The quandary

If there are two questions I am asked with stunning regularity (besides, of course, ‘How did you get those chiseled abs?’) they are:

(a) Should I take early CPP (A: yes, always), and
(b) Should I commute my pension.

‘Commuting’ a pension simply means withdrawing the money you and your employer put into a registered plan over the years, instead of leaving it there and drawing a monthly income. These days, when 70% of people lack a corporate pension – and the majority are just glorified group RRSPs – most of us don’t have this choice. But for those who do, it’s a troublesome decision. Which it should not be.

However, Evelyn is struggling,

“While reading your comments in December 21st blog re ‘Peter’, and without getting into too many details, I’m wondering generally what your thoughts are regarding commuting pension funds vs. taking a monthly pension?

“I met with my investment executive who suggested taking the commuted value (just barely over $300,000) vs the monthly payment ($1325.00) is not likely to provide any added benefit. Both are pitiful, I worked for a major bank and had broken years of service in between having my children for which I’m being penalized, in my opinion.  I’m still on the fence and have a bit more time to decide.

“I would appreciate any advice you have. Thank you for your blog, for your intelligence, insight and humour and your love of dogs!!”

Like most things financial, this is more an emotional decision than a logical one. Once more, let’s lay out the key facts.

Logically, here are the five reasons commuting is a no-brainer:

Control: Stick with the pension plan and you surrender complete control of your money. The plan administrator makes all investment decisions, and over the decades of your retirement may or may not be competent. Control is good. Always.

Returns: While 2018 was an unusually sucky year, balanced portfolios have averaged about 7% over the last half-century. Many pension plans fall below that benchmark, so before you make any decision check out what yours is invested in, and the track record. Once again, it’s all about control – if you control the money you can be as conservative or aggressive as you want.

Reliability: Retirement is long. Lots of stuff can happen in twenty or thirty years. If your pension plan is under-funded, benefits could be cut in the future (ask Stelco workers about that). If it depends on new members’ contributions to pay existing retirees, that’s a big red flag. If it’s a public pension, it could be subject to political changes (as has happened in the US). If the sponsoring corporation fails or falters, the plan could be impacted. Why take the risk?

Taxes: If you stick with the pension plan every monthly cheque for the rest of your life will be counted as taxable income. That could affect other pensions, like your OAS. It could push you into a higher tax bracket. If it’s money you don’t actually need for a while, the unwanted income stream could cost you a lot in additional levies. But if you commute, taxes are payable off the top on about half the amount, while the rest is rolled over into a tax-free vehicle. For the rest of your life you can choose when you want to take income, and how. If you put a bunch of the dough into a TFSA, for example, it can grow and provide income that doesn’t reduce government pogey payments by a single dime.

Succession: Stick with the pension plan and when you croak the payments stop. Some plans offered a reduced payout to beneficiaries, or for a limited time. But if you commute the pension your family gets all of the money, since it’s in your possession. Most of it can usually be transferred to your squeeze with no tax implications.

So why do people debate this so much? Why do most end up taking the monthly pension plan payments? Simple. They don’t think it through or (more commonly) feel the monthly cheque is ‘secure’ as opposed to the potential of ‘losing it all’ in bad investments. This is the same reason people buy GICs, spend all of their money paying off low-interest mortgages and marry tall men. Emotion. Perception. Rote.

Now you know, Evelyn. Print this off and give it to your advisor. As you fire her.

112 comments ↓

#1 Sold Out on 01.01.19 at 4:06 pm

Evelyn, commute the pension. I pulled out my pension funds 3 years ago, no regrets. If I get hit by a a bus, my spouse keeps all the funds. If I stayed invested in the plan, my spouse would only get a miserly survivor benefit on the occasion of my untimely demise.

#2 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 01.01.19 at 4:12 pm

“Succession” is the key word here. (And about as close to “success” as a Make Believes Toronturd fan will ever get. LOL)

If you live in the GTA, your chances of getting murdered after retirement are extremely high, so it makes no sense to count on a guaranteed full pension payout for more than a couple years. Plus, your family will need the commuted value funds to pay for updated security systems for your overvalued crapshack after you are gone, maybe private security and weapons as well as an underground safe room for your Etobicoke gem.

https://torontosun.com/news/local-news/toronto-rings-in-new-year-with-fights-stabbings-shooting

So take Garth’s advice, Toronturds. Commute your pension the minute you are eligible. You only live once. And in the GTA it’ll probably be a lot shorter than you think.

#3 Danforth on 01.01.19 at 4:19 pm

A kitten! There is hope for this blog yet !

#4 A Yank in BC on 01.01.19 at 4:23 pm

Without a doubt, commuting (sometimes called lump-sum) is the way to go. Did so nearly 11 years ago. Company filed bankruptcy three years later. I was completely insulated from the effects of this. A no-brainer for sure.

#5 Phylis on 01.01.19 at 4:28 pm

Ahem, she has an executive. /sarc off

#6 Government Shill on 01.01.19 at 4:31 pm

Does this advice also make sense for defined benefit pensions, federal government in particular? If so, I think it can only be commuted if one leaves the public service before a certain age.

Correct. – Garth

#7 TheBMan on 01.01.19 at 4:55 pm

Garth, what are the tax implication when commuting pension? Any ways to mitigate that?
Thanks

The cash portion is taxable as income in the year received while the rest is untaxed inside a LIRA. Unused RRSP contribution room can help you out. – Garth

#8 D C on 01.01.19 at 5:01 pm

@#1 Sold Out on 01.01.19 at 4:06 pm
Evelyn, commute the pension. I pulled out my pension funds 3 years ago, no regrets.

I did similarly around the same time, also no regrets. Absolutely love having total control and building my ‘estate.’ Even though mine was a rock-solid plan, I calculated that the monthly sum not being added to/indexed over next 15 or so years (pre-retirement) would mean I had a very low bar to break even doing it myself.

Do consider individual conditions, however: at the time Sold Out and I commuted our pensions interest rates were lower (resulting in higher commuted value) and we enjoyed optimum market conditions. As well, consider the taxes you’ll owe upon commuting (both income taxes due the next year (surprise, the paltry amount they take off the top is not enough!) and plans for where you’ll park it (usually not everything can get dumped into a LIRA, and my RSPs were full).

#9 playing monopoly on 01.01.19 at 5:01 pm

advice on what to do needs to come from a person
1. you are SURE in not biased towards
the pension administration system directly or indirectly
2. who is educated in these matters
3. who knows the basics of your unique situation
4. who has YOUR interests in First place

So few out there have all four of those much needed qualities

Blog Dogs Did I miss anything??

#10 akashic record on 01.01.19 at 5:04 pm

The biggest, arguably showstopper obstacle to commute a pension is the initial, major tax hit, especially if you have a maxed out RRSP.

Psychological. All pension money is taxable. This just gets some of the tax hit out of the way early. Then the after-tax portion can grow inside a TFSA and provide untaxed retirement income. – Garth

#11 Fish on 01.01.19 at 5:04 pm

“This is the same reason people buy GICs, spend all of their money paying off low-interest mortgages and marry tall Men”

Garth, oh pleasant way never thought of that, you just don’t know what 2019 will bring

#12 marcus on 01.01.19 at 5:05 pm

What’s a Pension?

#13 [email protected] on 01.01.19 at 5:15 pm

this will be a strange year indeed, pls Garth explain why…

https://www.cbc.ca/radio/asithappens/horny-confused-cane-toads-are-humping-python-says-biologist-1.4962815

#14 Linda on 01.01.19 at 5:16 pm

To take or not to take the commuted value of the pension? Garth correctly points out that doing so gives you total control of the funds. However, with that control comes the risk of ensuring that those funds last you for the remainder of your life. While the points Garth makes are valid, the human factor is one that has to be evaluated. So for anyone thinking of commuting their pension the questions are: how do you handle your finances now? Do you feel financially comfortable/stable, or are you living pay cheque to pay cheque? Do you have money set aside for emergencies? Do you invest? Do you have debts & are you managing those debts, or are interest rate increases stressing you out? What is your life expectancy?

