 – one meal out a week

#81 Devore on 10.04.13 at 12:09 am

#6 Miley Cyrus

Not necessarily higher taxes. What we need is far less government. I will take care of my elderly parents. You take care of yours.

In the future, sure. But you can’t cut the legs off the people who lived their whole lives with certain promises and expectations, and conducted themselves accordingly. That would be social disaster.

We’re seeing this already for example with union contracts. If you were hired after a certain date, you’re on a completely different schedule of benefits vs someone who was grandfathered in.

Existing promises must be kept, at least in spirit. No doubt they will be scaled back, but we can’t do a total 180.

#82 WesternEnt on 10.04.13 at 12:25 am

#80 brew

The problem is, what is 4% of future dollars after rule of 72 worth in todays dollars worth. 40k seems like a lot of money. From my results using a detailed calculator it seems like a conservative approach is 3% of current assets. IE if i am 50 and have 1 mil saved, it will generate 30k in equal buying power when i retire, adjusted for inflation.

I think a lot of people dont realize how much they neec to save for a given income goal. As well, the ones that get goverment DB pensions have no clue how much they are worth.

#83 MEANWHILE IN EUROPA on 10.04.13 at 12:29 am

And that is the Achilles heel of my Nomad lifestyle. Pension. Or the lack of. That ruined my coffee this morning. 17 years left.
One sentence advise?

#84 Carpe Diem on 10.04.13 at 12:30 am

I rent but I think I’m OK in terms of investments.

With 3 kids it is hard to keep a balanced monthly budget but our family wealth went up 100K in 2 years. Some of that is because of our trusted investment advisors!

Now what interests me is what is a robust investment portfolio by age 45?

How about 45 year-olds should have in 5,10,15 and 20 years to stay robust? That would be a very interesting read!

Personally, I believe the Boomer WAVE will ruin CPP and OAS and we should never assume the government can manage our future.

I started my family late – I had lot of fun before that but now I’m a pretty serious guy. I want to ensure all my kids have the funds to go through University and not get in debt. I also want to make sure my wife is taken care of when I’m gone.

Health care cost and insurance is one thing to look at. I think that is a big piece everyone should be thinking about for retirement. Will you be covered?

I’m not an insurance sales guy … I’m just seeing my retired dad is very taken care of with his oil company insurance … Hell, he never signed divorce papers with my mom for 20 years so he can keep paying for her coverage. She appreciates that now that she needs it.

I asked him a few months ago why he never signed the papers. He said, I knew someday health care would be a significant cost for me and your mom. I did not want this to be your issue.

Health care costs will surely rise with the boomer wave in terms of taxes but also in terms of insurance cost. How do we plan for that when not employed by some mega-corp or government?

I hope you know how to grow MJ.

#85 bob on 10.04.13 at 1:39 am

Garth:

If you have the choice (i.e. self employed)
Would you choose to “opt-in” to CPP? i.e. pay yourself a salary up to the maximum (e.g. 51K/year) as well as the 9% contributions? Or would you just decide CPP isn’t worth it, and maybe pay yourself a low salary and go dividends and pay less taxes? My ultra conservative accountant likes the CPP safety net. But like you said in your post, 30 years from now, who knows how safe it will be.

#86 TakingResponsibility on 10.04.13 at 2:14 am

“There is only one solution to stave off social collapse 15 years from now, and it is higher personal taxes.”

Define “social collapse” – would it be Boomers collapsing?
Or, the young ones who need to be taxed more to pay for Boomer lack?

Higher personal taxes to stave off a social collapse is just…just…reactionary.

#87 Freedom First on 10.04.13 at 2:17 am

A lot of boomers may not have to worry about retirement. I think quite a few are not going to make it to the age of 65, and the ones that do, many of them aren’t going to live that many years past 65. From what I see everywhere I go, work, family, weddings, anywhere the boomers are, so many of the boomers: smoke, drink too much, are sedentary and overweight/obese, gamble….I don’t gamble, but I have walked through casinos in different cities in the U.S. and Canada, and they are the ones I always see in the casinos and standing in line at the lotto kiosks. No wonder so many of them are already bit..ing about their hip/knee replacements, diabetes……etc. I learn a lot of good things from smart people that I can use, as well as from my own learning and studying things, but it is also good to learn from the bad examples too. $24,000 for two people to exist on……I am so grateful for my life and where I am at. Garth’s blog is an excellent place to visit to see the good, the bad and the ugly too. It is amazing to see the # of people who write comments and argue their idiocy in a public blog. But the again, look at the debt levels of Canadians. Insane.

#88 Mean Gene on 10.04.13 at 2:42 am

Tax capital gains on the sale of principle resids. Should stop fools from pumping all their earnings into real estate, should encourage minions to invest more in the real economy.

#89 Buy? Curious? on 10.04.13 at 2:43 am

YES GARTH TURNER!

“If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.”

It’s easy! Any retard can stick a seed in the ground and see a plant, depend on the strain, produce 2-4ounces. How can a plant that grows naturally be wrong or illegal? How is nature bad? Booze and cigarettes do more damage, drain more social services and have worse health effects than any other substance out there yet marijuana is illegal. F-you lawmakers! F-you people who claim it’s a gateway drug!

Legalise it, Trudeau! LEGALISE IT!

http://www.youtube.com/watch?v=54YWs8n_aZg

#90 willworkforpickles on 10.04.13 at 2:51 am

If we have only reached the stage of social collapse 15 years from now …. that will be a best case scenario by far.

#91 tree on 10.04.13 at 4:48 am

“In Canada, 72% of us have no corporate pensions. Half of people have no RRSPs, and the half that do have an average of $42,000.”

This could mean a number of things.

e.g.:

– 28% have corporate pensions;
– 22% have no pensions but an average of $191,000 in RRSP (0.22*191=42)
– the remaining 50% are married to someone from the above two groups
– the average of “us” has some (how many?) years before retirement

#92 Bob Rice on 10.04.13 at 5:05 am

Anyone care to comment on this “looming disaster” – how will it play out? What impact might this have on our borrowing rates?

“A default would be unprecedented and has the potential to be catastrophic: Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse,”

http://www.theglobeandmail.com/report-on-business/top-business-stories/the-doomsday-scenario-of-a-us-default/article14684206/

#93 Edward the 7th on 10.04.13 at 6:01 am

Yep – SM was on a roll. I see a business opportunity in ‘helping’ people with their finances, providing objective advice without representing specific products. A branding of trust/integrity to the service would carry it a long way.

Exactly what a fee-based advisor does. — Garth

#94 Harry Wilson on 10.04.13 at 6:37 am

For those wondering about the advantage of taking CPP at 60 rather than 65, as suggested in Mr. Turner’s posting, I made an excel sheet to see how much of an advantage there is. Here’s what I learned, and sorry it’s a bit long:

Consider a set of triplets, Harry, John, and Eva. Harry takes CPP at 60; John takes CPP at 65; Eva takes CPP at 70.

Assuming that they all made the same contributions, and that the CPP that they would be eligible for at 65 would be the average $596/month, their CPP would be:

Harry, starting CPP at age 60: $381/month (64%)

John, starting CPP at age 65: $596/month (100%)

Eva, starting CPP at age 70: $846/month (142%).

By their 65th birthdays, Harry has collected $22,886.40. By their 70th birthdays, Harry has collected $45,772.80, and John has collected $35,760.

The relative ages quoted in the comparisons below would remain the same regardless of the size of their contribution, as long as all three siblings had equal total contributions.

Regarding total CPP collected, the following is where one’s total would catch up to the other’s total (numbers in brackets are the age at which they began collecting CPP):

—————– Not Invested:

John (65) catches up with Harry (60) at age 73 years 11 months.

