Illiterates

FICTION

For the past 28 years Gerrie’s been a dedicated employee at one of our world-class universities. Now he’s 64, soon to be put out to pasture. “My son says I should contact you,” he says, because no self-respecting academic would admit to reading a blog that talks about hormones, thirsty underwear, moist Millennials and canonizes canines.

“I want to pension this year and not sure if I should leave my pension at the University and collect for the rest of my live or take the money and invest?”

Since I wrote about the thorny issue of staying on a pension teat or taking the lump sum commuted value (if you’re lucky enough to be offered) a few days ago, a lot of people like Gerrie have been brimming my email. Seems this is a big topic as it goes to the heart of confidence vs. weenieness. People with a sunny view of the next few decades seem totally okay walking off with a big chunk of money to control, invest and grow. Those who fear the future do just the opposite, staying within the comforting bosom of the Big Plan.

Here’s the deal he’s being offered: $3,151 a month for life (the pension croaks when he does), or a commuted value of $720,233, of which all but $73,000 is rolled into a tax-free LIRA (basically an RRSP). So, he can collect $39,000 a year plus his CPP and OAS (about $57,000 anually, all taxable), or take the cash and see what happens.

If you came here last week to waste time you’ll remember the reasons I proffered for commuting the pension. There are a few. Like always being in control of your own pension funds instead of surrendering that decision to a pension administrator you cannot control and will never meet. Laws may change in the decades ahead, plans could become underfunded or pension benefits reduced arbitrarily.

More profound, commuting a pension means the asset doesn’t die with you. The commuted value, or what remains after you depart, becomes the property of your estate and your heirs. Many a spouse has been thankful for that. People who commute pensions have the ability to take income in a less-taxed fashion (thanks to TFSAs and return-of-capital payments, for example), and investment returns are often higher than those more conservative administrators achieve.

However since markets fluctuate, there’s risk, too. But it’s not what you think. The risk isn’t that there’ll be a re-run of the 1930s and you’ll end up eating bugs under a bridge, but that you’ll over-react to temporary volatility and make stupid decisions, like pulling out money during a correction. That’s what zapped investors in 2008-9, since all asset values came roaring back and there was no need to sell.

Yup, it’s not Mr. Market that will kill ya. It’s human nature. As far as commuting a pension goes, the financial no-brainer decision is to do it, as the advantages massively outweigh the passive alternative. Unless you’re a doomer.

Well, how about Gerrie?

If you run a retirement calculator on his situation, the results are stark. Taking the monthly pension for the next 20 years, until be falls over at age 84, the dude would collect a grand total of $756,240, all of it taxable at about a 20% rate. Upon death the pension would cease, with no residual for his estate. If he took the commuted pension and invested it, securing a long-term average return of 6% (over the last 20 years the S&P gave 8%), and took exactly the same payment and paid identical taxes, at the end of 20 years he would have more than $350,000 left in his LIRA. Additionally, if he took the $73,000 cash portion, stuck it in a TFSA and just left it to grow, at 84 it would be worth $244,000.

So, stay in the pension plan and have nothing to pass on. Or commute the pension, get an identical income and leave about $600,000 to your young mistress and surviving dogs. How’s that even a debate?

Sadly, it is. A big one. You can thank financial illiteracy for that – the fact most people get their money and investing knowledge from Mom or the media. Thus we build a perception that markets are unstable and dangerous, financial assets are unsecure and everyone’s out to fleece you. We exaggerate and misinterpret risk, come to believe there’s a Bernie Madoff lurking everywhere or weirdly believe the economy could collapse (when it never has in your lifetime).

As I said, we’re our own worst enemies. Those favoured people among us with defined benefit pensions who are offered the chance to commute them, and don’t, are evidence of why this blog must not die. But if it does, Bandit gets a bundle.

172 comments ↓

#1 Randy on 05.12.16 at 6:25 pm

I took the defined benefit pension at 55. It was my best decision yet.

#2 TurnerNation on 05.12.16 at 6:30 pm

Hey Millennials here is your future after graduation with a 4-year obedience certificate (with student loans):

Latest LAMB condo has “1 bedrooms” at 400 sq feet in size:

https://www.realtor.ca/Residential/Single-Family/16830039/612—39-BRANT-ST-Toronto-Ontario-M5V1S7-Waterfront-Communities-C1

You owe:

– Most offer 5% down, so with (uncapped) closing costs and CMHC, payments on $300,000 of debt + interest to banks.
– Realistic condo fees will be .70-.80/sq foot per month.
– Highest electricity costs, for public unions and green-theft.
– Heat pump rental of $50/mo as developers too cheap to buy them outright.
– Property taxes, of which .24 of each dollar in Toronto goes toward Policing – more than other services combined – of which 80% (I think) goes towards richest police union salaries.

– Monthly telecom costs of $150-250 to billionaire Rogers family (of the Rogers/Bell duopoly).
– Nearby Loblaws/Shoppers Drug stores (owned by billionare Weston family) or Sobeys (billionaire Sobeys family).
– Or take rusting King St streetcars – which pre-date your birth – due to TTC union largess.

So, here in Kanada we are slaves to Banks, Public Unions, Billionaire duopolists.

Remember we fight because they hate our freedoms!

#3 JSS on 05.12.16 at 6:31 pm

Many DB pension plans require you to quit before the age of 55, and then are given the option to either commute or stay in the plan.

For many employees with DB pensions, if they’re past 55 it’s too late to commute. You’re stuck. Check out Alberta pension plans (PSPP, LAPP, MEPP).

#4 Doug t on 05.12.16 at 6:40 pm

Wonder what % of workin Canucks even have a pension these days

#5 A Yank in BC on 05.12.16 at 6:41 pm

If the option exists, it’s a no-brainer. Lump-sum(Commute). For yourself, and for your heirs. Besides.. it’ll give you something to manage.

#6 Robert on 05.12.16 at 6:45 pm

#3 JSS – you’re right; we call it the 54-11. Commute your pension on the 11th month of your 54th year and then get ‘hired’ back as a consultant.

#7 Jason on 05.12.16 at 6:48 pm

Garth,

You failed to mention at least two important things:

1. Pensioners can elect a 100% survivor benefit to their spouse (with appropriate actuarial reduction).

2. Not everyone drops dead at 84; some live to 90 or 95, and that’s a terrible age to have to content with the challenge of managing money.

#8 The Great Gazoo on 05.12.16 at 6:53 pm

Oil trading above $46 and rising.

Global oil markets ‘heading towards balance’: IEA

http://www.cnbc.com/2016/05/12/global-oil-markets-heading-towards-balance-iea.html

And here is one of the reasons why. The Niger Delta Avengers want their community to have a fair share of the oil revenues.

Militants ask oil firms to shut down in 2 wks

https://www.thecable.ng/breaking-militants-give-oil-firms-2-week-ultimatum-shut

Will the oil companies risk it and continue to operate or shut down as they have been instructed to do?

#9 A box in the sky on 05.12.16 at 6:56 pm

#2 TurnerNation on 05.12.16 at 6:30 pm
Hey Millennials here is your future after graduation with a 4-year obedience certificate (with student loans):

Latest LAMB condo has “1 bedrooms” at 400 sq feet in size:

https://www.realtor.ca/Residential/Single-Family/16830039/612—39-BRANT-ST-Toronto-Ontario-M5V1S7-Waterfront-Communities-C1

You owe:
———

And yet those condos will sell out INSTANTLY because King west is a fng awesome place to be if you’re a millenial with money

#10 cto on 05.12.16 at 7:01 pm

#2 TurnerNation

yo Millennials,…and new Kanadians for that matter, you know, there is actually a better way to live. yes a substitute from the be-all-end-all, so in vogue Toronto. Canada is a very big country, and beyond the borders of “the best place on earth” people are living quite happily with all the amenities you would get in and around Brad Lambs shoebox!
so, get out there, take a chance and you might just find out that you have been had,… and life north of 7 is not bad after all.!!

#11 Yellen's negative on 05.12.16 at 7:03 pm

http://www.businessinsider.com/janet-yellen-doesnt-rule-out-negative-interest-rates-2016-5

Opsss….

#12 Randy on 05.12.16 at 7:05 pm

Working in the 70’s, 80’s and 90’s was fun. By the Y2K, work started to suck, so I said screw it and retired early. No regrets.

#13 Mark on 05.12.16 at 7:10 pm

Having an awesome time in the Beltway this week. Word on the street is that a financial scandal of some sort is going to break in the next few months. Its kind of eerie here too say the least, and I was treated this morning to an excellent meeting with a US Senator in the Hart building.

Must have been hundreds of kids I saw walking around the Capitol with those Trump T-shirts. Quite the level of enthusiasm from the younger crowd, that’s for sure.

I’ll be back to my regular posting next week. Until then, peace.

#14 Big Dipper on 05.12.16 at 7:11 pm

First question: is there a Mrs. (or equivalent) Gerrie?.

If the answer is “yes” he cannot take the pension option – unless he hates his partner!

If the answer is “no” he cannot take the pension option – unless he hates his family!

That solves the problem. Unless, of course, the case was inaccurately stated.

#15 pathcontrolmonnk on 05.12.16 at 7:11 pm

DELETED

#16 Julia on 05.12.16 at 7:13 pm

#3 JSS
My DB plan is like that. I can only commute if I leave the organization before age 55. After that, I am locked in.

#17 Interstellar Star Stuff on 05.12.16 at 7:14 pm

#3 JSS on 05.12.16 at 6:31 pm

Many DB pension plans require you to quit before the age of 55, and then are given the option to either commute or stay in the plan.

For many employees with DB pensions, if they’re past 55 it’s too late to commute. You’re stuck. Check out Alberta pension plans (PSPP, LAPP, MEPP).

Yup. yup. Retire at 55 or lose the chance to commute. Lucky dude.. surprised he gets a choice at the end…he should commute.

#18 Henry Olivere on 05.12.16 at 7:15 pm

People don’t know how pensions work. Collect money from workers and then payout when they retire but not all will live 20, 30 years.

Those that get their pension for 25, 30 years and those that run,manage, administer the pension plan reap way most benefits while other that die in 2, 5 maybe 10 years are the real losers.

In this case presented in today’s blog, he would have to live to 83 years old just to get back his original principal.

Pensions are there for them not people’s best interest.

#19 Shawn on 05.12.16 at 7:17 pm

Allowing Commuted Value is Poor Policy

Pension plans hope to make say 7% using a balanced portfolio. Other than government plans the pensioners have some level of risk if the returns don’t materialise and if the company is not strong enough to make up the difference. A guaranteed defined benefit is only as strong as the party making the guarantee.

