What will I spend? – Part 2

RYANBy Guest Blogger Ryan Lewenza

 

In my last blog I discussed the important topic of retirement spending, taking a 10,000 foot view. I discussed how we assume clients will spend roughly the same in retirement as their pre-retirement income when developing their long-term financial plans and cash flows. In this week’s post I drill down into the different sources of income in retirement, and how we structure our client’s retirement income stream so as to minimize taxes and maximize government benefits.

First let’s review the assumptions behind our hypothetical case study of our client’s Jim and Jane:

  • The couple are both 64 and retire next year with $1,000,000 in total savings
  • Jim and Jane each have $250,000 in their RSPs, maxed out TFSAs of $65,000, with the difference of $370,000 in their joint non-registered cash account
  • We are excluding the value of their home and assuming they have no debt
  • They are both entitled to current CPP pension income of $13,277 and $6,557 for OAS per year
  • Our plan assumptions include 6% returns net of fees, adjusting the annual income stream by 2.5% for inflation, and a 1% inflation rate for government pensions

After coming up with the assumptions we examined two different cash flow scenarios. In the first scenario we crunched the numbers for an annual income stream of $60,000 including CPP/OAS. This is a conservative income stream equating to a roughly 3% withdrawal rate. In this scenario a sizable estate would be left in the end. The second scenario uses an annual income of $84,000 and this scenario assumes no estate at the end with all the investments being depleted by age 95. Sorry kids you’re on your own!

In year 1 Jim and Jane receive $39,668 from CPP and OAS. We draw $9,858 from the RSPs, which would be recorded as income for their taxes. We pull out $11,000 from the non-registered account which then goes back into the TFSAs to fund the annual TFSA contributions. Lastly the $370,000 in the non-registered account generates $18,533 in a mix of dividends, interest and capital gains (we assume 3% in yield and 3% in growth). A portion of this goes to paying taxes with the difference going back into the account as the CPP/OAS and RSP income meets most of Jim and Jane’s income needs of $60,000. In the $84,000 income scenario we have to draw more assets from the non-registered accounts of $21,863 to meet their annual income needs.

By income splitting the CPP/OAS, minimizing the RSP withdrawals and having tax advantaged dividends and capital gains in the non-registered account we’re able to keep taxes low and avoid any clawback of pension income. Finally we also show the income streams for the two scenarios in year 5 with our inflation adjustments for the income and pensions. This just shows over time that your income will increase with inflation so that you’re standard of living is not negatively impacted.

Two Spending Scenarios

Source: Naviplan, Turner Investments

Now that we’ve covered the income let’s look at the different estate values based on these two income scenarios. For the conservative $60,000 income stream the estate would grow to $2.2 million by age 95 leaving a nice nest egg for the kids or to donate to charity. It grows to this level since Jim and Jane are pulling out far less than the growth (i.e., 3% versus our plan assumption of 6%). In the more aggressive $84,000 income level the investments are completely depleted with nothing left over in the end.

So based on a $1 million portfolio, fairly conservative long-term assumptions, Jim and Jane receiving all their government benefits with no clawback, they can draw between $60,000 to $84,000 per year depending on whether they want to spend every penny of their savings or leave a nice legacy to their kids or favourite charities.

Jim and Jane’s Estate Values

Source: Naviplan, Turner Investments
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

123 comments ↓

#1 Smoking Man on 09.29.18 at 12:47 pm

The next Google.

https://www.fastcompany.com/90243936/exclusive-tim-berners-lee-tells-us-his-radical-new-plan-to-upend-the-world-wide-web

#2 Alessio on 09.29.18 at 1:18 pm

Given houses cost 500,000 average means they have 1.5MM net wealth no debt. Is this a realistic example or is this blog just for the 5% Canadians?

#3 Where's The Money Greedo? on 09.29.18 at 1:18 pm

DELETED – Libellous.

#4 Baph on 09.29.18 at 1:23 pm

Would be great to hear specific asset classes and maybe a few model etfs that you use.

#5 yvr_lurker on 09.29.18 at 1:45 pm

I think with many retirees that they can supplement their income a bit with a part time job (if needed at least in the first 5 years or so), or renting out a room to a student (if they live in an urban area). The retirees that I know in my area of YVR are doing exactly that. With regards to the numbers crunched out, I would be interested in the level of withdrawls that can be taken out to achieve a steady-state over the long term (no real decrease or increase of the overall portfolio). For me, I would want to leave a sizeable amount to my kid and not to some charity.

#6 Whitey on 09.29.18 at 1:51 pm

Pay to play Baph

#7 baloney Sandwitch on 09.29.18 at 2:15 pm

OK – so the moral of the story is that if they spend 84K per year, they risk eating cat food at 95?

I think a better way is to delay CPP/OAS till 70. This will give them “longevity insurance”. They can then spend more in their go-go years and be secure in their no-go years.

#8 TalkingPie on 09.29.18 at 2:28 pm

#2 Alessio on 09.29.18 at 1:18 pm
“Given houses cost 500,000 average means they have 1.5MM net wealth no debt. Is this a realistic example or is this blog just for the 5% Canadians”

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

I can’t speak to averages or “Top 5%,” but my girlfriend and I are at the moment on track to get close to this example by the time I’m 65 (currently 35). I’m a flight attendant, she’s a translator (making, at the moment, a good bit less than I am), so not exactly Top 5% earners. And I’m not counting my DB pension or any potential inheritances.

#9 Phylis on 09.29.18 at 2:40 pm

Hey its mr furley!

#10 say it aint so on 09.29.18 at 2:54 pm

the average person never lives to 95. more like 80. take your CPP at 60. enjoy yourself. spend like a drunken sailor. these numbers are not realistic.

why “adjusting the annual income stream by 2.5% for inflation, and a 1% inflation rate for government pensions”

i suppose you don’t believe government numbers? i suggest adjusting for inflation by 4-5% going forward. that will be more realistic over the next 20 years.

#11 akashic record on 09.29.18 at 3:08 pm

#8 TalkingPie on 09.29.18 at 2:28 pm

#2 Alessio on 09.29.18 at 1:18 pm
“Given houses cost 500,000 average means they have 1.5MM net wealth no debt. Is this a realistic example or is this blog just for the 5% Canadians”

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

I can’t speak to averages or “Top 5%,” but my girlfriend and I are at the moment on track to get close to this example by the time I’m 65 (currently 35). I’m a flight attendant, she’s a translator (making, at the moment, a good bit less than I am), so not exactly Top 5% earners. And I’m not counting my DB pension or any potential inheritances.

Twenty something years ago my first rent in Toronto, at Yonge&Davisville, for a 1 bedroom appt was $480.

Out of curiosity, for this comment I checked out the same building: 1 bedroom, 670 sqf… wow… $2100.

Will the current 1.5 mil, worth 370K in 30 years?

#12 Shawn Allen on 09.29.18 at 3:24 pm

Predictions are difficult

The one thing that is most certain in this projection:

In year 1 Jim and Jane receive $39,668 from CPP and OAS.

That, by the standards of a lot of people is a pretty nice base level of income. That is equivalent to 2800 hours at $14 per hour. It is bringing in what two jobs at 27 hours per week at $14 would bring in!

And this base income will be indexed at least mostly with inflation (Yes, Stan, only official inflation).

This part of the projection is super reliable.

The other parts of the projection, especially the investment returns while conservative are subject to much uncertainty.

CPP and Old age pensions rock for this particular couple.

#13 Shawn Allen on 09.29.18 at 3:33 pm

In Praise of Pension Income

One of the great things about pension incomes including defined benefit work pensions, CPP and Old age pensions is that it provides “guilt free spending money”.

In contrast taking money out of TFSA, RSP and non taxable investment accounts and even DB pension plans (other than forced minimum withdrawals from RRSP / RIF) will always be tinged with a bit of guilt for the type of people that have these. Those people are savers and don’t really relish drawing down their portfolios.

But pension money collected in retirement? That provides totally guilt free spending money. It’s not a drawdown and the cheques keep coming for life (setting aside weak private pensions). No need to worry about depletion!

Yes, DB pensions including CPP and old age pension rock!

#14 crowdedelevatorfartz on 09.29.18 at 3:38 pm

Excellent retirement scenarios Ryan.
Well done.
I assume the pension numbers hold true for a single person with the exact same dollars invested and CPP/OAS monthly income?