Eva (70) catches up with Harry (60) at age 78 years 2 months.

Eva (70) catches up with John (65) at age 81 years 11 months.

—————– Invested Until Age 65

If Harry invests his first five years of CPP payments for five years, at a 5% return, he would earn an additional $5,721.60. In this situation:

John (65) catches up with Harry (60) at age 76 years 1 month.

Eva (70) catches up with Harry (60) at age 79 years 3 months.

Eva (70) still catches up with John (65) at age 81 years 11 months.

—————– Invested Until Age 70

If Harry and John both invest their CPP payments at a 5% return until age 70, Harry would invest his first ten years of CPP payments for ten years, and would earn an additional $22,886.40. John would invest five years of payments for five years, and would earn and additional $8,940. In this situation:

John (65) catches up with Harry (60) at age 79 years 4 months.

Eva (70) catches up with Harry (60) at age 82 years 4 months.

Eva (70) catches up with John (65) at age 84 years 11 months.

—————– Effect On Your Gov’t Pension (With GIS)

One more thing to consider for po’ folk like me: If your post-65 income is low enough that you will be collecting the GIS (Guaranteed Income Supplement) along with your OAS (Old Age Security), taking CPP early will reduce your taxable income, and thereby increase your GIS.

In the examples above, if CPP is their only income outside of OAS/GIS, Harry would earn $4,577.28 per year in CPP. John would earn $7,152 per year in CPP, for an increase over Harry of $2,574.72 per year.

Assuming they’re both single, Harry would collect $505.49 per month in GIS, or $6065.88 per year. John would collect $397.49 per month in GIS, or $4,769.88 per year, for a decrease of $1296 per year.

Although John makes $2,574.72 more than Harry on the CPP, the difference in GIS reduces the difference in their total income by more than half, to just $1,278.72.

Harry’s CPP collected by age 65: $22,886.40

Harry’s post-65 annual CPP/GIS: $10,643.16

John’s post-65 annual CPP/GIS: $11.921.88

With the difference in their annual incomes being just $1,278.72, it will take John 17 years and 11 months to catch up to Harry, at which time he will be almost 83 years of age.

Here is the fed’s page where, if you can estimate your post-65 taxable income (excluding OAS and GIS), you can find out what your GIS would amount to (scroll halfway down, then choose your marital status and post-65 income):
http://www.servicecanada.gc.ca/eng/services/pensions/oas/payments/index.shtml

—————– Caveat

Numbers are for entertainment and amusement purposes only. Offer void on earth and its subsidiaries. Don’t sue me if my numbers are wrong.

From 2012 through 2016, the feds are reducing the amount that you collect if you take CPP early, by 0.5-0.6% per month. For Harry starting at 60, I have used the post-2016 amount of 64% of the amount that he would get if he took CPP at 65. Before 2012, he would have collected 70%. If you turn 60 between now and 2016, your mileage may vary.

One last thing to consider is whether you would rather be receiving the extra income in your Harley years or your Depends years. Only you can decide.

I hope this made sense, and at least one person finds it useful.

G’night.

Or, save and invest better, at which point these detailed calcs are a waste of time. — Garth

#95 Randman on 10.04.13 at 6:58 am

“Um, what is “MJ”?

Marijuana?”

As your attorney…I strongly advise you not to answer that….

#96 CanadianCorner on 10.04.13 at 7:17 am

If you have accrued years in a DB pension plan, can that pension plan convert your “pension value” to a DC plan without your consent?

Yes. — Garth

#97 Kevin on 10.04.13 at 7:18 am

As you can see, an average retired couple will collect about $12,000 in OAS and an equal amount in CPP. That’s a grand total of $24,000 annually

Compare this to the United States, where the maximum Social Security payment is $1,923 a month

Since when is it fair to compare the “average” in one country to the “maximum” in another? Sounds like the kind of shady “fun with numbers” a realtor would do.

The maximum in the US (as I wrote) is $3,350 a month at age 70 and $2,533 at age 67. The average for all is $1,210 – or about 200% of the Canadian average. Try to keep up. — Garth

#98 Yuus bin Haad on 10.04.13 at 7:21 am

This is going to be fun!

#99 BonjieW on 10.04.13 at 7:26 am

Huh, and now apparently Canada’s real estate is overvalued by over 40% according to imf’s own data. Thats up from 15% in the beginning of 2013.

#100 Onthesidelines on 10.04.13 at 7:35 am

As to the question of how much is needed to retire.

Without any income from pensions etc, I would think that a couple could retire comfortably on about 1.5M which would last over 53 years growing at a very conservative 2.5% while being depleted at 50k per year for living expenses.

Stick with Crown backed bonds, no drama playing the market. Preferably living overseas. That’s my take on this issue. Would love to hear others’.

Bad choices. Anyone investing over a 50-year period only in government bonds, without any equity exposure, will be slaughtered by taxes and normalization of rates. — Garth

#101 Franco on 10.04.13 at 7:38 am

You are dead on the pension planning. The Gov should offer you a job as the pension czar.

#102 TheM on 10.04.13 at 7:42 am

Assuming that one get’s out of university/trade school/whatever with no debt (very possible), and can save 40% of their pay (also very possible, I save around 70%), you can have 100K by the time you are 26-27. Obviously, this depends on your income level.

…and if your Mom does your laundry as well as cleans your room and lends you the Kia. — Garth

#103 ripped on 10.04.13 at 8:09 am

My plan when I can’t work anymore and can’t make ends meet.

Go into a Dollar store, buy a water gun and hold up a bank teller.

I’ll get thrown in jail, I’ll get my meds, I’ll have 3 squares a day, I’ll have cable T.V.

Same as living in an old folks home, except it’s free.

#104 TheM on 10.04.13 at 8:15 am

In truth, I did benefit from living at home during undergrad (I paid rent at rates that were below market) and besides that I paid for my schooling and transportation entirely – I admit I was subsidized. However, I argue that this situation is not unrealistic for many Canadian students that live in large cities or metropolitan areas. It is not a requirement to live in a dorm for school. I took a 1.5 hr commute to school each day.

I graduated with no debt and healthy savings. This was accomplished by controlling my spending, working each summer and being a TA each semester. I also did two years of graduate studies while working to obtain a professional designation.

The second I was done undergrad I moved out to an apartment and managed my finances to ensure that a minimum 40% savings rate could be achieved (yes, I did this on a $35K salary starting out). It just meant that I had to be deliberate with my spending. My salary is much higher than that now but I haven’t allowed my lifestyle to inflate too much. My largest money vice is music (fiddle lessons) which is not money “down the drain” as I enjoy it and it has earned me free booze.

I enjoy your writing immensely Garth. You do however have a tendency to paint all 20-somethings with the same brush.

#105 The Man From Nantucket on 10.04.13 at 8:18 am

CPP – I suspect that most of the salaried readership here is paying max, which is something around five percent of the first $40 odd thousand .

So, ~$2300 per year for forty years.

If I were to invest myself and average 5%, I get something just south of $300,000.

If I then were to draw it down over 25 years while still earning 5% on the dwindling pile, that’s $23,000 per year.

Frankly, I want a choice to opt out and manage this myself.

#106 Willy on 10.04.13 at 8:21 am

Garth – thanks for this post. I really enjoy these types of personal finance topics and hearing your advice.

I was semi-surprised by your suggestion to start drawing on CPP ASAP. I am only 30 and had not done the math myself, but your advice makes sense.