A commuted value gives a sum that can provide the same pension even if invested in 100% government bonds. The commuted value allows the pensioner to remove ALL risk. (Unfair advantage?)

If I were making the rules I would not allow commuted values on group DB plans. DB plans are barely affordable and what makes them affordable (or used to) is the fact that money saved from early deaths goes to the longer lived people. Having pension money leak off to children just adds to pension costs which are already at best barely affordable.

The requirement to pay commuted values based on low bond rates is part of what has driven pension liability amounts through the roof.

How can a pension plan taking in money intended to be invested in a balanced fund at 7% possibly have enough money to cover a liability calculated on the basis that all the money goes into bonds at 2%? It can’t and the notion that it should seems flawed to me.

A basic flaw of DB plans is the guaranteed pension. Little in life is guaranteed. People with DC plans don’t get guarantees. Even Garth’s balanced clients don’t get guarantees. DB pension liabilities would sink and pension short falls would evaporate if rules were changed such that DB pensioners would get some reduction in benefits if the returns eventually did not pan out. What is really unfair about that? And the alternative has been the death of the DB plan.

#20 For those about to flop... on 05.12.16 at 7:21 pm

Clarification on the new distracted driver rules.

Talking on your cell phone….big problem.

Sticking your snout in a Starbucks cup whilst driving or putting a brown paper bag over your head to shake out the last timbit crumbs….no problem…

M41BC

#21 Shawn on 05.12.16 at 7:24 pm

Where’s The Wife?

Gerrie has a son. Does he have a surviving wife or partner? If so, that changes the choice drastically.

With two lives the pension is reduced but goes on until the death of both partners (often with a reduction upon the first death).

The chances of dying young are greatly reduced when there are two lives involved.

I am uncomfortable with the notion of suggesting the commuted value is right for most people. It is most certainly not the right choice for everyone.

If the commuted value is the correct approach (and it may be) then certainly no one with a lump sum should buy an annuity.

In fact a pension commuted value may pay out far less than the cost to purchase an equivalent annuity. If so what would that tell you?

#22 pathcontrolmonnk on 05.12.16 at 7:26 pm

Garth, nothing offensive about my comment at all. Can I try again?

#23 pathcontrolmonnk on 05.12.16 at 7:29 pm

Booooooooring! Garth, can’t we talk about something more scandalous? How about the mother of Gregor Robertson’s nubile GF getting arrested for corruption in the PRC. Or, perhaps we could discuss how The Economist’s recent article about the PRC’s teetering economy, “The coming debt bust”, is actually a salacious inference to a certain premier’s endowed stature.

#24 turn of the tide on 05.12.16 at 7:29 pm

A question:

Filed my tax return. I owe CRA about $2,800. Also have a line a credit with RBC owing about same amount (@6.85%) – no other debts. I have a lump sum of $3000 coming in. Does it make more sense to pay off the line of credit fully and ask CRA for a payment plan over time or should I pay CRA the full amount owing and continue to slowly pay of the Line Of Credit?

Thanks!

#25 Love My Kia on 05.12.16 at 7:31 pm

OK, I know that I collect CPP at 60, no exceptions. Now I see flags in the comments that the option to commute pensions expire in many cases after age 55. This opens up a big can-o-worms. Commute or not to commute with a 55 cut off?

#26 Smoking Man's Old Man on 05.12.16 at 7:32 pm

Today’s Lesson;

Whatever most people do, do the opposite. Common sense is anything but common… :)

#27 WalMark of Sadkatoon on 05.12.16 at 7:33 pm

As I said, we’re our own worst enemies.

this is true. ppl fight to remain ignorant. ppl fight to remain poor. after they retire or die – mission accomplished

#28 Porsche on 05.12.16 at 7:34 pm

My father left his in the pension, when he dies the pension dies and mom is on her own.

They have half a mill in the bank from selling the house and all they ever do is go to Timmy’s and Church with other fossils

He’s 94.. been milking that pension longer then he worked.

#29 Shawn on 05.12.16 at 7:37 pm

Circumstances vary…

In my particular case I had brought 13 years service with one pension plan into a very similar (but technically distinct) sister plan. (Interstellar Star Stuff above will know what I refer to) I then worked about another 13 years in that second plan.

For whatever reason, although my pension would be EXACTLY the same as if all 26 years were in the same plan the commuted value would have been considerably lower. I would have been disadvantaged by several hundred thousand dollars in taking the commuted value. (I am not sure the exact amount, it was never revealed to me)

I also considered that if I were to die young, my wife would prefer the survivor pension rather than having to look after investments.

In addition I had investments already. It seemed to me that having Balance and multiple streams of income favored taking the pension. What if I lost my mind and blew all the investments? It can happen.

For me, it was an easy decision to take the pension, not the commuted value.

Here is another reason, all our lives we treat investments as money to be grown not spent. I might feel guilty spending income from investments whereas pension money feels like it is intended to be spent.

There are many different situations. It is not right to suggest that the commuted value is right for everyone.

#30 Mark on 05.12.16 at 7:37 pm

“A commuted value gives a sum that can provide the same pension even if invested in 100% government bonds.”

Shawn, where do you find government bonds that have a yield equivalent to the discount rate (you claim 7%) that is used by the plans to calculate the commuted value?

Just interested. Because while I do agree that commutting has some benefits, the suggestion that one could just take their commutted DB plan and invest it entirely in government bonds seems a bit of whack to me based on currently available interest rates and the significant likelihood that government bonds will be hard pressed to perform well for many years/decades to come (in a rising rate environment).

#31 Smoking Man on 05.12.16 at 7:37 pm

Of course we will take the monthly payments.

Life time of being feed a fish weekly, you can’t expect him to try fishing for himself.

The schooled is all I’m saying.

#32 Lead Paint on 05.12.16 at 7:39 pm

#2 TurnerNation

Enlightening. It’s amazing how much of our hard earned pay goes straight to entrenched power. Nearly all of it.

#33 Mark on 05.12.16 at 7:40 pm

“Even Garth’s balanced clients don’t get guarantees. “

A balanced portfolio inherently has the guarantee of strong diversification amongst asset classes, and hopefully, political regimes, investment styles, etc.

I’d rather the ‘guarantee’ of a diversified collection of counterparties, than a single guarantor. Especially if that guarantor or payor is a government that can periodically be replaced, through election, by the people. Destroying a Garth style balanced portfolio is a heck of a lot more difficult than it is for government to address their fiscal problems through pension reform by fiat.

#34 NoName on 05.12.16 at 7:47 pm

As a Dave always sad:

“Anyone single with DB pension should marry someone in 20s, that will teach them a lesson!”

#35 Popeye the sailor man on 05.12.16 at 7:51 pm

Last year at age 47 due to a ballooned transfer values after the rate drop last Jan. I commuted the transfer Value to my investments.
I explained what I was doing to my employer, was struck off strength (quit), hired back only weeks after and working on the next leg of DBP.
50% went to a LIRA 30%cash to TFSA and Non-RSP, and about 20% to taxes (ouch).
I will leave the money untouched until I would normally of retired, and will have 1.15 Million @6% gains per year. I will miss out on about 10 years of bridging till 65, other wise I will have equal income from my investments and new small DBP. Once CPP kicks in I will have 115% of what I would have if I stayed.
I will also retire 3 years earlier with this math. If markets under perform I’m ready to work the extra 3 years I gained if needed, which is still age 55-56. I plan to work at something likely till my early 60’s anyway, so the nest egg is likely to grow even more if I don’t touch it.
The lack of survivor benefits for my wife (50%)till she passes and 20% till the kids hit 18 then it has no value, was not enough of a legacy.

Get someone proper to help with the math find a fee based adviser you trust and take the money and run.

#36 Wild Roasted Gonads on 05.12.16 at 7:51 pm

Son has been reading the blog and wants some inheritance!

#37 Dan on 05.12.16 at 7:55 pm

The only question I have if you take the lump sum payout and retire at 55. Do you still get health care benefits?

#38 Brazil ex-pat on 05.12.16 at 7:57 pm

Fries with that?

http://www.huffingtonpost.ca/2016/05/12/job-vacancies-canada_n_9932560.html?utm_hp_ref=canada

#39 TurnerNation on 05.12.16 at 8:08 pm

Yes King St W party/club/restaurant strip is a cool place to live (been here years) – where there’s a 100% chance of vomit raining down on Friday and Saturday nights.

They all know me by name at lil Bar Buca and by face at anywhere from 2 Cats to Thompson hotel rooftop patio (where I’ll be partying tomorrow – look out below haha.)

There’s a local bakery making natural bread on site; an organic butcher where their cheapest cuts of steak are 2x better than repackaged supermarket grind. Back to 100 mile diet.

#40 Popeye the sailor man on 05.12.16 at 8:09 pm

(disclaimer exact details fuzzy; but you will get the idea)

I know of someone in our circle who had a DBP and was planning to retire at 62 he died at 51 and the survivor pension for his wife was peanuts like 12K a year. If he had taken the Transfer Value before it was locked in the returns would have been about twice that and would of had about 600k in investments.

She also got supplementary death benefits of 2X his annual base pay. But she would of still got that he he was reemployed and working on a new DBP.

#41 Barb on 05.12.16 at 8:09 pm

As an FYI, in British Columbia ALL government employees’ pensions are UNFUNDED LIABILITIES.

Good ole’ BC.

#42 Vancouver Troy on 05.12.16 at 8:09 pm

Garth,

Listened to your podcast yesterday.

How come you always say “billionaire Donald Trump” but never mention the Clinton’s are worth well over $100 million?

#43 the other white meat (pork) on 05.12.16 at 8:10 pm

I’m not sure which province this chap lives in, but here in BC the Pension Benefits Standards Act (PBSA ) enacted last year has addressed many of the issues to which you speak. Married people must have a joint life plan (unless waived by the spouse) so I’m not sure where the concerns over the widow come from. Also, everything that comes out of a LIRA (must be converted to a LIF ) is fully taxable as income so no advantage is gained there. He would lose the “qualified pension amount ” deduction from his income taxes which makes commuting look even worse. As long as the man isn’t a fool, having control over the money would be desirable but the risk he assumes is longevity risk, which is now borne by the plan.

#44 BOOM! on 05.12.16 at 8:11 pm

WHAT is ever guaranteed in this life? Death, and before that, Taxes are two guaranteed “knowns.”

Will the balanced portfolio reach its historical averages? Probably will, if not let us state the likelihood it gets close is a safer bet that the “guaranteed payout will not be diddled with my administrators, politicians, continued low bond returns (should that happen), a zombie apacolypse plus whatever man seeks to change.

Plus, YOU have control! That means a great deal in my world.

I am not a very good passenger, I prefer to drive, or at least sit up front where the view of the impending crash is much better.

