Suck it up

retired modified

Days ago F shocked a room full of suits by shutting down three years of haggling over the national pension plan. Worse, the little devil was racked with a cold so nasty he was barely able to croak. But he made it clear, nonetheless. The CPP stays the way it is.

Like Al and Freda, most people have no idea what crumbs they’ll receive when they stop working and start wrinkling. After paying into the plan for an entire career, the average benefit received is just $700 a month. The self-employed may get nothing. Ditto for stay-at-home moms. And the Old Age Supplement at 65 gives a paltry $530 monthly.

“It’s a shocker,” Al told me from Winnipeg earlier this week. “Maybe it’s my fault for never looking at this stuff, but I just assumed the pension would be there for us when we needed it. And now, godammit, we need it.”

It’s still there. But nobody can live on the public dole. You might exist, but it won’t be fun. Nor was it ever designed to support you. The CPP was meant to be just one of three income sources in retirement, the others being personal savings (as in an RRSP) and a company pension.

For most people those corporate plans are either gone or morphed into a scheme whereby an employer matches your own RRSP contributions, which are then dumped into some dodgy mutual fund. In other words, the outcome’s totally unknown until you actually approach retirement and in most cases, is miserably inadequate.

Remember that 70% of people no longer have a traditional company pension plan. RRSP contributions have plunged since 2007. The amount of money diverted into residential real estate is epic. At the same time personal debt has exploded (thanks to housing), and our ignorance level has scaled new heights.

TFSAs, for example. I have a hard time believing it (actually, I don’t) but almost 90% of Canadians have no idea what can go into a tax-free account, while 81% don’t know the annual contribution limit, according to a new bank survey. How can folks be so dumb in an age when everybody Googles?

Because they don’t care, obviously. And so of the 48% of Canadians with a TFSA – the single most important retirement-savings vehicle in the land – only a small fraction actually use it. This means the chances are high that Al and Freda’s son, Brent (now 28), will end up exactly like his hapless parents.

As you know, over 40% of people within a decade of retirement say they’re not ready. Half of the other 60% are lying. The average RRSP is now less than $50,000 and the average age for owning one is 46. Four in ten tell survey-takers they have trouble making monthly payments, even at a time when debt rates are the lowest in three generations. Making it all more worrisome is the apparent wussification of our youth, with young people horny to buy condos using extreme leverage but scared poopless of investing in financial assets. Nobody understands risk any more.

It’s not hard to see where this is going. Especially in a nation where the economy’s slagging, youth unemployment’s 15%, degrees are meaningless and the one thing everybody owns – real estate – has a troubled future.

That’s what some politicians worry about. Ontario’s premier says she’ll probably make pension plan reforms part of her next election campaign, for example. But this is instilling false hope. Even if CPP contributions were almost doubled immediately, as the Canadian Labour Congress suggests, the average pension of $24,000 would not be fully in place for another 40 years. Making it all more urgent is the impact that nine million aging-by-the-second Boomers will have on public finances over the next three decades. Keeping the health care system functioning will be intense.

So, F just proved even a peckerettte can do the right thing. But for the wrong reason. CPP premiums should not be goosed (so payouts can rise many years from now) because it will hurt the economy. That may be true, but there’s a larger issue. The government’s simply not capable of paying people to retire. Period.

That’s why they get capital gains tax-free returns on their houses. Why they can deduct retirement plan contributions from taxable income. Why half of investment profits aren’t subject to tax. Why a couple can stick $62,000 in a TFSA by January and grow it for decades with nothing to pay. Why you can earn $48,000 a year in dividends, free of tax. Why you can sell yourself assets you already own and get a tax refund for doing so. Why you can income-split and pension-split.

The problem ain’t the system. It’s us.

This is also why I sucked as a politician.

200 comments ↓

#1 Bottoms_Up on 12.19.13 at 7:35 pm

Garth, with your influence and insight and wisdom and genuine helping of many Canadians over many years, it’s a wonder no university has granted you an honorary doctorate.

I nominate U of T and UBC to be the first universities that should consider it.

#2 Robbie on 12.19.13 at 7:39 pm

Yes, Garth, being right sucks at times. ~

Ignorance is not bliss but it can take people a long time to figure that out!

Have a Merry Christmas/Happy Holiday!

#3 Country Girl on 12.19.13 at 7:48 pm

“even at a time when debt rates are the lowest in three generations”

Garth, you meant interest rates, right?

Rates on debt = interest rates. — Garth

#4 Andrewski on 12.19.13 at 7:51 pm

People don’t plan to fail, they fail to plan…

#5 not 1st on 12.19.13 at 7:51 pm

Garth, did it ever occur to you that people may not trust the govt so they don’t stick money into their TFSA.

Once there is billions in those things, the govt with the stroke of pen can change the rules, just like they did on income trusts. I have seen it before in other programs as well. Nothing is sacred especially when there will be a desperate need to fund our wrinklies and pensioners in the near future.

No, that is not why. — Garth

#6 BWilson on 12.19.13 at 7:54 pm

I’m 33, will max out my RRSP contribution this year to have about $118k between that and a DC pension plan I used to contribute to before shifting to a DB plan before my employer closed it (My DB play is currently worth at least $200+ month in retirement inflation adjusted and growing by about $100/month of benefits for every year of service).

I rent at a sub 2% cap rate in Coal Harbor and also have well over 100k in other non-registered liquid assets.

Those who fail to plan, plan to fail.

#7 Gladiator on 12.19.13 at 7:57 pm

Garth, nowadays everybody is talking about how they or someone they know got rich with real estate. Who cares about TFSAs? A drop in the bucket and it also requires brainwork to choose where to put their money. And lastly, who trusts those crooks in capital markets who milk those very markets to their own benefit?
Sarc off.

#8 Knackered Knosty in LaLaLand on 12.19.13 at 8:01 pm

“But nobody can live on the public dole and our ignorance level has scaled new heights.” — Remember those words as you take a brief time out to view the following.

In order to put a case against Garth’s optimistic view from the previous post, I present a short video of Hypnotic Propaganda directly from North Korea.

Please stop laughing. It was embarrassingly easy to smuggle this wonderful gem of cornucopic crap out of Pyong Something or Other. Note how the term “snow” is used frequently.

To the best of my limited knowledge, snow is another reference for cocaine.

#9 T.O. Bubble Boy on 12.19.13 at 8:01 pm

I’ve heard Wynne’s pension proposal is that all Ontario residents get an OPG pension… problem solved — we’re all rich!

#10 DreamingIntechnicolour on 12.19.13 at 8:02 pm

We all retire in Canada ? surely you jest – the truth must be they want us to get so fed up that we baby boomers all head south to a cheaper country to live in and get our medical care somewhere else year – come to think of it – a great idea really. Last retiree out – turn off the lights!

#11 Smartalox on 12.19.13 at 8:04 pm

@#5 Not 1st, I don’t understand what you mean: the government has nothing to do with my TFSA – it’s all allocated to diversified growth ETFs. And doing quite nicely these last few days, thank you very much.

#12 Cici on 12.19.13 at 8:05 pm

So early! Yeah :-)

#13 Victor V on 12.19.13 at 8:12 pm

http://business.financialpost.com/2013/12/19/the-rising-tide-of-home-ownership-may-have-finally-met-its-match/

Anyone sitting on the sidelines considering whether to buy a home in Canada might want to take a look at a recent report from the International Monetary Fund.

The group says that among countries in the Organization for Economic Cooperation and Development, Canada is now the most expensive place in the world to own relative to the cost of renting.

#14 espressobob on 12.19.13 at 8:13 pm

At least for some of us who understand the importance of creating multiple income streams from our rrsp’s, tfsa’s, & non-registered accounts, there may be hope in retirement?

Tack that on to cpp & oas when the time comes and maybe life ain’t so bad, unless you have a forever mortgage.

#15 bigtown on 12.19.13 at 8:14 pm

I was reading in the Post that the CHMC has a statistic that an average two bedroom rented for $900 in 2012….i am really overpaying for our family’s junior one bedroom near Humber College in Etobicoke or for you Canada folk not aware this is where Rob Ford’s homestead is.

I have to tell my other half…we need to get out of town and find that two bedroom at $900…he knows we will have to go at least as far as Kitchener or Oshawa or at least Hamilton if not Niagara Falls. Well in the GTA there is no room for rental WUSSES. Only the strong survive in the DARWINIAN landscape of the rental survival world of Toronto. If anybody out there wants to start a reality TV series about finding a good decent two bedroom in the GTA for the CHMC rate of $900 you will have a hit on your hands.

#16 Norval on 12.19.13 at 8:18 pm

The Canada of today is not the Canada I remember as a child nor will it be the Canada of the future, those who do not look forward in all aspects of life weather they agree with Garth’s facts or not will only have themselves to blame for their personal state of affairs. Unfortunately they will be the ones to blame gov’ts. and everyone else but themselves for their state of affairs. Pass the Alpo!

#17 Smartalox on 12.19.13 at 8:19 pm

I do have to say that I was hoping that the ministers would see fit to boost CPP this week. My parents, aged 76 and 81 respectively rely on CPP and OAS for all of their income these days. They sold their home to retire, paid off their debts, and 18 months later, had nothing left of the proceeds.

As we try to push them (kicking and screaming) into bankruptcy to eliminate their debts and get them living within their means, us kids and our families are desperately trying to set aside enough funds from our own budgets to cover them when they’re unable to take care of themselves – before they need it.

I’d have gladly paid 10% more in my CPP contributions if it meant an additional $50 or $100 more for each of them every month.

But no. That little F’er, his (federal and provincial) taxpayer-funded pensions are all paid up. His wife’s (an Ontario MPP) too. He doesn’t need any more income to make ends meet, why should anyone else?

#18 Ralph Cramdown on 12.19.13 at 8:20 pm

Yeah, but F didn’t promise(ish) to enhance CPP once the budget was balanced, he promised to double the TFSA limit.

A higher TFSA limit will likely be preferable for various blog dogs here who have the knowledge, time and desire to manage their own investments effectively. But the average joe would be FAR better served having his money managed by CPP or OMERS with low overhead rather than the DIY, too much in cash and the rest chasing last year’s hot, 2.5% fee MF, the strategy that many investors use.

#19 Suede on 12.19.13 at 8:27 pm

700+530 a month.

If i get that at age 65 will i be able to trade it for more youth?

#20 Tri-Guy on 12.19.13 at 8:44 pm

Omers tells me that I can retire after 30 years of employment. I expect that number to rise to at least 35 when I’m ready to retire. Every municipality I’ve worked has around 3 boomers to every 1 gen y or x. They all say 1 more year to get a better return.

With more and more municipalities outsourcing to contractors (who don’t pay in) for sanitation, plowers, landscapers, paramedics, etc. the more omers members are screwed.

#21 kabloona on 12.19.13 at 8:44 pm

#17 Ralph:

Bingo….couldn’t have said it any better myself.

Much as it would help me personally, expanding TFSA contribution room does diddly squat for the vast majority of Canadians.

Bring on the TFSA doubling, Flaherty!!

#22 Bill Gable on 12.19.13 at 8:50 pm

Being a man of high principles, morals and a keen sense of
good old giving a damn about people, it must have made your life Hell, in Ottawa, sir.

That being said – I have to say something publicly and it makes me sad.

Too many people have been ‘grabbing for the piece of cake’ for a long time and now it’s time to pick up the tab.

Our blind stupidity with money and no clue how fast years fly by have left many of my cohort in deep doo doo.

But something REALLY gets me steamed. INTERNS. Especially in Media. 7000 print and 3700 radio and TV people have been gassed in the last 11 months.

The stations *controlled by one of SIX conglomerates*; get Interns in sweet deals with Broadcast schools and the kids are worked to death for three to six month, with the promise of a JOB and a Career, at the end of the rainbow.

What ho? Working for free – and then worse, just before the end of the internship, said hopeful is told, ‘eh, sorry, you didn’t make the cut’, and they start another crop of fools just bought in.

Working for NOTHING is called slavery. I am sorry, Mr. Turner, but I have thousands of my friends that have been sold out, I needed to vent.