From the perspective of someone in their 30s like me, what is your opinion of the reliability/dependability of some of the bigger non-government public pension plans, like OMERS, etc? My wife has an OMERS plan and the ability to buy back 2yrs of mat leave. We have wrestled with whether to invest the money on our own vs buy additional years back into the plan. I think, if one were retiring with the plans as they are today, the latter would “be worth more” – but as you point out, 30yrs from now, things can change a lot, these plans can run dry, rules can change, and taxes can increase. This just makes me want to keep the cash in our personal investment accounts. What do you think?

#107 detalumis on 10.04.13 at 8:23 am

The other reason to take CPP early is that almost no couples have the no-income housewife model. That is pretty much extinct. When one of you dies the survivor benefits will be a lot less for somebody who already is collecting their own CPP especially if it is in the higher ranges. So a person who is collecting the max on their own will get zip in survivor benefits. It’s a win-win for the “little housewife couples” who are the beneficiaries while the dual-income couples get zip.

I don’t know of any so-called “pension” where the survivor benefits are based on the survivor’s own income. The CPP is once again just another social assistance program disguised under a different name.

#108 Jim Lahey, Sunnyvale Trailer Park Supervisor on 10.04.13 at 8:30 am

“If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.”

Folks, that can easily be addressed at the TASTPGFBDCParty. Some of those past attendees know Ricky has several weed fields that he unfortunately forced several blog dogs to harvest at gunpoint during our first blog dog xmas party. Well he was severely reprimanded for that but now that the bearded mystic oracle is actually suggesting growing MJ as an income option, I would like to announce that all blog dogs attending this year’s blog dog xmas party in good ol Sunnyvale will be given free MJ growing lessons by none other than Ricky himself! I knew the bearded mystic oracle would eventually see this as a viable option for financially desperate Canadians! All are welcome but book early because trailer space is limited!

#109 T.O. Bubble Boy on 10.04.13 at 8:31 am

@ #76 Ronaldo on 10.03.13 at 11:35 pm
#9 T.O. Bubble Boy – M.J. = Mary Juana
——————–
Thanks… Garth just fwd’ed your email to the Colorado Weed Company’s mailing list. Remember, maximum 4 plants per order!

#110 Crossbordershopper on 10.04.13 at 8:47 am

First time writter, going to a university of waterloo condo development seminar, the usual, pay 10% down, gtd revenue for firstyear, a little capital appreciation, a little mortgage reduction and wholla, 40% per year every year. Its condo development number 6 so even in a small university town like waterloo, craines are in the sky too. Toronto money, local money, offshore, i question the $365 per square foot construction cost on a low grade student rental condo, someone is making money in the construction trade this side.
next time i will talk about my real estate holdings across the border

#111 PRR Broadway Limited on 10.04.13 at 8:55 am

Hi there Garth –

Good point about taking CPP at age 60. I’ve been paying into this thing since November 1969 – continuously since April 1975 – and according to the Service Canada website I’m entitled, at present, to nearly a full pension at age 65, with roughly a 1/3rd discount should I start collecting at age 60. Getting out my trusty slide rule shows that, by starting at age 60, my breakeven will be age 75. In other words, by starting at age 60, I will be ahead for fifteen years – and that doesn’t include any income earned by investing these funds! It’s a no-brainer. On November 19th I turn 60; my CPP application goes out November 20th.

#112 Linda Mulligan on 10.04.13 at 8:57 am

Maybe the latest CPP proposal won’t go through but I will bet the Gov’t wants to implement it for the following reasons: First, the pension cap would double to $102,000. The immediate effect is that all those people who have been making maximum CPP contributions would now not be paying the maximum & your eventual CPP is calculated on what you pay in. Result for most would be lower CPP payments because there is not now enough time for most Boomers to contribute the maximum (& very unlikely most Boomers would be making $102,000 plus EVER) for the majority of their lifetimes. Second, those who do pay the current CPP maximum usually have it paid up just about now, so their last 3-6 pays in the year have a bit more take home pay. Raise the contribution rates, lose the extra net pay. More money paid in, less net to take home. Third, has anyone noticed that the proposed changes are supposed to take place in 2016? Guess how many Boomers were born who won’t turn 60 until 2017 – I looked it up & it is some 7 million Canadians. Throw in the proposed increase to being able to collect CPP ‘in full’ from 65 to 67, to match OAS. Guess what the average life expectancy of people born 1960 – 1962 is as per StatsCan? Answer: age 68 for men; age 74 for women. Last, throw in the not inconsiderable fact that Boomers (or so the resentful say) have the ‘best’ jobs with the ‘best’ pay – therefore presumably pay the ‘most’ taxes overall after the highest income earners. If all those Boomers continue to work rather than retire in the next 18 years (1966 boomers w/b 65 in 2031) then revenues continue to flow nicely while expenditures are minimized. For those who are going to say it, Canada IS different re: boomers – our official boom was 1946 to 1966, not 1964 as was the case in the USA. So our youngest boomers won’t turn 65 until 2031, whereas boomers in the USA will all be 65 by 2029.

#113 miketheengineer on 10.04.13 at 9:01 am

Garth et al:

It is not a CPP problem. It is a problem with quality jobs lacking in the economy and the # of part timers who pay almost nothing into the system. Give everyone a decent paying full time job (ie one that pays better than 10 bucks and hour) and problemo is solved.

It the government implemented 2 very simple changes, I believe things would improve….

1) Legislate employers to employ people for a minimum of 37.5 hours for a minimum of 90% of their employees
2) Legislate employers, that do take part timers in that they work minimum 20 hours, and deduct CPP from them at a reasonable rate (ie not nothing)

Also, raise the minimum rate by at least 2 bucks an hour.

Everyone is hurting…why…all the basic prices have increased beyond what is reasonable and wages, including that give to pensioners has not.

Check all the people living in 1 million dollar homes, see what their income “really” is….and then get them via Canada Revenue. Too many people wanting to be paid cash only for work and not declaring it….this is destroying the country.

#114 Linda Mulligan on 10.04.13 at 9:01 am

Just to clarify my earlier post – when I said 7 million Canadians won’t turn 60 until 2016, that is ALL boomers born between 1956 & 1966. So the younger boomers will turn 60 in subsequent years to 2016 until the last ones turn 65 in 2031.

#115 PRR Broadway Limited on 10.04.13 at 9:11 am

For those who are interested, here’s the calculation referred to above.

Note that the actual pension dollar amount at age 65 makes no difference. Only the discount matters, and at age 60, the discount is around 33% – call it 1/3rd.

Let A = Pension at age 65

so 2/3A = Pension at age 60

Let X = # months at discount pension

so X – 60 = # months at full pension (5 years early)

2/3A x X = A x (X-60)

2/3AX = AX – 60A

A drops out on both sides

2/3X = X-60

1/3X = 60

Thus X = 180 or 15 years!

The numbers don’t lie.

Now take 60 payments at -33% and invest them to receive 7-8% compounded over five years. In any case, I feel sorry for those who have to sweat this. The numbers are so small. — Garth

#116 Castaway on 10.04.13 at 9:18 am

Since when was government responsible for everyone’s retirement. Typical short sighted ignorant government response. Lets raise the taxes on the ever shrinking working class and their employer to cover more benefits for the non working or non contributing ones. More good old Canadian dissincentive to work and contribute. Just spend it all living for today and gov will look after me! F’ing pathetic. Of course those premiers with this great idea have a stonking indexed pension for life so it won’t impact them one bit.

What they fail to realize is that with the coming demographics governments will not be able to raise enough in taxes to cover health care, let along pension supplements. Bunch of 5th grade morons.

