Entries from August 2016 ↓

Who are you?


It’s been too long since we asked this question. Who are you?

The audience numbers are simple enough to find. In the last thirty days there were 1.41 million page views here during 584,828 sessions conducted by people who should probably have been doing something more worthwhile than spending an average of 3.5 minutes on this pathetic blog. Imagine: two sessions with me equals the time consumed by the average lovemaking (7.3 minutes), for example. Just sayin’.

Casual readers of the comments section might think this is a drop-in centre for pooched renters, enraged, entitled Millennials, moldy basement-dwellers, the Trump-for-Canada party, doomers, angry old Boomer white guy, xenophobes, bullion-lickers, guns-&-God cowboys and Vespa-riding, bearded and financially illiterate latte-sucking metrosexuals. Which seems about right.

But those who post an opinion amount to only 1% or so of the people who actually come here. What they say and who they are may not reflect the current crop of readers whose empty lives drive them to this site. So let’s take one day and tell each other about us.

Here’s what I’d like to know: your age, income and net worth. You can tell us if you’re married, or have a house if you want, and maybe your line of work. Post a comment about you – so we all know if you’re average, or special!

By the way, here’s what average looks like right now:

Average age of Canadians: 39.8 years. (There are now more Millennials than Boomers, and the number of people over 65 has hit an all-time high of 14.6% of the population).

Average income of a Canadian male: $49,000. (Shockingly low, isn’t it? The median family income in Canada is now $78,870.)

The average amount saved by the 60% of people with savings: $70,700.

Average income people think they’ll retire with: $46,000.

Average life expectancy: 80.4 years

Average age at which Canadians get married: 31 (men) and 28 (women). (The oldest in recorded history.)

Average length of time a marriage lasts: 14 years. (The divorce rate in Canada is 48%, so good luck.)

Average amount paid out monthly to new CPP recipients: $643.11. (Try living on that.)

Average home price: $480,743. (This is 9.9% higher than it was one year ago).

Average net worth for a Canadian household: $322,800. (This includes all real estate equity, corporate and self-directed pension plans, non-registered investments and other savings.)

Number of Canadians with $1 million or more (excluding a house): 298,000. (Roughly 1% of the population.)

So, how do you compare to the average? Does the noisy cabal of GreaterFool commenters fairly represent you? Or are they just an unfortunate pool of human flotsam? Are you normal? Let’s find out…

The end

TEACHERS modified

Kate and Paul are so typical. Big bucks for the wedding. Bought a house and now the focus, (“like, 100%”, he says) is paying off the mortgage. Neither have corporate pensions, and both expect to job surf for most of their careers. “Whatever we save, they’ll eventually tax the crap out of it. So why bother?” Now in their mid-thirties, making $145,000 between them, they have a plan. A bad one.

So, 65% of us (2011 numbers) have no pension. None. Zilch. Of the rest, 29% have defined benefit plans and about 9% work for companies offering a defined contribution plan. The trend is scary. The feds say from the late 1970s until lately, the number of working men with any kind of pension dropped from more than half to little more than a third. (Pensions for women, in contrast, ticked a little high, since many more work for the government.)

Sure, nobody in their 30s worries much about being in their 60s. But with the cost of houses and kids, the dearth of pensions, plus the paucity of public retirement pogey, it could easily take three decades to grow enough to survive the 25 or 30 years after you quit a paycheque. So Kate & Paul are myopic throwing everything for years at a 2.4% mortgage on an asset that might decline in value and certainly won’t generate an income stream when they start wrinkling.

Thus, it’s time for a little primer on pensions. So stop fidgeting and sit up.

“Many of us have DC pension plans through our work. There’s little understanding of them though,” blog dog Gord says. “What are they? How can we maximize them? In my case I contribute 5 per cent, and my company matches dollar-for-dollar. I can’t pass that up because I can’t ignore the 100 per cent rate of return in year one.

“After that the wheels sort of fall off though. I feel like I don’t get very good returns and the fees are too high. Should I be transferring this out as soon as possible into my SDRSP account? Are there legal or financial barriers for doing this?”

What the heck are DC and DB pensions, anyway?

Ask postal workers – since this is exactly what they’re going on strike about. A defined benefit plan (typically what government workers enjoy) sets in stone a formula determining exactly what a future pension benefit will be. The employer’s on the hook to contribute enough money to keep the plan solvent. All contributions are pooled, managed by an administrator, and employees have nothing to say about how the thing is run. DB plans are gold-plated, but many (like that of the post office) are seriously and dangerously under-funded.

So Canada Post wants to evolve it into a defined contribution plan. Here the employer and employee (typically) both contribute, the money goes into market-based assets like mutual funds and the amount paid out in retirement is unknown until it happens. So, it’s like a glorified RRSP, but one you do not have much influence over. With DB, employers take the risk. With DC, workers do.

How can I max my company’s lousy plan?

Most companies with DC plans hire a mutual fund/insurance outfit like Sun Like, Great West or Manulife, to run them. These guys typically offer employees a choice of their own mutual funds (bond, balanced, aggressive growth etc), and will sometimes nip their inflated fees. So what should you choose? Simple. Make your fund choice complement the investments you have outside your company plan. If you have a balanced approach, a good choice in the plan is a bond fund, because MERs are usually low and then you can manage the growth assets more actively outside. Also check how often (if at all) you can move funds out and into your own RRSP. Do it.

What if I leave my job? What happens then?

DB plans usually keep your money, paying out an earned benefit when you start wearing thirsty underwear. But DC plans travel with you, often becoming regular RRSPs or locked-in plans (LIRAs), which you can’t raid until retirement (exceptions are below). You have the right to move both your contributions and any returns earned on them, and anything the company’s chipped in so long as it is vested (usually happens after a couple of years on the job).

Can I get money out of a pension plan early?

Maybe. Sometimes. The unlocking options include financial hardship (low income or high medical costs, for example) or the fact your doctor says you have a shortened lifespan. Also, if you leave Canada and stay away for two years and are no longer employed by the company whose plan it is. Or, when 55 you can move half a LIRA into an RRSP and withdraw money (taxed). Or, if the LIRA contains a small amount – under approximately $28,000 – and you’re 55, you may cash in the whole plan.

How much is it possible to withdraw then?

All of it, if you move or expect to croak soon. In the case of financial hardship (from not reading this blog) withdrawals may be up to $27,450 if you have no other income, and diminish until nothing is allowed if you earn $41,000 or more.

I’m allowed to commute my pension. Should I?

‘Commuting’ has nothing to do with road rage. It simply means you’re given the right to take a pension (usually a DB one) and remove it from the administrator’s control. For most people this should be done in a heartbeat, even though a portion of it will come as taxable income (it all ends up being taxed, anyway). While it may be scary to leave the womb of a big pension plan, the benefits are compelling. You control your own retirement destiny and income, you can engineer less tax, you escape the danger of being locked into an under-funded plan that could nip benefits, and your family owns the cash, so it can be passed along to a spouse or basement-dwelling, needy Millennials when you expire.

Soon I will tell you how much you’ll need to retire. So prepare.