#15 AK on 09.29.18 at 3:41 pm

“They are both entitled to current CPP pension income of $13,277”
=====================================
How many retirees receive this amount @ age 65. ?

#16 espressobob on 09.29.18 at 3:46 pm

I’m all for financial responsibility and a safety net for more reasons than retirement. People generally don’t plan for anything anyways and eventually find themselves in a world of shit.

For those that sacrifice, save, and invest earlier in life, wind up with freedom later on. Is that a goal? I’m not so sure.

Many miss out on the things they really wanted to achieve. To busy chasing the carrot. You can’t bank time or take your wealth with you in the next world.

The happiest individuals I know work on their hobbies and balance that with their occupations. Way more fun than worrying about ones future. Even better if your a good investor.

#17 dakkie on 09.29.18 at 4:14 pm

Recent Weak Lumber Prices Are Not A Good Sign For Housing Stocks

http://www.investmentwatchblog.com/recent-weak-lumber-prices-are-not-a-good-sign-for-housing-stocks/

#18 Stan Brooks on 09.29.18 at 4:28 pm

#8 TalkingPie on 09.29.18 at 2:28 pm
#2 Alessio on 09.29.18 at 1:18 pm
“Given houses cost 500,000 average means they have 1.5MM net wealth no debt. Is this a realistic example or is this blog just for the 5% Canadians”

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

I can’t speak to averages or “Top 5%,” but my girlfriend and I are at the moment on track to get close to this example by the time I’m 65 (currently 35). I’m a flight attendant, she’s a translator (making, at the moment, a good bit less than I am), so not exactly Top 5% earners. And I’m not counting my DB pension or any potential inheritances.

————————————–

Average Canadian household net worth is around 450 k
That includes an average house of 380 k (leveraged price at the top of the housing bubble, this is not real wealth).

1.5 mil is top 10 % by net worth.

To get close to that example in 30 years you will need at that point in time the equivalent of 6-8 times that money or around 9-12 millions in future CAD.

Cost of living roughly doubles in 10-12 years despite what you ‘measure’ as CPI.

As for DB pensions, you are too early in the game to count on these, majority of contributions happens in the last 15-20 years and if you change a job in the meantime do not count on having it as an option.

CPP and OAS benefits will with fade to close to nothing with time, they are indexed with CPI which is 2-3 times less than cost of living inflation, basic guesstimate shows that in 30 years when you start your retirement you will probably be getting probably around 1/3 to 1/2 from current purchasing power of CPP and OAS that will further decline with time/as there is debt to be paid – provincial, federal, municipal + their pension obligations which is a ticking time bomb.

I am not even talking about automation and disappearance of jobs here, or the introduction of paid health care that is only a matter of time.

#19 Doc on 09.29.18 at 4:30 pm

Well, lucky couple to score full CPP/OAS. Thats 40% ahead of some of us who heeded advice to take CPP early. The 7 figure portfolio isn’t what it was on “The Millionaire” in the late 50’s TV drama where a billionaire gave away 1 million weekly to random people to study the impact it had on them. I think a decent house was about 10000.00 then. This couple will have quite a modest lifestyle on 5000.00 per month so there is no risk for them of a major lifestyle change. They may want to plant a garden and get a few chickens. Some of us “millionaires” have been”investing” in such things. Good job today Ryan.

#20 Shawn Allen on 09.29.18 at 4:35 pm

Life Style Inflation

Imagine actual inflation is 3%

and imagine real incomes go up 2%.

You need to spend 3% more annually in retirement to keep up with inflation.

But you also need to spend an extra 2% annually to keep your position in the social strata if real incomes are going up 2% per year.

This in part is why inflation might feel like it is 5% even if it is really 3%.

If you retire on an income that is at the median then you need to increase that by inflation PLUS any average gain in real incomes to keep yourself at the median.

#21 Rob on 09.29.18 at 4:43 pm

40 grand a year for government pensions seems kind of high, is this a normal amount?

The average monthly CPP payment at age 65 is $666.56. – Garth

#22 IHCTD9 on 09.29.18 at 4:46 pm

#16 espressobob on 09.29.18 at 3:46 pm
I’m all for financial responsibility and a safety net for more reasons than retirement. People generally don’t plan for anything anyways and eventually find themselves in a world of shit.

For those that sacrifice, save, and invest earlier in life, wind up with freedom later on. Is that a goal? I’m not so sure.

Many miss out on the things they really wanted to achieve. To busy chasing the carrot. You can’t bank time or take your wealth with you in the next world.

The happiest individuals I know work on their hobbies and balance that with their occupations. Way more fun than worrying about ones future. Even better if your a good investor
——-

No reason why the sacrifice has to be so huge as to negatively affect your quality of life. We’ve never shoveled more than 1K/mo. into investments. All you have to do is start young enough to get 40 years worth of deposits in before retirement.

#23 DTS on 09.29.18 at 4:49 pm

with the non reg investments would it not make sense to use some heloc to min tax assuming one is comfortable? thoughts?

#24 Gravy Train on 09.29.18 at 4:55 pm

Ryan, do you first convert cash flows to constant (or real) dollars—using the Fisher equation—before calculating present or future values?

#25 Wrk.dover on 09.29.18 at 4:57 pm

Is that Felix?

#26 AR on 09.29.18 at 5:20 pm

We had 2 DB pensions. 6 years ago I left, commuted mine and invested it. I started a small business. In 2 years we will both retire with the best of both worlds – guilt free income from his DB and a nest egg we can draw down how we like, spend like sailors or leave our kids something. I can see that some years it may be more or less depending on vehicles, travel, health etc. Flexible. Oh- and I got out of that job 8 years early. Bonus. We are lucky and grateful for our options. (We saved hard for 32 years).

#27 For those about to flop... on 09.29.18 at 5:28 pm

Recent sale report.

Been waiting to do this one for a while.

Well, this one is probably going to raise a few eyebrows.

This detached property on Vancouver’s hallowed Westside was marketed as the cheapest option on the Westside, I guess to try and whip everyone into a frenzy.

Let’s have a look at what happened.

836 w 66th Ave,Vancouver.

Originally asking 1.79 for six months in the last half of 2017

Lowered the price to 1.5 in early 2018 and six months later it sold for 1.4 million.

Most recent assessment,2.06

I looked at the pictures and although not the prettiest from the outside,someone appeared to be living there in reasonable conditions.

Someone snapped this up 32% less than assessed on the bottom of the Westside market.

This house probably had a better floor under it than the Vancouver market has…

M44BC

#28 Newcomer on 09.29.18 at 5:31 pm

I’m guessing that 60 K with a paid-off house and no need to save or raise kids would support spending similar to a 100K income in midlife. Maybe even more, once you consider taxes. I’d still spend it all though. Inheritance is bad for everyone.

#29 Awesome article , quick question on 09.29.18 at 5:32 pm

What assumption are you making for tax rates ?

#30 Stone on 09.29.18 at 5:50 pm

I remember a prior post you wrote, Ryan, where you thought a 5% withdrawal rate was still safe enough. Scenario 1 appears to be about 2% and scenario 2 about 4%. Is there a reason you don’t consider a 5% withdrawal rate in this case?

#31 espressobob on 09.29.18 at 5:51 pm

IHCTD9 @ 22

While I agree with you wholeheartedly, that wasn’t my point.

#32 For those about to flop... on 09.29.18 at 5:52 pm

Race to a million.

Here are some of the results from some of my Race to a million posts.

Bear in mind some of them are basically knockdowns and some are very respectable Vancouver Specials with assessments north of 1.44 and in between are starter homes which you could house a young family if you didn’t want to commute.

It is just a rough guide as to where we are.

All houses are in Vancouver and are detached properties and what they recently sold for.

3313 Church st. 1.13

1127 e 33rd ave, 1.26

1843 Nootka st, 1.06

2171 e 36th ave, 975k

2305 Ferndale st,980k

3291 e 28th ave,1.23

5002 Manor st ,1.05

5005 Manor st,1.10

2965 e Georgia st,1.08

6174 Bruce st, 975k

3531 Marshall st, 1.00

3141 e 19th ave,1.17

1595 e 20th ave,875k

2243 Ferndale st,1.1

3948 Nootka st.1.06

1827 Pandora st,875k

And so as you can see the leading edge has dipped below 1 million and something you wouldn’t be ashamed to house your family in is roughly in between 1 and 1.1 although you can get a brand new infill house for around 950k.