Word of advise if you are young and ambitious. Go offshore for your prime working years. You can keep more of what you earn and fund your own retirement. Or you can sit around like the idiot in the article and bank on OAS/CPP

#117 Ralph Cramdown on 10.04.13 at 9:19 am

Or, save and invest better, at which point these detailed calcs are a waste of time. — Garth

That’s pretty trite, Garth. People don’t want to run out of money in retirement, but most people are income constrained and would rather not save more than they have to. CPP and OAS are going to be a big chunk of most peoples’ retirement income, and attempting to maximize it is in no way time wasted.

Anyone for whom CPP and OAS is ‘a big chunk of retirement income’ has failed financially. — Garth

#118 Penny Henny on 10.04.13 at 9:23 am

a point to ponder-
Garth you make statements like this “In both countries the bulk of net worth has gone into real estate. In the case of the Yanks, about $6 trillion in net worth was actually lost” but what you must consider is that along the way people were selling and taking the money and also taking out more loans against the property to buy all those things that kept the economy going after 911.
boy that was a long sentence.
Anyways what I am saying is that alot of that 6 trillion was spent keeping the economy afloat and not just LOST.

It was lost to the people whose houses drained of value where, like here, the bulk of retirement-allocated net worth was stored. — Garth

#119 economictsunami on 10.04.13 at 9:25 am

Well our new BOC economic mode has so far failed to materialize: away from a consumption based economic model and more towards exports/ business investment. (almost the same moves being pushed by every western economy since the start of The Great Stagnation.)

Apparently some of our ‘best government economic thinkers’ didn’t get the BOC memo, for they state their election platform will be loosely based upon helping consumers already credit/debt impaired consumers.

The question then becomes:

Will accounting hocus pocus from deficit reduction (as already experienced in Ontario under “F” but the debt will have grown) along with cheaper smartphone rates and easier/ less costly cross border shopping, get the credit crushed mice to re elect the same cats?…

#120 Mr. Frugal on 10.04.13 at 9:27 am

The bottom line is that you can’t spend like a drunken sailor and still have a splendid retirement. The book “The Millionaire Next Door” breaks down alot of myths about how the “wealthy” spend their money and about how the rest spend their money trying to act rich. You can either save, invest and prosper or go down in flames trying to impress the folks next door.

#121 Steve on 10.04.13 at 9:43 am

Anyone for whom CPP and OAS is ‘a big chunk of retirement income’ has failed financially. — Garth
_________________________________________
Sadly, as today’s article indicates, that is far too many Canadians.

“In Canada, 72% of us have no corporate pensions. Half of people have no RRSPs, and the half that do have an average of $42,000. As I’ve told you before, 51% of Canadians can’t lay their hands on $10,000 in the event of an emergency.”

It would be more illuminating to see some of these statistics reorganized by decade of birth. Hopefully those RRSPs are biased towards the Boomers…

#122 KWaltz on 10.04.13 at 9:47 am

It’s a good thing I am a great gardener! No employment or income security, no prospects of anything better in this economy, not enough coming in to pay regular bills, let alone accumulate savings. I’ll have to forage in the woods in the desolate post-boom era of my retirement. 30 + years to go. Yeah me!

Beats being a sociology major. –Garth

#123 lawboy on 10.04.13 at 9:51 am

Weeeel, lookie here. This listing was $1.249mil and invited offers at 7pm Wednesday. I guess it didn’t go as well as the greedy owners thought, because now it is listed for $1.305mil. Disgusting.

http://www.realtor.ca/propertyDetails.aspx?propertyId=13688381&PidKey=1275620697

#124 Holy Crap wheres The Tylenol on 10.04.13 at 9:55 am

#48 Smoking Man on 10.03.13 at 10:18 pm
#13 mariecurtispride on 10.03.13 at 9:16 pm
Smoking Man
SHHhhh , stop pimping out long branch or else those condos at Aqua view will be finally sold a year later
………………………………………….
I love long branch, If I was in Oakville, Or bayview and Lawrence, ya, I could get invited to parties. I can hang with the movers and shakers, been there done that.
B..oaring………
Out grow that long time ago.
I got my toothless guy, with the epileptic wife who’s making me kill my x mass train blinking lights. He knows I leave my empties, wine bottles by the side door every Wend.
He cleans em up for me, where else, what can you get such free service. Oakville, Ha.
This place is a writers paradise…….
I love it.
——————————————————–

Smoking Man I live in Oakville and believe me we too have our less than uppity areas here as well. As for movers and shakers I live with them and see them every day, some are nice and some are just a$$holes.
As for boring, Ive been to boring places at the high and low end. Again you see a$$holes everywhere.
Our area of Oakville is great I go to my boat and hang out with the people I like because I like them. Not because I have to like them just because they are at the same marina. You are going to run into crap everywhere in life just weed out the garbage and clutter and live life as best as you can!

#125 Penny Henny on 10.04.13 at 10:01 am

to Harry Wilson.
Wonderful post!

#126 Onthesidelines on 10.04.13 at 10:01 am

Bad choices. Anyone investing over a 50-year period only in government bonds, without any equity exposure, will be slaughtered by taxes and normalization of rates. — Garth

Not neccessarily. Doubt I’ll live much past a hundred if that, and planning to let my last cheque bounce. The money will easily last the remainder of both of our lives invested in bonds. Why bother with the casino market when one doesn’t have to?

For the reasons stated. Bad idea. — Garth

#127 Ralph Cramdown on 10.04.13 at 10:04 am

#108 The Man From Nantucket — “So, ~$2300 per year for forty years. If I were to invest myself and average 5%, I get something just south of $300,000. If I then were to draw it down over 25 years while still earning 5% on the dwindling pile, that’s $23,000 per year. Frankly, I want a choice to opt out and manage this myself.”

By my calcs, you’d run out of cash in year 18. Maybe leave it to the pros?

Other things to consider:
– what happens if you live to 95?
– would you really have the same portfolio allocations at 89 as you would at 40?
– what if you become senile and unable to manage your investments at age 70? What if you think you still can?
Pension plans solve these problems. Individual savings can’t.

#128 Ralph Cramdown on 10.04.13 at 10:20 am

#81 Happity — “Jim Rogers Warns US Stock Investors “Be Careful… You’re In A Fool’s Paradise”

Ralph Cramdown warns investors in Jim Rogers’ funds: “Don’t just file away your quarterly statements unopened assuming everything’s fine.”

Since November 19,2012 (inception for one of the funds):
S&P 500 +21% plus dividends
RGRC -2%
RGRC -13%
RGRP -22%
http://goo.gl/TxnDLu – click ‘all’ to zoom out

#129 Smoking Man on 10.04.13 at 10:35 am

TO BUBBLE BOY

The headlines read in FP

Toronto home sales soar, prices continue to climb.

The herd don’t care or care to know that 2011 same month was better..

Fundamentals don’t mean crap, watching and understanding what makes the herd tic, is all you need for good predictive skills.

Fundamentals is what you look at the end and explain after the herd changes course.

It’s unless in trying to predict when the herd will turn.

That’s why bay street thinks I’m a god.

In the elevator, guy I meet once, who was buying me rounds few months ago, I never tell anyone I’m the smoking man.

He tells his two buddies who where going to a meeting.

Thats the smoking man, they shook my hand and said I was awesome…

Not liking this fame,

But it’s enevatable, consistency calling the future, maybe I should grow a long white beard…

#130 Doug in London on 10.04.13 at 11:11 am

Elmer, post #70, makes a good point about how you can retire much cheaper abroad. However if you live in an expensive place like Toronto area, and sell now (or better yet have already sold) to retrieve the equity in your house there are other options. You could always move somewhere where the cost of living is much cheaper. Take your pick: some place like London or Sarnia in the southwest, Kingston or Belleville in the east, St. Catharines or Fort Erie in Niagara, or one of many cheap places in the north like Timiskaming Shores or Timmins (if you don’t mind the cold winters).