Interns! Wake up – and if you get the shaft – get a lawyer.
The whole thing makes me sick.
It ain’t kosher, on any level.

#23 Son of Ponzi on 12.19.13 at 8:55 pm

No pensions for those who have not paid premiums.
And no OAS for those having more than 50k per year.
Problem solved.

#24 Questions on 12.19.13 at 9:02 pm

It’s not completely us. The us have a hard enough time negotiating mobile phone customer service let alone future planning. The us are inundated with noise and even the most clever find themselves trapped in hundreds of administrative hell-holes.

#25 Randy on 12.19.13 at 9:02 pm

Hey Garth….Pogo almost said it as well as you did….”We have met the enemy and he is us”……

#26 eddy on 12.19.13 at 9:05 pm

If anyone has friends or relatives who are mentally or physically disabled and eligible for the Disability Tax Credit, they should look at this. My brother opened one of these and the government matched his contribution (even going back a few years) with a substantial amount

http://www.servicecanada.gc.ca/eng/goc/rdsp.shtml

#27 -=jwk=- on 12.19.13 at 9:10 pm

No pensions for those who have not paid premiums.
And no OAS for those having more than 50k per year.
Problem solved.

What problem? both of those things are already true…

#28 Son of Ponzi on 12.19.13 at 9:15 pm

I heard that CMHC will require income verification beginning Jan 1st.

#29 Cici on 12.19.13 at 9:18 pm

#11 Smartalox

He means that he and others worry that government will remove the tax-free status at some point in the future, and subject the funds to high tax rates.

#30 Kolbie on 12.19.13 at 9:19 pm

Rather than everyone paying in to CPP that is then paid back to you based on how much you worked over your life, why not change the system to something like Australia. Your employer makes mandatory contributions to your RRSP as a part of your remuneration (around 10% additional). It is paid into an account at an “RRSP fund” and you choose whether you add more to it, and want it invested for safety, growth, or balance. You can’t touch the thing until 65, then you cash it out in the same way you do now. You literally get your fair share from your working life, it’s guaranteed to be invested with some growth, and none of it, other than the 15% tax, ever touches the government’s hands. All the funds are managed by industry groups, including some not-for-profit member run groups. The government can reduce employees to run CPP, can force employers into a pension-type scheme without putting future employees on the hook, and Canadians have a forced, much more liveable retirement plan. Seems better than doubling a plan that already doesn’t work.

#31 Ford Prefect on 12.19.13 at 9:30 pm

I am one of the boomer cohort. I have always said that if you are in this group you have to work hard to fail. So obviously most of this group worked very hard!

#32 Porsche on 12.19.13 at 9:30 pm

The simple reason RRSP’s and TFSA’s are not maxed, better yet not even contributed to… is because everyone is maxed out on that thing called a mortgage.

#33 Porsche on 12.19.13 at 9:34 pm

Thursday gold prices closed at their lowest level in more than three years falling through $1,200

#34 conan on 12.19.13 at 9:36 pm

I actually agree with the big F on this CPP issue. As far as doubling TFSA room I do not. Giving more breaks to people who already have enough money to save for retirement is stupid. What we really need is smarter government that does not bleed the nation dry over the long term. Taxes are too high and the recent crop of politicians want to raise taxes more. I think any politician that suggests any kind of tax increase should have to live on 30k for a year. Instead, get creative FFS.

#35 Porsche on 12.19.13 at 9:40 pm

What Fed tapering means for you

The Federal Reserve’s funneling of trillions of dollars into the economy over the past five years has provided a shot in America’s arm. The stimulus has affected consumers more than they realize, experts say, as will the tapering.

On Wednesday, the Fed announced it would begin to wind down the quantitative easing program known as QE3. Analysts say consumers should start to prepare now — especially those who are planning to buy a car or home within the next three to six months. “The stimulus program was supposed to boost spending going in, so it’s going to reduce spending going out,” says Peter Morici, economist and professor at the University of Maryland’s R.H. Smith School of Business.

http://www.marketwatch.com/story/what-fed-tapering-means-for-you-2013-12-18?mg=id-mw

#36 Brad on 12.19.13 at 9:55 pm

I know! I know! Why not create a housing bubble ala 40 year mortgages/low emergency rates so the boomers can fund retirement by selling grossly overvalued homes to the younger generation Brilliant!!

#37 Smudgekin on 12.19.13 at 9:58 pm

Young modest income? Rent close to work. Do without a car. Why feed big oil, the banks & insurance industry? Walk/transit to work. Buy a folding bicycle for the apartment. The money you save stuff in TFSA then RSP. Need to take an occasional drive? Get an Autoshare/Zipcar membership and an associated CC that gives zero deductible. Let the debtors commute & own 3-garage mcmansions.

#38 Ripped on 12.19.13 at 9:59 pm

#31 Porsche
The simple reason RRSP’s and TFSA’s are not maxed, better yet not even contributed to… is because everyone is maxed out on that thing called a mortgage.
……………………………………………………………………..

Contributing to that thing called a mortgage has totally blown away any returns of an RRSP or TFSA.

Not saying how much longer that will last but it’s sure set maximum returns the past 5 years.

Totally unbeatable!

#39 espressobob on 12.19.13 at 10:00 pm

#33 conan

Not that I disagree with you, but if you consider that a TFSA may in fact be more productive for low to mid income earners since all the gains are tax free. RRSP’s on the other hand are better for upper incomers that can dodge those higher taxes year end.

Just a thought along with a little stradegy.

#40 TurnerNatrio on 12.19.13 at 10:06 pm

Two things you’ll not hear again from the unreformed-Cons: Senate Reform and “China’s human rights record”.

It’s not good for Party business.

#41 Freedom First on 12.19.13 at 10:07 pm

Nice post Garth. The stark truth of reality. Reminds me of the story of the Grasshopper and the Ant. Grasshoppers don’t listen and learn until the consequences hit hard.

Debt is the money of the poor. Debt has become normalized today, and the majority have not learned that debt is the #1 enemy of your financial well being. The wealthy/people who will be wealthy, save and invest, while the poor/people who will be poor, have debt. Canada is becoming more and more a Nation of haves and have nots.

#42 economictsunami on 12.19.13 at 10:16 pm

The impact of poor retirement planning can be personally devastating; as too many under funded retirees (still carrying debt?) can also be very destructive, long-term for the Canadian economy.

Our lifestyles have been artificially juiced by debt for decades.

Just as living on a fixed income challenges your liquidity position, debt servicing costs for too many and inflation on daily basics will simultaneously eat away at their discretionary spending.

Western economies will be bidding against younger, more affluent emerging economies for increasingly costlier/ scarcer resources; further straining effective spending in our economy…

Asoka: The Looming Lost Decade…

http://tinyurl.com/l4pnyuc

#43 piazzi on 12.19.13 at 10:18 pm

Garth,

could you elaborate on this please:

“sell yourself assets you already own and get a tax refund for doing so”

#44 Victor V on 12.19.13 at 10:28 pm

http://ca.finance.yahoo.com/blogs/pay-day-/tfsa-becoming-tax-saving-dynamo-cash-161007418.html

The CRA doesn’t keep regular tabs on how much we’re tucking away in our TFSA’s on a national level but they do have a few telling facts. At the onset of 2013 more than nine million Canadians had tax free savings accounts – less than half of eligible Canadians 18 years or older. At last count the Canada Revenue Agency estimated the total value of assets in all TFSAs at $62 billion.

That means the average tax free savings account had a value of $6,900. A spokesperson for the CRA says that includes any gains on the contribution, which likely puts the average total contributions over the past four years well below the $31,000 limit.

Tax free savings account limits are becoming as pointless for most Canadians as registered retirement saving plan (RRSP) limits. The maximum RRSP deduction limit for the 2013 tax year is 18 per cent of earned income up to $23,820. A recent Sun Life Financial/Ipsos Reid poll found only 36 per cent of eligible Canadians even make contributions to their RRSPs. Another recent Bank of Montreal survey found the average RRSP contribution last year was only $4,670.

#45 No Cheerin’ for Yellen on 12.19.13 at 10:29 pm

No Cheerin’ for Yellen

The prospects for an unwinding of the Fed’s bloated balance sheet without even more damage to the economy and a return to a more reasonable rules-based monetary policy, are significantly diminished under a Yellen-led Fed. It is time, not to restore a rules-based policy, but to denationalize money. John P. Cochran

#46 Nemesis on 12.19.13 at 10:29 pm

A parable…

http://youtu.be/83IUvoNyICQ

#47 not 1st on 12.19.13 at 10:33 pm

The best rule change the govt can make is to let people collect current CPP and OAS while living full expat in Costa. Will help our medicare system too and get some wrinklies out of the country for good.

#48 Boomer21 on 12.19.13 at 10:36 pm

Excuse me Al and Freda, did you not think that you should know what you have invested in for your retirement, including what CPP and OAS would pay you at 65? Did you think that “mother government” should have kept you informed about what they would pay? Has everyone given up on taking any personal responsibility for their future? It is an easy phone call or Internet search on Service Canada web site to find out how much CPP and OAS you will receive at retirement. I am constantly amazed at how a lot of Canadians are surprised that when they retire they don’t know how much they will receive from CPP or OAS and then blame government!! for their lack of planning. CPP was only intended to be 25% of your retirement, the other 75% comes from RRSP, company pension (if your lucky) or a lot of personal saving and investment. OAS is a bonus if your income is not above $70,000 per person per year. So much education needed, Garth thanks for trying to educate daily but really what I see is a lot of “deer in the headlights behavior “. Keep calm and carry on I guess!

#49 Ole Doberman on 12.19.13 at 10:37 pm

Garth how do we earn $48K in dividends tax free?

#50 Ole Doberman on 12.19.13 at 10:37 pm

I thought dividends earned in a TFSA are indeed taxed.

#51 Mr. Frugal on 12.19.13 at 10:41 pm

Ed Beckley used to say “Watch what the poor people do … and then don’t do it”. We all need to take a good hard look at the future consequences of the decisions we make today.

Fifty years ago, I think you would have had a very hard time selling Prada purses for $700. Now, everyone seems have the latest and greatest. It’s really no wonder that people need so much to get by on.

The best savers would have no problem getting by on CPP and OAS with just a little bit of extra savings. The ones that are unable to set money aside are invariable unable to get by on the Canadian pension plan. It all comes down to your choice of lifestyle – are you a spender or a saver.

#52 InMississauga on 12.19.13 at 10:44 pm

On Mississauga Rd in Mississauga:

Offered first @ $10,888,000 in 2010
http://www.ambassadorfinecustomhomesinc.com/PDF/SaxonyManorAdSummer2010.pdf

Then :7500,000 http://priceypads.com/saxony-manor-7500000/

& now @ $1 (auction)
http://www.realtor.ca/propertyDetails.aspx?propertyId=13924709&PidKey=-1127505168

#53 Ralph Cramdown on 12.19.13 at 10:46 pm

#29 Kolbie — “Rather than everyone paying in to CPP that is then paid back to you based on how much you worked over your life, why not change the system to something like Australia. Your employer makes mandatory contributions […] and you choose whether you add more to it, and want it invested for safety, growth, or balance.”

Because most people are lousy investors, pay a far greater % in fees than a $10 billion fund does, and don’t know whether they’re going to die at 64 or 104. Other than that, it’s perfect.

#54 Ronaldo on 12.19.13 at 10:48 pm

#40 Freedom First

”Debt is the money of the poor. Debt has become normalized today, and the majority have not learned that debt is the #1 enemy of your financial well being.”

Unless it’s good debt of course.

#55 What's It To You? on 12.19.13 at 10:51 pm

They should not have called it a Tax Free Savings Account. It’s much more of a Tax Free Investing Account. The current name misguides people.

#56 Victoria - the Original on 12.19.13 at 10:51 pm

The bank said a typical Canadian bungalow requires 43.3% of household monthly pre-tax income based on mortgage payments, utilities and property taxes.