In other words, the human factor. If you are the type of person who has never saved a day in your life etc. then do not commute the pension unless you have good reason to believe your death is imminent – as in, you have been told to put your affairs in order. Because a lifelong habit isn’t going to change upon retirement. Yes, you do run the risk of your pension benefit eroding or even disappearing = for grim examples, Stelco, Air Canada, Enron, Sears, Nortel etc. – but what of the risk from poor money habits? There have been many a major lottery prize winner who has filed for bankruptcy within a year of winning sums that should have been enough to live on for several lifetimes. They had control of the money for all the good it did them.

So my advice to Evelyn is to make her decision based on her financial track record & her current life expectancy. If both are good, commute. If both are bad, commute. No point being the richest woman in the graveyard. If the financial track record is bad & her life expectancy is excellent, do not commute. And may her eventual retirement be healthy, wealthy & more fun than she can imagine.

#15 eightlock90 on 01.01.19 at 5:17 pm

hey grand poobah,

I think you’re wrong about the effect of Trudeau slashing the stress test or bringing back longer amortizations.

69-70% of people here are already homeowners and mortgage/heloc debt is already at eye watering levels.

There isn’t enough pent up demand for housing to start increasing speculative demand again. 2015 was the last trip to the punch bowl for that.

Also if you look up the things the head of CMHC (evan siddall) has said, it doesn’t sound like they are in a rush in restart the housing bubble, it sounds more like they want to squash it even more.

Nowhere did I suggest the stress test will be slashed. Just capped. – Garth

#16 rookie57 on 01.01.19 at 5:19 pm

I thought my wife married me because of my personality. Now I know she married me for my height (6’2″). Thanks for the info Garth. I guess I will have to cut her out my will as I have shrunk a bit and lack the steel abs. Then again, I do make her laugh. Now I wonder what that is about though?

Happy New Year.

#17 Stone on 01.01.19 at 5:24 pm

#7 TheBMan on 01.01.19 at 4:55 pm
Garth, what are the tax implication when commuting pension? Any ways to mitigate that?
Thanks

The cash portion is taxable as income in the year received while the rest is untaxed inside a LIRA. Unused RRSP contribution room can help you out. – Garth

——-

How do you calculate what is the cash portion of it versus what can go into the LIRA?

You don’t. They do. – Garth

#18 crowdedelevatorfartz on 01.01.19 at 5:29 pm

@#12 marcus
“What’s a Pension?”
++++
A “pension” is something govt workers get…guaranteed for the rest of their lives…
The rest of us have non guaranteed “investments” that we must live off of indefinitely…..or until the money runs out…..

#19 Blacksheep on 01.01.19 at 5:35 pm

This video provides some understanding asto how intertwined politics and banking actually are, all while the UK Gov claims, it’s only acting in its citizenry’s best interest. Even gets into the rise of populism.

I’m just glad Canada, has no connection to the UK : /

https://www.youtube.com/watch?v=np_ylvc8Zj8

#20 Danny Partridge on 01.01.19 at 5:40 pm

Hi Garth. Would you suggest a member of the OTPP commute his/her pension as well (if it is even possible)?

#21 Stan Brooks on 01.01.19 at 5:46 pm

Evelyn,

Withdraw all your money in a tax efficient way and move to Spain. Or spend it all and call Turdesitto and the french villa guy on their promise to provide minimum guaranteed income. Raise a tent in their backyard and demand that income.

You are absolutely doomed with this ‘pension’ in Canada.

Do not leave that money in that pension ‘plan’ no matter what. 1.3 k a month will have the purchasing power of 600 bucks today or less 10 years down the road. 300 20 years from now.

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

#2 50 YEARS OF MAPLE LEAF INCOMPETENCE! on

Yep, the dump in its way towards a complete Detroitization.

#22 just a dude on 01.01.19 at 5:52 pm

Garth,

I understand that a DB pension can be split 50/50 with one’s spouse starting as early as age 55. Also, some DB pensions have substantial health benefits attached to them provided at least 10 or 15 years of continuous service (for example) have been accumulated.

These two benefits would be lost if the commuted value were taken instead (assuming that the DB plan in question allowed pension payouts to be pulled starting as early as age 55).

Thoughts?

Thank you

#23 Maple syrup on 01.01.19 at 5:52 pm

My wife and i both have defined contribution plans so I guess the rules are the same as pension. Is 55 the earliest age to commute these plans out?

#24 Shawn Allen on 01.01.19 at 6:03 pm

The Commute Pension Decision is not black and white

Certainly if the employer is at risk of bankruptcy commuting is called for. Certainly if a plan member sadly has a short life expectancy than commuting is called for. But to suggest it is always the correct route is not correct.

As far as government defined benefit pensions:
Unless Armageddon happens, the investment decisions and returns the plan makes have zero impact on the defined benefit to be received. Shortfalls are made up by higher contributions from still-employed government workers and the government. Besides that, government pension plans that I have seen are well managed and most are reasonably well funded at this time.

Providing an inheritance does not seem like a good reason to risk life-long pension income from a government plan or very strong private plan (Utility, bank, railroad, big telco).

Some older people would absolutely be at risk of having their money taken away by children or others if they commute.

The tax on commutation versus tax if paid over the years would have to be looked at individually. Someone with a small pension like the $1325 mentioned here might not be paying much tax on that.

There are many people who simply have no idea how to manage a windfall of money from a commuted pension.

To suggest everyone who can do this, should do it, seems downright dangerous in my opinion. If in doubt, men should simply ask their wife. If will be an emphatic NO! And rightly so in most circumstances.

Even more dangerous. – Garth

#25 Keith in Rio on 01.01.19 at 6:06 pm

IMHO, the best pension you can have, is a piece of real estate that you will live in which is mortgage free.

Sure, property taxes, insurance, and some maintenance will be required as time passes, but, these are within your control. Not paying $1,000 to $3,000 a month in mortgage/rental costs is money in the bank when you are middle aged, or older.

Now, I am posting from a 6 year old laptop here, so when Garth’s head explodes from my next sentence, I can throw the thing out.

Putting $2-300,000 into a property and not having to make mortgage payments/rent on the applicable amount can be considered a yield on your investment.

For example, I put $300K into acquiring a property and the equivalent rent/mortgage for same is $1,800 a month after tax……that is roughly a 7% yield on my money.

#26 tccontrarian on 01.01.19 at 6:11 pm

You had me at ‘control’! And along with all the other reasons, a no-brainer, indeed!

I don’t know how some people can’t see the obvious sometimes.

tcc

#27 Hans on 01.01.19 at 6:11 pm

Garth, do you have any recommended reading for more information on this? I agree that most people don’t understand how it works and the comparison between commuting vs taking the pension. Speaking to people who have done it both ways, it’s very hard to tell who actually is ahead because there are so many variables. After reading how retirees are treated when a company does go belly up, I can totally understand the desire to commute as soon as it’s allowed. Are there circumstances where leaving the pension in place is better? Thanks!

#28 not 1st on 01.01.19 at 6:13 pm

Of course take your CPP as soon as you can. Program is insolvent and only a matter of time before it blows up, or they tax you into oblivion to keep it going. Meanwhile govt pensions are real and bankable.

#29 -=jwk=- on 01.01.19 at 6:14 pm

I’d need to know what her Pension plan was before making broad statements like that.
————–
Does this advice also make sense for defined benefit pensions, federal government in particular? If so, I think it can only be commuted if one leaves the public service before a certain age.

Correct. – Garth
—————————

The advice does not make sense for a defined benefit pension plan like the feds, ontario teachers or HOOPP. These plans are very well funded, and are much smarter than you and I when it comes to investments. You aren’t going to do any better on your own. Just count the pension as part of your fixed income portfolio.