I don’t think the north will see too many retirees, but a lot of other places probably will.

#131 DonDWest on 10.04.13 at 11:12 am

Beats being a sociology major. –Garth

My boss has a sociology major. It’s one of the favorites for the psychopathic offspring of the wealthy classes.

#132 Shea on 10.04.13 at 11:19 am

If self employed skipping the CPP payments to max out a TFSA seems like a no brainer. Why pay taxes on CPP when you could have a big fat juicy TFSA. I doubt its a coincidence contribution levels are about the same.

As for what age to take CPP. I think it would be an easy choice. Take the CPP early and invest it in TFSA. If the break even point is 80 years old your probably living off of coffee and rye bread anyway.

#133 Ralph Cramdown on 10.04.13 at 11:21 am

I feel sorry for those who have to sweat this. The numbers are so small. — Garth

The numbers are NOT small. Here’s a couple with $1.3m in investable assets, and they’re on track to get fully 29% of their income from CPP+OAS:
http://business.financialpost.com/2013/10/04/so-many-funds-so-many-fees/
The advisor suggests lower fees; then they’d be getting about 25% from CPP+OAS.

To look at things another way, to replace the average single person’s CPP payout of $576 + OAS of $541 if you turn 65 today, you could buy a life annuity from RBC at a cost of $187,432.25 if you’re a man or $206,113.38 for women. That’s the capitalized value of the stream of payments, and it ain’t chump change. Yes, it’s a terrible time to buy an annuity, but it is what it is.

I think you’re a bit off the mark today. A senior couple’s income of $25,000 won’t buy a lot of wining, dining and cruises, but if the home is paid off and they live in an inexpensive area of a province that allows them to defer property tax, I’d bet there’s lots of people living on that right now and not feeling too deprived. It pays for the utilities, occasional repairs, food in the fridge and the car in the driveway.

Am I aiming higher? Hell yeah. But don’t confuse the average 50 year old’s dream of retirement, or your average client’s situation with the average Canadian current or near retiree.

This blog hardly caters to Mr. & Mrs. Front Porch, who are financially challenged and will never stray from a bank GIC or a mortgage payment. For then CPP/OAS may be a big deal. Sadly. — Garth

#134 Beach Girl on 10.04.13 at 11:32 am

I was a self employed business owner for 25 years, and bought many rental properties. Have sold most. The remaining rentals, will be an income stream. I paid into the CPP, like forever.

No time off for babies. Needed to pay for help. Will take the CPP at 60. Also, it will be increased, from the working standpoints of my long departed husbands. Not dead yet, only to me. HAHA.

Starting buying RRSP’s at 20. Will be eating quality cat food for sure.

So woman haters, will get pissed, because I split my CPP pensions with men who made more. Luck of the draw.

#135 Scott on 10.04.13 at 11:40 am

Garth,

As a 34-year old should I be considering NOT investing in RRSPs, and going TFSA then cash, to reduce my long term tax obligations?

The one thing retirees will do for themselves is show up in record numbers to vote themselves more money at the expense of working people.

#136 Dean Mason on 10.04.13 at 11:46 am

Garth, you forgot one important factor that pensions, annuities etc. use for investment return assumptions, long term interest rates more specifically long term government bond yields and some corporate long term bond yields.

In 1993, long term government bond yields varied between 8% to 10%, in 2000, they were around 6.00% to 6.50% and in 2007 before things went downhill they were 5.00% to 5.50%.

Today, they are 3% to 4.25%. These are all government bond yields I stated above.

When I hear pension plans were and are still using 8% to 9% rates of return for their long term actuarial assumptions, they are promising too much.

Even if we see long term government bond yields of 5.00% to 5.50% on Canada and U.S. bonds which are back to 2007 levels, this will not be enough to correct this pension mess.

#137 Beach Girl on 10.04.13 at 11:47 am

What happens to peoples CPP money if they die before 60? Married or not?

Just give us a forwarding address. — Garth

#138 Suede on 10.04.13 at 11:54 am

#19 Samsara

What would a ‘robust’ portfolio look like at 45?

—————————————

Hot wife

Kids

25+ Countries on your passport

Facebook account with daily statuses that gets 10+ comments and 35+ likes

Brand new Mazda hatchback with A/C

Being able to go for Filet Mignon or Junior Chickens at Rotten Ronnies whenever you want

Owning more S&P500, DJ and Int’l ETF’s than equity in your house

#139 Godth on 10.04.13 at 11:58 am

It’s all well and good for the oldsters to pretend that this game will continue ad infinitum in it’s current incarnation, they’d be wrong of course. In 25 yrs. how many people will be inhabiting this orb at current rates? 9 billion, 10 billion? What will the US debt look like? lol, sad. Outside the bubble of me it’s apparent that all bets are off over the course of the next 20-25 yrs., if we manage to make it that far without blowing ourselves up. The world will be unrecognizeable any way you slice it.

#140 Harry Wilson on 10.04.13 at 12:19 pm

re #114 PRR Broadway Limited

If you’re planning to start collecting CPP next month, don’t wait until the day after your birthday to apply. According to the Service Canada website, you can apply as early as one month after your 59th birthday, as long as you want your payments to begin within 11 months.

I could only find one reference to retroactive payments, and that was only for people who were applying after their 65th birthday, so get your app in as soon as possible. They take about eight weeks to process; I don’t know if that means your payments would start at the completion of the process, or as of the date the application is submitted.

The best plan is to call Service Canada and get it straight from the horses mouth, meanwhile here’s their page with general info on applying, and links to the required forms for applying online and by mail. Happy Retirement!

http://www.servicecanada.gc.ca/eng/services/pensions/cpp/retirement/index.shtml

P.S. Thanks, Ralph & Penny.

#141 Agio on 10.04.13 at 12:32 pm

To all those asking what a ‘robust portfolio’ would look like @ 45 and the spewing out numbers like 1 mill, 2 mill or higher, get a grip. Odds are you’re not going to have anywhere near that. If only 5% of the entire Canadian population has 250k in investable assets what makes all of you so special? Nothing. Try to survive first and get rich later.

#142 Bob on 10.04.13 at 12:45 pm

Video: Rising interest rates will mean lower savings or no savings at all, says Wealthy Barber

http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/20130906theglobeandmailltidavidchilton2impactofrisinginterestrates720p3000kbpsmp4/article14492809/

#143 Mike on 10.04.13 at 12:49 pm

Small businesses are not really “choked on fees and taxes”; in BC my employer who is a CCPC currently pays 13.5% for income tax; down from 17% about 5 years ago. I am not saying this is too high or too low, but compared to my personal rate it looks quite rosy.

Now add in employer payroll contributions. Not so rosy. — Garth

#144 father on 10.04.13 at 12:56 pm

if you go to ross kay’s site, just click on click here and support ross against the big bad klump in the comment section on the bottom

#145 Ralph Cramdown on 10.04.13 at 12:58 pm

#144 Agio — “If only 5% of the entire Canadian population has 250k in investable assets what makes all of you so special? “

Self-selection, obviously. We’re spending time on a personal finance blog instead of lolcats.com

“Try to survive first and get rich later.”

Terrible advice. For most first generation high net worth households, getting rich is a long, slow process. Because your pile grows exponentially, the sooner you start, the easier it is. Besides, how many people do you know who couldn’t save in their 20s, 30s and 40s, but suddenly found religion at 50 and started putting away $80,000 per year or more?

#146 Edward on 10.04.13 at 1:01 pm

The premier wants to double contributions so he can up the CPP of Boomers going into retirement in the next few years?! They really want to do that to GenX and their own Boomer kids? That is outright theft. If anything like this is seriously considered we must rise up and smite them!!