This year, in Victoria, an extra 1,000 families are requiring assistance for Christmas dinner. The Mustard Seed and Salvation Army can’t keep up with the demand. I said this before I wonder how many of these people are home-owners?

#57 Victor V on 12.19.13 at 11:05 pm

#48 here is your answer:

http://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/dividend-investing/you-do-the-math-almost-50000-in-earned-dividends-0-in-tax/article4599950/

#58 PopeRatzo on 12.19.13 at 11:11 pm

It’s possible that the only thing that can make things significantly better would be to put the entire financial sector into rocket ships and send them into space one-way.

Tell them there’s free money and free labor on Mars or something.

#59 bentoverpayingtaxes on 12.19.13 at 11:34 pm

All the more reason for the oil revenue to start flowing pronto. Todays advice to advance the pipelines west is a chance for little Canada to finally get the world price for our landlocked oil. Think of how many hospitals and schools we could build without having to raise taxes. Norway just announced it has 800 billion in Brent earned reserves that it can’t spend…despite the highest wages and sbest social infrastructure on the planet. Perhaps if we can beat back the American and Saudi oil lobbies who scream against Canada’s interests this will lead to a lowering of taxes allowing Canadians to spend more or save for retirement.

Lets face it….a people who are socked with 80% direct and indirect taxation don’t have a lot left over. The only people who are retiring with wealth are the civil servants on over generous public pensions.

And…aren’t there three legs to the Canadian pension scheme? CPP-OAS/GIS….adding up to $17850 p/a ? unless you make $114,815?

#60 sasquatch2099 on 12.19.13 at 11:43 pm

Said it before and again; My generation is going to work until the day we die.

#61 Coho on 12.19.13 at 11:43 pm

Why don’t we ask ‘Canada’s’ central bank…you know, the one we pay billions of dollars in interest each year to suspend interest payments for a couple decades until the wrinklies die off. Aren’t the owners rich enough by now lending money with nothing to back it. How nice for them.

We hear about entitlements and it seems people are ‘entitled’ to less each passing day. Soon the very air we breathe will owned by the owners of the system and classified as a privilege and not a right. But, come hell or high water, the central bankers get their cut. It comes right off the top and we’re left with fewer crumbs to fight over. Talk about entitlements.

Is it a mystery why there isn’t enough money for schools, hospitals, pensions and damn near everything else when 30% of our taxes go to these faceless creatures lurking in the shadows?

Yes, we’re all accountable for our actions, and that goes for those in the halls of power that seem to be throwing every temptation, every trap, every obstacle between the average person and prosperity.

The issue of who is at fault cuts both ways. Free money and easy payment terms to entice people to spend above their means is akin to pulling the garbage bag out from under the sink and leaving it out for the dog to tear into it while you’re at work. No matter how well that dog is trained and knowing full well the garbage is out of bounds, it is just a matter of time before he or she gives in. Left over chicken, especially Kentucky fried is a Will breaker! Just like free money.

#62 Cheep cheep on 12.19.13 at 11:44 pm

#49 – Ole Doberman – No income generated from investments within a TFSA is taxed. You make contributions with after-tax money but whatever you earn inside the TFSA is tax-free. And, unlike an RRSP, you don’t pay tax on it when you withdraw funds and it is not included in your “income” when determining whether you are eligible for benefits such as OAS or GIS.

I guess I fall into the “saver” category. Looking to retire in about 7 years – wish I had more time to beef up the TFSA – but have maxed out both it and RRSP even on my rather modest income. I only wish I’d known more about investments earlier but I’m learning a lot from Garth (and others). While there’s a lot written about risk aversion, I think the majority of people simply spend every penny they earn and then some. Saving money for retirement simply doesn’t give you the same high of buying a brand new car or latest electronic gadget.

#63 wallflower on 12.19.13 at 11:48 pm

People do not save. People do not plan.
Most of my peers have not saved, have not planned. (None of them have a pension.)
I have NO idea what they are thinking other than
Caribbean vacation $4K yes
Savings $0 yes
It’s a disaster rolling out … CPP plan augmentation is a complete waste for these people.
CPP augmentation or extension for irresponsible people?
That is what the Ontario government is proposing and the converse of that is forcing me, the one who saved, to pay for it.

#64 OlderbutWiser on 12.19.13 at 11:53 pm

Ole Doberman, the whole point of the TFSA is that anything earned in the plan is tax free. Garth is right that an individual can earn a significant amount of dividends paid by Canadian public companies without paying any Canadian tax. But those dividends need to be the only income you earn.

Mr. Fruga, I agree it is all about choices. I was shopping for Xmas presents today and was pricing out exercise wear in the Eaton Centre. A workout bra was priced at $70. I just bought a bunch in Florida for $3 each. Not a name brand but who gives a crap. They keep the “girls” in line. The problem is that today’s generation has been fed a load of [email protected]#t that they need to have name brand gear or they are less than human. What a pile of bunk. But then again I can afford to be choosy, I make high six figures and spend $3 on a bra, hahahahah! Man I love a bargain.

#65 World According To Garth on 12.19.13 at 11:55 pm

Or if your a Govt worker you get $5400 a month to sit in your hacienda in Mexico paid for by the working poor taxpayer.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Like Al and Freda, most people have no idea what crumbs they’ll receive when they stop working and start wrinkling. After paying into the plan for an entire career, the average benefit received is just $700 a month. The self-employed may get nothing. Ditto for stay-at-home moms. And the Old Age Supplement at 65 gives a paltry $530 monthly.

#66 Kothar on 12.20.13 at 12:01 am

I can tell you if the crazy liberal Wynn is going to force me to join some extra pension with more to come off my pay check. Then the amount I put in to TFSA or RRSP is going to go down. Not only that how is this going to be run. Is it going to be full of waste and corruption like every other liberal induced project.? What happens if this pool of money looses due to market foces does that mean tax payers have to pay more in? I want an opt out I refuse to pay into any ontario liberal slush fund!

#67 Retired Boomer - WI on 12.20.13 at 12:02 am

Garth, good post.

Retirement? In your 20’s it probably ain’t gonna be much of a thought. In your 30’s maybe, you are settled, with a kid or several… In your 40’s Get Moving cherry cheeks times NOT on your side….didn’t think about it til the kids are out of school? Too bad, you’re cooked, you CAN make up some time but, you will work longer to have any chance of a “decent” -by MY standards- retirement.

I didn’t start in earnest til my mid 30’s. HAD to put away a higher percentage than I would have needed to had I started 10 years earlier.

Math is VERY unforgiving. The magic of compounding is truly wonderful -IF you have taken a reasonable amount of risk with your money. IF you stuck only to GICS band bonds, you will get the low return that you deserve.

Can I make this any plainer? I do NOT like DEBT. Good, or BAD it still must be paid back out of non guaranteed further earnings. Do you REALY need whatever it is you are buying? Not smart enough to earn your way through school buck-o? Suggest you don’t go then, you don’t deserve to take up the space.

There are NO do-overs in retirement. Plan, and execute well, die early, or live in poverty it’s strictly YOUR choice.

Merry Christmas…BAH, Humbug! (expecting 3 ghostly visiters on next Tuesday……..BAH HAH,HAH,HAH!!!

#68 dienekes on 12.20.13 at 12:04 am

Watching TV last night a was startled by someone pounding on my basement entrance door, went to window, looked outside, saw neighbour, not at my door, but at his, smashing it in with a 20lbs sledge hammer. New weiser door locks froze on every door. They are junk, don’t buy them.
He carries huge debt levels, single income, 5 children. Now a thousand dollar door to buy. Typical Canadian.

#69 KommyKim on 12.20.13 at 12:15 am

RE: #26 -=jwk=- on 12.19.13 at 9:10 pm
No pensions for those who have not paid premiums.
And no OAS for those having more than 50k per year.
Problem solved.
What problem? both of those things are already true…

Sort of, except it’s not a 50K cutoff, but a gradual tapering from 71K till you get zero OAS at $114K.
One thing Garth never seems to mention is the GIS. The truly poor get both GIS and OAP for a max monthly total of $1,286.51 ($546.07 OAS + $740.44 GIS).

#70 LS in Arbutus on 12.20.13 at 12:15 am

I am with Garth on this one. Even if they doubled CPP contributions, how much more money is it going to give a contributor in the end? And people can barely afford payroll taxes now.. not to mention the expense to companies…

It’s pretty sad when the majority can work a whole lifetime and have no savings to show for it.

#71 Dean Mason on 12.20.13 at 12:27 am

Garth, the $530 a month GIS is income tax free.

When everyone seems to talk about this they always leave this point out.

GIS $530 a month tax free income is equivalent to a $750 to $1,060 RRSP, RRIF, pension, interest, annuity income etc., basically most retirement income.

In order to generate $750 to $1,050 in monthly interest from certain bonds in or out of an RRSP, registered accounts excluding TFSA’s, you would need between $200,000 to $300,000.

Using GIC’s which I agree is paying peanuts these days, most Canadians would need between $320,000 to $435,000.

Since you talk about not depending on just preferred shares and other dividend paying stocks, even with your 7.00% rate of return , people would still need anywhere between $125,000 to $180,000 in non-registered money.

We all know most people will not earn this rate of return because of many reasons but since $530 a month is income tax free, it skews the numbers by quite a lot.

Also, if you exclude the GIS, the next $12,000 of income from C.P.P., OAS etc. is also income tax free since the first $18,000 per 65 year and older Canadian taxpayer.

OAS is taxable. GIS is a supplement to the near-destitute. You do not want to receive it. — Garth

#72 chapter 9 on 12.20.13 at 12:30 am

#58 bentoverpaying taxes
new hospitals,schools,infastruture,debt reduction,the list is endless. Where can we find some cash to cover some of those costs. Let’s see! $2 billion 400 million That is the amount spent by the federal government and all the provincial governments in 2012 on official bilingualism.

#73 Dean Mason on 12.20.13 at 12:36 am

Sorry, I thought you said GIS but you were talking about old age pension but the world supplement is not really what it is called.

OAS is Old Age Security but it my point still stands, the first $18,000 for a 65 year old or 67 soon, is income tax free and a single person that has no savings or little money at all will get about $18,000 a year in C.P.P., OAS, GIS.

Provincial governments also have some supplemental pension benefits too.

There are other medical, dental and other benefits like the new $500 Ontario hydro grant if people can’t pay their bills.

#74 Pulp Faction on 12.20.13 at 12:40 am

The only reason you sucked as a politician is because you gave the average pee-on a chance in life.

Us minions thank you, the ones who listened anyway.

#75 Ronaldo on 12.20.13 at 12:41 am

#58 Bentoverpayingtaxes – ”And…aren’t there three legs to the Canadian pension scheme? CPP-OAS/GIS….adding up to $17850 p/a ? unless you make $114,815?”

Yes. See link below.

http://www.servicecanada.gc.ca/eng/services/pensions/oas/payments/index.shtml?utm_source=vanity+URL&utm_medium=print+publication,+ISPB-185,+ISPB-341&utm_term=/oasamounts&utm_content=Mar+2013,+eng&utm_campaign=OAS+Pension+2013,+Benefits+for+Low+Income+Seniors

#76 DR on 12.20.13 at 12:41 am

Benjamin Tal, deputy chief economist of CIBC World Markets Inc., said he’s not surprised to see the numbers produced by the IMF and said the shift could be towards renting now.
————————————————-
Does this guy Benjamin work???

Hes in almost every other article i read in a newspaper somewhere.

He must get paid everytime they “interview” him…….I have one article saved from April 2011. He stated that was the last good spring market.

#77 High Plains Drifter on 12.20.13 at 12:57 am

Alberta’s growth should take care of Mr. Turners moribund growth, expensive real estate conundrum, out west the money looks set to poor in. Send us a note, when you
are ready to sell us your sister’s corvette.

#78 TEMPLE on 12.20.13 at 1:03 am

#58 bentoverpayingtaxes on 12.19.13 at 11:34 pm

The only people who are retiring with wealth are the civil servants on over generous public pensions.

Why is it always a race to the bottom with you neocons? If civil servants get such good pensions, that makes you look pretty stupid for not being in the civil service, doesn’t it?