Hope this helps someone…

M44BC

#33 Guru on 09.29.18 at 5:53 pm

Just came back from a new developers model house up in Markham. Everything was Sold out in 2017 due for closing in the past few months but 12 units came back available now. Sales rep basically said a lot of people couldn’t qualify for mortgages so they are available again. This is not something new in the GTA right now, the downward pressure is enormous.

#34 Mtl_One on 09.29.18 at 5:54 pm

Happy to see you guys are using NaviPlan for the creation of financial plans and scenario modeling. Solid stuff. Keep up the great work.

#35 IHCTD9 on 09.29.18 at 6:07 pm

#28 Newcomer on 09.29.18 at 5:31 pm
I’m guessing that 60 K with a paid-off house and no need to save or raise kids would support spending similar to a 100K income in midlife. Maybe even more, once you consider taxes.
————-

Yep. We spend a pile right now too. Tuition payments, two rounds of braces, feeding 250 lbs worth of kids and 15 lbs of kitty, gasoline bill is huge running around to all the events and kids jobs, that’s on top of the general costs of running a household, care and feeding of a sfd, and investment deposits.

I bet we’d not notice much difference in lifestyle after all those mid life family bills end, even if we only had 30K yr to live off of.

#36 Keith on 09.29.18 at 6:16 pm

Average monthly CPP payment at 65 is $666.56.

On average it’s a beastly payment.

Proof that getting rid of the company pension plan and relying on CPP, OAS and RRSPs and TFSAs is really bad public policy. Senior poverty will return with a vengeance.

#37 For those about to flop... on 09.29.18 at 6:27 pm

Recent sale report.

I could wait and present these types of cases as Confirmed Pink Snow but since my ankle is the size of Charles Barkleys head I might as well do a session with my Progressive Insurance Price Tool that Adam Major lent me for the weekend.

If they want to dilly-dally around updating the database sometimes six months after a sale then I’m gonna slap ’em around in the meantime.

The details…

Paid 2.58 September 2016

Sold 2.1 August 2018

Won’t bother with the final numbers until final confirmation but this house was in the previously hot area of Kits.

For these guys it’s the pits…

M44BC

Sold early August for 2.1

2765 W 8th Avenue, Vancouver paid 2.58 September 2016 ass.2.26

Jan 24:$2,459,000
Aug 9: $2,195,000
Change: – 264000.00 -11%

https://www.zolo.ca/vancouver-real-estate/2765-west-8th-avenue

https://www.bcassessment.ca/Property/Info/QTAwMDAwMEJEOQ==

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

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#38 Tony on 09.29.18 at 6:33 pm

Given a real world scenario as all the worldwide bubbles collapse and the Canada pension plan comes up with negative investments returns for a least the next decade as well as bank bail-ins and the government taking taxpayers’ money like in Cyprus they better rethink their strategy in the future.

#39 TurnerNation on 09.29.18 at 6:38 pm

Today’s picture – I think Sir Elton penned something similarly.

Artistic liberty:

“He’s got cowboy boots, a darkblue suit
You know I read it on an online blog
G-G-G-Gartho and the Dogs”

Totally sobar I swear.

#40 Smoking Man on 09.29.18 at 6:55 pm

The dude in the pic has to be from Californa. This place full weirdos and freaks of nature.

For the biggest weirdo. Click my name.

.

.

#41 For those about to flop... on 09.29.18 at 6:58 pm

Recent sale report.

This house sold 16 days ago

I mentioned these guys the other day and have an even bigger loss on Puget Drive which might have affected these guys’ mindset and so I will do them separate to avoid confusion.

I wrote about these guys several times,lowering the price, only to jack it back up all to no avail.

The market was having none of it.

Secondly, they purchased the property before the epic Spring Fling 2016 and still took a massive loss.

The details…

3329 Puget Dr,Vancouver

Paid 3.26 November 2015

Sold 2.75 September 2018

Absolute carnage,the last time anything went downhill so fast and so bumpy in Vancouver was the mogul skiers during the 2010 Olympics…

M44BC

Sold mid September.

3329 Puget Drive, Vancouver, Paid 3.26. November 2015 ass 3.41

2018-01-29 : $4,188,000
2018-05-08 : $2,999,000

https://www.zolo.ca/vancouver-real-estate/3329-puget-drive

https://www.bcassessment.ca/Property/Info/QTAwMDAwMEwwNg==

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

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#42 Nonplused on 09.29.18 at 6:58 pm

Who would have thought this would have turned out to be a bad idea:

Calgary’s newest mall a ghost town

https://www.youtube.com/watch?v=JEt9n8BSRro

From what I gather from the video the mall was sold as “condos” to investors, but it looks like they came up short finding leases. If that’s the case, I could see why the project was doomed to fail from day one. Who would rent a store in an empty mall? So you have to have some sort of critical mass to attract tenants. When something like Cross Iron Mills was built, the big tenants like Bass Brothers and Sport Check were already on board meaning they had the mall mostly leased out before construction began. It’s way easier to lease out space in a mall that is mostly full of stores and thus has the required foot traffic.

Me thinks the investors who bought these units are going to lose a lot of money. Perhaps all of it.

#43 Reality is stark on 09.29.18 at 7:00 pm

There is a very unfortunate reality pending. The income threshold for the clawback of the OAS government pension will be reduced.
The government will have to redistribute income to young people who will continue to suffer from precarious employment prospects.
Artificial intelligence and technology will kill jobs for low skilled workers. Not everyone is able to write code or fix complicated machinery.
This is the canary in the coal mine. Governments are starving for money. They could cut salaries but we know that is not going to happen. Reducing benefits to the upper middle class is much more palpable.
You cannot live with your head in the sand.

#44 Money Market Mayhem on 09.29.18 at 7:00 pm

Thinking big picture….

Many of us have been there and done that.

Bought everything we could ever need, visited as many places as we ever wanted to, have the big screen TV etc. and all the other fun and flashy toys.

Consumerism is dead. Home sales are dead.

Winding down to retirement has never been so easy.

Trick is to stay healthy and happy.

Forget about keeping up or trying to impress.

Just enjoy life and live simply.

Know how to stretch every one of your dollars as much as you can and for as long as you are alive.

Spend every cent while you can – don’t leave a penny behind

#45 crossbordershopper on 09.29.18 at 7:02 pm

this analysis is 20 years old in their viewpoint, and from the eyes of an investment advisor.
regular people have no money, and your talking a million here, and maxed out tfsa.
someone is starting to smoke early already.
the vast majority of canadians have very close to ZERO. i am talking 80% have nothing.
the entire canadian system is set up that the majority of its citizens never have anything, its the system, if you work hard never get get sick , have a good job, and live modestly sure you can save a million canadian, but well, its an entire lifetime. for what more frugality upon retirement.
the best thing most canadians should do is spend everything, since trust me in 30 years the goverment will confiscate assets from you if you have. dont believe me, they change the rules all the time, that they are broke. income trusts, corporate class shares, small business. are just the start, the real theft will occur later.
hide your money in the caymans in Canada everything belongs to the government they just havent told you that yet.

#46 Tony on 09.29.18 at 7:05 pm

Re: #4 Baph on 09.29.18 at 1:23 pm

Most of the hedge funds in America went broke the past decade. Imagine how bad things will get in the future. Most likely case is any wealth will dissolve over the next quarter century.

#47 Terry on 09.29.18 at 7:18 pm

NAFTA negotiations update:

– Canada to open the door for more dairy access from the U.S.
– NAFTA dispute mechanism…………….U.S. wants it gone………….Canada wants it to stay……….is now under the microscope for enabling/implementation rule changes to better suit both sides when disputes arise.
– Most other minor issues are now resolved.

Stay tuned………………

P.S.
Please note that half a Trillion dollars in 3 way trade is at stake here. Make no mistake………….Canada is right at the edge of the economic abyss precipice right now. The last time Canada was here was during the the 1995 Quebec Referendum vote that the “No” side narrowly won.

#48 Stan Brook's Fan Club on 09.29.18 at 7:18 pm

Blog dogs, just started the Stan Brook’s Fan Club. All you lovers of the one and only Stan Brook can register online at StanBrooksFanClub.com. Keep the comments coming Stan, you are the man! We will let you know when enough members are on board to have a convention and then you of course will be the main speaker. Stay tuned!