#147 Dorothy on 10.04.13 at 1:02 pm

I am sick and tired of people who have guaranteed large retirement incomes (i.e. MP’s with gold plated pensions) telling the rest of us that we should do with less OAS and CPP during our golden years.
My spouse and I have paid taxes and CPP contributions for 40 years, and do not consider either of those benefits to be a “hand out”. Whereas MP’s receiving pensions larger than my annual salary cannot say the same.
They should fix the problems in their own “back yard” before deciding what to do about ours. What a bunch of hypocrites!!!!!!!!

I imagine that was directed at me. My MP pension for nine years in office, including as a cabinet minister, plus three years of unpaid campaigning and substantial pension contributions is $26,000. Maybe that’s too much, or too little. Beats me. But I donate it. Of course this does not change the fact that most people have dismal retirement prospects, entirely of their own making. — Garth

#148 Comox4 on 10.04.13 at 1:02 pm

I’ve been following Garth’s advice & enjoying the peace of mind. My portfolio has been up nicely since taking advantage of the US stock markets.

Garth…the European markets are starting to look very attractive. What’s your opinion on these markets compared to the US?

#149 Comox4 on 10.04.13 at 1:15 pm

The housing prices on Vancouver Island (north of Victoria) have been very different from Vancouver & Victoria. The prices peaked in 2008 & have been declining ever since.

What’s next for Courtenay, Nanaimo, & Duncan? Why haven’t we seen the price rises like the ROC & BC?

#150 bigtown on 10.04.13 at 1:17 pm

Apparently 60% of seniors over 65 in Canada have an income of less than $30,000 per year which brings us back to the housing affordability. Should us boomers unload and sell our homes now we have to be vigilent in researching where we are going to move to. Our family of boomers has highlighted the Niagara area in Ontario and also out by London and Aylmer and St. Thomas and Sarnia for rentals which will slice off about 40% more or less off your GTA rentals. Other provinces are better especially downhome like in New Brunswick and also Quebec has some great towns. B.C. is good out in Nanaimo for rentals not so much in the Okanogan. B.C. is doable also in Victoria. The Prairies are not as easy now due to the fact that there are more jobs than in hard hit industrial Ontario. It looks like Hamilton is putting on a better looking exterior and the rents are far more competitive than the GTA.

#151 young & foolish on 10.04.13 at 1:38 pm

“Compare this to the United States, where the maximum Social Security payment is $1,923 a month”

Wow! … pardon my ignorance, but why is this so?

That’s the maximum for early retirement. It rises from there. Why? The US is obviously a socialist paradise! — Garth

#152 father on 10.04.13 at 1:41 pm

why would you donate it garth? you out of all people earned it, not being nosey but what cause do you support

#153 Renter's Revenge! on 10.04.13 at 2:09 pm

Scott @138:

I’m about your age. By the time we’re 65, a third of the population will be older than us. That means “we” outnumber “them”.

We just need to get out and vote in record numbers to take more money from retirees and give it to workers!

Get out and vote, Gen-X, like your life depends on it!

Vote or be crushed by the burden of the wheezing, greying masses!

#154 Old tom on 10.04.13 at 2:21 pm

#132 Smoking Man on 10.04.13 at 10:35 am
But it’s enevatable, consistency calling the future, maybe I should grow a long white beard…

Calling yourself a God and being one are two entirely different things. There are many false Gods……
If you were truly a God then you would not be a farm slave working downtown. Or perhaps you are a new form of the Christ who has come to work with the huddled masses of farm slaves.

Our Lord who art in Bay Street…………………..
Hallowed be thy name……….Smoking Man????????????

God Help Us.

#155 Old Man on 10.04.13 at 2:44 pm

#153 bigtown – you are a bit too late for blowing off a home at the top of the market, but nevertheless there are bargains to be had for rentals in certain parts of southern Ontario, but you are missing a few gems in the equation. It all has to do with the net bucks one might have once the home is blown off, and will tell you why, as renting might not be the way to go in these areas of distress. There are nice renovated homes to be had for 100K or less, so perhaps buy again for a bargain and invest the rest as an option, and I know where they are, so do your homework.

#156 Pulp Faction on 10.04.13 at 3:20 pm

“If you don’t have a robust investment portfolio by age 45, I hope you know how to grow MJ.”

Or…invest in the large corporations that are being granted commercial growing licences to grow Med Pot in massive quantities.
They are going to sell it at the “street price”, like they were growing it illegally.
There are currently around 38,000 people in Canada receiving Med Pot, and after this program rolls out they expect that number to increase to 455,000.
Sounds to me like big corporations are the new Hells Angels. Grow massive quantities, then push it on everybody at the street price.

When’s the IPO ?

#157 The Prophet Elijah on 10.04.13 at 3:29 pm

DELETED

#158 The Prophet Elijah on 10.04.13 at 3:31 pm

#154 young & foolish on 10.04.13 at 1:38 pm
“Compare this to the United States, where the maximum Social Security payment is $1,923 a month”

Wow! … pardon my ignorance, but why is this so?

That’s the maximum for early retirement. It rises from there. Why? The US is obviously a socialist paradise! — Garth——–
———————————————————
And that’s why they have 100 trillion in outstanding liabilites coming due. They will fail like Communism. Boy are things going to get interesting in 2015

#159 Smoking Man on 10.04.13 at 3:37 pm

#157 Old tom on 10.04.13 at 2:21 pm
#132 Smoking Man on 10.04.13 at 10:35 am
But it’s enevatable, consistency calling the future, maybe I should grow a long white beard…

Calling yourself a God and being one are two entirely different things. There are many false Gods……
If you were truly a God then you would not be a farm slave working downtown. Or perhaps you are a new form of the Christ who has come to work with the huddled masses of farm slaves.

Our Lord who art in do Street…………………..
Hallowed be thy name……….Smoking Man????????????

God Help Us.
…………………………..

What’s growing a white beard have to do with God.?

How about Santa.

Ah the power of suggestion, see how good I am,

#160 jess on 10.04.13 at 3:49 pm

Bribery, corruption and cover-ups in Leighton Holdings’ international construction empire

Read more: http://www.smh.com.au/national/building-giant-leighton-at-centre-of-bribery-scandal-20131002-2usvp.html#ixzz2gmcT4e9W

=

Irish Government says ‘no apologies’ for corporate tax avoidance in Ireland
By Michael Hennigan, Finfacts founder and editor
Oct 4, 2013 – 5:50 AM
http://www.finfacts.ie/irishfinancenews/article_1026639.shtml

#161 gloomygus on 10.04.13 at 3:53 pm

#30… Shawn you said

“And the self employed? (like Real estate agents) they often paid little into CPP and nothing into RRSP.

-this isn’t a fact…the self employed realtards are independant contractors and have to pay both the employer AND the employee share of CPP. Double tax in fact.

#70 Elmer….Thailand requires a) a refundable zero interest roughly 24,000 dollars ( 800,000 baht) before granting a one year renewable ‘O’ visa ( retirement). Or…you have a pension of minimum $2500 p/m ( and have to prove it) OR….you can stay six months and have to leave the country ( a 3 monh extension can be had for 2000 baht but you’ll then have to leave the country for 9 months before re-try).

#162 Deb on 10.04.13 at 4:28 pm

#114 PRR Broadway Limited

If you plan on applying for CPP benefits on the day after your 60th birthday, you might want to consider starting the application process several months before your 60th instead. It takes a considerable amount of time for the powers that be to review your application and calculate the monthly amount that you can expect to receive. Getting the ball rolling early will save you from the disappointment of unforeseen delay.
Finally, don’t expect a birthday card from F.