In reality (not something that you would know about, I suspect), most civil servants make wages that are comparable to, or below those in the private sector. In my profession, I am running at about 70-75% of what I would make in the private sector.

I also suppose you didn’t consider the massive pension contributions made by civil servants to their “over generous public pensions,” right? I had over 20% of my take home pay last year go directly into my pension plan (which I might not even be able to collect), along with a concomitant reduction in my available RRSP contribution room. Sound like a deal to you? Because it isn’t. It’s fair, and that is about all.

TEMPLE

#79 Nuke on 12.20.13 at 1:12 am

Neighbour put house on market for 1.4 mil. I got rent increase notice of .008 increase. Or $11 a month. The differential of rent to house price is starting to frighten me. At least I can fall back on a full CPP OAS for the both of us, nice 6 figure rrsp and 35 year vested pension.

Will try to max the TFSAs and take advantage of the new bull market.

#80 rp1 on 12.20.13 at 1:45 am

Stop spreading fear Garth. People aren’t going to be stuck with crumbs. Canadians look after each other. We have done so even in the hardest times. There is going to be real growth. If we need to raise taxes to pay for things and help people, we’ll do it.

#81 KommyKim on 12.20.13 at 2:05 am

RE: #48 Ole Doberman on 12.19.13 at 10:37 pm
Garth how do we earn $48K in dividends tax free?

Read this:
http://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/dividend-investing/you-do-the-math-almost-50000-in-earned-dividends-0-in-tax/article4599950/

#82 Bast on 12.20.13 at 2:06 am

Garth, two questions…
1) Why do you say self-employed people may not get CPP? I’ve been paying both employee and employer portions for years and will be mightily ticked if that happens.
2) How do you sell yourself an asset you already own and get a tax refund?
Gracias, amigo.

#83 rp1 on 12.20.13 at 2:12 am

“It’s not hard to see where this is going.”

I’ll tell you since you don’t know. It’s all getting flushed. That’s where it’s going. Good riddance.

#84 Scibadubadebumbado on 12.20.13 at 2:12 am

#21 Bill Gable on 12.19.13 at 8:50 pm
The stations *controlled by one of SIX conglomerates*; get Interns in sweet deals with Broadcast schools and the kids are worked to death for three to six month, with the promise of a JOB and a Career, at the end of the rainbow.

To add to your comment I think we should limit the number of stations any one individual can possibly be involved in or own any shares in to 5.
Newspapers or TV and Radio.
In Vancouver we have 2 majors Newspapers owned by the same company.
One conglomerate can tilt an election one way or another.

#85 Jay on 12.20.13 at 3:32 am

CPP should be eliminated. Two reasons why: 1) It gives people a false sense of security for their retirement 2) It’s a ponzi scheme; pay in now and hope to get back later from others. The government shouldn’t have anything to do with planning for people’s retirement. The fact you can’t opt out is ridiculous. Get rid of the whole thing and people can plan for their retirement and invest their money as they so choose.

#86 Buy? Curious? on 12.20.13 at 3:44 am

I know this married couple, 40’s, kids, who are both struggling in their self-employed businesses. They are so doomed! No pension, no pension, no inheritence, they are so doomed!

http://www.youtube.com/watch?v=F4BL9NfJYes

#87 Future Expatriate on 12.20.13 at 4:03 am

#16 Have you priced a can of Alpo lately?

Raising corn for gas instead of beef only raised beef prices 400% in five years. Including the hooves, bone, eyes, excrement, and testicles they grind up for Alpo.

Now THAT was a genius move.

#88 backwardsevolution on 12.20.13 at 5:34 am

The U.S. situation:

“So you have unemployment claims rising, existing home sales falling, home prices beginning to turn negative, rising mortgage rates, retail sales in the toilet, wages stagnating, corporate profits falling, Obamacare premiums crushing the middle class, gas prices at the highest December level in history, and Bernanke about to reduce his monetary stimulus. Of course the stock market should be at record highs.

Buy the All-Time High. Facts don’t matter in a country run by tyrants and inhabited by delusional believers.”

#89 sam marbot on 12.20.13 at 6:17 am

Why a housing bubble is good (but maybe bad for you)

The theme for this holiday season bedtime story is:
“Why I learned to stop worrying and love the property bubble.”

http://www.cbc.ca/news/business/why-a-housing-bubble-is-good-but-maybe-bad-for-you-1.2470614

#90 babs on 12.20.13 at 7:09 am

So Garth, would it better to have u.s. reits instead of cdn reits to prepare for retirement?

#91 Gord on 12.20.13 at 7:50 am

I could not agree more with you Garth. It is NOT the governments responsibility to support us through retirement, it is ours. If the government wants to help people from making dumb financial decision (like get too far in debt) then make it harder to borrow money and thus easier to save.

But doing something simple like that may not buy too many votes, so it will not likely get happen.

#92 bigrider on 12.20.13 at 7:58 am

I will just throw this out there. Not a gold bug at all but gold equities have bottomed.

Big drops for gold bullion yesterday and a few days past and the corresponding equities held in.

Get ready for gains in the equities (not necessarily the bullion) next year.

I will be buying gold equities today.

#93 Detalumis on 12.20.13 at 7:58 am

Not sure why people are crying for the poor, poor senior with nothing. This hypothetical $700 CPP guy also gets $350 in GIS and his OAS, he would have about $300 a month less to live on a month then fully half the working people in this country – the median earned income is only around 30K. With this extra $300 a month you are expected to pay all your work related expenses.

Seniors have the lowest rate of poverty of any demographic actually but keep those tears coming, it serves them well. I save mine for the personal care worker in your faux town making $12.50 an hour to wash senior butts but then that’s just me.

#94 Glen on 12.20.13 at 8:17 am

This will likely be said over and over: Garth for PM! Garth for PM! Garth for PM! Can’t speak French, Garth? No problem. Chretien couldn’t speak either official language. At minimum, you should be Finance Minister, without a micromanaging PM looking over your shoulder, to clean this mess up.
Merry x-mas Garth!

#95 GTA SFH catch of the day -some exceptional sales on 12.20.13 at 8:37 am

Average declared percentage under asking price: -4.16%

http://img440.imageshack.us/img440/6870/5z9w.jpg

There are some catastrophical sales highlighted on the map, look at the out of GTA area(Barrie, Georgina, Uxbridge) I just wonder what was the rash for these buyers to sell for -30% …
I am starting to regret that I did not watch the cottage country market closer. That might be a good indicator of what is going on.

#96 T.O. Bubble Boy on 12.20.13 at 8:39 am

Also, if you exclude the GIS, the next $12,000 of income from C.P.P., OAS etc. is also income tax free since the first $18,000 per 65 year and older Canadian taxpayer.

OAS is taxable. GIS is a supplement to the near-destitute. You do not want to receive it. — Garth
——————–
Exactly – there are some government tax breaks / handouts that you really should not feel good about qualifying for (unless you are in the unfortunate situation where you need them).

Kinda like a guy at work the other day celebrating his capital losses because they reduce his capital gains bill. I’d rather have not lost money in the first place. Is anyone happy about getting fleeced on RIM and others?

#97 T.O. Bubble Boy on 12.20.13 at 8:41 am

(Not that I’ve ever directly owned RIM/Blackberry… But there are always some stinkers)

#98 recharts on 12.20.13 at 8:45 am

#81 Bast on 12.20.13 at 2:06 am
Garth, two questions…
1) Why do you say self-employed people may not get CPP? I’ve been paying both employee and employer portions for years and will be mightily ticked if that happens.
2) How do you sell yourself an asset you already own and get a tax refund?

1) misinformed
2) you transfer it from the corporation to yourself. Depending on the nature of the asset you might right off some losses

(a) If you make such contributions, you are covered. Most self-employed do not. (b) It’s called a ‘contribution in kind’ to an RRSP. Nothing to do with corporate assets. — Garth

#99 economictsunami on 12.20.13 at 9:02 am

Interesting take on the US housing ‘recovery’…

Housing “Bubble 2.0″; Same as “Bubble 1.0″, only different actors…

http://mhanson.com/archives/1546

#100 TurnerNation on 12.20.13 at 9:09 am

I mentioned this name the other day. Could happen here? Bet they are salivating.
BX.US. Never take your eyes off the smartest guys in the room.

http://www.bloomberg.com/news/2013-12-20/wall-street-unlocks-profits-from-distress-with-rental-revolution.html

Though he’s occasionally mistaken for a thief, Futral, 37, is working for Blackstone Group LP (BX), one of the world’s most sophisticated investors. For the past 18 months, he’s picked locks, shimmied under garage doors and crawled through windows to get into foreclosed homes the company has bought.

The locksmith is a cog in a machine assembled by Blackstone to build a rental-home empire across the U.S. In less than two years, the New York-based firm has bought 41,000 properties, most out of foreclosure, in 14 metro areas to become the largest single-family landlord in the country. It’s hired more than 10,000 plumbers, leasing agents and lawyers to transform a mom-and-pop business into one of Wall Street’s hottest investments.

….

And you’ll never again hear the unreformed Cons mention “Senate Reform” or “China’s human rights record”. Gets in the way of Party Business. Even Door #2 Lil Tru-doh is on board.

#101 Catalyst on 12.20.13 at 9:29 am

I have a hard time feeling sorry for current seniors who refused to save, bought granite & ever bigger houses, payed lower percentages of their pay then current workers and are entitled to more. And they call millennials’ the entitled ones!

#102 Fortune500 on 12.20.13 at 9:38 am

A chance to put your money where your mouth is people

http://www.theglobeandmail.com/report-on-business/the-hard-landing-hedge-fund-a-new-way-to-bet-against-housing/article16063936/

#103 Stickler on 12.20.13 at 9:40 am

If you don’t pay your self first (by saving), then you are cheating yourself.

People with no money saved should not buy the latest i-gadget, or designer clothes, bags, boots, or a BMW.

A little perspective…
79% of India’s population lives on less then $2.00 per day.

#104 RVP on 12.20.13 at 9:46 am

It’s snowing in Vancouver!

#105 Stickler on 12.20.13 at 9:49 am

@ #87 backwardsevolution on 12.20.13 at 5:34 am

The U.S. situation:

“So you have unemployment claims rising, existing home sales falling, home prices beginning to turn negative, rising mortgage rates, retail sales in the toilet, wages stagnating, corporate profits falling, Obamacare premiums crushing the middle class, gas prices at the highest December level in history, and Bernanke about to reduce his monetary stimulus. Of course the stock market should be at record highs.

Buy the All-Time High. Facts don’t matter in a country run by tyrants and inhabited by delusional believers.”

————————
Asset price inflation?

Some think that it is the consequence of a natural reaction of investors to the danger of shrinking value of practically all important currencies.

Which seems to them highly probable due to the tremendous world wide growth of the mass of money & credit.

Their preference for real goods pushes their price up without any purposive policies from decision-makers.

Typical assets are financial instruments such as bonds, shares, and their derivatives, as well as real estate and other capital goods.

#106 Steven on 12.20.13 at 9:52 am

Canadians think that if they get a job, buy a house, pay their taxes, be open minded, bend over for politically correct special interests and vote for the appointed politicians on the ballot that they will live for ever in lollipop land and only good things will happen. Wrong suckers! You will all find out the hard way that you are ruled by official organized crime syndicates, 2+2=4 and the so called powers that be don’t actually give a hoot in hell about you. They just want your power and your money the rest is expendable. So Garth do I get my degree in political science?

#107 Ronaldo on 12.20.13 at 9:59 am

#97 Stickler –

”A little perspective…
79% of India’s population lives on less then $2.00 per day.”

Interesting. That is how much we used to budget for food ($60 /mo) back when I was first married in 67. I wonder what they can buy with that $2.00. Today, we pay that much for a cup of coffee, except at Timmies of course. So much for inflation.

#108 Rational Optimist on 12.20.13 at 10:04 am

#5 not 1st: “Garth, did it ever occur to you that people may not trust the govt so they don’t stick money into their TFSA.”