#49 Jungle on 09.29.18 at 7:27 pm

A frugal person (bad stigmatism ) or “savvy spender, smart shopper” might be able to live the same lifestyle on 45k vs 60k the following ways, which is a form of lifestyle insurance

Price matching grocery, plan off loss leaders, shop discount stores

negotiate cell / cable / use netflix etc

Prescriptions at costco 30-50% off

Cook a fancier meal at home with alcohol, vs restaurant all the time

Avoid buying new things unless actually needed

DIY home maintenance, small- med repairs

Shop insurance every year

Use one car

Use free community resources (library, parks, waterfront etc)

Outdoor activities: kyack, running and cycling clubs, etc

Indoor games groups with like minded

DIY home/ car maintenance and cleaning

Shop around vacation deals

Workout/ meditate at home

#50 For those about to flop... on 09.29.18 at 7:29 pm

Recent sale report

This Westside house sold 63 days ago.

This is the other one on Puget Dr. that I alluded to.

I wrote about the rumoured sale price at the time of the sale, and now that I have seen the preliminary result with my own eyes,but as usual it is yet to be written in stone, it is good enough to do a report now with the numbers.

The details…

3595 Puget Dr,Vancouver.

Paid 3.5 November 2016

Sold 2.6 July 2018

So it’s well over a million lost after expenses ,obviously even worse if we dinged them for opportunities lost.

Maybe I will get someone to do a proper tally when bc assessment updates the file.

This one is gonna hurt for a while.

At least the guy in the kayaks face would have only stung for a minute after being slapped by an octopus wielding seal…

M44BC

3595 Puget Dr,Vancouver.Paid 3.5 November 2016

2017-06-05 : $3,588,000
2018-04-19 : $2,999,000

https://www.zolo.ca/vancouver-real-estate/3595-puget-drive

https://www.bcassessment.ca/Property/Info/QTAwMDAwMEwyMw==

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

Feel free to make a donation.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#51 Newcomer on 09.29.18 at 7:31 pm

Has everyone seen zealty.ca?

You go to the map, click on a property and see all the sales and relisting info, as well as the assessment and other deets. Pretty sweet. It makes it a lot harder to hide the carnage by relisting. BC only. Sorry, 416.

#52 Jungle on 09.29.18 at 7:32 pm

A lot who come here are passionate about economics, personal finance, investing and successful in their careers.

I would argue the audience here (or any personal finance forum) has higher than average knowledge, net worth and investments.

So with that said, for those who have worked hard, probably over saved and will have a lot, how do you balance this into a life of high well being??

#53 Doug t on 09.29.18 at 7:38 pm

I know 11 couples average ages 55 – less than 10k in savings – no more than 50k rrsp to date – non home owners and scared sh*less about the future – how many in Canada fit that description? Or worse? Be thankful

RATM

#54 Jungle on 09.29.18 at 7:50 pm

How many years do you have to work for full cpp?

#55 Jungle on 09.29.18 at 7:56 pm

Full CPP not realistic for most.

In 2016, only 6% per cent of CPP retirement-benefit recipients received the maximum.

https://www.theglobeandmail.com/globe-investor/retirement/retire-lifestyle/full-cpp-benefits-are-a-tough-goal-to-reach/article38025370/

#56 Ryan Lewenza on 09.29.18 at 7:59 pm

crowdedelevatorfartz “I assume the pension numbers hold true for a single person”

That is correct. Just divide those numbers by 2 assuming you’ve paid into CPP the whole time. – Ryan L

#57 MaggieB on 09.29.18 at 8:02 pm

That’s funny. We were told we couldn’t include CPP and OAP in income splitting. Is that because we’re already splitting a military pension?

#58 Shawn Allen on 09.29.18 at 8:02 pm

Get Better Friends?

45 crossbordershopper on 09.29.18 at 7:02 pm said:

regular people have no money, and your talking a million here, and maxed out tfsa.

*****************************
If your crowd is people who have no money, I believe Garth has suggested in the past the solution is to get better friends. This may apply also to your friends if you are also such a regular person.

Friends with bad habits and (worse) bad attitudes will drag you down. Stay away.

#59 Jungle on 09.29.18 at 8:08 pm

If you log into Service Canada account, they have a CPP estimator based on your current time and contributions, with three estimates assuming you retired today at age 60, 65, 70.

It says today the maximum monthly amount at 65 is $1134.17

#60 Ryan Lewenza on 09.29.18 at 8:09 pm

DTS “with the non reg investments would it not make sense to use some heloc to min tax assuming one is comfortable? thoughts?”

You could use a HELOC to fund the non-reg account and you can write off the interest. But this increases your risk, requires you to take a longer term perspective and you need to be cognizant of rising loan costs as the BoC hikes. – Ryan L

#61 Ryan Lewenza on 09.29.18 at 8:17 pm

Gravy Train “Ryan, do you first convert cash flows to constant (or real) dollars—using the Fisher equation—before calculating present or future values?”

We start with current investment amounts then project them forward using our 6% return assumptions and 2.5% inflation. At retirement that estimates the clients net worth. Then we calculate what their savings can conservatively provide in annual income. – Ryan L

#62 FOUR FINGERS WATSON on 09.29.18 at 8:27 pm

Flop. Love your posts, keep up the good work. Very interesting and informative…..Your numbers are showing some very significant losses for some sellers, like 250k to 1M in some cases…..I would like to know who among us can absorb such losses. Is it the Chinese dudes packing up and going back to HK? Is it the laundered drug money pulling the plug? Who among us can take such huge losses? Certainly not average families in the LM who make under 100k per year. Anyone here have any thoughts on who might be getting toasted?

#63 -=JWK=- on 09.29.18 at 8:36 pm

Fantastic. I’m about a million dollars short of a plan like this.

#64 Ryan Lewenza on 09.29.18 at 8:38 pm

Jungle “How many years do you have to work for full cpp?”

It takes roughly 39 years of paying into CPP to receive the maximum amount. – Ryan L

#65 prairie person on 09.29.18 at 8:49 pm

Sad story in the local paper about a woman who was always employed. Never did drugs, didn’t drink much but her work had no pension. At 71 she had a small stroke. She can’t pay the rent. She’s living in her car. Lots of those coming up. But then I know two people who because of ill health have chosen to take the pill. Averages are necessary but our lives don’t always work out to averages.

#66 Ryan Lewenza on 09.29.18 at 8:51 pm

Stone “I remember a prior post you wrote, Ryan, where you thought a 5% withdrawal rate was still safe enough. Scenario 1 appears to be about 2% and scenario 2 about 4%. Is there a reason you don’t consider a 5% withdrawal rate in this case?”

I still like the 4-5% withdrawal rate but for this post I just wanted to use a conservative cash flow and one that depleted all the assets in the end. – Ryan L

#67 will on 09.29.18 at 8:52 pm

What a ridiculous looking costume…

#68 Tbone on 09.29.18 at 8:55 pm

I believe you need to work around 40 years to get max ccp . I have.
I get 730 a month for taking it at 60 . You lose about 33 % if you take it early .
It goes up a little very year too .I get a raise for doing nothing.
I am going to get oas in a few years too.
Where is all this money going to come from when all the boomers retire
And pay a lot less tax.

#69 Vampire studies on 09.29.18 at 8:59 pm

Ryan – does it make sense to draw down rrsps first before unregisterd? Garth has often mentioned the tax bomb a large rrsp can be. Just rig it so you don’t push it to the next tax bracket?

#70 Leftover on 09.29.18 at 9:03 pm

Ran your $60k scenario through taxtips.ca and $72k cashflow after tax.
What software do you use?

#71 Kevin Gill on 09.29.18 at 9:45 pm

Good read! Keep up the great posts.

#72 Sydneysider on 09.29.18 at 9:53 pm

If I’m not mistaken, some of that RRSP should be converted to RRIF at age 65. Then they can each draw the first $2K tax free.

#73 Fish on 09.29.18 at 10:16 pm

Everything Zoomer
13 Things You Need to Know About the Canada Pension Plan
PETER MUGGERIDGE | APRIL 20TH, 2018

http://www.everythingzoomer.com/money/2018/04/20/13-things-about-cpp/

#74 theoryAndPractice on 09.29.18 at 10:30 pm

#7 baloney Sandwitch on 09.29.18 at 2:15 pm

OK – so the moral of the story is that if they spend 84K per year, they risk eating cat food at 95?