If you have a DB plan, and it allows you to commute at a time appropriate for you, by all means weigh the option!!

Crappy week on the street of Wall this week. Still ahead!

#45 crowdedelevatorfartz on 05.12.16 at 8:16 pm

@#4 Doug t
“Wonder what % of workin Canucks even have a pension these days….”
********************************************

Public sector workers? 75% or more.
Private sector workers? 10% or less.

However….I think the public sector unionized workers will be crushed by underfunded pensions and overtaxed voters.
Hence inevitable clawbacks, cutbacks, pension payment reductions, medical/dental/eyewear/ drug prescription cutbacks..etc etc etc coming to a retired public sector worker near you………

#46 Ace Goodheart on 05.12.16 at 8:18 pm

RE: take the lump sum: Exactly. However, do not let anyone know about this. Reason why: People who manage pensions tend to be well connected, wealthy individuals with ties to government and big finance.

Remember, the “public safety” argument is often used by the well connected to control wealth producing assets and make sure that the rabble don’t get to enjoy the same advantages as they do.

If these folks get wind of this, the first thing they will do is make it illegal, for reasons of “public safety”. After all, you don’t want everyone cashing out their pensions and investing the money themselves. This is very unsafe! We all need to be protected from such lunacy.

Hint: whenever you hear that you are not allowed to do something for reasons of public safety, 99% of the time, you are being screwed.

#47 joblo on 05.12.16 at 8:20 pm

Just watchin Chelsea’s new show on Netflix.
Now I know what to do with the rest of my life, 2 things:
1. Read Garth’s Blog.
2. Enroll in Netflix U.

#48 I'm stupid on 05.12.16 at 8:21 pm

It always amazes me when people say investing is too risky, or in this case commuting the pension is gambling your retirement. I always say the same thing; do you think your pension is immune to the same catastrophic collapse you speak of? If a complete collapse of the markets does occur you won’t stand a chance, no one will be immune.

#49 I'm stupid on 05.12.16 at 8:23 pm

#19 Shawn

I completely agree with you.

#50 common sense on 05.12.16 at 8:25 pm

From the Hmmmmm dept…

Just ready Chez WENDY’S is rolling out self serve kiosks in 6000 USA outlets to off set wage costs…fair enough. Now are they going to pass on ANY of the wage cost savings on to customers? Highly, highly doubt it…

#51 Interstellar Old Yeller on 05.12.16 at 8:27 pm

Please let us know what Gerrie decides! Hoping at least someone who bothers to write you about commuting a pension will take the money and run.

#52 Chimingin on 05.12.16 at 8:27 pm

I took the commuted value when I left, and am glad I did–more freedom to do what I like with the money–they had too much control over it for my taste. Coworkers I left behind are ill with stress or deeply unhappy from working for a miserable employer, but stay because they are waiting for their pension. Sorry, but life is too short for that bull.

#53 common sense on 05.12.16 at 8:28 pm

#20 Schooner Nose

How about muffy the petite dog sitting on mommy’s lap with her head out the window while driving? No problem.

or

Screaming parent, reaching into back seat to separate fighting children or clean that sippy cup spill? No problem

#54 Bottoms_Up on 05.12.16 at 8:30 pm

#4 Doug t on 05.12.16 at 6:40 pm
—————————-
I think Garth has quoted 40% of workers have some type of pension plan, including defined benefit, defined contribution, and matching (doubling) RRSP contributions.

#55 The Truth shall set you free on 05.12.16 at 8:42 pm

Many pensions have survivor benefits, up to 75%, so the money, in many cases gets passed on to the living spouse or children, for a lifetime pension for them. I happen to know many cases of people commuting their pensions only to loose most of it, in terrible investments. You can find many as Walmart greeters.

You made that up. — Garth

#56 Bernie on 05.12.16 at 8:47 pm

Garth, To provide a full picture don’t you need to address the tax implications? In your example, only a small portion of commuted value goes into a LIRA, the remaining balance must all be taken into income in one year — which means massive tax hit of almost 50%!

I said the opposite. — Garth

#57 crowdedelevatorfartz on 05.12.16 at 8:52 pm

Hey!
A country in South America in worse shape than Brazil!
Who woulda thunk it?

http://www.google.ca/url?url=http://www.zerohedge.com/news/2016-05-12/raw-venezuela-looter-burned-alive-while-streets-filled-people-killing-animals-food&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjxqdys6dXMAhUFxGMKHQ9zCdwQqQIIFjAA&usg=AFQjCNEbLdyWJJm1c02XQhsz3HMqeYXKEw

#58 Kam on 05.12.16 at 8:53 pm

Public sector employees are forced to put their hard earned income with the OMERS/Pension boards. Most of the pension boards spend millions of $$ to pay their VPs and Directors. Check the sunshine list in the ministry of finance website WTF. VPs hire investment management firms to manage investments then why to pay $300k to $500k to them?
Public sector employees should be allowed to invest on their own or to hire their personal investment/financial advisors.
Is there some way to withdraw your pension money and invest in the companies you would like to invest?

#59 Newbie on 05.12.16 at 8:54 pm

To#11 http://www.bloomberg.com/news/videos/2016-05-12/nassim-taleb-compares-monetary-policy-to-drugs

#60 D on 05.12.16 at 8:59 pm

#25 NoName on 05.12.16 at 7:47 pm

As a Dave always sad:

“Anyone single with DB pension should marry someone in 20s, that will teach them a lesson!”

……………

Great advice for anyone who want to survive on half a pension. As with many things in life your better of renting. This post is FF approved.

#61 Insurance Guy on 05.12.16 at 9:01 pm

My company is going through the process of closing the DB now. Worst time in human history for companies to do so with interest rates so low. No-brainer to commute.

#62 Simple, really on 05.12.16 at 9:04 pm

If they had the mindset, the appetite for risk to take the commuted value they would not have lived their life as employees, eligible for pension.

As simple as that. Not that hard to get it.
No amount of preaching is gonna change that.
They would have to be different people, not what who they are.

#63 Give us this Blog our daily Garth on 05.12.16 at 9:07 pm

I have a DC plan, which is obviously not my choice. But I consider myself lucky still. Some don’t have even that. But it’s also why every penny loaded into my TFSA will matter over the next 25 years. Job is not guaranteed.

We are all allowed $46,500 in TFSA, so in the spirit of Garth… shovel as much in there as you can… especially if you are a Millennial without a DB pension.

#64 BC_Doc on 05.12.16 at 9:10 pm

Being self-employed, I have to look after my own retirement. I follow “Rule of 1/3s”– save a third of what I earn, spend a third, and set aside the final third for the Tax Man. Saved money gets invested into ETFs (Vanguard has four that I like) as well as laddered GICs. It’s all very easy to do. My wife gets lessons on how this works. My kids have all started their own balanced portfolios with money earned from after school and summer employment. I’m teaching the next generation how to fish.

If you offered me the option of “reverse commuting” my savings and buying a pension benefit (an annuity would be the closest thing), I would say no. I prefer to keep my own hands on the steering wheel. No need to pay anyone the vig to drive either. After my wife and I die, I would like to be able to leave something to the underlings.

#65 Carlyle on 05.12.16 at 9:13 pm

#3 JSS

I’m in an Alberta pension plan. I stayed at age 39. So leaving at 55 isn’t an option sadly. I don’t but 85 factor until age 62.

#66 Andrew Woburn on 05.12.16 at 9:16 pm

Vancouver millennials have lowest discretionary income in Canada after buying property: Vancity

“The report found a typical millennial couple in Vancouver will accumulate $2,745 in debt each year — including additional expenses — if they buy property. It found Vancouverites aged 25 to 34 have less pocket money than their counterparts in 10 other Canadian cities.”

Doesn’t matter. It all goes on the plastic anyway.

http://www.cbc.ca/news/canada/british-columbia/vancouver-millennials-have-lowest-discretionary-income-in-canada-after-buying-property-vancity-1.3576908

#67 Brazil ex-pat on 05.12.16 at 9:33 pm

#58 Kam on 05.12.16 at 8:53 pm
Public sector employees are forced to put their hard earned income with the OMERS/Pension boards. Most of the pension boards spend millions of $$ to pay their VPs and Directors. Check the sunshine list in the ministry of finance website WTF. VPs hire investment management firms to manage investments then why to pay $300k to $500k to them?
Public sector employees should be allowed to invest on their own or to hire their personal investment/financial advisors.
Is there some way to withdraw your pension money and invest in the companies you would like to invest?

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

Hard earned pension? From pushing paper around all day? Most Govt Workers are paper pushers not front line workers like police or nurses. Pensions that are 1/2 paid for by TAXPAYERS? Getting too much sun today?

#68 WalMark of Sadkatoon on 05.12.16 at 9:34 pm

Must have been hundreds of kids I saw walking around the Capitol with those Trump T-shirts.

I’m w alien genderless prognosticator Smoking Man. Trump wins. in a landslide.

#69 joseph on 05.12.16 at 9:35 pm

Garth stated ” (the pension croaks when he does)”.
In the case of federal government pensions, not only does your spouse get 50% of your pension (for life) when you die, but upon death the spouse also gets 2 years salary paid up front to her in a lump sum payment from the member’s highest salary. So if you make $100K in your final year before retirement, that amounts to a $200K immediate payout.

#70 WalMark of Sadkatoon on 05.12.16 at 9:38 pm

#35 Popeye the sailor man on 05.12.16 at 7:51 pm

this man

gots it goin on

well done sir!

#71 NoName on 05.12.16 at 9:55 pm

#60 D on 05.12.16 at 8:59 pm

You are not thining it true. Hint WUL.

Where is that guy that is retired somewhere in tropical paradise with wife that is half of his age, when you need him…

#72 Lobster Man on 05.12.16 at 9:59 pm

For those of us who do not have DB plans, what would be a “typical” size of your RRSPs when you are, say at age 60? I just want to get a feel for how that would compare with the commuted values illustrated in today’s comment section. Any volunteers?

#73 Stuart on 05.12.16 at 10:17 pm

3150per month X 12 = 39,000 per year. which calculator does one use to get enhanced sums?

Then LIRA must start withdrawals at over 6% approaching high end of maximum withdrawal rates.
Now start with 2 down years of returns like it was from 2008 then you eat through the capital fast. Run a Monte Carlo on the true cash needs and see the odds of portfolio survival to a realistic possible age of say 95.

Where are those planners that can do a professional assessment or do they even exist? I never found one.

Shawn the commuted value is based on the actuarial rate of return of the plan used in the OSFI valuation for the plan year.