Wait a minute: because Canadians don’t want to save and invest their money in a vehicle which theoretically could be confiscated by the government (right), they’ll ask the government to tax them and hold on to the money for them; pay people to invest it; and then give them a stream of income based on a calculation that can and does change from one year to the next, and that is sufficiently complicated that they won’t bother to even try to figure it out?

Did I miss something?

#109 quebec economist on 12.20.13 at 10:04 am

Garth you didn’t suck as a politician…
people thought you sucked. Its not the same, almost.
I voted for you at the PC convention.
Happy Holidays.

#110 Ronaldo on 12.20.13 at 10:18 am

#100 Catalyst on 12.20.13 at 9:29 am

”I have a hard time feeling sorry for current seniors who refused to save, bought granite & ever bigger houses, payed lower percentages of their pay then current workers and are entitled to more. And they call millennials’ the entitled ones!”

I would venture to guess that those seniors that you refer to are in the minority and those that did do what you claim were probably very able to afford it.

Most seniors that I know are not in that category. My parents generation certainly weren’t. Keep in mind that the boomer generation spans 20 years and there is quite a difference in spending patterns between the top end and the bottom end.

Credit for one thing was not as easily available as it is today. You almost had to prove you didn’t need the money to get a loan and they wanted 100% collateral for the most part.

Today, they will lend money to anyone with a pulse. It is the generations below the boomers who spend like there’s no tomorrow. The same ones that have a hard tine leaving home. The new 20 is now 30.

#111 gladiator on 12.20.13 at 10:27 am

@63 OlderButWiser:
I always wondered how people use this expression: “six figures”. Is “high six-figures” somewhere around 750,000 dollars and up, because the highest six-figure number I know is 999,999.
So can you or someone else clarify this for me?
Cheers.

#112 Ronaldo on 12.20.13 at 10:32 am

#85 Buy Curious? – re: the 100 yr old working at Walmart.

All I can say is good for him. If I live to be that long and still capable of doing what he is and not staying at home and withering away, I would do it too whether I needed to or not. Retirement is not all that it is cracked up to be. Have seen many people with hoards of cash just wither and die. What was it all for?

#113 Just some guy on 12.20.13 at 10:37 am

There are no short term fixes for the people who will have to suffer through an inadequately-funded retirement. I feel for them.

I think people need to understand the basics of investing, how compound interest works, and the concept of budgeting. They also need a better understanding of history, particularly as it relates to hardship and suffering and how ridiculous and wrong commonly-held beliefs were in hindsight. The Dutch Tulip market, the 1929 stock market crash, the dot com crash, and the early 21st century (soon to be) Canadian housing crash come to mind.

If I had my way, I would set up a television show that would feature the Jar Lady and Garth the Impaler. I think the JL’s “reality” programs where she harasses and embarrasses the people who are bad with money are effective but I don’t think her efforts are complete. The natural complement to the “bad cop” portion would be Garth the Good coming in to show the participants how they can recover and prosper.

This will never happen but I think it would be entertaining, especially a coda in which the Jar Lady and Garth dance around looking for openings to take shots at each other. And then, Smoking Man could appear as an oracle shrouded in smoke, telling the audience what they learned in tonight’s episode and to cast off their chains and be free.

#114 Ronaldo on 12.20.13 at 10:38 am

#84 Jay – ”Get rid of the whole thing and people can plan for their retirement and invest their money as they so choose.”

The problem is Jay is that people won’t. Garth has already covered this point. The government is doing everything it can giving incentives for people to save but they don’t take advantage of it. Ends up that these tax deferred programs end up being great for the top 5 or fewer percent. You can lead a horse to water but you can’t make it drink. The only way it will work is if its made mandatory. People are a stubborn lot but like to complain and blame the government for their bad decisions.

#115 Country Girl on 12.20.13 at 10:41 am

Another excellent post, Garth.
Too often, children live what they learn from their parents about spending and investing.

Wanted to share this article, it summarizes opposing perspectives:
“Has the fed been fueling bubbles? You be the Judge”
http://tinyurl.com/mkjugct

#116 Mr Happy on 12.20.13 at 10:45 am

#7 Gladiator on 12.19.13 at 7:57 pm
Garth, nowadays everybody is talking about how they or someone they know got rich with real estate. Who cares about TFSAs? A drop in the bucket and it also requires brainwork to choose where to put their money. And lastly, who trusts those crooks in capital markets who milk those very markets to their own benefit?
Sarc off

——————

It’s true. I made a fortune off of real estate.

That is because I sold almost all of it and am growing that fortune by properly investing. NOT by buying more real estate.

There is a time for everything… Real estates time is over!

#117 Ronaldo on 12.20.13 at 10:48 am

#72 Dean Mason –

”There are other medical, dental and other benefits like the new $500 Ontario hydro grant if people can’t pay their bills.”

Dean, I understand also that a person who is collecting OAS CPP and GIS that in addition to the $18000 can earn an additional $3500 or so from ”employment” income without affecting the other benefits (clawback).
So in effect, they can earn around $22,000 counting in some tax credits basically tax free. The equivalent of earning around $28,000 or so tax free. (single person)
Am I correct here

#118 Mr Happy on 12.20.13 at 10:49 am

#110 gladiator on 12.20.13 at 10:27 am
@63 OlderButWiser:
I always wondered how people use this expression: “six figures”. Is “high six-figures” somewhere around 750,000 dollars and up, because the highest six-figure number I know is 999,999.
So can you or someone else clarify this for me?
Cheers.

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

If you require clarification for that???

Enjoy working at Walmart…..

#119 Ronaldo on 12.20.13 at 10:50 am

“The equivalent of earning around $28,000 or so tax free. (single person)“

I meant to say $28000 or so before tax.

#120 Canadian Watchdog on 12.20.13 at 10:52 am

So it begins.

Silver Streams Homes Inc. of Richmond Hill files for bankruptcy.

http://www.silverstreamshomes.com

That's what happens when your sales tumble and cash flows burns out. Next…

#121 Bottoms_Up on 12.20.13 at 10:58 am

#33 conan on 12.19.13 at 9:36 pm
—————————————
Exactly. The people that contribute to RRSP/TFSAs these days are wealthy considered to most Canadians. We need policies that help those that are living paycheque to paycheque. We need a better social safety net for young families and those just starting their careers (read the post above about unpaid interns). $100 a month for a child is a slap in the face these days. Yes it helps….pays about 1/2 the hydro bill, or a case of formula and box of diapers. And daycare (per child) should be the equivalent of a mortgage payment? Some families have a mortgage payment, plus 2 or even 3 more mortgage (daycare) payments.

#122 Daisy Mae on 12.20.13 at 11:07 am

#50 Mr Frugal: “Now, everyone seems have the latest and greatest. It’s really no wonder that people need so much to get by on.”

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

A classic example of money wasted is the use of disposable diapers. They are EXPENSIVE…and take forever to break down in landfills. Cloth diapers are still available but no one will consider that option.

#123 Infused with Opiates on 12.20.13 at 11:09 am

“If you make such contributions, you are covered. Most self-employed do not.” – GT

Huh? I do, as well as the other half of the contribution. I may be able to start skipping some as I can switch to collecting dividends from my business. Is this the
situation are you referring to?

http://www.allabouttax.ca/32-canada-pension-plan-cpp-for-the-self-employed.html

#124 Average Age on 12.20.13 at 11:12 am

“The average RRSP is now less than $50,000 and the average age for owning one is 46.”

What do you mean by “the average age for owning one is 46”?

The average age for opening an RRSP account?

Average of holders. — Garth

#125 SofaKing on 12.20.13 at 11:13 am

No! degrees are not worthless. “I have a realtor’s licence, so that makes me a professional :-)”

something I overheard not long ago.

#126 Stickler on 12.20.13 at 11:27 am

@ 111 Ronaldo on 12.20.13 at 10:32 am

#85 Buy Curious? – re: the 100 yr old working at Walmart.

All I can say is good for him. If I live to be that long and still capable of doing what he is and not staying at home and withering away, I would do it too whether I needed to or not. Retirement is not all that it is cracked up to be. Have seen many people with hoards of cash just wither and die. What was it all for?

—————————

So work at Walmart, or stay at home to wither & die…you sure there aren’t more options?

#127 Ralph Cramdown on 12.20.13 at 11:32 am

#90 Gord — “I could not agree more with you Garth. It is NOT the governments responsibility to support us through retirement, it is ours.”

Are you governed by Martians?

There seems to be a lot of stupid on here about pensions. ‘Tis the season, so I’ll be charitable and assume it’s just ignorance.

If you pay into a pension, you don’t have to save as much as you otherwise would to get the same benefits. Why?

1) Some people will die at a younger age than you, and at a younger age than the average lifespan. They subsidize the rest. That’s a feature, not a bug.

2) The pension trustees can invest for the long term, even if you’re 71 and collecting already. An individual investor, unless very rich, MUST switch to less risky, lower returning assets as he ages.

3) Big pension funds can afford to diversify and invest in illiquid asset classes, with low expense ratios that are impossible for individual investors to replicate.

4) The biggest pension funds can afford to hire top asset managers and still have very low overhead.

In 2013, a reasonably learned person who wants to talk about retirement funding ought to understand this… The Scots understood it two hundred years ago.

http://goo.gl/G1jMX9

#128 ozy - there is a REASON on 12.20.13 at 11:32 am

There is a reason why RE (causal effect) is so damn expensive in TO

and the news is that it will continue to do so, no macro changes in kanatian younger generation “thinking” expected not the way govt, banks and other cheerleaders of all benefiting industries will behave

take my forecast, 416 freeholds especially detached or even semis in old city of TO (best areas) will continue their crazy climb in prices well after the MACRO variables start to adjust CLEARLY.

That being said, 1 year more after the 5y mortgage rates reach 5% – and today smart fellas can get 3.5%

so maybe 3-4 more years of muted 5-8% per year appreciation

then is going to come a 25% sudden drop, so it will revert to 2013 prices nothing behind. Then flatten for 5 years, then recover the peak in another 10 years.

now go do your projections based on this scenario, what if it is true?????

not going to get my gold piece for this service to houseless people (I was about to say homeless) – but hey it’s christmax lol

hope santa will deliver my sweet girl for two week of disconnect, see u all in Jan and beyond

#129 Daisy Mae on 12.20.13 at 11:35 am

#63 Otherbutwiser: “But then again I can afford to be choosy, I make high six figures and spend $3 on a bra, hahahahah! Man I love a bargain.”

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

And to think that the company was still making a profit on the $3. They’re not selling for less than cost. I love bargains, too! Good for you! LOL

#130 SofaKing on 12.20.13 at 11:38 am

#22 Son of Ponzi

Spot on. There are way too many greedy wrinklies currently double and triple dipping in their retirement with a HUGE fcuk’n sense of entitlement while they demand generation x,y,z to suck it up and work longer to expect less.

#131 Nemesis on 12.20.13 at 11:39 am

QuantitativeFridayMischief….

[BloomBergBizWeek] – Chinese Students Major in Luxury Cars

…“Most schools are recruiting [Chinese] students for whom the difference between a $20,000 and a $40,000 education is a rounding error,” Krommenhoek says. “This is a very attractive demographic for foreign brands.”

Chinese students in the U.S. purchased about $15.5 billion in new and used vehicles in 2012 and 2013 through October, according to Art Spinella, president of CNW Marketing Research.

His figures, based on car sales, student and family visa data, and other factors, include Chinese students attending high school, undergraduate, and graduate institutions in the U.S. A comparable group of American students purchased $4.7 billion in vehicles…”…

http://www.businessweek.com/articles/2013-12-19/chinese-students-in-u-dot-s-dot-boost-luxury-car-sales#r=lr-sr

#132 angela on 12.20.13 at 11:55 am

great article

Now I’m worried. — Garth

#133 angela on 12.20.13 at 12:12 pm

Now I’m worried. — Garth
I like what you write about when its Canadian realestate canadian economy ,pensions but you suck at monetary science and political science ,world macro economics

I see. I’m smart when you agree with me. — Garth

#134 rosie "moving forward" in the knowledge that, "this won't end well" on 12.20.13 at 12:20 pm

#129 sofaking

Get off the couch, get to work and keep paying for all my pensions. Lazy millenials.