I think a better way is to delay CPP/OAS till 70. This will give them “longevity insurance”. They can then spend more in their go-go years and be secure in their no-go year
————————————————————–
There is no certainty if one can make it to 70, just get it while you can. (if said benefits are still around).

#75 Moses71 on 09.29.18 at 11:15 pm

Hi Ryan,
This info maybe plays into what the majority of readers here can relate to, but how about a scenario for the other 50% of non/never married or spouseless people need to read to relate with. I am a GM in the retirement industry and I’m here to tell you even from the never divorce era, most are not married to a live person, and for many years at that (decades for most)
How about a post about singles? Non-income splitting peeps?

#76 SoggyShorts on 09.29.18 at 11:23 pm

#18 Stan Brooks on 09.29.18 at 4:28 pm
#8 TalkingPie on 09.29.18 at 2:28 pm
#2 Alessio on 09.29.18 at 1:18 pm

Cost of living roughly doubles in 10-12 years despite what you ‘measure’ as CPI.
****************************
What do you measure? Where do you get this number from?

Double a decade is quadruple in 20 years. I’m just not seeing it.

Despite a very significant increase in my standard of living, I’m having trouble thinking of anything I have that was 75% cheaper 20 years ago.

20 years ago:
♦Gas was not 28c per liter (around 50c)
♦Rent for a 1250 sqft apt was not $345 (I paid $600 for a 600sqft)
♦Ford F 150 was not $7,000 (it was $20K)
♦TV 27″ was not $35 (it was $300+)

Those are some pretty big ones that fail to meet your 10y double rate by quite a large margin.

Other than RE in a few select areas, what examples can you share that show the cost of living to be 4x as much as it was in ’98?

#77 Tim on 09.29.18 at 11:30 pm

Hi Ryan, this is a very interesting and helpful post. Thanks for the worked-out sample case.

I’m wondering why the model only has government benefits increasing by 1% inflation each year when you assume 2.5% inflation overall? Both CPP and OAS are indexed to the All-Items Consumer Price Index (CPI), which is the standard overall inflation measure (e.g. 1.6% in 2017).

I use 2% per year (the Bank of Canada target) for my own future inflation modeling. I do find it interesting though that I haven’t see that level of inflation in my own actual consumer spending.

I track my household’s spending carefully. Our household is 2 adults in urban southern Ontario and we buy about the same kinds of things each year and have lived in the same house for many years.

Since 2007 through 2017, our yearly spending on everything relating to non-discretionary regular life spending has been between $25,000 and $29,000 each year. This is spending for all groceries and household items, property taxes, utilities, car maintenance and gas for two vehicles, house furnishings and regular maintenance, insurance, telephone/internet, eating out and misc. spending. I’m excluding more unusual/irregular spending like home renovations, car purchases and big trips, and also not including charitable giving, savings and income taxes.

Working out a smoothed annual inflation rate that matches our actual spending on normal living consumer items works out to about 1.4% per year over the 11 years.

The published national all-items CPI figures are about 0.1% to 0.2% higher than the personal inflation rate seen our particular mix of spending, which is really pretty close.

It’s interesting that the 2.0% annual inflation target hasn’t been generally true either in the measured yearly CPI data (or in our own household spending) for quite some time.

Whether this low-inflation environment will continue into the future is a big question, of course. Small changes in the inflation rate one uses for projecting future income needs has a big impact on the overall model.

#78 Mic on 09.29.18 at 11:39 pm

Consider income tax reduction strategies as well

https://www.taxtips.ca/calculators/invest/investment-income-tax-calculator.htm

#79 Ace Goodheart on 09.30.18 at 12:16 am

A lot of people don’t realize how much you actually get off of CPP and OAS. For a couple it’s almost 40k per year. If you own your house and have no debt you can easily live on that, and use the dividends from your portfolio for luxuries and leisure.

So update on my heavily advised against Toronto real estate investing.

A driveway down the street from us just went for a cool mil. It is 16 feet wide 126 feet deep. It was severed from the house it used to belong to. It is very nice. There were weeds growing on it with these cool purple and blue flowers that look like someone squashed a grapefruit with a box of blue berries. They are gone now. The neighbourhood kids used to pick them and make necklaces out of them. They smelled like lavender mixed with draino. It had an old tumble down garage with a roof that was collapsed at the back and a family of Racoons.

At any rate it’s now a construction site. Someone bought it and is building a 12 foot wide home.

I bought the house five doors down from this truly awesome driveway back in 2012 for 329,000. It seemed like a lot. But I figured the neighbourhood had good bones and it looked like they might build a multi billion dollar transit hub with underground LRT, UPX, Go train and busses across the street so I thought what the hay, might as well pull out the cheque book. 329,000 isn’t really that much so I just paid cash.

Anyway it seems that my lot, without the house, would go for a mil or more now. So yay as soon as MPAC figures that out up go the property taxes.

Added to the problem is that I actually bought two houses not one, in this area. Second one was slightly cheaper, 279,000.00

The one two doors down just sold for 1.3 mil so not sure what mine’s worth. Has tenants in it. Lovely hopeless people who rely on me to provide them with shelter. They’re sitting in a 1.5 mil paid for building paying ghetto rent while I consider what to do. Just this week I decided to trim the bushes in the back of this rental building to look like a hedge. I was like what a good decision.

So Elon pulled a hat trick and TSLA will continue to gain value based on pixie dust and fairy wings.

I give up. If people want to willingly participate in get rich quick schemes then let them. I am not everyone’s mother

Boys and their toys.

#80 Russ on 09.30.18 at 1:43 am

Smoking Man on 09.29.18 at 6:55 pm

The dude in the pic has to be from California. This place full weirdos and freaks of nature.

For the biggest weirdo. Click my name.
================================

Isn’t the pic just an old man doing “Truman Capote”?

You are there, one and done.

Cheers, R

#81 Smoking Man on 09.30.18 at 1:50 am

James.. I dedicated tonights periscope to you.

It will be auto deleted in 23 hours. You know where to find me on Twitter. You freak show doxxer

#82 Smoking Man on 09.30.18 at 1:55 am

#59 Jungle on 09.29.18 at 8:08 pm

If you log into Service Canada account, they have a CPP estimator based on your current time and contributions, with three estimates assuming you retired today at age 60, 65, 70.

It says today the maximum monthly amount at 65 is $1134.17
…….

I can burn through that in 30 seconds. Forex little people.
400 to 1.if your good. Casinos every weekend. If you suck.
You suck.

No risk no reward unless your communist. Theft at gun point

#83 FOUR FINGERS WATSON on 09.30.18 at 5:19 am

Ryan. Dude. You look real spiffy with yer ascot.

#84 Ryan Lewenza on 09.30.18 at 7:07 am

Tim “Hi Ryan, this is a very interesting and helpful post. Thanks for the worked-out sample case. I’m wondering why the model only has government benefits increasing by 1% inflation each year when you assume 2.5% inflation overall? Both CPP and OAS are indexed to the All-Items Consumer Price Index (CPI), which is the standard overall inflation measure (e.g. 1.6% in 2017).”

Our planner uses that number and I think he just wants to be conservative. Maybe with the huge cohort of boomers retiring he thinks they may not be able to afford CPI adjustments of 2.5%. Good question and I’ll confirm that with our planning team. – Ryan L

#85 TalkingPie on 09.30.18 at 8:52 am

It seems that a lot of posters on here have never planned for retirement on a long timeline.

When you’re 20+ years out, of course you know that there will be an increase in cost of living due to inflation. There will also be an increase in wages due to inflation (my collective agreement is at 2% per year). That’s assuming you don’t move upwards in pay scale in career.

The trick to planning on a long time line is to subtract inflation from investment gains. 2% is a reasonable amount despite what the doomers say. You can then make your projections using current dollars, knowing full well that the actual values will be inflated by then.

Despite the pitfalls of home ownership, one does know that mortgage payments aren’t subject to inflation, only interest rates. I’m also fairly confident that my Montreal suburb house’s value is likely to at least keep up with inflation.

Some of you guys need to change your diet or something; life really isn’t that bad!

#86 Concerned Reader on 09.30.18 at 9:39 am

Thanks for writing this Ryan. I find it educational/interesting when you break things down like this. Do you assume that income requirements will increase as one gets older and health care costs increase? Would it be more realistic to assume that this couple will be spending 60k for about 10 years and then need to spend the 84k?