#163 Rexx Rock on 10.04.13 at 4:39 pm

I sold my house last year and make 2% with my money.I know its crazy but I will not gamble in the stock market any more.Just perserve what you have and be happy.The central banks and goverment don”t want you to save but spend.My friend who lives in Japan says he made less than 0.5% with his 125,000 in the bank for the last 7 years so 2% is pretty good if you think about it.

Of course not. After inflation and taxes, it’s a negative yield. Get some help. — Garth

#164 betamax on 10.04.13 at 4:50 pm

#43 T.O. Bubble Boy: “just seeing who the pot smokers on this blog are!”

You mean seeing who the *old* pot smokers are. The term ‘Mary Jane’ hasn’t been commonly used in thirty years.

#165 broadway skytrain on 10.04.13 at 5:14 pm

#167 betamax on 10.04.13 at 4:50 pm
#43 T.O. Bubble Boy:

—- bud,weed,smoke,’stuff’,pot,green pants/paint/etc. are in current use, but call it whatever, hell the GOVERNMENT licensed stores are now growing/dist/selling openly(grey mkt now) all over washington st. and it becomes 100%legal in a few months.

#166 Mike on 10.04.13 at 5:30 pm

“Now add in employer payroll contributions. Not so rosy. — Garth”

Not really, Employer CPP is a matched and EI is only a 40% premium (so $357, per employee/year); plus employer deducts CPP/EI for taxable income. 13.5% tax and a EI premium is a relatively low burden vs. personal taxes or historical corp rates.

Now try having a profitable small business. — Garth

#167 Marginal on 10.04.13 at 5:39 pm

#120 Ralph Cramdown on 10.04.13 at 9:19 am

Agreed, as I do with most of your posts (hat off to you…great evidence supported posts). Nobody, rich or poor leaves money on the table. The rich who earned their wealth are especially careful, second generation not so much.

#168 jess on 10.04.13 at 5:40 pm

Dublin, yesterday Richard Bruton launched a report by the American Chamber of Commerce in Ireland on the
So in Dublin, yesterday Richard Bruton launched a report by the American Chamber of Commerce in Ireland on the business relationship between the two countries.

https://www.amcham.ie/article.aspx?id=1026

Irish-US Linkages Post-Crisis Ties are even Stronger and More Critical
chapter one highlights:

•Since the Great Recession of 2008/09, and amid swirling winds of global change, Ireland has become even more important and more critical to the global success of corporate America.
•Over the five-year period starting in 2008 and ending in 2012, U.S. firms invested more capital in Ireland ($129.5 billion) than in the previous 58 years combined.
•The level of investment in Ireland over 2008-2012 was roughly 14 times larger than U.S. investment in China.
•In 2012, Ireland ranked as the fourth largest recipient of U.S. FDI, garnering almost as much U.S. investment as all of developing Asia. While U.S. investment to Ireland rose marginally last year, by roughly 1%, to $22.8 billion, total U.S. investment to the EU declined sharply, by 17.5%.
•In the first half of 2013, Ireland moved up in the rankings, emerging as the third largest recipient of U.S. FDI. U.S. investment flows to Ireland totalled $15.8 billion in the first half of this year, a 32% rise from the same period a year ago.
•On a historic cost basis, the stock of US investment in Ireland broke the $200 billion barrier for the first time in 2012. Corporate America’s FDI stock in Ireland is equal to the U.S. stock in France and Germany combined. What’s more, it is nearly 20% larger than the aggregate U.S. stock in the BRIC nations.
•Exports figure only nominally in Irish-U.S. linkages, but when U.S. foreign affiliate sales in Ireland are factored into the equation, a minor player in trade becomes a global strategic giant based on foreign direct investment and affiliate sales/activities.
•U.S. foreign affiliate sales in Ireland are hardly insignificant. By our estimates, U.S. affiliate sales of goods and services totalled $282 billion in 2012.
•Using actual figures-for 2010-U.S. foreign affiliate sales in Ireland-with a population of 4.5 million and a GDP of just $210 billion-were greater than affiliate sales in China ($170 billion) and Japan ($247 billion).
•Ireland now ranks the number one export platform in the world for U.S. affiliates based on the latest available data, underscoring the importance of Ireland in the global value chains of U.S. firms.

========

Michael Hennigan, Finfacts founder and editor
Oct 4, 2013
says:

The Reality Check: impressive claims but the reason for these selective large figures is massive corporate tax avoidance and cash that is technically hoarded overseas is treated as an investment inflow!

read more @

http://www.finfacts.ie/irishfinancenews/article_1026639.shtml

#169 Smoking Man on 10.04.13 at 6:00 pm

#171 jess on 10.04.13 at 5:40 pm

Branson is a goof, I chirp him all the time in linked in using my real name, he patronized his slaves, kind of like west jet, OUR PARTNERS. The employee slaves, and they all fall for it.

I can’t stand stupid people and hero worshipping.

My dna is screwed..

#170 Smoking Man on 10.04.13 at 6:10 pm

Hope all is well with Vladimir, nosty, and his mom.

Thinking about you dude. Hope your OK…

Got my email if you feel like chatting. I’m not going to bug you right now

#171 happity on 10.04.13 at 6:16 pm

Surprise!

While the SnP500 index has had an upward trend this year, the same index has had a reverse trend in EPS.

And that is despite the fed printing 85 billion a month.
The taper that never was and the fools who believed it.

#172 johnnny on 10.04.13 at 6:39 pm

#153 – everything is a trade off.I bragged on this site
quite a while back about my cheap apartment rent.
I get to go to drop in clinics because my name hasn’t come up on the “doctor’s” list. Once you are assigned a doctor,guess how long it takes to make an appointment.
What happens if you aren’t happy with your assigned doctor?
Also,what is the taxbase of these “cheap” locations.
If all the young people are fleeing from lack of opportunity,guess what?
They are cheap for a reason.
Every one has different priorities and needs.
Due diligence is a must for going to a location,based on cheaper living.
This also includes Thailand,Belize and Montenegro etc…
Cheap,but what is the cost of health insurance?
Google it with the monthly amount as you get older,it is similar to the richter scale.
Or are you going to roll the dice that nothing bad will happen?
It’s all about research.

#173 maxx on 10.04.13 at 6:49 pm

It never ceases to amaze me that, given all of the advance and privileged information at the fingertips of the governing elite, it is so incredibly shortsighted.

What an unmitigated disaster we have on the pension front. There is so much misery on the near horizon. We’ve only just begun to see it unfold. A pandemic of panic will follow.

Just this week, a realtard stated that he couldn’t believe how many seniors say they need to continue working in retirement. In a country as wealthy as ours could be.

Shameful.

Gubmint couldn’t plan a piss-up in a brewery.

#174 maxx on 10.04.13 at 7:03 pm

#30 Shawn on 10.03.13 at 9:30 pm

Spot on- and advance planning and execution is everything, no matter how bumpy the road.

The value of time is not well understood.

#175 Marginal on 10.04.13 at 7:19 pm

#172 Smoking Man on 10.04.13 at 6:00 pm

“I can’t stand stupid people and hero worshipping.

My dna is screwed..”
————————————————————–
Don’t worry be happy, the Dunning-Kruger effect has you covered.

#176 investmentisgambling on 10.04.13 at 7:24 pm

“That’s because, like families here, personal finances are a disaster.”