Succession. – Garth

#30 Smartalox on 01.01.19 at 6:15 pm

@ Remembrancer: https://www.greaterfool.ca/2018/12/31/expectations-3/#comment-630324

So much of the electorate has been hoodwinked into thinking that participation in our democracy is limited to the hour one gets off work to vote, once every couple of years – and that to voice any interest in ‘change’ one has to protest loudly, if not violently.

Such extreme tactics drive voters away from political action further alienating them from the democratic process, until voters feel that the only choice they have is between extremists, or authoritarians.

#31 Smartalox on 01.01.19 at 6:27 pm

More Expectations:

The price of Alberta crude will creep up again now that BP’s refinery in Whiting, Indiana, USA (the single largest buyer of Western Canada Select) comes back online after having shut down for maintenance last September, about 6 weeks before overproduction of WCS drove the price to (fake) ‘crisis’ levels.

Notley played her cards perfectly, using the opportunity to extract whatever she could to drive the pipeline debate. And the ‘temporary production cut’ that was put in place, will be reversed as soon as the refinery is back to full capacity, the excess is removed from the system, and things are back to normal.

– US congress will remove ‘national security’ tariffs from Canadian and Mexican steel and aluminium, as part of their ratification of USMCA, when Ford, GM, Boeing, demonstrate that the current tariffs represent a greater threat to the US economy.

– The Trans-Mountain pipeline expansion decision will be approved. Trudeau and Notley will look like heroes, and both will eb re-elected.

#32 SmarterSquirrel on 01.01.19 at 6:28 pm

Seems to me if you took that $300k and wound up with $250k, assuming some tax and RRSP room to shelter against tax, and put it in a diversified group of dividend growers, you could potentially get $12,500 annually in dividends in the first year once fully invested. And then that dividend payment would grow from there.

As an example, in a mock portfolio purely for demonstration purposes, I “bought” 18 shares of Brookfield Infrastructure Partners (BIP.UN) for $56.05 on Nov 27, 2017. (https://smartersquirrel.com/portfolio) Back then it was providing a dividend of $0.435 USD per share per quarter. Now it has increased to $0.47 USD per share per quarter, a dividend raise of 8%. In the 13 months since the original purchase date, the dividends received from the 18 shares would’ve amounted to $56.60 CAD. That would have allowed another purchase of one share at the last close price of $47.15 CAD leaving $9.45 CAD left over. So a dividend investor in this example would have gone from 18 shares providing $31.32 USD to 19 shares providing $35.72 USD due to reinvesting dividends and dividend growth. That’s an increase in dividends received of 14% in just 13 months. And though the current stock price is below the original purchase, if you just invest for the long term in a diverse portfolio of fundamentally strong dividend growers, reinvesting the dividends, it seems it would be quite advantageous.

Applying that 14% growth to the $12,500 assuming a diversified portfolio of dividend growth stocks (of course not invested in just one stock), the next year dividends could potentially grow to $14,250. That’s in just 13 months. It seems if you extrapolate that out over the long term, you could build a significant passive dividend income.

Taking the commuted value and investing it in a diversified portfolio of dividend growth stocks and reinvesting the dividends (assuming the money isn’t needed right away), seems to me to be a much better option than hoping for the best leaving it in the pension plan.

#33 Exodus 2020 on 01.01.19 at 6:29 pm

Some pension plans might come with health insurance benefits, so be sure you know what you are giving up when commuting.

#34 Chester on 01.01.19 at 6:45 pm

You should only commute a good pension if you are an experienced investor and can handle a bear market. First of all you lose a large amount to tax. I have seen several people with public sector pensions commute put it into the stock market and panic when the market dipped. They sold out near the bottom and ended up having to go back to work.

That’s a lesson in DIY investing, not commuting a pension. – Garth

#35 Barrie from Barrie on 01.01.19 at 6:53 pm

Exodus 2020 made a good point. “Some pension plans might come with health insurance benefits, so be sure you know what you are giving up when commuting.”

My wife’s DB pension includes health care benefits. So far these have been worth about $7k annually to the two of us together, with a dozen years left before they run out. A good friend has retired but with younger children, two getting braces and one with some other health issues. Both parents make good use of massage and physio benefits plus orthotics. So far their health benefits have averaged almost $18500 annually they tell us, for three years so far. They would not have these if they commuted their pensions. Probably worth an extra hundred grand for them over 8-10 years.

Read the fine print. All cases are unique.

#36 Not so fast ... on 01.01.19 at 7:11 pm

If you have a partner, believe he/she has to agree to this. Maybe not so easy to do.

Why? – Garth

#37 Figure it Out on 01.01.19 at 7:24 pm

It would make an interesting thought experiment to guess what % of people would, if they took the proffered advice and commuted their pension, would screw it up such that they’d have been better off not doing it.

e.g.
– Buying cars for themselves/kids that they can’t really afford
– putting it all into syndicated unmortgages, with the same company
– letting [email protected] put it into Gold-Plated Class(tm) mutual funds for special customers, with the usual and customary 1.8% fees
– finding an incompetent advisor
– turning on the TV and trading lithium stocks, instead of turning off the TV and taking lithium pills
– etcetera etcetera

I’m not saying it isn’t the right decision for some people, or that it won’t work out great for some people. But the odds aren’t great.

Wealthy people are called ‘1%ers’ for a reason. – Garth

#38 Rob on 01.01.19 at 8:02 pm

What about a pension inside something like this which is guaranteed? https://www.theglobeandmail.com/globe-investor/personal-finance/financial-road-map/a-guaranteed-retirement-income/article1360276/

#39 JM on 01.01.19 at 8:08 pm

Commuted my pension years ago when I left, worked out well control is good. Other interesting thing that happened was I got back a large ammount of RSP contribution room that I had lost over the years because of the generous pension – didn’t pay any tax…… Don’t underestimate how predatory and incompetent most companies are, or can become over time. Who saw gender equality of outcome trump competence 20 years ago?

#40 M. Towne on 01.01.19 at 8:12 pm

Hi Garth,

Appreciate as always your advice. Certainly, defined-benefit pensions are not as secure as people hope (nor, frankly, as gold-plated as the steerage section seems to think.)

I do question the wisdom of *always* taking CPP as early as possible, though. Always is a pretty definitive statement.

Everyone’s circumstances are very different and the value of a higher CPP payment if they live an unusually long time might be worth something.

An example from my own situation: I have a DB pension that will provide, at age 65, about 40% of my working salary (I entered the system late.) It’s indexed to inflation, though they’ve recently started trying to mess with that, but let’s leave that aside. I have eighteen years to go.

I max out my TFSA’s every year, so there’ll be that.

That leaves CPP and OAS, and the roughly $45k in my RRSP, from back when I thought RRSP’s were a retirement savings vehicle. None of the “good” reasons you’ve given for putting money into RRSP’s is likely for my spouse and myself–not planning to have kids, and government jobs about as secure as they come (more so because we’re both high performers, the kind that bosses go out of their way not to can.)

So, to simplify, there’s $45k that I can either draw down starting at 65 or, at age 70, I’m going to have to convert it to some kind of annuity, at whatever crap payout is offered. That’s a squeeze, the opposite of control. A lot of the benefit of controlling your own money goes out the window if it’s in an RRSP, where you are forced to surrender it at age 70.

As it stands now, due to some mis-spent twenties earning no money, I stand to get $750 a month or $9000 a year from CPP if I take it at age 65.

If I defer taking CPP until age 70, that payment increases by 42% to $12,780, or $3780 per year. Plus CPP goes up with inflation.

If, during the five years from 65 to 70, I withdraw $9000 a year from the RRSP instead of taking the $9000 a year CPP, the RRSP goes to zero. And when I start taking CPP at the higher rate, the extra $3780 is equivalent to 8.4% of the $45,000 RRSP, which is probably more than I would have gotten from an RRIF. And if I expect to live for a long time (the dudes in my family are remarkably long-lived) that pays off even better.