#87 Prairie Girl on 09.30.18 at 9:43 am

As I have been retired for 20 years, I have some comments to make. The two scenarios are idealistic, but not practical in my opinion. During the first 2 or 3 years of retirement, that is the time to travel or fulfill lifetime wishes regarding activities. I found those years to be the most expensive. Now that I am in my 80s, my needs are minimal – no travel, no new car, just very basic lifestyle. I believe that a couple could live on CPP/OAS in their 80s, but need a much higher income in their 60s. A plan designed to accommodate this type of life plan would be much more suitable.

#88 Lord Stanley on 09.30.18 at 9:48 am

16 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 09.29.18 at 12:34 pm

“*Hey Toronturds – Better dip into that HELOC to get your Make Belief tickets soon – they haven’t lost a regular season game yet this year ;)”

Good morning sunshine. Want to make some friendly wagers on the Leafs this year? Come on big guy, let’s put some money on the line. Multiple bets on the season and playoffs. You do have a heloc you can tap for bets don’t you? We can get in touch through the bearded mystic financial sage that runs this pathetic blog.

#89 NoName on 09.30.18 at 9:50 am

interesting read, bride prices out of control…

this
https://www.bloomberg.com/view/articles/2018-09-29/why-marriage-costs-in-china-are-out-of-control

and this from 2013
https://www.bloomberg.com/view/articles/2018-09-29/why-marriage-costs-in-china-are-out-of-control

#90 Mr. Lahey on 09.30.18 at 9:51 am

Hi Ryan. I did a double take on the photo of the geezer in the blog photo today. Did you have someone do a photo shop aging trick on you? He looks like you fast forwarded 40 years….

#91 NoName on 09.30.18 at 9:52 am

I may have placed same link twice.

bride prices out of control…

this
https://www.bloomberg.com/view/articles/2018-09-29/why-marriage-costs-in-china-are-out-of-control

and this from 2013
https://qz.com/92267/in-a-reversal-of-the-dowry-chinese-men-pay-a-steep-price-for-their-brides/

#92 Gravy Train on 09.30.18 at 9:54 am

#76 SoggyShorts on 09.29.18 at 11:23 pm
“What do you measure? Where do you get this number from? Double a decade is quadruple in 20 years. I’m just not seeing it.”

You’re wasting your precious time, Soggy! Facts, truth and reason don’t matter—and are of no interest—to ‘deplorables’; by definition, they’re incapable of learning, so it’s pointless to try to teach them.

You’re lucky you didn’t become a teacher; half the class couldn’t have followed your lessons to save their lives.

#93 Mtl_One on 09.30.18 at 10:06 am

#70 Leftover on 09.29.18 at 9:03 pm

NaviPlan Select (i.e. Extended).

The most comprehensive cash flow based financial planning software that I am aware of and use.

While not being actual tax software, runs detailed tax calculations (Federal + Provincial) based on the current tax code and then projects out brackets etc based on the assumed rate of inflation. The taxes around within dollars of what actual tax software would solve for based on the same inputs.

Awesome stuff. Allows the planner to view projected effective marginal tax rates for a joint member plan side by side where the idea would be develop a strategy to normalize the tax rates between the members through various income splitting strategies, etc.

#94 IHCTD9 on 09.30.18 at 10:11 am

#42 Nonplused on 09.29.18 at 6:58 pm

Who would have thought this would have turned out to be a bad idea:

Calgary’s newest mall a ghost town

https://www.youtube.com/watch?v=JEt9n8BSRro

From what I gather from the video the mall was sold as “condos” to investors, but it looks like they came up short finding leases.

—————-

I gotta hand it to the developers of this Mall, smart guys.

They knew bloody well what would happen selling these tiny spaces as condominiums. Now they’ve made their money, they’re collecting condo fees from all the wannabe flippers, the support staff costs for maintaining the mall is halved, and they don’t lose any sleep at night worrying about putting businesses into these 500 boxes.

They damn well knew if they threw the word “condo” around enough, they’d have hoards of flippers with a residential RE mindset piling in trying to make quick dollars for no work. The developers knew these flippers would gloss over the fact that now THEY were the ones responsible for putting businesses into these units.

Absolutely brilliant plan by these developers. I feel bad for the very few owners that were planning on actually running a business in their units, but as for every one of them who hoped to quickly flip their units for 50-100% profit? They can burn (we don’t need no water).

#95 Stan Brooks on 09.30.18 at 10:13 am

#76 SoggyShorts on 09.29.18 at 11:23 pm

Other than RE in a few select areas, what examples can you share that show the cost of living to be 4x as much as it was in ’98?

I said cost of living doubles in 10-12 years, quadruples in 20-24 years.

I guarantee you that gas will be $ 2 CAD per litter 4 years from now (i.e. 4 times your 50 cents)

Groceries are up at least 100 % in the last 10 years,
I gave an example with Jimmy the Greek roast chicken dinner which was 4.49, now 8.99 for 30 % smaller plate today than compared to 10 years ago.

375 grams of bacon is twice the price of 500 grams from 5 years ago.

Shrinkage in packages for the same or higher price has been the standard for almost every packaged food.

If your electricity bill did not double when compared to 10 years ago, then you are lucky.

Houses in Vancouver and Toronto increased 6-8 times in the last 20 years.
Exclude housing? 75 % of before tax income of an average GTA family goes to pay for an average GTA house. 110 % of after tax income. So you have to borrow to subsidize the rest.

Same for car repairs/oil change.

You do not notice inflation also due to drastic drop in quality of food, just read the content of what you are buying, mostly glucose fructose syrup filled staff (not even sugar).

I exclude electronics and cars from inflation as very small amount of my income goes for that. A new car is 5 % of the net worth of an average Canadian.


#84 Ryan Lewenza on 09.30.18 at 7:07 am

Very nice way of proving my point, thanks.

Only a very confused person would believe these 1-2 % official inflation numbers.

I agree though with you that we might not even see the benefits from inflation reduced CPP/OAS and some further nominal reduction could be in place.

#45 crossbordershopper on 09.29.18 at 7:02 pm
is spot on on possible confiscation of your nested egg in one way or another.

Don’t forget, that RRSP withdrawal is not that straightforward, you need to purchase annuity from it at some point, filling the pockets of financial sharks, pay income tax on it etc.

#96 dharma bum on 09.30.18 at 10:19 am

#35 IHCTD9

“Yep. We spend a pile right now too. Tuition payments, two rounds of braces, feeding 250 lbs worth of kids and 15 lbs of kitty, gasoline bill is huge running around to all the events and kids jobs, that’s on top of the general costs of running a household, care and feeding of a sfd, and investment deposits.”
——————————————————————-

This is an EMERGENCY!

Dude, you need an immediate intervention.

Dial up: http://www.mrmoneymustache.com

Save yourself.

You are caught up in the “spend on everything – overprogram with events – drive gas guzzlers – godforbidthekidshavetopaytheirowntuition – until I drop” trap.

Seriously. Typical middle class sheep nightmare.

Contact Mister Money Mustache!

#97 dharma bum on 09.30.18 at 10:28 am

#45 crossbordershopper

“The best thing most canadians should do is spend everything, since trust me in 30 years the goverment will confiscate assets from you if you have.”
——————————————————————–

I do get that feeling sometimes.

Is it realistic for a 60 year old couple to apply for a green card and escape this communist regime?

How does one get to live in the promised land?

Can you “buy” your way in?

Arizona here we come:

https://photoshopcontest.com/view-entry/198624/tumbleweeds-gif.html

#98 Beny on 09.30.18 at 10:28 am

Can anyone tell me if there are any flaws in my FIRE plan? I am 38, wife is 34. We have a three year old and will have one more child soon. Our net worth is 3 million. We have 1.3m in equity in our home worth 1.7m in Vancouver. Let’s say in a few years we decide to retire, and assuming then we will have 2m in investable assets and a paid off home. We would like to stay in our neighborhood and are aware we can move to a cheaper place. If we buy all in XEI, which will generate 5% dividends, (100k a year) with a paid off home, won’t this last forever? Is there anything wrong with this scenario?

#99 Benny on 09.30.18 at 10:30 am

Btw, for people in BC, there’s a new website that will give you sold data now without having to contact a realtor. You just have to register at zealty.ca.