#74 Bottoms_Up on 05.12.16 at 10:22 pm

#55 The Truth shall set you free on 05.12.16 at 8:42 pm
—————————–
Actually this may be partially correct. Children may get survivor benefits (maybe 10% of the members monthly pay) until a certain age or until they leave school. Surviving spouse can also get part of the pension. For federal public servants, the surviving spouse gets 50% of what the member was getting. Early death of course is still a massive financial loss to the family, but at least something is retained for the survivor.

#75 Bottoms_Up on 05.12.16 at 10:25 pm

#69 joseph on 05.12.16 at 9:35 pm
—————————
The immediate payout of 2 years salary is actually a life insurance plan into which all public servants must pay, and the rates aren’t great.

#76 WalMark of Sadkatoon on 05.12.16 at 10:26 pm

or those of us who do not have DB plans, what would be a “typical” size of your RRSPs when you are, say at age 60?

why just RRSP?

#77 jane 24 on 05.12.16 at 10:34 pm

Garth I was also a teacher and when I retired two years ago I had the same dilemma. Luckily reading the small print I realised that i could go 50/50. Take half now tax free and leave half with them as a monthly pension. I went for this option and have slept well ever since.

#78 Jacob on 05.12.16 at 10:38 pm

While Garth is likely right about the benefits of commuting the pension, there is a ‘non-doomer’ scenario to consider; especially if you are relatively young. If you have been following the exponential increase in computing power and technology in general, there is a good chance that in you may live dramatically longer than the current average lifespan predictions. If that is the case, commuting the pension may be a poor decision. While the plans will certainly all become insolvent in this scenario, current retirees stand to benefit the longest as they would be the oldest and least likely to have their benefits cut. Heck, if you believe the chief futurist at Google (someone not to be taken lightly).. We may not die at all in 30-40 years from now. It’s not as far fetched as you might think if you keep up with the latest technological breakthrough these days… Anyway, food for thought…

#79 Bottoms_Up on 05.12.16 at 10:40 pm

#24 turn of the tide on 05.12.16 at 7:29 pm
———————————–
CRA will charge you 5% interest.

#80 Popeye the sailor man on 05.12.16 at 10:47 pm

#37 Dan on 05.12.16 at 7:55 pm
The only question I have if you take the lump sum payout and retire at 55. Do you still get health care benefits?

Good question!

In my case your right I had to give up health care benefits, which are OK at best. I addressed that by returning to the employer after a couple of weeks and I am back on full benefits, again and will after a few years will get another small pension and benefits like the supplemental death benefit of 2X income till around 70.

If your a valued employee and out line with HR what your goals are and make arrangements that don’t disrupt thing much many employers will rehire you back. Being federal government (Blue collar) worker I had to start as casual for two months while the fund were transferred. Then I was given a one year term employment contract and now will have to enter a new Staffing Process to get a indeterminate position again or wait three more years to role over to indeterminate status again. Yes it was a risk, I had other options if needed, and if your not deadwood they will want you back.

Actually an employer may benefit in the long term where I would of retired at 55 now I could stay till 65 or longer building a new pension (unlikely thou) but I could.

#81 Freedom First on 05.12.16 at 10:56 pm

#60 D

Yes. My thoughts exactly. High risk.

#82 Popeye the sailor man on 05.12.16 at 10:58 pm

#62 Simple, really on 05.12.16 at 9:04 pm
If they had the mindset, the appetite for risk to take the commuted value they would not have lived their life as employees, eligible for pension.

Not true read my posts today, it takes guts to leave a permanent job, commute the pension and get rehired or look for another (better) job. But I’m not the only one to have done this. I will give you that some will look at it and take no action, which is to be expected anywhere.

#83 Shawn on 05.12.16 at 11:02 pm

Pension Commuted Value Math and Risk

#30 Mark on 05.12.16 at 7:37 pm responded to my post at 19:

“A commuted value gives a sum that can provide the same pension even if invested in 100% government bonds.”

Shawn, where do you find government bonds that have a yield equivalent to the discount rate (you claim 7%) that is used by the plans to calculate the commuted value?

*****************************************
Pensions plan to make 7% on the money. That is the assumed return on plan assets.

Commuted values and also the pension liability is calculated using AA bond rates so maybe 3% these days.

Say the pension fund planned to pay your pension with $300k invested in a balanced fund to earn 7%. On commuted value they must give you more like $600k so you can earn the same annuity (risk free) by investing at the 3%.

I kid you not. The math is ludicrous. Pension liabilities are arguably overstated in that they would only need the amount of assets calculated as the liability if they in fact do invest strictly in bonds. The so called pension shortfalls are phoney baloney in many cases because they assume that 3% return.

Providing a pensioner a commuted value is a gift and is unaffordable to most pension plans.

Garth is right that the math is take your massive commuted value calculated on a 3% yield and invest at 6% and you almost (but not quite) certainly end up with more money. But you have to take a risk to do it. And your wife will NEVER agree.

The whole thing is stupid. They made the pension liability rules so conservative that they basically killed the DB plan. It’s like refusing to be born to avoid the risk of dying.

The requirement to pay commuted values is stupid and should cease.

A pensioner in a private companies pension plan faces some risk the company will not be able to honor the pension. But take the commuted value and invest in government bonds and voila the risk is gone. Unfair and also it eventually kills the BB pension plan.

DB pension plans used to work in large part because those who died young subsidized those who lived very long. It worked. Commuted values are like a parasite that destroys the host.

#84 Popeye the sailor man on 05.12.16 at 11:13 pm

#69 joseph on 05.12.16 at 9:35 pm

Your right its called supplemental death benefit of 2X income till around 70.

It is like life insurance. You could buy your own or…

If you leave one employer you can find another job with like benefits or return with the same employer like I did.

#85 Shawn on 05.12.16 at 11:16 pm

There is no typical…

Lobster Man on 05.12.16 at 9:59 pm asked

For those of us who do not have DB plans, what would be a “typical” size of your RRSPs when you are, say at age 60?

***********************************
RRSP sizes vary a lot more than lobster sizes.

There is no typical. RRSPs for those without a pension vary from zero to several million or more. I would bet the top several percent RRSPs for those without pensions by age 60 is over one million.

The average? For those who actually have at least more than zero? More like $300k at best? Maybe a lot lower. The median?, lower still.

Ironically enough it is people with pensions that probably have larger RRSPs on average. Everyone with a good pension probably has a job where they could afford to put in the maximum in their RRPS. Their maximum would be low due to the “pension adjustment” . But having a good job and being in a high tax bracket they will mostly max whatever RRSP room they have.

Meanwhile the hordes without pensions are often lower paid and can’t afford to contribute to an RRSP. They have tons of RRSP room and they can’t or don’t use it.

A rare few like lawyers and doctors and top sales people and others have no pension but big incomes and will maximise their RRSPs and could have $2 million at age 60. Easily $1 million I would think.

Again, there is nothing typical about it.

#86 Popeye the sailor man on 05.12.16 at 11:39 pm

#83 Shawn on 05.12.16 at 11:02 pm

“DB pension plans used to work in large part because those who died young subsidized those who lived very long. It worked. Commuted values are like a parasite that destroys the host.”

You realize that there is very few things middle class people like myself can take advantage of and while this is available still (and legal) and it is in your family’s best interest do it don’t let someone try to shame you into not doing it because the fund will only work when half die early. What a poor incite.

Also back in the early 90’s the federal government pilfered the PSPP for like $28,000,000,000 then several years ago after the baby boomers have all paid for there pension contributions us gen X and Y now have to pay 50% more for the same pension. They also changed other rules 3 years ago so people will have to also stay longer to get maximum benefits. If they had left the money in-place the growth from 93 to today it would be well funded.

So who was the parasite.

#87 Popeye the sailor man on 05.12.16 at 11:43 pm

#70 WalMark of Sadkatoon on 05.12.16 at 9:38 pm

Thanks.

#88 BC_Doc on 05.12.16 at 11:50 pm

#85– @Shawn

I’m a 50 year old MD. Between my spose and I, RRSPs sit just under $800k. At this point, for tax planning reasons, we’re trying to limit the amount we put in our RRSPs each year– we want to pay a lower marginal tax rate when we withdraw funds in our golden years, not a higher rate than our current marginal rate. Basically, we add only what we need to to obtain the matching amount from our provincial medical association. At this point, we’re maxing out our TFSAs every year and leaving money behind in the medical corporation to invest (tax sheltered).

#89 Lobster Man on 05.13.16 at 12:00 am

#85 Shawn on 05.12.16 at 11:16 pm

Thanks.
I read that as:
– for the top few percent, a million or more.
– for those who have more than zero, the average is no more than $300,000, with the median being somewhat less.

Any other suggestions/guesses?

#76 WalMark of Sadkatoon on 05.12.16 at 10:26 pm
Why just RRSP?

…….because it is already complicated enough!

#90 Frank on 05.13.16 at 12:50 am

Mortgage rates are at 3-year low.

https://www.washingtonpost.com/news/where-we-live/wp/2016/05/12/mortgage-rates-havent-been-this-low-in-three-years/

Buy with confidence, the rate increases you’ve heard about didn’t come this year. They won’t come next. Everyone that’s said this is the “new normal” have been consistently right. Everyone saying rates will “normalize” have been consistently wrong.

Global growth will be sluggish for years. Expect lousy returns.

#91 WalMark of Sadkatoon on 05.13.16 at 1:09 am

A rare few like lawyers and doctors and top sales people and others have no pension but big incomes and will maximise their RRSPs and could have $2 million at age 60. Easily $1 million I would think.

nightmare scenario.

shifting tax to the end of life.

brutal.

it’s like accumulsting a small beating every year only to get it all at once when you’re old

#92 This is what a 3.5 mill home should look like on 05.13.16 at 2:44 am

https://youtu.be/cIY6NLSG6wo

#93 IHCTD9 on 05.13.16 at 7:56 am

#140 A box in the sky on 05.12.16 at 6:13 pm

Toronto is a shithole? What an absolute joke. If that’s how you feel chances are good that you lack the financial capability to compete with people who live in the desirable areas of this city.

Toronto isn’t NYC but it’s a damn good city.
___________________________________________

Well shithole might be a bit excessive.

But it is sure as hell not “a damn good city”.

Massive, colossal, ginormous traffic problems, massive transit issues, excessive population growth, poor and getting worse wages, insane housing prices, manufacturing exiting en-masse, the dumbest drivers in the world, and a perpetually broke City Hall.

I cringe when I have to go to Toronto – it literally stinks, most times there is a brownish haze hanging over the city. The traffic is absolutely abominable, horrific, all day, every day.

A couple of decent venues for sports and arts as well as a whack of cool places to eat don’t make up for all the many and serious shortcomings.

I draw this info primarily from my immigrant customer base who all live and work in the GTA, and my own limited (by choice) experience in the city.