There are other factors in there that I haven’t accounted for, but they kind of pull in opposite directions.

My point being: if your situation is such that you’ve got some money stranded in an RRSP, it might be worth using that money to put off taking CPP, and then taking advantage of the higher CPP payout.

#41 John in Mtl on 01.01.19 at 8:28 pm

#37 Figure it Out on 01.01.19 at 7:24 pm

It would make an interesting thought experiment to guess what % of people would, if they took the proffered advice and commuted their pension, would screw it up such that they’d have been better off not doing it.

If I could commute my pension, I would; then run straight to Garth’s office for a consult and setting up investment accounts.

Happy New Year Everyone, and Thank You, Garth, for your continued presence in this ever maddening world !

#42 BC Assessed Values - We are all Millionaires Now on 01.01.19 at 8:36 pm

Against everyone’s advice to not buy an overpriced home in Kelowna.

The mortgage is $450,000. The place cost $570,000 in 2015.

I just got my BC Assessed letter saying that it is valued at $906,000.

Big middle finger to everyone who told me I was nuts.

This has been the easiest way to join the drug cartels without doing anything supposedly illegal aside from owning a home – the instrument of choice for washing money in BC.

My buddy in Nanaimo beat me out though. 27% jump for him this year. Impressive. I heard this is going to continue up Island for awhile.

NDP couldn’t close out a drug case if they tried.

If you want to know where the drugs and money are flowing that will sky rocket home values just follow the spec tax.

The spec tax should be called the cost of allowing drug cartel business tax.

The government is very in tune with what is happening and it is too late to right this ship.

#43 MF on 01.01.19 at 8:44 pm

#21 Stan Brooks on 01.01.19 at 5:46 pm

-^official troll status achieved?

Same footing as Trumpoclypse 2018…I mean 2019.

MF

#44 baloney Sandwitch on 01.01.19 at 8:47 pm

Pensions have an insurance component as well. In case you get hit with dementia and/or longevity (more common than we think) it is good to have some reliable $ trickling in.
That is why I think we should delay CPP/OAS till 70 – this gives a built in longevity/dementia insurance. Get your RRSP out of the way in your early retirement years.

#45 BC Baby...BC! on 01.01.19 at 8:50 pm

It says the benchmark price — the average price for a typical home in BC — is $1.5 million for a detached house, $818,500 for a townhouse and $667,800 for a condo.

Hahahahahahahahahahahaha…wakeup BC.

Chip Wilson’s mega-mansion on Point Grey Road. The seven-bedroom, nine-bathroom waterfront home is now worth $73,120,000, down from $78,837,000 a year ago.

A drop in value at Chip’s place doesn’t mean the cost of living is getting better for the average Joe Sixpack in BC.

Wakeup people.

Garth was right. Government policies made it more expensive to buy and rent and now people are going to get gutted with higher taxes. I am hearing 4,5,6% tax hikes in lots of areas of BC.

#46 tbone on 01.01.19 at 8:51 pm

My employer sold off the company and our defined benefit pensions were no more .
We had options of what to do with the pension money.
90 % took lump sum payouts .

#47 Patty twinkle toes on 01.01.19 at 9:03 pm

BC Assessed Values – We are all Millionaires Now on 01.01.19 at 8:36 pm

“I just got my BC Assessed letter saying that it is valued at $906,000.”…..

Your property tax just doubled no??……not rad

#48 NOPE on 01.01.19 at 9:03 pm

A few missing points:
Tax implications for commuting. My $960k pension would require a tax remittance of $280k.
Now I need to make up that shortfall with riskier investments to juice returns.
My pension plan OMERS has been returning 11 to 13% returns annually for the past 5 years. My payout is fully indexed to inflation to a maximum of 6%. Unused indexing is able to be carried over from the previous year.

I carry term life insurance to protect my heirs in case of my early demise and my younger spouse will continue to receive 2/3s of the monthly for life. I had a pension actuary and 2 advisors look at commuting. None recommended commuting.
One size does not fit all here.

#49 Public Warning to Millennials around GTA or BC on 01.01.19 at 9:03 pm

Listen up millennial:

Are you getting a big inheritance? If yes, you will be fine around the GTA or in the drug cartel province of BC.

Are you already equity rich on a property? Then, don’t worry, you’re set.

Now for anyone else under the age of 40 who answered no to the above you must take warning.

You will be financially cooked if you even think about trying to make a life near the GTA or in Drug Cartel BC.

I am betting big on this trend. Branching out, going remote. Decentralization. The technology allows for it.

Avoid the debt trap at all costs. The boomers didn’t want to be like their parents and they spent it all on housing. Money they never had. Only debt (and allowing drug activity) can hold up this house of cards.

#50 AB Boxster on 01.01.19 at 9:12 pm

Another plus for taking a pension is that a retirement pension plan (RPP-defined benefit plan) allows you to income split even if you take that pension prior to age 65, which can save a fair bit of tax if the pension is fairly large.

In this case the pension is not very large so pension splitting will not have much impact.

If you have the option of a safe pension as well as other financial investments, that is a good scenario.

You can treat your pension like the fixed portion of your portfolio and be more aggressive with your non pension assets.

#51 Capt. Serious on 01.01.19 at 9:12 pm

Garth, thanks for your blog and the wisdom it presents. I read quite a few blogs with a financial bent (I need hobbies) and yours is among the best written, is relevant for us poor Canadians, and has the power of dogs. Rockstar cameos for a 7/365 experience too. Have a great 2019!

#52 OTPP guy on 01.01.19 at 9:17 pm

#20 Danny Partridge on 01.01.19 at 5:40 pm
Hi Garth. Would you suggest a member of the OTPP commute his/her pension as well (if it is even possible)?

I got you covered, Danny.

After logging into the OTPP site as a member, look under Members, then Your Pension. Click commuted value in the bottom right corner and see your LIRA and Cash amounts. Hope this helps.

#53 Doug t on 01.01.19 at 9:34 pm

PENSIONS – gawd I just love talking to friends/relatives who are teachers, fed employees etc who look at you with wide eyes when you tell them “no we don’t have pensions” – you can see the little gray matter short circuit in their brain as they contemplate your existence LMAO

RATM

#54 Paully on 01.01.19 at 9:38 pm

Do you always have the option to take the commuted value upon retirement, or is that only available in certain cases?

#55 yawbawdy on 01.01.19 at 9:52 pm

Dad commuted his pension when he retired early less than 10 years ago; the investments have doubled since then. He died, too young, in a freak accident in 2018. Mom in way better place than she would be had he taken monthly payments. Heed this sound advice.

#56 Partridge Perrie on 01.01.19 at 9:55 pm

Garth, If everyone commuted their pension, would many plans fold-up because of lack of capital to invest?

#57 W on 01.01.19 at 9:58 pm

Would the advice be any different down the road if interest rates were much higher and the commutable value of the pension was lower? I have a ways to go to retirement and it’s very likely interest rates will be much higher when I get there.

#58 Smoking Man on 01.01.19 at 10:03 pm

2018 the year of fun. When a Dr tells you have 6 months to go. Like five years ago. And you are still smoking.

I’m thinking our education system is over rated.

#59 Chaddywack on 01.01.19 at 10:15 pm

The other side of the coin is I know plenty of government co-workers who now spend half the year in Hawaii and retired at 55 thanks to their lifetime pensions. No worry about markets plus they can claim the pension amount credit before age 65 or split income with their spouse and pay almost no tax.

#60 Russ on 01.01.19 at 10:22 pm

I inquired casually about commuting a pension connected to PPWC and was told that the option is not available if over 55 years of age.

I am an inactive member (of 18 years) but had 24 years vested.