#135 angela on 12.20.13 at 12:36 pm

Blackberry lost 4.4billion and is up 15% as of this writing gee I wonder why people don’t trust anymore there are no fundamentals

#136 Scibidubadebumbado on 12.20.13 at 12:37 pm

#58 bentoverpayingtaxes on 12.19.13 at 11:34 pm

I agree with you. The US has no interest in completing Keystone XL to Texas because they get our oil for $20 to $40 less without it. What a rip off.
They also have more hegemony over us politically if we cannot get the Pipeline to the west coast.
They know they can use their bully pulpit to wrestle Disney copyright laws through the Pacific Free trade agreement.
We will also pay more for drugs and we will lose more of our sovereignty through Supranational courts.
They will force our Internet providers to police our downloading and cut us off after the 3 strikes rule.(Disney law again)
IF it is good for the largest corporations and bad for small business and individuals, then it is in this agreement.
http://www.huffingtonpost.ca/2013/11/13/tpp-canada-trans-pacific-partnership_n_4266866.html

#137 Paul on 12.20.13 at 12:39 pm

128 Daisy Mae on 12.20.13 at 11:35 am

#63 Otherbutwiser: “But then again I can afford to be choosy, I make high six figures and spend $3 on a bra, hahahahah! Man I love a bargain.”

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

And to think that the company was still making a profit on the $3. They’re not selling for less than cost. I love bargains, too! Good for you! LOL
=====================================
18 ,A, cup Half Price

#138 Shawn on 12.20.13 at 12:43 pm

DB Pensions are inherently bettrer than DC or RRSP or even TFSA

Ralph Cramdown at 126 said:

If you pay into a pension, you don’t have to save as much as you otherwise would to get the same benefits. Why? (Then he gave the reasons)

********************************************
Absolutely correct but seldom understood.

This is why it is a shame that DB pensions are being tossed. They need to be tweaked not tossed. The demise of DB is a real tragedy. Fix, don’t kill the DB.

The other issue is government versus personal responsibility.

I would say it is mostly a personal responsibility. But we need the ability to be in group plans for the reasons Ralph gave. Governments can be part of the solution. I see CPP as a good thing.

But not sure it should be expanded…

#139 Mixed Bag on 12.20.13 at 12:45 pm

#112 Just some guy on 12.20.13 at 10:37 am

This will never happen but I think it would be entertaining, especially a coda in which the Jar Lady and Garth dance around looking for openings to take shots at each other. And then, Smoking Man could appear as an oracle shrouded in smoke, telling the audience what they learned in tonight’s episode and to cast off their chains and be free.
———————————————–

That made me laugh, sick today and out of sick days, so thanks. Really.

#140 onpar on 12.20.13 at 12:54 pm

Hey Garth,
I begged and pleaded with both my siblings to set up a TFSA and fill it with a diversified basket of index ETFs. I was shocked how difficult it was to explain — might was well have been speaking Chinese. It’s too bad we don’t have some kind of class for the youth of this country to plan for their financial future.
Great blog, sir.

#141 Bigrider on 12.20.13 at 1:25 pm

I have lived in T. O all my life and have visited Vancouver.

I can’t figure out what is so special about these two cities that they should command the highest housing price multiples of any measure , globally in the world.

Is it the eternal gridlock , the wonderful two season climate( construction and winter) the infrastructure dating back to the 1960’s ?? Help what is it??

I am ready for all the ” you can leave ” BS that I expect to be heaped on me.

#142 nelson on 12.20.13 at 1:28 pm

121 Daisy Mae on 12.20.13 at 11:07 am

A classic example of money wasted is the use of disposable diapers. They are EXPENSIVE…and take forever to break down in landfills. Cloth diapers are still available but no one will consider that option.

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

Yes, and let’s start making our own soap and candles again, too! People these days with their electric light bulbs. what a waste of money

#143 DML on 12.20.13 at 1:43 pm

#49 Ole Doberman on 12.19.13 at 10:37 pm
I thought dividends earned in a TFSA are indeed taxed.

U.S. dividends are subject to a 15% withholding tax in a TFSA.

#144 SofaKing on 12.20.13 at 1:46 pm

@rosie

Better yet, I’ve been emailing MP’s around this country to cap mofos like you on how much retirement income is allowed so you’ll get diddly-squat from CPP & OAS. See… there are solutions for the self-entitled boomers.

#145 This one is for Smoking Man on 12.20.13 at 1:50 pm

Hi SM – I got this in my inbox this morning and immediately thought of you…

NOMINATED FOR — BEST E-MAIL OF THE YEAR

After being interviewed by the school administration, the prospective teacher said:

” Let me see if I’ve got this right.

You want me to go into that room with all those kids, correct their disruptive behaviour,

observe them for signs of abuse, monitor their dress habits, censor their T-shirt messages

and instil in them a love for learning.

You want me to check their backpacks for weapons, wage war on drugs and sexually

transmitted diseases, and raise their sense of self esteem and personal pride.

You want me to teach them patriotism and good citizenship, sportsmanship and fair play,

and how to register to vote, balance a chequebook, and apply for a job.

You want me to check their heads for lice, recognize signs of antisocial behaviour, and

ensure that they all pass their final exams.

You also want me to provide them with an equal education regardless of their handicaps,

and communicate regularly with their parents in English, Arabic or any other language,

by letter, telephone, newsletter, and report card.

You want me to do all this with an outdated computer, a piece of chalk, a blackboard, a bulletin board, a few
books, a big smile, and a starting salary after 5 years of university that is laughable.

You want me to do all this, and then you tell me……

“Merry Christmas ” because someone might take offence? “

#146 45north on 12.20.13 at 1:51 pm

rosie: #129 sofaking

Get off the couch, get to work and keep paying for all my pensions.

mine too

#147 Bill Gable on 12.20.13 at 1:55 pm

83 Numbers From 2013 That Are Almost Too Crazy To Believe: (*This was so astounding, I just about needed Oxygen):

(Just one) > Right now, four of the “too big to fail” banks each have total exposure to derivatives that is well in excess of 40 trillion dollars.

RUN!

LINK: http://tinyurl.com/k8qrbcc

#148 rosie "moving forward" in the knowledge that, "this won't end well" on 12.20.13 at 1:58 pm

#143 sofaking

Quit wasting your time bothering M.P.’s. The wrinkly boomers elect governments around here. Now get back to work.

#149 Canadian Watchdog on 12.20.13 at 2:07 pm

Via FT (paywall)

December 20, 2013 11:14 am
Canada bubble fears stoked by launch of short-focused Spartan fund

By Camilla Hall in New York

Investors in Canada are to get the chance to bet against their own real estate market as one of the first short-focused funds is set to launch in the country, where concerns have grown that there is a housing bubble ready to burst.

The Spartan/Libertas Real Asset Opportunities Fund, set to launch in Toronto in the first quarter of next year, will allow Canadian brokers, developers or pension funds to mitigate their exposure towards a possible downturn in the real estate market, Michael Brown, manager of the fund told the Financial Times.

The new fund reflects broader investor interest in shorting or hedging risk to Canada after high-profile names from Steve Eisman, featured in Michael Lewis’s The Big Short, to Robert Shiller, the Nobel-prize winning economist, have raised questions over the challenges facing the Canadian real estate market.

Under the watch of Mark Carney, the former Bank of Canada governor who now holds the same job at the Bank of England, the country weathered the global financial crisis better than many industrialised peers. But low interest rates have encouraged soaring property prices and household debt levels which many economists say are unsustainable.

“The thesis behind the fund is that the Canadian housing market is one of the most overvalued in the world,” said Mr Brown. “A lot of things people observed in the US in the run-up to 2007-8 crisis are happening here.”

The OECD has ranked Canada as one of the countries most at risk of a price correction, especially if borrowing costs increase or income growth slows. Deutsche Bank recently said Canada is the most overvalued market in the world, with a 60 per cent overvaluation, above Belgium and Norway.

Canada’s average home price index has increased 20.2 per cent in the past 36 months, according to the Canadian Real Estate Association. Average existing home prices in Canada were at C$391,997 in November, 50 per cent higher than in the US, according to analysis by BMO Capital Markets.

Canada bears point to how low interest rates and the government’s backing of the mortgage market – by insuring home loans – have fuelled a real estate bubble and worse, stoked a consumer borrowing binge.

The ratio of household debt to disposable income has grown to 152 per cent in Canada, near to the US peak of 165 per cent, according to a December report from Canada’s central bank.

The level of the government’s involvement in the mortgage boom has drawn the attention of the International Monetary Fund, analysts and regulators as the portfolio of home loans insured by the Canada Mortgage and Housing Corporation has swelled to $560bn.

“When something gets that big, even governments get nervous,” Mr Eisman, founder of Emrys Partners told a conference in New York in May, attracting the attention of global investors.

But, since May, shares in mortgage company Home Capital Group – singled out by Mr Eisman – have increased more than 40 per cent and stocks of Genworth MI Canada have risen more than 30 per cent.

The new fund is being launched through Toronto-based Spartan, a multi-fund investment platform for individual hedge fund managers. Mr Brown was a managing director and partner of Enterprise Capital Management, a small, privately owned hedge fund sponsor.

While Mr Brown would not give specifics of the trades, the fund could look at strategies such as shorting equities or buying put options to bet on asset price declines, an alternative method of hedging.

It will bet on price declines across asset classes from equities, to fixed income and target sectors such as financial companies and real estate-linked companies, as well as the currency, said Mr Brown.

Goldman Sachs has recommended shorting the loonie, as the Canadian currency is known, as one of its top 2014 trades. In a separate report, Goldman also warned of the risks of overbuilding in Canada and said price declines could be “quite significant” in the event of a housing bust.

However, Canadian companies and banks are quite resolute in their rejection of the hedge fund bears and in particular, the comparisons they make with the US subprime mortgage crisis.

“[Canadian] Banks don’t lend money to people who can’t afford to buy houses and can’t afford to service the mortgages,” Gordon Nixon, chief executive of the Royal Bank of Canada told the Financial Times

—-

Thanks for reassuring Canadians Gord. Make sure you close the door on your way out. You too Ed.

#150 Son of Ponzi on 12.20.13 at 2:10 pm

Ralph Cramdown.
Thank you for being so patient with us idiots.
Marry Christmas.

#151 Son of Ponzi on 12.20.13 at 2:14 pm

# 141
Guess what. people are starting to grow their own vegetables again.
Many young people don’t own cars anymore.

#152 Smoking Man on 12.20.13 at 2:20 pm

Good Morning Dogs

What a hangover……. Don’t even know how I made it home. Did an amazing post during my accumulation of drinking JD in a beer glass last night.

Not sure which blog it ended up on. If some finds it, send me the link.

#153 waiting on 12.20.13 at 2:21 pm

I guess we have nothing to worry about …

“[Canadian] Banks don’t lend money to people who can’t afford to buy houses and can’t afford to service the mortgages,” Gordon Nixon, chief executive of the Royal Bank of Canada told the Financial Times. ”

really …

#154 Son of Ponzi on 12.20.13 at 2:21 pm

Blackberry loses 4.4 b.
Shares up.
Go figure.

#155 Ralph Cramdown on 12.20.13 at 2:22 pm

Remember folks. If you’re going to appoint someone with no insurance experience and very little senior executive experience (President at Osler Bluff Ski Club, anyone?) as president and CEO of CMHC, the Friday before Christmas is an excellent time to bury the news.

Carry on.

#156 45north on 12.20.13 at 2:38 pm

Bigrider: I have lived in T. O all my life and have visited Vancouver.

I can’t figure out what is so special about these two cities that they should command the highest housing price multiples of any measure , globally in the world.

back in the 1950’s Montreal was the biggest city in Canada. It grew steadily but in the 1960’s Toronto overtook Montreal. You were part of the massive influx of Italians to Toronto.