#94 ETF FAN on 05.13.16 at 8:03 am

Hi Garth,

Once the commuted funds are moved into a LIRA, can the LIRA be self-directed and managed by the retiree or can the funds only be managed by an advisor? Thanks.

Either. — Garth

#95 IHCTD9 on 05.13.16 at 8:16 am

#2 TurnerNation on 05.12.16 at 6:30 pm
Hey Millennials here is your future after graduation with a 4-year obedience certificate (with student loans):

Latest LAMB condo has “1 bedrooms” at 400 sq feet in size:

https://www.realtor.ca/Residential/Single-Family/16830039/612—39-BRANT-ST-Toronto-Ontario-M5V1S7-Waterfront-Communities-C1

You owe:
__________________________________________

Back in 2002 I added a back room onto my house. It was to be used primarily for storage and as a laundry room. It measures 400 sq. ft. I built it myself, and it cost me $8500.00 to put up.

Millennials aren’t this stupid are they?

Are they?!?

#96 Almontage on 05.13.16 at 8:23 am

It’s not all doom and gloom if you can’t commute a DB pension.
Surely if you’re careful you can save something outside your pension contributions. You can treat your DB pension as a fixed income asset that’ll keep the wolf away from the door and – if you want – be a bit more aggressive with your personal savings.
My parents collected modest DB pensions for 25 years and it allowed them to live their retirement with dignity and move into assisted living as they got very old.

#97 yorel on 05.13.16 at 8:24 am

Yep, I know some people who commuted their pensions, taking a sure thing and gambling with it. I see them at the burger joints, flipping burgers. Great retirement.

Troll. — Garth

#98 crowdedelevatorfartz on 05.13.16 at 8:38 am

@#67 Brazil ExPat
“Hard earned pension? From pushing paper around all day? Most Govt Workers are paper pushers not front line workers like police or nurses. Pensions that are 1/2 paid for by TAXPAYERS? Getting too much sun today?”
********************************************

Well …..its finally happened. Hell hath frozen over.
I 100% agree with you.

In the immortal words of that “B” rate actor Charleston Heston in one of the worst acting jobs of his carreer in Planet of the Apes.
“Damn you all to hell!” :)

#99 Centre Wing on 05.13.16 at 8:54 am

Is there an easy way to know if one’s DB pension plan offers a commute option?

#100 Ace Goodheart on 05.13.16 at 8:56 am

RE: #2 Turner Nation:

Translation of the condo’s descriptive features:

1. Exposed Concrete Feature Wall – this is just a bare concrete wall with no finishing. Cheaper than drywall. Your condo has that cool concrete parking garage smell

2. Engineered Hardwood Floors – ie, laminate floors (engineered hardwood is fake hardwood).

3.European-Style Kitchen – all appliances are “apartment size” (ie, very small) and there is no separate dining room, the dining table is literally placed in the middle of the kitchen.

#101 IHCTD9 on 05.13.16 at 9:02 am

#10 cto on 05.12.16 at 7:01 pm
#2 TurnerNation

yo Millennials,…and new Kanadians for that matter, you know, there is actually a better way to live. yes a substitute from the be-all-end-all, so in vogue Toronto. Canada is a very big country, and beyond the borders of “the best place on earth” people are living quite happily with all the amenities you would get in and around Brad Lambs shoebox!
so, get out there, take a chance and you might just find out that you have been had,… and life north of 7 is not bad after all.!!
_____________________________________

I don’t live North of 7, but I aspire to LOL!

I hate to say it, but IMHO it is the comfort of the big enclaves that keeps the new Canadians stuck in the GTA. I don’t blame them, makes perfect sense. But they are starting to get pretty full…

I will say that some New Canadians are braving small town Ontario, and as usual it is the East Asians, Koreans (couples) and Philippinas (99% women) that are stepping out first.

I am noticing also quite a few Asian Female/Caucasian Male couples showing up as well, but I guess that one makes sense. I already see many half White half Asian kids at school events these days, so this has been going on for years now.

I’m not holding out for big city Millennials to move to small town Ontario as it is not Cool enough to sufficiently stroke the ego. Probably just as well as they just would not fit in without a complete frontal lobotomy.

#102 Bottoms_Up on 05.13.16 at 9:25 am

One for SM…take your kid out of school for an educational trip to another continent, get fined for missing “lessons”:
Term-time holiday father wins at High Court – http://www.bbc.co.uk/news/education-36277940

#103 IHCTD9 on 05.13.16 at 9:46 am

#100 Ace Goodheart on 05.13.16 at 8:56 am
RE: #2 Turner Nation:

Translation of the condo’s descriptive features:

1. Exposed Concrete Feature Wall – this is just a bare concrete wall with no finishing. Cheaper than drywall. Your condo has that cool concrete parking garage smell

2. Engineered Hardwood Floors – ie, laminate floors (engineered hardwood is fake hardwood).

3.European-Style Kitchen – all appliances are “apartment size” (ie, very small) and there is no separate dining room, the dining table is literally placed in the middle of the kitchen.

____________________________________________

You can make anything sound good with a little poetic license:

Beautiful 103 year old landmark home. Built in 1913, it features 2 stories, and 3600 square feet of living space boasting all the character you would expect of a timber framed structure built entirely by hand . This home is built with a beautiful combination of rough sawn, and hand hewn hardwood timbers mortise and tenonned throughout. Exposed Concrete Feature Walls on all four sides downstairs complemented by “hand finished” Exposed Concrete and igneous aggregate Feature Floors.

Upstairs features gorgeous 250 year old full 2″ thick natural scraped finish hardwood flooring. Soaring 40′ high vaulted ceilings with exposed timbers and naturally weathered pine clad walls.

Also comes with 14 stalls for cows, bale hoist, double doors for access to the hay mound, and a side pen for goats or chickens. Manure pile is fully stocked, and I just shoveled the shit trough out.

#104 Hot Albertan Money on 05.13.16 at 9:50 am

as commuting a pension goes, the financial no-brainer decision is to do it, as the advantages massively outweigh the passive alternative

What if you can only commute your pension before a certain age, like at 50 with the main Federal plan?

Should someone take an “early” retirement just to get the immediate cash (but no health/dental benefits) or stay on for another 5-10 years to increase their years of service and take the pension/benefits?

#105 Godth on 05.13.16 at 9:54 am

Genocide, ecocide and the Empire of Chaos
http://www.theecologist.org/Interviews/2986750/genocide_ecocide_and_the_empire_of_chaos.html

#106 Starship Grouper on 05.13.16 at 10:06 am

“The risk isn’t that there’ll be a re-run of the 1930s and you’ll end up eating bugs under a bridge,……” Garth

Bugs, bugs, bugs……for many savoring some delicious bugs would be an ideal retirement, so watch what your saying, okay?

http://i.cdn.travel.cnn.com/sites/default/files/styles/article_large/public/2012/08/23/insects_main.jpg?itok=pStUA4c1

#107 Starship Grouper on 05.13.16 at 10:08 am

We exaggerate and misinterpret risk, come to believe there’s a Bernie Madoff lurking everywhere or weirdly believe the economy could collapse (when it never has in your lifetime)….Garth”

Isn’t there a saying like, just because you’re paranoid doesn’t mean that they’re not out to get ya!

#108 jess on 05.13.16 at 10:15 am

March/April/May 2016
Mend, Don’t End, Fannie and Freddie

Conservatives blame the mortgage giants (wrongly) for the financial crisis, and both parties want them dead. But to finish the job of financial reform without destroying the housing market and costing taxpayers billions, we need to let them live.

By Bethany McLean
http://www.washingtonmonthly.com/magazine/marchaprilmay_2016/features/mend_dont_end_fannie_and_fredd059896.php?page=all
…”A study published by the National Bureau of Economic Research in early 2015 found that the wealthiest 40percent of borrowers obtained 55 percent of the new loans in 2006—the peak year of the bubble—and that over the next three years, they were responsible for nearly 60 percent of delinquencies.”

The Line That May Have Won Hillary Clinton the Nomination | Rolling …
http://www.rollingstone.com/…/the-line-that-may-have-won-hillary-clinton-the...
Apr 28, 2016 – According to one study, about two-thirds of all subprime loans between 2000 and 2007 were made to people who already owned their homes. The targets were often elderly, in particular men and women of color. Visiting loan officers convinced these borrowers to use the homes they’d poured their savings .

#109 bittlelill on 05.13.16 at 10:16 am

#13 Mark on 05.12.16 at 7:10 pm
Having an awesome time in the Beltway this week. Word on the street is that a financial scandal of some sort is going to break in the next few months. Its kind of eerie here too say the least, and I was treated this morning to an excellent meeting with a US Senator in the Hart building.

Must have been hundreds of kids I saw walking around the Capitol with those Trump T-shirts. Quite the level of enthusiasm from the younger crowd, that’s for sure.

I’ll be back to my regular posting next week. Until then, peace.”

Is Trump considering Mark as one of his economic policy advisors?????Is this why he is in Washington rubbing shoulders with the elite?

#110 Farsyd on 05.13.16 at 10:16 am

Garth, Unlike the housewife where I agree with the pension fund, this prof can manage his own finances and taking the money is not a bad option. Your analysis is flawed, specifically your 756,240 for 20 years of pension payments. Odd are its an indexed pension fund, at 2% COLA, he get $914,413 in payment. The math still supports commuting. It really comes down to your personality. There is something to be said about a steady cheque. Ideally people should have their own outside investments and a pension. I have my own rule, 1/3, 1/3, 1/3. Outside investments, pension and government. There is a decent chance unfortunately, that the last third abandons the wealthy who have the first 2/3.

#111 coopoiler on 05.13.16 at 10:26 am

#25 OK, I know that I collect CPP at 60, no exceptions

Why do you collect CPP at 60 with no exceptions?

#112 Ole Doberman on 05.13.16 at 10:29 am

Former RBC CEO says Toronto RE is going higher.

http://www.bnn.ca/News/2016/5/13/Toronto-real-estate-will-continue-to-do-extremely-well-says-Former-RBC-CEO.aspx

Garth do you need anymore convincing our government is in bed with banks supporting RE with foreign capital inflows?

#113 CanMex on 05.13.16 at 10:35 am

It is implied by Garth’s math that that Gerry’s DB pension is not inflation protected. I read no discussion of this issue by either Garth or the commenters. Inflation may not be an issue right now, but history suggests that at some future time it will again become one. An additional point in favour of commutation and self-administration is that, properly invested, the commuted funds can provide a significant protection against the ravages that inflation might wreak on a flat-rate pension income over an extended lifetime.