#100 dharma bum on 09.30.18 at 10:31 am

#44 Money Market Mayhem

“Trick is to stay healthy and happy.”
——————————————————————–

Smartest and most accurate and insightful comment on this blog in many weeks!

Winner winner, chicken dinner!

#101 crowdedelevatorfartz on 09.30.18 at 10:43 am

@#32 Flop
“Race to a Million…..”

Its finally happening.
Housing prices returning slowly back to reality thank god.
++++++++++++++++++++++++
@#37 Flop.
“An ankle the size of Charles Barkley’s head”

Missed while attempting to kick a barking, snarling blog dog?

#102 IHCTD9 on 09.30.18 at 11:08 am

#68 Tbone on 09.29.18 at 8:55 pm

It goes up a little very year too .I get a raise for doing nothing.
I am going to get oas in a few years too.

Where is all this money going to come from when all the boomers retire?
———-

Immigrants.

#103 Oft deleted much maligned stock.picker on 09.30.18 at 11:17 am

If you had family and friends in Hong Kong when the globalist liberals “gave” 7.5 million free and Democratic person’s to Communist China this will put a smile on your face.

https://apnews.com/a5431c5775f24501a9a83b15ca6cfd30

Finally the free people of the world have a defender with the balls to stand up and say No. Taiwan will not fall to China. God bless Trump.

#104 IHCTD9 on 09.30.18 at 11:36 am

The example in R’s post today has their funds nicely spread around between tax sheltered TFSA,s and taxable investments. I don’t hear a lot of talk about spreading it around like this (especially now with the TFSA available) as a strategic plan, but it sure would pay dividends later.

We realized just this year that we have too much concentrated in RRSP’s. This situation can really sneak up on you if you started investing young. It’s not going to be easy drawing it out efficiently either later on as we will be getting near full CPP’s x2 and OAS’s x2 and she has a small DBP also.

We are discontinuing RRSP deposits, and will be pounding it into TFSA’S and non registered stuff for the final 20 years left to go. We’re probably going to need to accept some higher income taxes, or an early retirement coupled with lean living + a decrease in the amount destined to be passed on. Or maybe part time work starting at 55.

For a couple with kids, or anyone hoping to pass on a sizeable egg without having Ottawa clean out over half of your life savings, this spreading it around is very important.

#105 Anti social social club on 09.30.18 at 11:45 am

I say take out more every month and enjoy what you saved for after a lifetime of being frugal and investing. If you just give it away in the end what was the point. You can continue to donate and volunteer when retired but live your one life to the fullest. Having money and living like you don’t is silly. People that didn’t save have no choice, why would I want to live like that. Buy the experiences that will make your life extraordinary. Leaving your paid off house is enough. I currently am maximizing my two children’s tfsa from 18-28. Fifty thousand each. They can’t afford to do this now. When they are at their retirement age the value will be in the hundreds of thousands. No need for a large inheritance.

#106 georgist on 09.30.18 at 11:49 am

> Despite the pitfalls of home ownership, one does know that mortgage payments aren’t subject to inflation, only interest rates. I’m also fairly confident that my Montreal suburb house’s value is likely to at least keep up with inflation.

This is the reason why the boomers are so rich, and the generation after them are so poor.

In the 1970s boomers took out mortgages, interest rates *and* wage inflation spiked, and yes they were tight for a couple of years but after this their repayments were trivial in real terms.

Contrast this with the last 20 years, when wage inflation has been very flat. Mortgages have not been eroded as much in real terms.

Yet if you ask boomers about now vs then they will invariably cite this spike in 1970 as the worst thing that happened to them.

#107 Djumbe on 09.30.18 at 12:38 pm

Thank you for the 2 excellent posts Ryan. Confirmation that our plan is solid. Been telling hubs for years and now he believes.

#108 Kate on 09.30.18 at 12:39 pm

This was great, and really interesting, thanks Ryan. Keen on more of these types of posts!

#109 IHCTD9 on 09.30.18 at 12:55 pm

#76 SoggyShorts on 09.29.18 at 11:23 pm
#18 Stan Brooks on 09.29.18 at 4:28 pm
#8 TalkingPie on 09.29.18 at 2:28 pm
#2 Alessio on 09.29.18 at 1:18 pm

Cost of living roughly doubles in 10-12 years despite what you ‘measure’ as CPI.
****************************
What do you measure? Where do you get this number from.

———

The reality is, we can bank on only a few (but ultra significant) areas where costs will be going up with an almost 100% guarantee:

1. Government
2. Taxes
3. Energy *a
4. Education *b
5. Roof over your head

a. Energy goes up and down, and new technologies are in the wings (ie. fusion reactors, and ever cheaper solar tech.). Costs here could someday drop if government decides not to usurp the difference via taxes or usurious rates. An individual also has a lot of latitude to control these costs, which is the best route to take. Government can’t resist pounding conventional energy with crazy taxes, so you either get your hands dirty, or pay.

b. Education does not need to cost nearly so much as it does in the Internet age. The ROI of a lot of degrees and programs is now also very low and will drop further. The primary reason it’s so expensive is that education here is archaic in form, and government run. Government is just not looking into all the different ways costs could go down.

Looking at this list, Government is actually the primary cause of the high costs for 4 out of 5 items.

Technology and Globalized manufacturing will keep driving the costs of just about everything else down.

#110 Djumbe on 09.30.18 at 1:06 pm

CME Group website provides Fed watch tool. Closest I can find for BOC is TMX OIS but nothing active to indicate odds – any hints where to look? Thanks for everything every day. You guys help Canadians so much.
F56BC

#111 Stan Brooks on 09.30.18 at 1:26 pm

We just achieved new highs in brainwashing.

Stats Canada tells you that inflation is at 3 % while it is at 6-8 % and you are saying you don’t feel inflation at all? Wow and I really mean wow!

Good job comrades from the propaganda, good job.
Not that is ts difficult with this sheeple, but still a major piece of work, keep it up.

#112 Newcomer on 09.30.18 at 1:34 pm

#97 dharma bum on 09.30.18 at 10:28 am

Is it realistic for a 60 year old couple to apply for a green card and escape this communist regime?

How does one get to live in the promised land?

Can you “buy” your way in?
———

You can. I’ve done it. They don’t care how old you are. If you really want to do it, pick up the phone and call an immigration lawyer. If you want to avoid the hassle of starting an actual company, 500 K is the starting price. You get most of it back. You are looking at maybe 50K in actual costs, maybe 200 K if things go sideways.
https://www.uscis.gov/greencard/investors

I don’t recommend it. I’m pretty sure you won’t like it.

#113 IHCTD9 on 09.30.18 at 1:37 pm

#106 georgist on 09.30.18 at 11:49 am
> Despite the pitfalls of home ownership, one does know that mortgage payments aren’t subject to inflation, only interest rates. I’m also fairly confident that my Montreal suburb house’s value is likely to at least keep up with inflation.

This is the reason why the boomers are so rich, and the generation after them are so poor.

In the 1970s boomers took out mortgages, interest rates *and* wage inflation spiked, and yes they were tight for a couple of years but after this their repayments were trivial in real terms.

Contrast this with the last 20 years, when wage inflation has been very flat. Mortgages have not been eroded as much in real terms.

Yet if you ask boomers about now vs then they will invariably cite this spike in 1970 as the worst thing that happened to them.
——-

If mortgage rates were trivial in the 80’s and 90’s, they must be paying you to borrow money at today’s rates.

Gen X’ers (those that followed the boomers) have had it way better, not worse. Decent pay, decent house prices, great rates for a decade straight, not crazy tuition.

Millennials have had the cheapest costs of borrowing ever recorded, easiest credit ever, decent house prices if they live anywhere in Canada except two cities, all the massive benefits globalized manufacturing has had on the cost of consumer goods, many enjoy a carefree, globe trotting, fun filled single lifestyle unheard of in decades past.

Fact is, the younger the generation, the easier they’ve had it.