Is this valid and if so, is it legal? Especially considering age discrimination legislation..

cheers, R

#61 akashic record on 01.01.19 at 10:26 pm

Wealthy people are called ‘1%ers’ for a reason. – Garth

“Today, slightly less than 1% of the world’s adult population occupies the $1M+ wealth range. Despite their small numbers, this elite group collectively controls 46% of the world’s wealth, valued at approximately $129 trillion.

Not only is money concentrated among a small portion of the population, those people tend to gravitate towards global cities such as London, Hong Kong, and New York.

In fact, 70% of ultra high net worth individuals (UHNWIs) – persons with investable assets of $30 million or more – reside in just ten cities around the world.”

Location, location, location…

https://www.zerohedge.com/news/2019-01-01/visualizing-extreme-concentration-global-wealth

#62 mousey on 01.01.19 at 10:44 pm

Dear Millionaire in Kelowna – the assessed values in my neck of the woods, south surrey (west of White Rock) are down about 15%. I checked around some of the other properties in the hood and a few people that bought last year are now in a negative position having paid more than the assessed value. One place actually was assessed about $300,000 less than what they paid in 2017, so a big paper ouch for them. The assessed value on a relative’s place in Point Grey (west side Vancouver) went down 20%, which is about a million dollars in paper loss. Looks like assessments are going to be up or down depending on location, but lower mainland seems to be trending down based on what I’m seeing.

#63 Grm on 01.01.19 at 10:54 pm

Completely disagree. Its much smarter to pay down a kortgage when rates are low than when high. When rates are low you are eating into your principle much quicker. Your theory always assumes you make money with investing. Look now – if you invested money over the last 3 years your gains would be $0. If you paid down your mortgage over the past 3 years your debt would be lpwer, interest payments lower, and would have tax free appreciation on your house.

#64 not 1st on 01.01.19 at 10:55 pm

If the liberals get a minority govt with the NDP holding the balance of power she is game over for the failed experiment called Canada. Take your commuted pension, sell your assets and get your wealth outside of the borders because you will lose it all here.

#65 ww1 on 01.01.19 at 10:58 pm

So the famous “4% retirement rule” model says you can take out 4% of your carefully invested diversified portfolio every year and “almost certainly” never run out of money. In some scenarios your portfolio actually grows, in others it goes to zero before you get to 95. And you can’t predict the future so you have no way of knowing what will happen.

Lower the withdrawal to 3% and it’s a slam dunk you never run out of money but that’s a 25% cut in your annual income from your portfolio.

But if your DB pension annually pays out anywhere close to 6% of the commuted value then you are pretty much way ahead so long as the pension stays funded. Speculation about “succession” is kind of moot – with a 4% withdrawal your commuted pension portfolio will statistically be likely to have some money left on death but it’s not guaranteed.

And if you get lucky and you have a fully funded DB plan from a US based employer (say by virtue of having worked in the USA), you also have the Pension Benefit Guaranty Corporation backing your pension to make sure you don’t end up with nothing like some of those with losing Canadian corporation DB plans. You get less – but not zero.

Also note that some of those USA DB plans can be rolled over 100% into an IRA when commuted – another upside to consider.

So the decision to commute is not really a simple question with an easy answer. At least not for many people. Finding good advice is a real problem.

#66 JSS on 01.01.19 at 11:22 pm

I worked the first ten years with some private and public sector companies. I took the DC and DB pensions from them, got a LIRA, and bought a slew of dividend growth stocks (80% Canadian/20% US), sold not a single stock for over a decade. Reinvesting the dividends. Did ok.

I had an option to port my DB pensions over to my current employer, who also offers a DB pension. Hoping to work with these guys for another decade, giving me two decades of seniority. Fingers crossed.

Best if you can find an employer with a solid DB pension, and set up a “supplementary” pension with RRSP’s and TFSA’s, in parallel. Stuff then with dividend growth stocks, and don’t sell. Forget. I think this combo can work.

#67 Ponzius Pilatus on 01.01.19 at 11:43 pm

Did some research on Confuzius and found this morsel:
Der chinesische Philosoph Konfuzius steht im Ruf, besonders weise gewesen zu sein, womöglich war er aber auch ein bisschen weltfremd. Aus heutiger Sicht etwas wunderlich lesen sich zumindest seine Ausführungen zum Thema Bauen. “Das erste Haus”, doziert Konfuzius, “baust du für deinen Feind, das zweite für deinen Freund und das dritte, das baust du für dich selbst.”
——–
For those who are a little weak on their German:
Confucius says:
Build the first house for your enemy, your second one for your friend and the third one for yourself.
Seems the dude was the first Realtor.

#68 crowdedelevatorfartz on 01.02.19 at 12:56 am

@#45 BC Baby BC!
” I am hearing 4,5,6% tax hikes in lots of areas of BC….”
++++

Gee….. the housing sales market has stalled over the past several months …..and the Dippers STILL increase Housing tax assessments ( not to mention govt car insurance… natch).

Sounds more like desperate measures from a govt desperate to balance the books before their minority govt gets dragged kicking and screaming …back to the polls.
Which begs the question ” Where is “Mr Integrity”? The leader of the Green Party in BC. Seems like the NDP have successfully silenced him with god only knows what amount of cash incentives to keep his beetle brow furrowed in bemused, distracted interest……far away from the comings and goings of the Legislature.

#69 Linda on 01.02.19 at 1:34 am

#36 ‘Not So Fast’ – your comment regarding how a pension partner affects things very timely. Pension partners have rights & their consent must be obtained.

People’s risk levels are different. Control doesn’t equate to an absence of risk. It can in fact be extremely risky, not least in the erroneous belief that one can control outcomes. Had a coworker who commuted to follow their dream to start up a business. Times were good, plan was solid. Problem was, the move was made in 2008 before the GFC occurred. Outcome was that coworker eventually came back, but the commuted funds did not. Some might say that move was too risky. But the money could still have been lost even with a balanced, diversified portfolio. All it would have taken was to panic & sell. Lots did.

#70 Stan Brooks on 01.02.19 at 3:09 am

#43 MF on 01.01.19 at 8:44 pm
#21 Stan Brooks on 01.01.19 at 5:46 pm

-^official troll status achieved?

Same footing as Trumpoclypse 2018…I mean 2019.

MF

Not really.

I never expressed any opinion whatsoever on Trump.

But hey, keep lying and enjoy those higher property assessments… that bring much higher property taxes.

What a way to tax the feel good/rich sheeple, pure genius, in addition to all other taxes – provincial land transfer, city land transfer, and the newest jewel effective this year – the carbon tax.

#71 jane24 on 01.02.19 at 3:42 am

In the British system when you retire with a defined benefit pension you can take 25% of the value, once only, tax free, known as your lump sum. I did for the reasons Garth recommends for Canada, control of the money and good tax planning. Plus if anything happens early to me the money is invested outside of my pension plan and can be inherited by my family. A total no-brainer.

Most of my buddies have left it in for a larger monthly nut which is fully taxable. So there you have it, human nature, always going for the perceived safe route rather than the sensible one. They say to me ‘you have to play safe as you don’t know what is around the corner.’ But at 65 I do know what’s around the corner-certain death! Roll on last minute crusies!

#72 Y. Knott on 01.02.19 at 7:17 am

DELETED

#73 maxx on 01.02.19 at 8:21 am

@ #14- fabulous post. 100% good sense.

#74 baloney Sandwitch on 01.02.19 at 8:25 am

Great topic (and a break from the real estate mayhem). No stories about people who commuted their pensions and squandered it (by bad luck or incompetence). The insurance benefit of a pension (or annuity) is not appreciated (see my comment above).

#75 Phylis on 01.02.19 at 8:35 am

…reading the fine print. For an indexed DB, does the commuted value reflect the value of indexation? Assuming the db has the rider…

#76 Stan Brooks is a Kook on 01.02.19 at 8:38 am

#2 Toronto Hater aka the Insane Stan Brooks

“If you live in the GTA, your chances of getting murdered after retirement are extremely high.”