The commenter who says that at age 90+ management of the funds will become onerous is correct. The answer is to be ready to hand over administration to a trusted family member or a paid administrator at some point. Then you can drop off the twig worry-free.

#114 MF on 05.13.16 at 10:46 am

#101 IHCTD9 on 05.13.16 at 9:02 am

The Filipinas are all caregivers. That’s why they are all women. Not saying that small town living isn’t good (it probably is better than the GTA), but they are only there out of necessity and 99% have husbands/boyfriends back in the Phils. From what me and my filipina GF see, quality of WM with AF is…..low to say the least lol

MF

#115 MF on 05.13.16 at 10:58 am

#2 TurnerNation on 05.12.16 at 6:30 pm

Ah King West. What a joke, although you are correct about the vomit.

Majority of people there are millennials who live at home and drive dad’s BMW from Mississauga, Woodbridge, or Scarborough to pretend they are something they are not every weekend (mixed in among bums on the street of course).

The place wreaks of pretentiousness.

But above all, when it comes to being pathetic, the absolute worst is these 35-40+ people who seem like they never really grew up? Or are looking to recapture their youth in some way by being “hip and urban” at 35-40+?

This group consists of former nerds turned accountants, divorcees, MGTOW losers, cougars who have lost “that youthful glow” and the like. Seems they will try anything to try and flaunt their leveraged and indebted pocketbooks around. These losers populate that place in great numbers and destroy any sense of urban hip vibe it may have.

Conclusion: PoopShow

MF

#116 Popeye the sailor man on 05.13.16 at 10:59 am

104 Hot Albertan Money on 05.13.16 at 9:50 am
as commuting a pension goes, the financial no-brainer decision is to do it, as the advantages massively outweigh the passive alternative

What if you can only commute your pension before a certain age, like at 50 with the main Federal plan?

Should someone take an “early” retirement just to get the immediate cash (but no health/dental benefits) or stay on for another 5-10 years to increase their years of service and take the pension/benefits?

___________________

Look at my earlier post # 35 and #80.

With the very low interest rates and low growth environment now is a very good time.

I’m with the main Federal plan. (Blue Collar worker).
I did it at 47 (quit and get rehired) and will now work at the same job for another 6 years to secure the full retirement benefits like medical and dental and supplementary death. The at 53 I will have all the freedom to stay, go, or find something different with an expected investment value over 1M and a 8-10K/Y small pension.

It can be done.

#117 yorel on 05.13.16 at 11:00 am

People who disagree with Garth are trolls?

No. Just you. — Garth

#118 MF on 05.13.16 at 11:06 am

#9 A box in the sky on 05.12.16 at 6:56 pm

“a millennial with money”

Nice oxymoron.

A millennial “with money” is in Vegas, LA or NY.

MF

#119 Ronaldo on 05.13.16 at 11:14 am

#85 Shawn

”A rare few like lawyers and doctors and top sales people and others have no pension but big incomes and will maximise their RRSPs and could have $2 million at age 60. Easily $1 million I would think.”

And there are many who were in the lower income brackets (seniors) who maybe were able to put away 1 or 2 hundred thousand by time they retired at age 65 to supplement theor OAS only to find out that their GIS would be clawed back by 50% or more for every dollar they withdrew from their RSP’s. Hence, their rsp’s sit and mould away til they have to turn them into a RIF at 72. The main reason that TFSA’s came into being. To eliminate the inequities created by RSP’s for this group. A tax trap. I know of many in this situation.

#120 Smoking Man on 05.13.16 at 11:18 am

“Hope” Spikes Most Since 2011 As UMich Consumer Confidence Hits 11 Month Highs

I call it the Trump Train.

Nice, that report sends the USDCAD up a cent.

100 contracts at average of 1.27204 P & L Up 232,700.00K

My next buy in 1.3025.

what I’m trying to figure out is why is the CAD still moving on oil. Fort Mac is not operating.

God damn algos.

#121 TurnerNation on 05.13.16 at 11:20 am

115 MF yep guilty as charged. 35-40 reliving my youth but this time with 5 star budget for entertainment and clothing.
Work 8hrs, gym, then out to the best places and events. No kiddie crowds. Usually a few places on one night, a few times each week, keep energy fresh. I call it social therapy. Keeps me young.

#122 Smoking Man on 05.13.16 at 11:33 am

The Ontario Liberals have lost there fking minds.
Ontario Wants to Eliminate Natural Gas.

They sure know how to attracted investment.

http://www.640toronto.com/2016/05/13/ontario-wants-to-eliminate-natural-gas/

#123 fancy_pants on 05.13.16 at 11:39 am

#3 JSS on 05.12.16 at 6:31 pm

for federal gov’t it’s age 50. after that, you can’t commute it.

#124 liquidincalgary on 05.13.16 at 11:53 am

Big Dipper on 05.12.16 at 7:11 pm

That solves the problem. Unless, of course, the case was inaccurately stated.

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

actually, you inaccurately interpreted the situation…wow, talk about *financially illiterate*

#125 jean on 05.13.16 at 11:56 am

Surely he will not be leaving “about 600,000” to his heirs? The amount remaining in his LIRA will be fully taxed as INCOME in the year of his death. Given the size, the tax rate will be north of 45%. The TFSA will be passed on tax free, but the LIRA will incur a tax bill of nearly 175k. Not small potatoes. Just sayin’

You’re right. Better to leave nothing. — Garth

#126 liquidincalgary on 05.13.16 at 11:59 am

Henry Olivere on 05.12.16 at 7:15 pm

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

what you don t seem to understand, from your example, is that, even if he dies at 83 (before collecting the DB principal), he STILL HAS half a million dollars to leave behind as part of his estate. staying with pension only, his estate receives NOTHING…again *financial illiteracy*

how the hell did i end up being the only non-1%er on this blog

#127 jean on 05.13.16 at 12:01 pm

Continued…Not saying I disagree with your analysis, but perhaps there is a better way to manage the after tax cash flow to avoid a huge tax bill on death. Say, extract a higher amount from the portfolio each year and pay a few percent more in tax, and use the excess money to make gifts to his heirs that they could use to fund their own TFSAs. Or something like that.

#128 tkid on 05.13.16 at 12:06 pm

#99 Go online onto your pension plan website and read the fine print. My DB pension has a FAQ, and they answered the commute question there. Play around with the tools (if any) that guestimate your pension.

Everyone should keep on top of their pension information. It’s surprising how many don’t, even when they plan on retiring in the next 12 months.

#129 IHCTD9 on 05.13.16 at 12:11 pm

#114 MF on 05.13.16 at 10:46 am
#101 IHCTD9 on 05.13.16 at 9:02 am

The Filipinas are all caregivers. That’s why they are all women. Not saying that small town living isn’t good (it probably is better than the GTA), but they are only there out of necessity and 99% have husbands/boyfriends back in the Phils. From what me and my filipina GF see, quality of WM with AF is…..low to say the least lol

MF
____________________________________________

There are enough stories out there about what you say that I know what you are taking about. The WMAF couples I know are pretty solid. Educated, solidly employed, God fearing, family rearing folks. Rip the shirt right off their backs for you.

I know one (white) guy who married a Filipina, he’s a business owner, and yes she is a nurse (LOL). She is a solid woman, no BF back home, has been in Canada for a long time. She is here because that is where he is from, got job, bought house, had kids, living a pretty good life. They are the same age, he was very eligible when single.

Most of the WMAF’s are Chinese wife same age etc, none of this 60 year old goof with a 20 y/o Asian “wife” stuff..

#130 Vundo on 05.13.16 at 12:18 pm

https://www.good.is/articles/slum-lord-shaming-on-social-media
The next big social media trend in Vancouver?

#131 Dan on 05.13.16 at 12:39 pm

Do not call it Toronto, please.
It is Turdonto, where turds rule.

#132 Shawn on 05.13.16 at 12:57 pm

RRSP Math versus Myth

#88 BC_Doc on 05.12.16 at 11:50 pm said:

At this point, for tax planning reasons, we’re trying to limit the amount we put in our RRSPs each year– we want to pay a lower marginal tax rate when we withdraw funds in our golden years, not a higher rate than our current marginal rate.

WalMark at 91 called a $2 million RRSP a nightmare rather than a dream.

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

The Myth is that the RRSP is a mere tax deferral device. The Myth is that your tax rate must be lower in retirement to benefit from an RRSP. These myths are simply false.

The Math has been discussed here before and shows if the marginal tax rate is unchanged then $10,000 in an RRSP with say 40% tax refund works out the EXACT same as paying the tax and putting the $6000 into a TSFA. Since the TFSA is an acknowledged tax avoidance plan so is the RRSP as long as the marginal tax rate is unchanged.

In that scenario think of “your” RRSP as being about 60% yours and 40% the taxmans. Your 60% share will grow completely tax free but the governments 40% share stays at 40% as well. Assuming an unchanged marginal tax rate of 40%.

In this scenario, the benefit of the RRSP is decades of tax free compounding on your share of the RRSP despite paying 40% in taxes at the end which is merely giving the taxman back his constant 40% of “your” RRSP.

Yes, the 40% can turn to 60% marginal tax in some cases with clawback so do be careful. But some of you will have incomes in retirement that give marginal tax rates around that same 40%.

Yes, use TFSAs first. But I think RRSPs will easily beat margin accounts for most people. Not sure about it beating corporate accounts.

In my case we are both 55 and our two RRSPs are now worth $7.80 for every dollar we put in. It is best if I think of this as my (after refund) 60 cents grown tax free to $4.68 and the tax man’s original 40 cent refund grown to $3.12.

So I could groan and whimper about the 40 cent refund growing to a $3.12 tax bill. Or I could consider the tax free compounding that allowed my 60 cents to grow tax free to $4.68. And yes maybe the tax share will be more than 40% and my share less than $4.68.

Anyway you do the math and even if the marginal tax rate is 50% or even 60% (very unlikely) if our RRSP grows to $2 million or $4 million that is a dream and not a nightmare.

People have the choice, look at the math and use RRSPs except if the marginal tax rate is expected to rise very considerably due to clawback or listen to myth and give up decades of tax free compounding on your share of the RRSP, which is the percentage you contributed net of the tax refund.

The Math does not lie. The Myth typically does not intend to be a lie but it is simply untrue for most people.

#133 TurnerNation on 05.13.16 at 1:03 pm

Is Gartho taking the Greaterfool motorcycle club down to that Port Elgin biker meet on?

Full patches have three sections on their vest: Bikes, Babes, Balanced Portfolios

#134 Shawn on 05.13.16 at 1:06 pm

RRSPs and Guaranteed Income Supplement

Ronaldo at 119 said:

And there are many who were in the lower income brackets (seniors) who maybe were able to put away 1 or 2 hundred thousand by time they retired at age 65 to supplement theor OAS only to find out that their GIS would be clawed back by 50% or more for every dollar they withdrew from their RSP’s

*****************************************
Agreed and if you plan to be of such low income as to qualify for the GIC then do not use RRSPs.