In my case I can see that my parents were motivated by the discipline of rural Ontario and the experience of the depression. They applied their energy to Toronto. My father worked as a chemical engineer and my mother as a teacher.

In short, the industry and discipline of the people made Toronto special. So it’s a nice place from which to start but it’s not enough. It’s going to get harder and tougher to raise a family – it already is.

#157 Time Bandit on 12.20.13 at 2:41 pm

#77 TEMPLE

Poor guy, I feel sorry for you. I guess you really have no clue as to what people are dealing with just to pay the rent and put food on the table. Sense of entitlement is so obvious. Please, if the private sector is so attractive why are you still sucking on public tit? Or maybe you cant find a job in the private sector, which is an obstacle many people are faced with in today’s climate. I’m sure may individuals will be willing and ready to assume your position including any pension payments.

#158 Victor V on 12.20.13 at 2:43 pm

http://business.financialpost.com/2013/12/20/saskatchewan-premier-says-timing-is-wrong-to-double-canada-pension-plan-rates/

REGINA — Saskatchewan Premier Brad Wall says he doesn’t want to see an increase to contribution rates for the Canada Pension Plan, at least right now.

“I just don’t think it’s right for the Canadian economy right now and we have to take a national view of this,” Wall said on Dec. 18 at the legislature.

#159 Shawn on 12.20.13 at 2:46 pm

COMPOUND INTEREST AND COMPOUND RETURNS

This is a year when some long-time investors get to really experience the wonders of compound returns.

Imagine that by investing for many years the $100k that they saved is now worth $400k.

And then imagine that due to the huge gain in the S&P 500 they managed a gain of 25% this year.

That’s $100k. That’s 100% of their total original investments. That is sweet.

Or imagine it with $250k now worth $1 million and they made $250k in one year.

It is possible after 25 or 35 years of investing…

Some people are definitely experiencing it this year.

Most not with 25%, but even at 10%, after a long while that 10% is earning on a lot of money…

Anyhow, experiencing the joys of compound interest and compound returns and how it can work in the long term is a very nice thing.

Tell the kids…

#160 Lucky Sometimes on 12.20.13 at 2:48 pm

Would anybody know how this works:
“Why you can sell yourself assets you already own and get a tax refund for doing so.”

#161 -=jwk=- on 12.20.13 at 2:57 pm


On Mississauga Rd in Mississauga:

Offered first @ $10,888,000 in 2010
http://www.ambassadorfinecustomhomesinc.com/PDF/SaxonyManorAdSummer2010.pdf

Then :7500,000 http://priceypads.com/saxony-manor-7500000/

& now @ $1 (auction)
http://www.realtor.ca/propertyDetails.aspx?propertyId=13924709&PidKey=-1127505168

Yea, but it comes with a huge 42.85′ lot. Think of the expansion possibilities!!

#162 Mike T on 12.20.13 at 3:12 pm

‘Blackberry lost 4.4billion and is up 15% as of this writing gee I wonder why people don’t trust anymore there are no fundamentals’

I am not trying to be mean or anything so please don’t interpret that way, but you are confused….see investors care about the future, about what Blackberry is going to do. What already happened means nothing with regard to the stock price jump…people listened to the plan going forward and see something they like.

Did you buy or sell in 2009? Do the opposite of what your instincts tell you….

#163 Life Is For The Living on 12.20.13 at 3:32 pm

To: Wall Steet and Bay Street

Life Is For The Living

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

#164 Julia on 12.20.13 at 3:32 pm

Where are we on the chart now?
http://www.cbc.ca/news/business/why-a-housing-bubble-is-good-but-maybe-bad-for-you-1.2470614

#165 Where's The Money Guido? on 12.20.13 at 3:43 pm

Garth; you said in ‘Suck it up’, December 19th, 2013 “Why you can sell yourself assets you already own and get a tax refund for doing so.”
How is that accomplished? Please give an example like real estate.

I referred to making a contribution in kind to an RRSP, in which case you can sell yourself assets already in your possession and receive a tax deduction for that action. The post was about retirement planning, not making your house into a refund. — Garth

#166 Nemesis on 12.20.13 at 3:50 pm

@Ralph/#154…

Yikes. I really should pay more attention to domestic developments.

As you are no doubt well aware, the only thing one need really know about Siddall’s appointment is this:

Goldman Sachs & Co., Lazard Freres & Co.

Clearly, they’re gonna ‘shop’ it. After some creative slicing and dicing.

http://youtu.be/1GniNeqSX5U

#167 Old Man on 12.20.13 at 3:54 pm

#1 Bottoms_Up : this has to be the best posting in a very long time, and the President at UofT is a one Meric Gertler who is new. So lets get the ball rolling with a petition alumni to make this happen in 2014. I will hit all my contacts, and you all do the same.

#168 live within your means on 12.20.13 at 3:59 pm

Really worried about younger sis & her daughter, etc. Financially speaking they are screwed. I still love them & send them money for Xmas, etc. They’re my kin.

Missing hubby tho I talk to him daily. So glad he’s there for his Dad & Mom. Thankfully, I have great neighbours to help this old broad out, invite me for dinner, etc.. & family that I’ll spend Xmas with.

#169 recharts on 12.20.13 at 4:06 pm

#127 ozy – there is a REASON on 12.20.13 at 11:32 am
There is a reason why RE (causal effect) is so damn expensive in TO

and the news is that it will continue to do so, no macro changes in kanatian younger generation “thinking” expected not the way govt, banks and other cheerleaders of all benefiting industries will behave

take my forecast, 416 freeholds especially detached or even semis in old city of TO (best areas) will continue their crazy climb in prices well after the MACRO variables start to adjust CLEARLY.

That being said, 1 year more after the 5y mortgage rates reach 5% – and today smart fellas can get 3.5%

so maybe 3-4 more years of muted 5-8% per year appreciation

then is going to come a 25% sudden drop, so it will revert to 2013 prices nothing behind. Then flatten for 5 years, then recover the peak in another 10 years.

now go do your projections based on this scenario, what if it is true?????

not going to get my gold piece for this service to houseless people (I was about to say homeless) – but hey it’s christmax lol

hope santa will deliver my sweet girl for two week of disconnect, see u all in Jan and beyond

Yeap it’s “Christax” and all sort of clowns like you have free time. You are dreaming actually. SFH in TO have not moved substantially since May (the beginning of the season). That is the most expensive type of property in RE in TO right now. That is a sign that the things have reached an upper limit.
Right now the supreme limit for the average mortal in To and GTA seems to be around 700K. They will continue to insanely bid on any house under this level. These are statistical observations not anecdotal facts.
If you remove the properties above 1mil and under 300K which are outliers this is what you get for TO. The limit might be lower for GTA.
Anyway, back to you bachic speech, the appreciation for SFH in Toronto is almost null since may. In contrast SFH in GTA appreciated with around 20K since then. Why ? Because they still have room to go up to 700K, the same goes for Semi detached in TO. They appreciated quite a lot since may.
So, above you have the situation before interest rates were stable.
Now that the foreplay with tapering started you are going to see some reactions from the RE market.
Of course you can continue to have your wet dreams for another 5 years because if you are owner and you don’t sell now, the longer the sleep the more the fun we will have looking at you ♫♫

#170 Retired Boomer - WI on 12.20.13 at 4:11 pm

Rosie & Sofa

Rosie & SofaKing…

SofaKing yes, get off the couch, go to work preferably for yourself, or at whatever.

Rosie, you get what you were promised, which is about 25% of what you will need from OAS, and CPP. So, if you have a pension that is good. If you have mid to high six figure savings that’s even better!

The “tools” have been in place for quite a few years, both in Canada, as well as the US where I live. We get to choose if we plan for our old age, or wake up at retirement and say “Shazaam I’m Broke” and wonder WHO is going to pay for retirement. Well, WHO is YOU. What our respective governments offer in old age security is only enough (barely) to exist, and that is assuming one has no debts to support.
We have the “tools” to build tax advantaged, or even tax free savings vehicles, but they don’t work if you don’t feed them, and they work poorly if you don’t select the proper investments either.
Read up on your options, the younger you start, the more you will likely end up with at retirement. Don’t start until your in your in your 50’s the outcome is likely to be you work longer than you might like, and end up with less than you might have wanted.

Good Luck trying to borrow to support your retirement, is not going to happen!

#171 Smoking Man, this one's for you on 12.20.13 at 4:32 pm

#144 This one is for Smoking Man on 12.20.13 at 1:50 pm

That last sentence should read…”not to say “Merry Christmas” because someone may take offense.”

#172 Ralph Cramdown on 12.20.13 at 4:35 pm

#137 Shawn — “I would say it is mostly a personal responsibility. But we need the ability to be in group plans for the reasons Ralph gave. Governments can be part of the solution. I see CPP as a good thing.”

If I may quibble, I don’t see group plans as being good enough. There are only so many talented money managers around. If your pension plan is the 57th largest in the country, its management won’t be talented. You’ll either be paying excessive fees to an external manager which will just index, or your internal management will serve as a farm team for the big boys.

Plus, shareholder activism only works if you’re big enough that your phone gets answered. That means Calpers, Omers, Ontario Teachers, Norway’s Oil Fund and a few others, but not the International Brotherhood of Electrical Workers local 57’s pension fund.

And funds have to be big enough to have professional internal management immune to political or sponsor interference — they basically have to grow to be larger and more credible than the organization that started them, otherwise you get crap like this:

http://www.forbes.com/sites/edwardsiedle/2013/10/18/rhode-island-public-pension-reform-wall-streets-license-to-steal/

#173 recharts on 12.20.13 at 4:36 pm

#148 Canadian Watchdog on 12.20.13 at 2:07 pm
Via FT (paywall)

December 20, 2013 11:14 am
Canada bubble fears stoked by launch of short-focused Spartan fund

By Camilla Hall in New York

Investors in Canada are to get the chance to bet against their own real estate market as one of the first short-focused funds is set to launch in the country, where concerns have grown that there is a housing bubble ready to burst.

The Spartan/Libertas Real Asset Opportunities Fund, set to launch in Toronto in the first quarter of next year, will allow Canadian brokers, developers or pension funds to mitigate their exposure towards a possible downturn in the real estate market, Michael Brown, manager of the fund told the Financial Times.

Question: If, based on CREA data I bet against or on canadian housing and their data is wrong and that causes me loses can I sue them?

Question2: In order to make sure they are not fudging the numbers can I ask them to provide a list of MLS transactions, (MLS numbers) AND …the brokerage house that recorded the transaction ?

With the new rules in place (brokerage houses are supposed to file the papers) you can ask for a list of transactions and the brokerage house that registered them and verify them one by one for Toronto for example. This can be done with a simple email. I think that this new rule, to file the papers will have unwanted consequences for the RE boards who fudge numbers..

#174 Canadian Watchdog on 12.20.13 at 4:39 pm

#154 Ralph Cramdown

Not to my surprise, he's an ex-Goldmanite  Evan Siddall

Meanwhile, CMHC chairman of the board, Robert Kelly has numerous pending class-action lawsuits (by pension funds) and about to face a state lawsuit brought by the Attonery General of NY.

BNY Mellon must face NY lawsuit over foreign exchange rates -judge

This all happend under his watch as chairman. And not one peep about it in Canadian news.

#175 espressobob on 12.20.13 at 4:57 pm

#158 Shawn

Great comment! Compounding is one of those things investors easily overlook. Al Bartett spells it out!

http://www.youtube.com/watch?v=vII-GxsrR2c

This video was presented on Garths blog some time ago by someone else. Thanks, whoever you are.

#176 Dean Mason on 12.20.13 at 5:20 pm

To #118 Ronaldo

You are taking about the WTB Working tax Benefit which is a tax credit for low income earners.

Yes, if you add this $3,500 in employment income, it is about $28,000 in annual income that will not be taxed because any amount taxed would be refunded anyway.

This single person would receive G.S.T. or H.S.T credit of maybe $400 a year.

Wohoo! Richer than we think. — Garth

#177 Dean Mason on 12.20.13 at 5:22 pm

I meant to say talking about the WTB, opps!