That’s right folks, with the likes of the insane Stanley Brooks running around this is a very true statement. Luckily Stanley is confined to his rubber room which was given new padding as an xmas gift. There is no guarantee mad dog Stanley won’t escape and wreak havoc on the good citizens of Toronto. You have been warned!

#77 Felix on 01.02.19 at 8:41 am

Great pic! Poor dumb canine, he’s utterly befuddled that such a small creature could be so much more intelligent than he is.

Congratulations Mr Turner. On Day One of 2019, you’ve demonstrated the massive superiority of the feline race.

Keep up the good work ;)

#78 Stan Brooks is a Kook on 01.02.19 at 8:49 am

21 Stan Brooks on 01.01.19 commenting on his own Toronto Hater post….

“You are absolutely doomed with this ‘pension’ in Canada.
Yep, the dump in its way towards a complete Detroitization.”

Stanley do they let you watch professional hockey and basketball games in your rubber room? If they do, check out how packed Scotiabank arena is and how half empty almost all American arenas are. Then try to process in your little pea brained mind that Toronto is light years away from becoming Detroit. Go back to your straight jacket you mindless moron.

#79 crowdedelevatorfartz on 01.02.19 at 8:55 am

@#64 not 1st
“If the liberals get a minority govt with the NDP holding the balance of power…”
+++++

Wont happen.
No way the NDP get to be “king makers”.
Novice Singh aint no Jack Layton.
Singh wont even get elected in Burnaby South.
NDP career political hack Kennedy Stewart barely won it last election due to the redistribution ( gerrymandering?) by the Harper Cons of the riding in the last Federal election. The seat was an NDP stronghold for generations until the cons split it into Burnaby North and Burnaby South Blue due to the population increase. Burnaby , for generations, blue collar workers predominated.
Now? Burnaby (North and) South where houses cost on average 1.5 million, rents are in nose bleed territory and kids drive to the local High School (where Michael J Fox hung his jacket) in Range Rovers, Mercedes and Maseratis ( no , I’m not kidding).
Stewart , like the opportunist rat he is, saw Gregor tanking in the polls so bad he quit before the election, looked at his own resume, ( pro union, check. Anti business, check. Vancouver voters are idiots. Thats a Bingo!) .
Stewart then has a “win win scenario. He resigns his “safe seat” to offer to the Leader of the NDP to run for mayor of Vandelusional. IF he loses as mayor…. the NDP probably guaranteed him some posh, high paid job somewhere in the bowels of the organisation.
Singh is toast. . And with his face at the front of the NDP advertisments country wide…..Another politically correct experiment that meets the reality of anonymous polls….leaving the Dippers to stare at each other on election night wondering, “What happened?” when, once again, it was their own stupidity.

Max Burnsbridges will be the deciding factor….
Winning enough seats in Quebec (and sucking them from the Libs or Conservatives) could be the rise of another Seperatiste Party ( Because …Lets face it. If he is willing to throw the Conservatives under the bus to satisfy his bruised, massive ego….. Lucien “Benedict” Bouchard part deux comes to mind) whats Canada? He can pull the “Us vs Them” card and keep getting elected for another 20 years).

The wild card is T2.
A politician ready to cry on cue with the stumbling, “ummmm, errrrr, ahhhhh” speech patterns of a chipmunk on valium.
Will he go “all in” with his ridiculous, failing to launch social experiment “peoplekind” vs “mankind” as per Gerald Butts?
OR will he actually believe the poll numbers in June , July, Aug which will show he’s going to lose……and change tack …..like the chameleon he is.

P.S.
Hizzoner Kennedy Stewart’s New Years address to Vandelusional. ” End homelessness and deal with the drug problem.”
The same meaniless crap Gregor spewed for 10 years….. and homelessness and overdose deaths are at record highs. New boss just like the old boss

#80 Expat on 01.02.19 at 8:58 am

As real estate collapses in Canada and now looks liek elsewhere combined with the wipeout in the markets what concerns me is the welath effect.

We know that when people feel wealthy they spend money (or today they use debt pretending they will pay it back).

In the US where I reside now, people are startingn to question their wealth. Ic an only assume that Canadians feel even worse.

It was great when RE was going down a few % a month because the markets were exploding higher. Now people have been whacked 20% on their investments….

People felt diversified.
Now nothing is growing…

This undiscussed area I think will be the story of the 2019.

#81 Almontage on 01.02.19 at 9:28 am

Hindsight is 20/20 but we’ve been contented enough collecting our pensions over the past 14 years. Interest rates were higher when we retired, and commuted values were not as high. Besides, we didn’t have the same choice of advisors or investment options back then. It’s only been the past couple of years where we have had the kind of trusted financial advice to handle larger sums.
Our pensions keep the wolf away from the door and allow us to prudently invest our other savings without worrying about the markets.

#82 I've been there... on 01.02.19 at 9:29 am

I went through the massively huge commute/monthly struggle last year before retiring. There are a great many things to consider if you look carefully. I started analyzing the pros and cons almost a year in advance in an effort to be sure my decision would be right for me. I also watched a half dozen or so co-workers go through the same thing and what they worry about. Here’s what learned:

-Get started early on researching, calculation and making your decision and don’t let others do it for you. No one cares more about you and your family than you do.

– If you’re a chronic worrier and don’t already have investments and experience with the ups and downs of investing you may not be able to sleep at night after taking the CV. Retirement should not be about worrying. Be honest with yourself. You cannot change your mind later.

– Depending on your income the initial tax hit on taking the CV can be over 50% where as it will most likely be less after retirement with monthly payments. Work out the numbers to be sure.

– Get used to the idea that you’ll be thinking a lot about your decision after you’ve retired. Wondering if you’ve done the right thing. Time will tell of course, but sitting down with a spreadsheet and working out all the angles and tax implications will definitely help.

– I’ve found it to be true that after living most of my life scrimping, saving and investing for the future, I now find it difficult to spend. The future is largely unknown regardless of which payout you choose.

-Did I mention to get started early making your decision?

#83 IHCTD9 on 01.02.19 at 10:10 am

#63 Grm on 01.01.19 at 10:54 pm
Completely disagree. Its much smarter to pay down a kortgage when rates are low than when high. When rates are low you are eating into your principle much quicker.
_____

Not if you have an open Mortgage and can make sizable lump sum payments that come right off the principal.

IMHO, no matter what is going on, a guy should be making lump sum payments every month, nothing nukes the principal faster.

I’ve always preferred to buy in a high rate environment where housing costs are severely depressed. The principal I have no choice but to pay, but I have several tools to limit how much interest I pay.

There is no rule regarding this. If your property constitutes all your net worth, then pouring monthly cash flow into the mortgage just puts you more at greater risk of a real estate correction. At the end of the day we need income more than a house. – Garth

#84 NoName on 01.02.19 at 10:27 am

Interesting Read

https://medium.com/street-smart/global-trends-and-middle-class-pressure-d7a6fd89e2f

#85 Mattl on 01.02.19 at 10:29 am

The BC Assessments this year are a bit of a joke. All the houses I looked at – under a million, went up fairly significantly. My understanding of the market is it has been flat / down. Not sure how they justify double digit increases in places like Mission, Kelowna, Vernon. Seeing people crow about their assessment is pretty funny, I must have been the only guy hoping for a lower assessment when I logged into the website yesterday. A little under a million, we bought at 800k 14 months ago. I’d be incredibly satisfied with a 750K assessment and possibly lower property taxes.

For those of you that think your assessment is what your home is worth, check out what homes are selling for in your area. In an up market, assessments are way low, in a down market, the opposite. Close to zero chance we could sell our home at the assessed value, highly doubt it would sell for more than what we paid, which is fine.