Firstly the tax refund was probably a low percentage for such contributors and secondly the marginal tax impact in retirement is huge. This has been well know for decades. Your 80% of the RRSP can turn into 40% in that case as the tax man takes 60% while your original refund was only 20%.

#135 jean on 05.13.16 at 1:10 pm

You’re right. Better to leave nothing. — Garth

Well that’s partly true, but only the amount in the LIRA needs to be reduced to zero. Your snark and sarcasm aside, you know I’m right. Your excitement at leaving “around 600,000” is wholly misguided, because what matters to his heirs is not the pre-tax but the after tax amount they end up with, and you have ignored it.

Gerrie needs to sit down with a tax advisor and determine the best way to reduce the amount sitting in his LIRA to as near to zero as possible by the time he dies, to minimise a MASSIVE tax bill. He can do this by taking a slightly larger amount out over the next 20 years and either gifting it to his heirs for their own investments (in a TFSA or even their principle residences) or use some other strategy. Any how is gifting it out over the next 20 years “leaving nothing”. Surely his heirs will understand the sentence “I’m making this annual gift to you now to minimise the tax hit when I croak”. Is that so hard?

#136 Blacklisted on 05.13.16 at 1:23 pm

#120 Smoking Man on 05.13.16 at 11:18 am
“Hope” Spikes Most Since 2011 As UMich Consumer Confidence Hits 11 Month Highs
I call it the Trump Train.
Nice, that report sends the USDCAD up a cent.
100 contracts at average of 1.27204 P & L Up 232,700.00K
My next buy in 1.3025.
what I’m trying to figure out is why is the CAD still moving on oil. Fort Mac is not operating.
God damn algos.
_________________________________________
The Trump Train is hauling a bucket of bullshit. You really believe in this guy? Wow you really are as dumb as yer spellin. Perhaps some schoolin! Algorithms are programmed for specific market scenarios, they may not react quickly enough if the market is dynamic. In order to avoid this situation markets may need to be closely monitored and then trigger trading suspension during market instability. However, in such extreme circumstances, a simultaneous suspension of algorithmic trading by numerous market participants could result in high volatility and a drastic reduction in market liquidity. Or your program is just fu*ked! It’s the Machine and the Machine has its own language. Or perhaps you have been misled by the Führer, all hail Trump.
http://www.newyorker.com/humor/borowitz-report/trump-promises-paul-ryan-that-hell-sound-slightly-less-like-hitler

#137 Ponzius Pilatus on 05.13.16 at 1:26 pm

Personally, I would not commute.
The traffic is getting worse by the day.

#138 liquidincalgary on 05.13.16 at 1:50 pm

Smoking Man on 05.13.16 at 11:18 am

what I’m trying to figure out is why is the CAD still moving on oil. Fort Mac is not operating.

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

wrong grade of oil?

#139 WalMark of Sadkatoon on 05.13.16 at 1:57 pm

#132 Shawn on 05.13.16 at 12:57 pm

solid post

a person’s $2m RRSP isn’t theirs. it’s a $1.2m RRSP.

and most won’t live long enough to drain down that amount. they’ll die first and then the tax man take the rest in a nice healthy lump

still agree TFSA first, RRSP second, but ppl shouldn’t be fooled that it’s all theirs. not even close.

#140 The Great Canadian Bubble Co. on 05.13.16 at 1:59 pm

Facinating Ponzi scheme analysis by Ross Kay

http://www.rosskay.com/vancouvers-ponzi-scheme.html

#141 Damifino on 05.13.16 at 2:06 pm

#135 jean

“… is gifting it out over the next 20 years “leaving nothing”. Surely his heirs will understand the sentence “I’m making this annual gift to you now to minimise the tax hit when I croak”. Is that so hard?
————————

No, it’s not so hard. I hear what you’re saying but I’d suggest in many cases ‘leaving nothing’ might end up being the practical result.

Every one of my contemporaries (and their offspring) have blown money gifted to them over time. They just can’t seem to it hang on to it. Especially in these times when savers are considered fools by many.

One friend received an unexpected $80K inheritance from an aunt. It was gone within a year. He still has a mortgage and other debts. I know of many similar cases. Saving money is so 1980’s.

#142 Ronaldo on 05.13.16 at 2:07 pm

#113 Canmex

”The commenter who says that at age 90+ management of the funds will become onerous is correct. The answer is to be ready to hand over administration to a trusted family member or a paid administrator at some point. Then you can drop off the twig worry-free.”

Hopefully by that time he will have planned well enough that he would not have that much to worry about. Dieing with a pile of money is not necessarily good planning.

#143 Sponge on 05.13.16 at 2:35 pm

Here’s a question… With a DB pension and a paid crib, should my investments (worth slightly more that my crib) be in 100% equities? Withdrawing 3-4% of the investments yearly..

#144 Rainclouds on 05.13.16 at 2:36 pm

Met the bank of mom at yoga today (Yes Smoking man Yoga….)

#145 Smoking Man on 05.13.16 at 2:41 pm

#136 Blacklisted on 05.13.16 at 1:23 pm
#120 Smoking Man on 05.13.16 at 11:18 am
“Hope” Spikes Most Since 2011 As UMich Consumer Confidence Hits 11 Month Highs
I call it the Trump Train.
Nice, that report sends the USDCAD up a cent.
100 contracts at average of 1.27204 P & L Up 232,700.00K
My next buy in 1.3025.
what I’m trying to figure out is why is the CAD still moving on oil. Fort Mac is not operating.
God damn algos.
_________________________________________
The Trump Train is hauling a bucket of bullshit. You really believe in this guy? Wow you really are as dumb as yer spellin. Perhaps some schoolin! Algorithms are programmed for specific market scenarios, they may not react quickly enough if the market is dynamic. In order to avoid this situation markets may need to be closely monitored and then trigger trading suspension during market instability. However, in such extreme circumstances, a simultaneous suspension of algorithmic trading by numerous market participants could result in high volatility and a drastic reduction in market liquidity. Or your program is just fu*ked! It’s the Machine and the Machine has its own language. Or perhaps you have been misled by the Führer, all hail Trump.
http://www.newyorker.com/humor/borowitz-report/trump-promises-paul-ryan-that-hell-sound-slightly-less-like-hitler
………………

Trump rocks. Hillary sucks, Wynee suck. T2 Sucks.

Suck it up..

#146 Popeye the sailor man on 05.13.16 at 2:55 pm

123 fancy_pants on 05.13.16 at 11:39 am
#3 JSS on 05.12.16 at 6:31 pm

for federal gov’t it’s age 50. after that, you can’t commute it.

__________________
Very true for any one hired 3 year or more ago.

http://www.tbs-sct.gc.ca/psm-fpfm/pensions/plan-regime/glance-coupdoeil-eng.asp
Type of pension benefits for plan members who began participating in the plan on or after January 1, 2013

New rules for new hires after Jan 2013 it is now age 55 for transfer value option.

#147 rainclouds on 05.13.16 at 2:59 pm

Met the bank of mom today here in the BPOE.

Casual convo meandered to RE (It is Vancouver:-) started with her blaming”Asian money” I countered with ” how do you know ? “no stats” .Then the “no land” argument, then gonna be “San Fran” I mentioned San Fran has something Van doesn’t, high paying JOBS/Industry/head offices

Then the bomb ” lent, err gifted” the brat 100k.
Bank said assessment is too low, need another 30k.
Mommy got hit with a BIG tax bill as she had to cash out investments, the 130k is probably 170k. Then told me she was “wiped out in TO in the early 80’s, 4 houses and interest rates ballooned ” Some people never learn……

Meanwhile yet another friend bailed. ask 1.1M got 1.5M. 20 yr old Condo, west end, no subjects. Now apartment hunting and new millionaires. I welcomed them to the club…………..

#148 jess on 05.13.16 at 3:33 pm

the rule of 90?

Live forever: Scientists say they’ll extend life ‘well beyond 120 …
http://www.theguardian.com › Science › Ageing
Jan 11, 2015 – “Radical life extension isn’t consigned to the realm of cranks and science fiction writers … But those longer lives come with their share of misery

#149 Smoking Man on 05.13.16 at 3:34 pm

For you Blacklisted

Nothing disjoints lefties more than a few miss speelt words.

It outs them every time. My logic being a lefty has probably spent a shit load of time in school getting mind fkd by socialist teachers.

Two things they have been programmed to hate the most, grammar and spelling. They typically will call you out on a few cleverly designed typos.

Math being not that relevant, lets face it, debt slavery is good.

Rightists are typically self employed or a paid on a quota type comp package like sales. Rightists are out in the world and hunt for a living and not a stay at home victim of some trivial imaged injustice.

Rightists could not give two flying fks about speeling or grammer.

Another brilliant observation by the great fantastic me.
Dr Smoking Man
PhD Herdonomics.

Ps. Lefties also despise ego maniacs.

#150 Bottoms_Up on 05.13.16 at 3:36 pm

#116 Popeye the sailor man on 05.13.16 at 10:59 am
————————————————————-
Also, what you (or your boss) did could be seen as violating the ethics code, if you were rehired without going through a formal competition? Surprised there were no red flags from HR.

#151 The Lazy Taoist on 05.13.16 at 3:37 pm

Funny thing is, if the economy and the markets actually do hit Armageddon, then what do the doomers think that the pension fund managers are going to do any differently to save those pensions????
Dumb.

#152 Smoking Man on 05.13.16 at 3:48 pm

https://www.youtube.com/watch?v=EE-ZsGvUAR4

Row six tonight at Seneca, already working on a beer buz

#153 God Emperor of Mankind Trump on 05.13.16 at 3:48 pm

@ Blacklisted

The Trump train has no brakes I’m afraid.

http://45.media.tumblr.com/a640c40708bf200c9dace9523b0a3a80/tumblr_o31d9oWD1H1qks3sxo1_500.gif

#154 cramar on 05.13.16 at 3:57 pm

Interesting article. Can be done when you get off the debt treadmill.

How I paid off $65,000 in debt in just 15 months.

http://www.marketwatch.com/story/how-i-paid-off-65000-in-debt-in-just-15-months-2016-05-11

#155 Mixed Bag on 05.13.16 at 4:04 pm

#136 Mixed Bag on 05.12.16 at 4:52 pm

How could I have not guess it’s all about you? — Garth

—————

I thought we were talking about mortgage interest rates.
(And as a consequence, when rates are low, take advantage of the savings to invest, versus paying down the principal, as you’ve espoused previously).