Show me a Millennial who lives in a basement, and I’ll show you someone who paid way too much for the wrong education, and then moved to the wrong city…

#114 Remembrancer on 09.30.18 at 2:27 pm

#104 IHCTD9 on 09.30.18 at 11:36 am
The example in R’s post today has their funds nicely spread around between tax sheltered TFSA,s and taxable investments. I don’t hear a lot of talk about spreading it around like this (especially now with the TFSA available) as a strategic plan, but it sure would pay dividends later.
——————————————————————-
Definitely, this should be part of the TFSA “owners manual” – that’s its likely the last money you spend as its tax free growth and tax free withdrawal that you can actually move more funds into each year based on contribution limits, which would have been a lot more advantageous before the $10K limit loss…

Next is the RRSP with tax-free growth which is most beneficial if you are able to use income to contribute that will be taxed at a lower rate when you withdraw before 71 then when you were working and based on annuity withdrawal requirements of the day after 71…

Last is investment income straight taxed as income like interest etc…

#115 SoggyShorts on 09.30.18 at 2:37 pm

#95 Stan Brooks on 09.30.18 at 10:13 am

AHA! Finally you give some examples and show that you are wrong due to massive bias.
You cite food as having increased by 100% in 10 years, yet you say you ignore vehicles since they are only 5% of spending. Well, food is only about 8% of my spending (and none of that low quality crap you mentioned) so I guess I should ignore food, right?
Hint: When calcutaing an average you can’t just ignore data that you don’t like.

Then you point out that Toronto houses have increased 6-8x in 20 years, but here in AB my rent has barely budged. Remember the earlier lesson on averages? Inflation is a Canadian stat, not a downtown TO stat.

You also “guarantee” that gas will be $2.00/L in 4 years? I just filled up at $1.13, and I’m doubtful that it will go up 77% over the next 4 years. Just walk it backwards:
You think gas will increase 77% in the next 4 years but was Gas 77% cheaper 4 years ago? No, it was not.
So since you are so clearly wrong about the last 4 years, what makes you so confident in your prediction for the next 4 years? I mean everyone can get predictions wrong but getting history wrong takes a special level of dedication.

Have a look at this post:

#77 Tim on 09.29.18 at 11:30 pm
I track my household’s spending carefully. Our household is 2 adults in urban southern Ontario and we buy about the same kinds of things each year and have lived in the same house for many years.

Since 2007 through 2017, our yearly spending on everything relating to non-discretionary regular life spending has been between $25,000 and $29,000 each year. This is spending for all groceries and household items, property taxes, utilities, car maintenance and gas for two vehicles, house furnishings and regular maintenance, insurance, telephone/internet, eating out and misc. spending.

According to you Tim must be eating half as much, using half as much electricity, sold a vehicle, etc etc.
But he hasn’t.
****************************************
Just because your specific spending habits are wildly different from average does not change facts.

It’s like people are telling you that the S&P 500 is up 14% over the last year and you are saying “Bullsh*t, Apple is up 45%- obviously, The S&P should be returning 45%”

#116 SoggyShorts on 09.30.18 at 2:57 pm

#95 Stan Brooks on 09.30.18 at 10:13 am
If your electricity bill did not double when compared to 10 years ago, then you are lucky.
******************************
I missed this one. Even in Ontario prices are nowhere near 100% higher compared to 2008:
https://www.oeb.ca/rates-and-your-bill/electricity-rates/historical-electricity-rates

45% =/= 100%

That is a HUGE error on your part. Seriously, if you can’t even be bothered to get the easy to google facts right, maybe you shouldn’t post numbers.

#117 IHCTD9 on 09.30.18 at 3:22 pm

#96 dharma bum on 09.30.18 at 10:19 am
#35 IHCTD9

“Yep. We spend a pile right now too. Tuition payments, two rounds of braces, feeding 250 lbs worth of kids and 15 lbs of kitty, gasoline bill is huge running around to all the events and kids jobs, that’s on top of the general costs of running a household, care and feeding of a sfd, and investment deposits.”
——————————————————————-

This is an EMERGENCY!

Dude, you need an immediate intervention.

Dial up: http://www.mrmoneymustache.com

Save yourself.

You are caught up in the “spend on everything – overprogram with events – drive gas guzzlers – godforbidthekidshavetopaytheirowntuition – until I drop” trap.

Seriously. Typical middle class sheep nightmare.

Contact Mister Money Mustache!

——-

I’m pretty much saved thanks. House was paid off 4 years ago, nest egg in great shape, incomes more than enough.

The kids are 16 and 14, and tuition is 14K, so the Wife and I figured they figured they needed some help. Besides, we’re the ones who made the decision where they would go to get educated, kind of outlandish to make them pay for it. When Post-secondary time comes, you can bet they’ll be on their own as much as is possible.

Kids cost money, that’s cool by me.

Cars are 15 and 6 years old, bought ’em used. House was 2X income 17 years ago. We are far FAR from the typical yuppie keepinupwiththejones middle class’ers, and you can take that to the bank.

#118 Stan Brooks on 09.30.18 at 3:58 pm

#116 SoggyShorts on 09.30.18 at 2:57 pm
#95 Stan Brooks on 09.30.18 at 10:13 am
If your electricity bill did not double when compared to 10 years ago, then you are lucky.
******************************
I missed this one. Even in Ontario prices are nowhere near 100% higher compared to 2008:
https://www.oeb.ca/rates-and-your-bill/electricity-rates/historical-electricity-rates

45% =/= 100%

That is a HUGE error on your part. Seriously, if you can’t even be bothered to get the easy to google facts right, maybe you shouldn’t post numbers.

That was really stupid on your part, to go there and start discussion on electricity in Ontario.


https://www.theglobeandmail.com/news/national/why-does-electricity-cost-so-much-in-ontario/article33453270/

Electricity prices in Ontario have soared in the past decade. Since 2006, the top rate for power has risen four times as fast as “inflation”.

In November, 2006, when the Ontario Energy Board set the first new rates after a four-year freeze, off-peak electricity cost 3.5 cents a kilowatt hour, mid-peak power cost 7.5 cents a kilowatt hour and on-peak, when juice is most in demand, was 10.5 cents a kilowatt hour. The current rates, set in November, 2016, are 8.7 cents, 13.2 cents and 18 cents.

That means the price of off-peak power has rocketed up 149 per cent over a decade, mid-peak power has shot up 76 per cent and on-peak is up 71 per cent. By way of comparison, “inflation” in Ontario over the same period was about 18 per cent.

Note that these ‘prices’ exclude delivery that is 70 % of your bill. If you live in Ontario, open your hydro bill and check how the above quoted electricity costs comprise just 30 % of your bill, rest is ‘delivery’ that has skyrocketed in the last few years.

I have a friend who spend 50 k on insulating his house only to see his electricity bills double in the last few years.

You are picking very bad fights you can’t win.
At the same time you are helping in opening the eyes of the sheeple so thank you for that.

#119 Stan Brooks on 09.30.18 at 4:11 pm

#116 SoggyShorts on 09.30.18 at 2:57 pm

No food inflation, right. Tell that to the hungry children:

THE RISING COST OF FOOD: A NATIONAL FOOD POLICY SHOULD FOCUS ON HEALTH AND SUSTAINABILITY

https://foodsecurecanada.org/resources-news/news-media/cost-food-national-food-policy-should-focus-health-and-sustainability

The International Covenant on Social, Economic and Cultural Rights, ratified by Canada, gives all Canadians the right to food. Nonetheless, 4 millions Canadians (link is external), including 1.15 million children, have trouble putting food on the table.

The fall of the Canadian dollar below the 70-cents-US mark is expected to leave Canadians with higher grocery bills. This situation is particularly critical considering that the vast majority of fruits and vegetables eaten by Canadians are imported and that the rate of inflation on food products hit 4.1% today. This puts Canadians in an unparalleled position among industrialized countries.

#120 J on 09.30.18 at 4:48 pm

Thanks Ryan. Great illustration!

#121 Lisa on 09.30.18 at 6:21 pm

Great scenarios you have laid out. But I recommend Fred Vettese’s book “Retirement Income for Life” – he makes a compelling argument for delaying CPP for example.

#122 Atrate on 10.01.18 at 9:07 am

It would be really nice if you would do a similar exercise for singletons. A lot of your scenarios for retirment are for couples, but I think that there are quite a few single people who would benefit from some of the same kind of advice. Thank you.

#123 crowdedelevatorfartz on 10.01.18 at 9:47 am

@#122 Atrate
“It would be really nice if you would do a similar exercise for singletons. A lot of your scenarios for retirment are for couples, but I think that there are quite a few single people who would benefit from some of the same kind of advice. Thank you.”

++++

total agreement.

https://www.theglobeandmail.com/news/national/census-2016-statscan/article35861448/

apparently almost 30% of the population.