So everyone should gamble with their money, play the markets and hope for the best? Investment portfolio? Get real. One shouldn’t have to roll the dice to afford retirement. There was an article a few months ago in which they talked to a bunch of investment bankers and crunched the numbers. Traders over there lifetime barely brake even with other peoples money. Playing the markets is complete dumb luck and chance. And this is what we have to retire to? social contract my ass

Thanks for showing us eloquently why so many people retire bitter. — Garth

#177 g2theBLA on 10.04.13 at 7:41 pm

#9 T.O. Bubble Boy: he’s talking MJ, as in Mary Jane. http://www.urbandictionary.com/define.php?term=mary jane

#178 WesternEnt on 10.04.13 at 7:46 pm

Mike

Small businesses are not really “choked on fees and taxes”; in BC my employer who is a CCPC currently pays 13.5% for income tax; down from 17% about 5 years ago. I am not saying this is too high or too low, but compared to my personal rate it looks quite rosy.

Now add in employer payroll contributions. Not so rosy. — Garth

Mike, you dont understand how integration from cra works. There is no way to avoid the taxes on income, even with a corp.

If a company makes 100k of “profit” the owner of the corp has two choices on how to get this money into his pocket. He can pay himself a salry off 100k and will give cra approx 39k in tax. If he decides to pay himself through dividends there are two steps. First the corp pays tax on the earnings, in your example this is 13.5k, then when he pays himself a dividend, he will have to pay tax that will take the total amount cra gets to approx the same as if it was taken in salary, 39k

I am using tax rates at the highest bracket for simplicity. As well, you are quoting the tax rates on small business earnings below 500k. Above 500 the rate goes to 25%.

There is a huge misconcept that business owners pay less tax somehow. As our account tells us, “i can reduce your taxes, just let me know how long you are willing to spend in jail”

#179 Marginal on 10.04.13 at 7:51 pm

Amen hallelujah to balanced investment portfolios; got that covered.

What I don’t understand is the total aversion/hatred/silver cross/wooden stake to GIC and/or bond portfolios.

Rule number one for investors, know thy risk tolerance. If you are highly risk averse then GIC/bonds may be the way to go.

Having worked with accountants for many years, I can attest to the fact that there are risk averse people who, not surprisingly offset their risk aversion with higher than average savings.

GIC has inflation risk, other investments have capital loss, non CIDC protection, or currency risks.

Know your risk tolerance.

#180 jaguar on 10.04.13 at 7:51 pm

Did anyone figure out that ‘MJ” is code for Mary Jane, which is code for marijuana….
Where is Daystar? I liked reading his comments…come back little Daystar……

#181 Daisy Mae on 10.04.13 at 8:27 pm

“It was lost to the people whose houses drained of value where, like here, the bulk of retirement-allocated net worth was stored. — Garth”

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

Or they were invested in mutual funds….

#182 Marginal on 10.04.13 at 8:49 pm

#177 maxx on 10.04.13 at 6:49 pm

Gubmint couldn’t plan a piss-up in a brewery.
—————————————————————
Oh, I think they did……

Low interest rates = free beer

…and a drunken, free for all, house buying debauchery ensued.

#183 The Man From Nantucket on 10.05.13 at 12:37 am

#130 Ralph Cramdown on 10.04.13 at 10:04 am

………Pension plans solve these problems. Individual savings can’t.

You certainly have some valid points.

There’s no single right answer, because none of us really know what comes next.

That said, what if I get hit by a bus….or cancer….or something between age 49 to 70.

As for my numbers, they were thrown together to quickly make a point. I could re-design it so I’m only skimming the return, so I can draw, perhaps, $15K indefinitely, or $17K with a forty year plan for depletion.

Either way, for those capable, good self-management of dollars that would have gone to CPP pension probably leaves the widow and family in a better situation under most permutations of those scenarios.

I’d like a choice to opt out, or at least half opt out.

Most situations, I’d rather have the funds somewhere that I can touch them rather than counting on a government to dole them out.

#184 Dean Mason on 10.05.13 at 12:57 am

To #183 Marginal

If you ask people today that if they could have a 6% to 6.50% guaranteed or close to little risk interest rate investments in GIC’s or government bonds, they would say yes.

In 2000, that option was available and what did most people do, they got greedy and believed they could make 25% to 30% a year like back in 1997, 1998, 1999.
The Dow, TSE which is now TSX did this in those 3 years.

Don’t even talk about the Nasdaq. I remember hearing radio commercials for the Nasdaq saying that the Nasdaq was the stock exchange for the next century.

Yes, it is going to take 100 years to get your money back to the original value. In 2000, 6% to 6.50% long term bonds either U.S., Canada, provincial were yielding this. Even 5 year GIC’s were paying 6.25% to 6.65% annual interest.

Their were 6.45% 5 year GIC’s paying monthly interest
directly into your bank account. The problem is people are greedy and don’t have patience.

They want fast, easy money now. Watch some U.S. T.V. and you will see all these commercials saying get your money now from structured settlements and annuities.

It’s your money, get it when you need it. The problem is people don’t understand that the discount interest rate these companies are using is high. I saw some as high as 8% annually compounded.

A 25 year annuity or structured settlement paying $1,666.67 a month equals total $500,000 after 300 payments or 25 years.

I see quotes of a lump sum payout today of $75,000 to $85,000 and that is it. The poor fool that does this exactly the current mentality of most people today.

#185 Dean Mason on 10.05.13 at 1:03 am

Correction to marginal #183

I am human, I made an error.

There were 6.45% 5 year GIC’s paying monthly interest directly into your bank account.

The poor fool that does this is exactly the current mentality of most people today.

#186 TurnerNation on 10.05.13 at 10:26 am

#167 betamax

That term appears as a lyric (chorus) in this Tone Loc song, from 1989 – also which sampled Stevie Wonder’s guitar line from Maybe Your Baby. (Better one). Might send some scurrying to their record collection. Recently discovered Wonder’s early stuff, and organ work from Jimmy Smith and Billy Preston (aka 5th Beatle). B4 my time.

http://www.youtube.com/watch?v=waL3DAl55zQ

Orig. http://www.youtube.com/watch?v=pM5SVMSB3HQ

#187 espressobob on 10.05.13 at 6:47 pm

#176 investmentisgambling

The end goal as investors is to create multiple income streams from our RRSPs,TFSAs & Non-registerd accounts, including CPP & OAS! How is that ‘gambling’?

#188 espressobob on 10.05.13 at 7:41 pm

#179 Marginal

Education on the subject of investing works best!

#189 Caron on 10.06.13 at 1:41 pm

“only one solution?” How about higher corporate taxes? Even the Yanks pay more. How about a progressive income tax again? How about higher resource royalties like Norway? How about rolling all private pensions into one large government run pool? How about changing the electoral system so we have a democracy?

Why do Conservatives think they can court social collapse with such impunity? There are many options for the future.

#190 Mike on 10.07.13 at 12:28 pm

“Now try having a profitable small business. — Garth”

I agree with this wholeheartedly, my only point was the business entity itself is not really being choked on taxes relative to personal or historical rates. (in my opinion)

It’s tough all around in the private sector.

#191 Mike on 10.07.13 at 2:34 pm

WesternEnt on 10.04.13 at 7:46 pm

“Mike, you dont understand how integration from cra works. There is no way to avoid the taxes on income, even with a corp”

No, I understand it; I was not saying business owners pay not tax.

My comment was restricted to the notion current small business tax rate were chocking off business; I don’t really see that in today’s market. After all, if today’s 13.5% rate is chocking business off then how did they survive 5 years ago when the rates were 22 or 23% higher? As far as I know, in BC at least, rates for CCPC’s have been falling for more than a decade and I think in the 90’s they were north of 20%. If the 13.5% CCPC rates themselves were the cause of businesses stalling out… then they can be completely avoided; boss can just draw everything as a salary and pay 2-3x that amount in personal taxes like a proprietor.

Also, I am not arguing about fairness or if the absolute value of 13.5% is reasonable; perhaps it is, perhaps it’s not. Relative to the past it is quite accommodating.