As stated here, houses nobody can afford are cheaper. Houses that used to be affordable no longer are. Thanks Comrade Horgan. – Garth

#86 Stan Brooks on 01.02.19 at 11:12 am

#76 Stan Brooks is a Kook on 01.02.19 at 8:38 am
#2 Toronto Hater aka the Insane Stan Brooks

Not really, totally different person.

Bad attempt to put in my mouth somebody else’s words.

——————————–

Stanley do they let you watch professional hockey and basketball games in your rubber room? If they do, check out how packed Scotiabank arena is and how half empty almost all American arenas are. Then try to process in your little pea brained mind that Toronto is light years away from becoming Detroit. Go back to your straight jacket you mindless moron.

Oh, but I have been there much more than you my friend, not just Air Canada Centre/since the glorious Vince Carter’s times but also most of the luxury restaurants you never dreamt of.

Most of the seats are corporate seats anyway.
You chances of paying 200 + bucks for a moderate seat based on your IQ are well, zero…

#87 Lee on 01.02.19 at 11:23 am

I keep hearing that we are on the cusp of self-driving trucks putting 500,000 men out of work in North America. I will bet that self-driving trucks will have almost zero impact on total employment in trucking (not including railways and subways, and possibly busing within city limits). Ever.

#88 Stan Brooks on 01.02.19 at 11:32 am

#76 Stan Brooks is a Kook on 01.02.19 at 8:38 am

I was hoping that you would at least appreciate me being merciful, for example: I did not congratulate you on the new ‘enhanced’ CPP along the other tax increases for all the rich Canadians.

#89 Mattl on 01.02.19 at 11:50 am

As stated here, houses nobody can afford are cheaper. Houses that used to be affordable no longer are. Thanks Comrade Horgan. – Garth

Agreed. I follow a somewhat reasonably priced market in YVR that we would love to buy into and there has been no downward movement on price, and inventory has dried up. Homes there were 600K – we thought that was ridiculous – now you can’t find a decent place for under 1.2 and those prices appear to be holding.

So what if Chip Wilsons assessment went from 75 to 70 mil, what does that do for anyone? And I have multiple friends that are builders and they will not build homes or develop into this market. So rental inventory will likely get squeezed even more. In Kelwona they killed a big tower project due to the spec and foreign taxes and the doomers in the comments cheered – how is a few hundred less units going to help anyone with their cost to rent? People are clueless, the NDP is making things worse.

#90 Retief on 01.02.19 at 11:54 am

#48 NOPE
Tax implications for commuting. My $960k pension would require a tax remittance of $280k.
Now I need to make up that shortfall with riskier investments to juice returns.
My pension plan OMERS has been returning 11 to 13% returns annually for the past 5 years. My payout is fully indexed to inflation to a maximum of 6%. Unused indexing is able to be carried over from the previous year.
______________________________________
Take a look at the OMERS website and your claimed 11-13% over the last 5 years is actually 8.9%. The 10 year return is only 5.9% and the 20 year 7.1%. The plan is slightly underfunded (94% in 2017). Hopes to be fully funded by 2025. Wants to increase contribution rates, lower inflation protection.

Your $960k CV would likely be $550+k to a LIRA tax free. The rest would taxed at your marginal rate unless you have RRSP room. Maybe $200k in taxes.

Not saying OMERS is not a good plan. Especially if your employer is putting in 50%. But in many cases, a CV before you turn 55 can be quite good.
Garth is right. Succession is extremely important. Your spouse gets two thirds if you die. If you both die, your kids (unless they are dependent) get diddly. With the CV it is all yours, your wife’s, your kids’ or your favourite dog charity.

#91 jess on 01.02.19 at 11:57 am

blacksheep …”understanding as to how intertwined politics and banking actually are: money laundering

https://www.hkma.gov.hk/eng/key-information/press-releases/2018/20181228-3.shtml

self identified?

..”the HKMA said in a statement Friday. The bank didn’t conduct relevant customer due diligence and handled wire transfers on the SWIFT messaging system without including the names of the originators.

Hong Kong introduced anti-money laundering laws in 2012 and State Bank of India was the first to be fined in 2015 followed by Coutts & Co AG and Shanghai Commercial Bank Ltd. In October 2017, the HKMA said it was investigating eight banks for alleged violations…”(bloomberg)

=
https://www.investopedia.com/articles/personal-finance/050515/how-swift-system-works.asp

SWIFT system — a messaging network used by banks and other financial institutions to securely and quickly send money transfer instructions ..

Later on, it was found out that unknown hackers breached the computer systems of Bangladesh Bank, attempting to steal a total of $951 million from its account at the Federal Reserve Bank of New York. (READ: TIMELINE: Tracing the $81-million stolen fund from Bangladesh Bank)

Most of the attempted transfers were blocked by the New York bank, but $81 million was transferred to 5 fake RCBC accounts in the Philippines, using the SWIFT system. (READ: Network: Who’s who in the RCBC money-laundering scam)

The entire process which the stolen money went through in the country involves several people mainly from 3 camps: Rizal Commercial Banking Corporation (RCBC), PhilRem Service Corporation, and the circle of casino junket operators.

https://www.rappler.com/newsbreak/in-depth/127645-network-rcbc-money-laundering-scam-personalities

cnn philippines
Swift system and $81M money laundering case
https://www.youtube.com/watch?v=Dckfb6FeBzI

========
“golden hello’s”

https://www.thisismoney.co.uk/money/news/article-6522913/Almost-1-5-biggest-firms-paid-year-5-got-handout-taxman.html

#92 All Are Leaving on 01.02.19 at 12:41 pm

I befriended years ago the greatest IT expert in USA who is retired now. She has got herself a new van and trailer for a trip all throughout America. I convinced her to you tube it all before she leaves Hot Springs, and we are now in the process of hooping a few sponsorships for free food and RV Resort stays – why not?

#93 JB on 01.02.19 at 12:44 pm

#58 Smoking Man on 01.01.19 at 10:03 pm

2018 the year of fun. When a Dr tells you have 6 months to go. Like five years ago. And you are still smoking.
I’m thinking our education system is over rated.
____________________________________________

Your right Smoking Man, next time I get pneumonia I’m going to go to the nearest Speedy Muffler shop and get an installer to fix me up.
Huh I’m actually surprised that people like you inhabit this planet and survive, it must be shear dumb luck!

#94 Ubul on 01.02.19 at 12:44 pm

There is no rule regarding this. If your property constitutes all your net worth, then pouring monthly cash flow into the mortgage just puts you more at greater risk of a real estate correction. At the end of the day we need income more than a house. – Garth

If you have a paid off house, wouldn’t you consider the guaranteed saved monthly rent (which is a very substantial and continuously increasing part of cost of living) as income? (Of course, there is property tax, maintenance to deduct.)

Still, it would require a substantial size of investment to generate a guaranteed $1.2-$2K withdrawal per month, regardless of market conditions, which is the standard amount now for rent in Toronto, for example.

Probably less than the equity in your home, paying you a pittance in imputed rent. – Garth

#95 Lorne on 01.02.19 at 12:53 pm

#79 crowdedelevatorfartz on 01.02.19 at 8:55 am
@#64 not 1st
“If the liberals get a minority govt with the NDP holding the balance of power…”
+++++

Wont happen.
No way the NDP get to be “king makers”.
Novice Singh aint no Jack Layton.
Singh wont even get elected in Burnaby South.
…….
When Singh loses, he will resign as leader and Nathan Cullen will take over…..which will definitely lift the NDP somewhat.

#96 Shawn Allen on 01.02.19 at 1:56 pm

Commute a Government Pension?

#90 Retief on 01.02.19 at 11:54 am responded to 48 Nope
______________________________________
Take a look at the OMERS website and your claimed 11-13% over the last 5 years is actually 8.9%. The 10 year return is only 5.9% and the 20 year 7.1%. The plan is slightly underfunded (94% in 2017). Hopes to be fully funded by 2025. Wants to increase contribution rates, lower inflation protection.