#178 Rockylal on 12.20.13 at 5:37 pm

#153 Blackberry loses 4.4 b.
Shares up.
Go figure.

Don’t you think the market expected a big loss when BB reported their numbers? Don’t you think it was already reflected in the stock price? BB went up because of the new announcement with Foxcom. Reducing thier costs for future production = good news……

Losing $4.4B with a new CEO at the helm is NO surprise and expected.

#179 Dean Mason on 12.20.13 at 5:52 pm

Numbers are numbers, they get skewed by income tax free income and taxable income.

It is $28,000 a year plus $400 in H.S.T. which really brings it up to taxable income of $28,600 a year for a single person.

A person with a portfolio earning 4.50% in fixed income investments would need $635,555.

Even with a 5.72% rate of return, he or she would still need $500,000.

This is what it is and has nothing to do with who is richer or not.

#180 nelson on 12.20.13 at 5:58 pm

#150 Son of Ponzi on 12.20.13 at 2:14 pm
# 141
Guess what. people are starting to grow their own vegetables again.
Many young people don’t own cars anymore.

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

totally different thing than cloth diapers, my friend. You’ll find out in a couple of years when the elder daycare won’t let you in with your washable, oversized nappies & giant safety pins. ;)

#181 karl hungus on 12.20.13 at 6:15 pm

Gonna be a big spring for Edmonton real estate. Prices have been mostly flat since 2009 and there is a lot of pent up demand.

#182 Old Man on 12.20.13 at 6:29 pm

Merry Christmas to one all, and especially to Mr. Turner for giving us all so many laughs. I booked a flight to Mexico that had to cancel as the weather is beyond the pale, as any delay would leave me holding the bag in Atlanta with no way out. No direct flight where I had to go called Guadaljara which is huge city to rent a car for a short drive. So have a few ladies that were waiting for me to party, so such is life.

#183 45north on 12.20.13 at 6:38 pm

Smoking Man, this one’s for you: After being interviewed by the school administration, the prospective teacher said:

“not to say “Merry Christmas” because someone may take offense.”

going back to Bigrider’s question “what makes Toronto special?”

Toronto was special because the public schools used to be Christian. I remember at Melody Road Public School the grade 5 class rehearsing the Christmas Story. You know

In the sixth month the angel Gabriel was sent by God to a town in Galilee called Nazareth, to a virgin betrothed to a man named Joseph, of the House of David; and the virgin’s name was Mary.

Toronto was special. Not anymore.

#184 conan on 12.20.13 at 6:49 pm

Re: 171 Actually star managers prefer smaller funds to deal with. Ideally about $300-$400 million. Your large funds that you talk about are as nimble as a knitting penguin as it takes months just to rebalance 10 % of a multi billion dollar fund. The smaller funds can move fast. Which is what you want IMHO.

#185 Canadian Watchdog on 12.20.13 at 7:03 pm

Remember F's covered bond plan to provide more bank liquidity for non-insured mortgages? So much for saving a a few beeps on those spreads.

Covered Bonds Get Second-Class Status in EU Liquidity Review

The European Union’s top banking regulator said that covered bonds shouldn’t be considered a top-tier asset for banks’ emergency liquidity buffers, dealing a blow to Denmark’s $530 billion mortgage-bond market.

Covered bonds, which are debt securities backed by cash flows from other assets such as mortgages, aren’t as stable as European Union sovereign debt for the purpose of building up banks’ liquidity buffers, the London-based European Banking Authority said today. Corporate bonds, equities and some local government debt were also considered to be less liquid than state bonds.

#186 brainsail on 12.20.13 at 7:13 pm

Garth, I don’t think most of the readers got your message about the dire straights concerning the financial status of the average Canadian nearing retirement.

A couple that worked all of their lives can not live on $700 plus $500 times two equals $2400 a month unless they have at least have a million dollar savings that would add 4 to 5% or $50,000 to their income for retirement.

Maybe the wife and I represent the top 2% of liquid worth but your message scared us. Maybe it is time for you to use the super sized crayons.

#187 Smoking Man on 12.20.13 at 7:33 pm

All this worry about pensions and retirement.

Say your 70 dead broke. Can’t make ends meet. Solution simple, Slip the [email protected] a note that says, give me all your loot.

Find a seat in the mall and wait for the cops.

The new penitentiary are like 5 star hotels.

3 meals a day. No need to worry about hydro rates.

#188 Devore on 12.20.13 at 7:33 pm

#8 Knackered Knosty in LaLaLand

It’s a funny video, it’s also totally fake.

You’re months behind the internet.

#189 Devore on 12.20.13 at 7:45 pm

#48 Ole Doberman

Garth how do we earn $48K in dividends tax free?

Simple, you earn $48k in dividends, and pay no taxes.

http://www.taxtips.ca/dtc/enhanceddtc/amt.htm

#190 Obvious Truth on 12.20.13 at 7:47 pm

158 Shawn

These numbers are real and we get to spend the money. It’s not paper wealth. And I know for many it’s too risky to a attain this type of gain. Others should know that it actually takes work, time and reading. It’s not all a smoke screen or luck.

Now for the best part of very good years.

For the many enjoying these returns this year please remember those down on their luck. You can also give your time. People are often inspired by a caring act from a perfect stranger.

Hey garth. How bout a piece on donating. Cash, stock etc.

#191 Paul on 12.20.13 at 7:49 pm

72 recharts on 12.20.13 at 4:36 pm

#148 Canadian Watchdog on 12.20.13 at 2:07 pm
Via FT (paywall)

December 20, 2013 11:14 am
Canada bubble fears stoked by launch of short-focused Spartan fund

By Camilla Hall in New York

Investors in Canada are to get the chance to bet against their own real estate market as one of the first short-focused funds is set to launch in the country, where concerns have grown that there is a housing bubble ready to burst.

The Spartan/Libertas Real Asset Opportunities Fund, set to launch in Toronto in the first quarter of next year, will allow Canadian brokers, developers or pension funds to mitigate their exposure towards a possible downturn in the real estate market, Michael Brown, manager of the fund told the Financial Times.

Question: If, based on CREA data I bet against or on canadian housing and their data is wrong and that causes me loses can I sue them?

Question2: In order to make sure they are not fudging the numbers can I ask them to provide a list of MLS transactions, (MLS numbers) AND …the brokerage house that recorded the transaction ?

With the new rules in place (brokerage houses are supposed to file the papers) you can ask for a list of transactions and the brokerage house that registered them and verify them one by one for Toronto for example. This can be done with a simple email. I think that this new rule, to file the papers will have unwanted consequences for the RE boards who fudge numbers.
———————————————————-
You are kidding right???

#192 herethere on 12.20.13 at 8:05 pm

Re. Olderbutwiser $3 dollar bra take. It is a tale where smart shoppers, savers, and investors can take comfort. As she delicately put it, it keep her “girls” straight and to boot at a $1,50 per “girl” a real bargain. But even, regardless of price or if heavy breathing is involved for the need of them, there are savings to be have. And it will help corporations, without regards, if they are registered or not, in a tax heaven places, therefore paying no Canadian taxes or barely doing it. To go to countries where they can exploit employees with the excuse of providing jobs. That will help paid their shareholders juicy dividens. Hopefully your TFSA will have ETFs and other instruments who carry those corporations and be able to enjoy that juicy dividends. So yes, we might be richer than we think. Before leaving for my place of worship, to try to con my God of me being worthwhile of his love, Yes Virginia there is a Santa. So cheer up, a three dollar a bra, how bad can it be.

#193 Devore on 12.20.13 at 8:06 pm

#126 Ralph Cramdown

“I could not agree more with you Garth. It is NOT the governments responsibility to support us through retirement, it is ours.”

Are you governed by Martians?

You make good points, and none of them have anything to do with governments managing pensions, so you are not addressing the post at all.

What you are talking about is asset pooling, economies of scale and diversification. All offered by any pension fund, financial planner, or even some MFs, nothing to do with public or private.

If you wanted to address the post you are replying to, you would talk about things like the many studies showing that people, on average, will not plan for the future, even when it is simple and convenient to do so. They will spend all the money they earn. This is the point public pensions are supposed to lean on, to provide a basic level of retirement income so old people are not penniless through their failure to plan. Those who do plan, will go far above and beyond that.

#194 Daisy Mae on 12.20.13 at 8:31 pm

#141 Nelson: “Yes, and let’s start making our own soap and candles again, too! People these days with their electric light bulbs. what a waste of money..”

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

I knew I’d get a rise out of someone. LOL For the record, many women DO made their own soap and candles — it has become quite a crafty trend. But I don’t think we’ve resorted to kerosene lamps just yet…so get a grip and relax.

#195 Entrepreneur on 12.20.13 at 9:41 pm

#77 Temple: Private sector escpecially small business take the all the RISK; you, working in the public, do not have to attribute to the cost of running the operation. Big difference there.

#33 conan: What we really need is smarter government.

Totally agree, we need leaders that have business sense and are environmentally savvy. The follow the gravy train mentallity in our government system is not working in this day. There way is obviously the wrong way when people cannot save, income goes to mortgages, and we have food banks.

As I see the WHOLE picture the leaders are living beyond the means of the ordinary people, a disconnect.
Government should have a healthy relationship with all their constituents, for or against starting from our MLA and MP. Maybe it is on the line of Christinanity, belief and practice or a BIG lack of it.

It is like a house with a solid foundation; it will stand solid for many years. No foundation, get eaten by the rot and everyone for themselves as the case in our system.

#196 live within your means on 12.20.13 at 10:48 pm

#191 herethere on 12.20.13 at 8:05 pm
Re. Olderbutwiser $3 dollar bra take. It is a tale where smart shoppers, savers, and investors can take comfort. As she delicately put it, it keep her “girls” straight and to boot at a $1,50 per “girl” a real bargain.
………………..

LOL Definitely a bargain. I used to shop at ’boutiques’ when younger. Loved beautiful clothes, but I would buy on sale & always classic styles.

Later made most of my own clothes. Was a good seamstress. Being nostalgic – made my Mom’s dress for younger sis’ wedding, complete accessories for my niece’s bedroom when she was born, including drapes to match. Did a cross stitch of her name, DOB, etc. & had it framed. Made a beautiful dress for my younger sis that she wore at her shower before my niece was born. We lived in different cities & I mailed all this stuff. Even sewed for my Dad. Now I only sew when I absolutely have to. Dad’s Mom became an at home seamstress when her hubby was lost at sea off the coast of Denmark. She had to support 2 young children. I guess I took after her.

#197 Tony on 12.21.13 at 10:00 am

Re: #17 Smartalox on 12.19.13 at 8:19 pm

So when all your ETFs crash and burn you’ll be in worst shape than your parents. You better read up on P.T. Barnum before February 2014 rolls around. Me thinks the second shoe will drop in the markets very soon and the 1987 lows will be revisited for quite awhile.

#198 Tony on 12.21.13 at 11:23 am

Re: #189 Devore on 12.20.13 at 7:45 pm

But you have to use a lot of money to hedge yourself as these markets will probably lose 90+ percent. That said as your dividend paying stocks plunge in price the dividends will be severely slashed. You’re still better off putting money in offshore havens instead of being lured or fished into buying Canadian dividend stocks.

#199 save. spend. splurge. on 12.22.13 at 2:17 pm

As someone who is self-employed, I have never mentally relied on the government to fund my retirement.

(Nor my parents, for that matter.. as some people count on inheritance from their parents to retire. Crazy or what?)

I assume all of that is a wash when I go to retire.

Then again, I am only 30, and I thought this at 25, AFTER clearing $60,000 of student debt (well used) in 18 months.

What do I know? I’ve only been saying “max out your RRSP, TFSA, SAVE SAVE SAVE” for 5 years.

#200 Entrepreneur on 12.22.13 at 7:03 pm

#199 save. spend. splurg.

That is how my adult career children think. What retirement? Both have careers and know that the system uses them and they are careful of being in debt.

They both have an entrepreneur blood line. They both are capable of running a small business and the system is thinking twice about small business…giving them breaks…need more though…a lot more.