If your advice regarding taking the 10-year rate was targeted for a particular audience, vs. the blanket statement I thought it to be, then I must have misunderstood.

To my eyes, admittedly bespectacled and sorry prescription, it does not appear that rates will move up significantly any time soon. When businesses start hiring more non-core business staff, that’ll be a cue to look at the longer terms.

If you’ve got the stomach for the shorter terms, and can afford potentially higher terms upon renewal, go for it. If you don’t, and the longer terms bring you peace of mind, go for that, the longer terms are still historically low.

#156 Basil Fawlty on 05.13.16 at 4:52 pm

This pension analysis does not recognize inflation, DB plan indexing, the 1% annual financial advisor fee, or the fact that the lowest interest rates in history have created an overvaluation in most asset classes. This blog tells us continually that rates will increase, which means asset prices will likely adjust downwards towards the mean.
This is not doom, or gloom, but simply full cost accounting.

Asset values generally rise with rates and inflation. Stock to being a doomer. — Garth

#157 For those about to flop... on 05.13.16 at 5:07 pm

Boom,I am sitting in Dallas on my way to Virginia.
This will be my 17th state….could be my last for a while.
Not too sure if Donny Rump will be o.k with my olive skin and my Hindustani wife.
Looks like I am saving the best for last, WI.
I will probably not come until you take the north land back that Michigan stole, just like Idaho got ripped off by Montana.

Hopefully the t.v is busted in the hotel room as I got my fill of the election stuff at Spring break…

M41BC

#158 NoName on 05.13.16 at 5:16 pm

#139 WalMark of Sadkatoon on 05.13.16 at 1:57 pm

shome what true , if you cash rrsp and take it to Panama, Bahamas and those no tax jurisdictions, 25% one time tax.
And if “old” man/woman set a company there not tax for person who inherit it. Lion banks knows all about it. they can “help” to setup everithing.

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-road-map/inheriting-money-from-abroad-understand-the-rules/article4451568/

If that $1-million was put into a properly structured offshore trust of which the Canadian child is a beneficiary, then the investment income that’s earned in that offshore trust can be non-taxable in Canada indefinitely,” says Prashant Patel, vice-president of high net worth planning services at RBC Wealth Management.”

#159 BOOM! on 05.13.16 at 5:58 pm

#157 Flopper…

What are you doing in Texas? Even us Americans don’t go THERE!! Don’t you know the best thing to come out of Texas is I-35 northbound…

Virginia is a fun place if you stay away from the donut that surrounds Washington. Frankly, I like the mountainous west parts best.

Forget Donnie Frump, the pastry skin Nazi-man is a herd of but a few, pay him no mind. He likely won’t be a factor after November -whether he wins or loses…

As for the Upper Peninsula of Michigan, well Michigan can have it, frankly. Decent fishing, crap land for much else.
Has some mineral wealth…but… lived there, fun times back in my ‘yut’ … ya-hey is the local expression around Iron Mountain area. Worth a trip there…if you know where to find it.

So when do you plan to visit the enchanted land of WI?
I live in the ‘driftless area’ of the west, in the land of Rock, by the river La Crosse.

#160 Metaxa on 05.13.16 at 6:05 pm

Another brilliant observation by the great fantastic me.
Dr Smoking Man
PhD Herdonomics.

Ps. Lefties also despise ego maniacs.

You know, Smoking Man, I’ve only been reading and posting here a short time and I have to say your intellectually bereft imitation of Hunter Thompson is growing old, even for the short time I’ve been subject to it.

the problem is, when you are called out or disagreed with you revert to being a bully. Like some 12 year old kid in middle school.

Sad, it is, helpful it isn’t.

#161 Popeye the Sailor man on 05.13.16 at 7:11 pm

#150 Bottoms_Up on 05.13.16 at 3:36 pm
#116 Popeye the sailor man on 05.13.16 at 10:59 am
————————————————————-
Also, what you (or your boss) did could be seen as violating the ethics code, if you were rehired without going through a formal competition? Surprised there were no red flags from HR.

____________________

Good point, but HR did look into this, and I submitted a new resume, I did not beholden them to anything, and was hired as casual first, they are shorthanded in this trade and were able to offer a term contract a few months later. I will have to go through a formal competition to change from term and will be on equal footing as every one else going for the same permanent position. If things did not work out for the same position I was willing to take a lower one if required and work my way back up.

HR is following proper procedures and it will be a year to three years or more before I am back as a indeterminate employee.

Anyone looking to do this has to accept this risk, at very least expose yourself to competition for your job again. or Find other work elsewhere if it don’t work out.

Good way to find out if management or HR view you as Deadwood!

#162 CanMex on 05.13.16 at 8:46 pm

# 142 Ronaldo

Dying with a pot of money isn’t necessarily good planning…I agree. But dying after the pot is empty is also pretty poor planning. The difficult part is knowing when to pop your clogs. I still reckon that after a certain point you need to give over the management of the pot to someone you can trust to dole it out as needed. If the pot is excessive, gift it before the clogs pop, and stiff the tax man.

#163 Homenova on 05.13.16 at 9:20 pm

It is a very sad situation but you can see a huge spike in average home prices in toronto. it is quite disgusting:

http://www.theglobeandmail.com/incoming/article30002229.ece/binary/WEB_rb_gi_carrick_620.jpg

I do think that waiting for the market to crash to buy is a mistake. The market can continue and appreciate for another few years. Foreign money is flowing here like chi towards a T-Junction, weak Canadian dollar, strong performing economy in Toronto, top ratings for Toronto as a world class city in the Economist, and the fact that (believe it or not) real estate prices here are still a bargain compared to london, moscow and hong kong means that this roller coaster hasn’t reached its peak yet.

I would also argue that even when the market corrects it will be over the course of years – 4-7 years cycle, meaning that to get a deal you have to continue and rent for another few years, with no gurantee of a complete crash.

Tough age to be living and owning in Toronto.

Roy

#164 Big Dipper on 05.13.16 at 11:49 pm

“Linda – you’ve learned. Remember this lesson. You could have lived in the same condo, paid less as a tenant, lost nothing, retained your freedom, and regret nothing.”

————————————–

Yeah right!

Do the math Linda. My guess rent would have been $1500/mo for a similar unit. Over three years you would have spend $54000 – and risk being punted by your landlord who wants to sell or whatever.

Now take three years of monthly mortgage payments plus condo fees payments plus sales realtor fees and subtract the equity you’ve accumulated.

You’re probably still better off buying.

#165 Ronaldo on 05.14.16 at 1:13 am

#162 CanMex

”If the pot is excessive, gift it before the clogs pop, and stiff the tax man.”

Exactly. This is what our parents did and what I plan to do as well. Better to pass it on when they need it and also dole it out to charities too.

#166 jess on 05.14.16 at 10:59 am

illerate machines?

machine learning and the “training” of data create classification algorithms
============
The Code We Can’t Control

Frank Pasquale’s new book highlights the dangers of “runaway data” and “black box algorithms.”
By David Auerbach
http://www.slate.com/articles/technology/bitwise/2015/01/black_box_society_by_frank_pasquale_a_chilling_vision_of_how_big_data_has.html

======
profiling used in the worst way

VIDEO: Stranger Asks Families of Missing Women For Money To See Them Again: Part 5
Stranger Asks Families of Missing Women For Money To See Them Again: Part 5
http://abcnews.go.com/2020

#167 jess on 05.14.16 at 11:28 am

signals

BANK OF CANADA
• FINANCIAL SySTEM REVIEW • DECEMBER 2015

Debt-to-income ratio

http://www.bankofcanada.ca/wp-content/uploads/2015/12/fsr-december2015.pdf

page 20
lending chains

… the expansion of these lending channels has increased the complexity in the mortgage market. For example, a loan might be originated by a broker, underwritten and serviced by an MFC, insured by a mortgage insurer and securitized or purchased by a bank.15
OSFI’s Guideline B-20 on residential mortgage underwriting and Guideline B-21 on residential mortgage insurance underwriting directly apply only to federally regulated lenders and mortgage insurers. Less-regulated lenders that do not comply with these standards jeopardize their access to crucial insurance and securitization programs, as well as their ability to sell mortgages to banks. To ensure that good lending standards are maintained, incentives are aligned and fraud is prevented, strong risk management is necessary along the entire lending chain, enforced by close monitoring and effective supervision.

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Nobel Laureate George Akerlof was the first economist to describe this “Gresham’s” dynamic. 1970.

“[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.”
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The three epidemics that drove the crisis are appraisal fraud, “liar’s” loans (collectively, these were the loan origination frauds), and the resale of those fraudulently originated mortgages through fraudulent “reps and warranties” to the secondary market and the public. Banks, like fish, rot from the head – the “C Suite.” Liar’s loans is an industry term that shouts the industry’s knowledge that it was originating overwhelmingly fraudulent loans. In a liar’s loan the lender agrees not to verify data that is essential to prudent underwriting. This would be an insane practice for an honest lender – and it was practice that was always discouraged by the federal regulators – but it optimizes “accounting control fraud.”[1]

http://neweconomicperspectives.org/2016/01/announcing-bank-whistleblowers-groups-initial-proposals.html

#168 Caught on 05.14.16 at 1:08 pm

Being contrarian for long periods of time is also psychologically draining. You begin to question your own thinking…

#169 Snoopy on 05.14.16 at 8:48 pm

Garth, interest rates are back to *sad levels*.
U.S bank stocks are looking terrible, even relative to Canada bank stocks.

None of this was predicted. Everyone on BNN, yourself, myself, my friends, were wrong. The world is weak. I’m still investing, but it’s a sad world.

#170 Tony on 05.15.16 at 1:58 am

Everything comes roaring back? Silver was 50 dollars U.S. an ounce in 1980. Platinum hasn’t even doubled in value in fifty years time.

#171 Snoopy on 05.15.16 at 1:08 pm

Garth: Fun TFSA quiz question

If you dad isn’t using his TFSA, can you gift him money, have him put it in the TFSA and invest it in one ETF. Then, 5 years later, have him sell it, take the cash out, and gift that cash to you.

It feels like a loophole. Is it Legal?

Thank you sir

Legal. — Garth

#172 Life among the stars on 05.15.16 at 3:11 pm

#171 Snoopy on 05.15.16 at 1:08 pm
Garth: Fun TFSA quiz question

If you dad isn’t using his TFSA, can you gift him money, have him put it in the TFSA and invest it in one ETF. Then, 5 years later, have him sell it, take the cash out, and gift that cash to you.

It feels like a loophole. Is it Legal?

Thank you sir

Legal. — Garth

Of course it’s legal… Just don’t expect to get it back!!