Your $960k CV would likely be $550+k to a LIRA tax free. The rest would taxed at your marginal rate unless you have RRSP room. Maybe $200k in taxes.

Not saying OMERS is not a good plan. Especially if your employer is putting in 50%. But in many cases, a CV before you turn 55 can be quite good.

**********************************
To a worker near or past retirement, the pension plan returns matter not a whit. This plan is nearly fully funded and will pay the agreed pension formula. Any changes to inflation protection are most likely to not apply to service already earned. The pension returns affect what people pay into the plan – which has increased as returns fell. The payout formulas for most government plans remain unchanged.

A huge issue on commuting a government pension is you can only do it before age 55 and you have to retire / quit to do it. Yeah, run that idea past your spouse and let me know how it goes.

Furthermermore, if you have not hit the “magic number” you get a big increase in your pension if you can stay long enough to get the magic number. (Typically a 3% bump for each year you stay on top of the usual 2% or so, this is if you are within ten years of magic number)

If these people had the ability to really save and grow their own money they would already have maxed out RRSPs. So, they would face big taxes on commutation as well.

If the idea of retirement savings is cashflow in retirement that never runs out, you simply cannot beat a government guaranteed pension like OMERS.

The default path is to keep that pension, especially if married and in reasonable health. Terrible idea to suggest the average person commute in my opinion.

#97 IHCTD9 on 01.02.19 at 2:08 pm

#83 IHCTD9 on 01.02.19 at 10:10 am

There is no rule regarding this. If your property constitutes all your net worth, then pouring monthly cash flow into the mortgage just puts you more at greater risk of a real estate correction. At the end of the day we need income more than a house. – Garth
____

Indeed, real cash incinerated via a market correction which may take 20 years to play out would blow. Irrecoverable. But in our case, the house was only 123K, we pounded an equal qty of ordinance into investments simultaneously, and still occasionally had some left over at the end of the month.

By the time we hit 42, the mortgage was gone, the portfolio was starting to look like something (16-17 years worth at that point), and all was well with our souls.

For those who have to choose between paying the 1 Mil. mortgage or padding the portfolio – but not both – I suggest moving somewhere where you CAN do both – or rent. :)

#98 MF on 01.02.19 at 2:10 pm

#78 Stan Brooks is a Kook on 01.02.19 at 8:49 am

Lol.

My take is that the Toronto haters are like boys in grade 5 who “hate” the girl they secretly like.

“I hate her!! She’s so annoying!”

Yeah sure you do….

MF

#99 Lenny on 01.02.19 at 2:18 pm

Other factors as ex-Federal DB employee. A) you have to quit and B) you have to do this before age 50. Basically rules out commuting if you can’t retire til 65.

#100 Ustabe on 01.02.19 at 2:52 pm

Folks, don’t listen to all the above experts about the recent property assessments.

Assessments are only a factor in the amount of property tax you pay. Property tax amounts depend on the mill rate set by your city/town/muni.

So to assume property tax increases based on the recent assessment is to be wrong. How much is decided on the local level, something you can actually do something about.

If we were to all of us decrease our assessments by 50%, all local council would have to do is increase the mill rate. And they will unless you let them know your opinions on the matter.

#101 Derrick on 01.02.19 at 3:10 pm

I agree with Shawn Allen and others that it’s a terrible idea to suggest the average person commute. I think Garth is pullin folks chain a bit, get real.

#102 IHCTD9 on 01.02.19 at 3:16 pm

#94 Ubul on 01.02.19 at 12:44 pm

If you have a paid off house, wouldn’t you consider the guaranteed saved monthly rent (which is a very substantial and continuously increasing part of cost of living) as income? (Of course, there is property tax, maintenance to deduct.)
______

I have about 280- 300K into my 123K house in real honest dollars over 18 years of ownership. That’s a 1.3K-1.4K/month rent payment. Rent in town for a 2 bedroom is about 1100.00-1200.00. Renting a 3-4 bedroom house is 1700.00 or so.

I’ve also got 500.00+/month ongoing costs even though I own the place. These only ever go up.

Any and all issues/maintenance around my place fall on my shoulders instead of a landlord.

If you’re honest – the difference is less money and more lifestyle in my situation. I would never live in a 2 bed apt in town (given the ability to choose), so I bought a house, and I pay the resulting bill.

It would take quite a few years yet before my house costs get down to the 2 bedroom apartment level – if they ever even do (I got a big roof job coming up…).

#103 IHCTD9 on 01.02.19 at 3:23 pm

#99 Lenny on 01.02.19 at 2:18 pm
Other factors as ex-Federal DB employee. A) you have to quit and B) you have to do this before age 50. Basically rules out commuting if you can’t retire til 65.
___________________

Yikes, that’s an ugly set of rules.

Maybe that’s why you see so many public workers “retiring” and then coming back on “contract”…

#104 Bytor the Snow Dog on 01.02.19 at 3:28 pm

#48 NOPE on 01.01.19 at 9:03 pm sez:

“A few missing points:
Tax implications for commuting. My $960k pension would require a tax remittance of $280k.
Now I need to make up that shortfall with riskier investments to juice returns.
My pension plan OMERS has been returning 11 to 13% returns annually for the past 5 years. My payout is fully indexed to inflation to a maximum of 6%. Unused indexing is able to be carried over from the previous year.

I carry term life insurance to protect my heirs in case of my early demise and my younger spouse will continue to receive 2/3s of the monthly for life. I had a pension actuary and 2 advisors look at commuting. None recommended commuting.
One size does not fit all here.”
————————————————————–
This is pretty well my situation. In fact, a certain bearded individual with chiseled abs advised me not to commute. I didn’t, and I’m retired now. Indexing was 2.6% this year, which is more of a raise that I would have had if I has stayed working.

Life’s good.

#105 Remembrancer on 01.02.19 at 4:12 pm

#100 Ustabe on 01.02.19 at 2:52 pm
If we were to all of us decrease our assessments by 50%, all local council would have to do is increase the mill rate. And they will unless you let them know your opinions on the matter.
———————————————————-
In aggregate very true, though in individual cases there may be a tangible value in appealing a reassessment (and winning with a valid arguement).

Overall this keeping up with the Jones’ and having a higher assessment then others in the neighbourhood some are discussing here is a hoot. This is not a contest I’d want to win…

#106 stef97 on 01.02.19 at 4:21 pm

Hi All,
Since the topic is pension I would appreciate if someone can confirm whether what / which pensions we can take with us / still entitled to collect if we decide to move to another country ?
Thanks
Steven

#107 acdel on 01.02.19 at 4:24 pm

Great post today with many great opinions on either side.

I am in a position that I will have to make that decision soon as well.

#108 Mean Gene on 01.02.19 at 4:35 pm

Well, if you take 300,000 and divide it by 1325 you get 226, divide that by 12 you get 18.886.

So if you were to just spend the commuted value at the same monthly amount as the pension, it would last almost 19 years, excluding inflation blah blah blah.

65 plus 19 is 84, which is about the life expectation of a Canadian woman.

On the surface, taking out seems to be the wiser choice, as long as it’s invested in balance portfolio by a fee based adviser, not the crappy bank advisor.

#109 Ubul on 01.02.19 at 5:19 pm

#102 IHCTD9

In my case it makes some difference that I bought the house long time ago, my initial cost was low. I am also able and willing to do almost all maintenance or upgrade. In the past ten years I had less than $10K cost, which was spent mostly to replace and maintain gas heating and hot water with most energy efficient solution.

I also have self-directed investment, that is more than I paid for the house. On top of those, extra savings went into DB-pension.

I am also not fun of condo living.

#110 TRUMP 2020 on 01.02.19 at 11:53 pm

LETS MAKE THE WORLD GREAT AGAIN!!!

#111 AJ on 01.03.19 at 11:42 am

I would not consider a paid house as income in retirement as suggested here.

Actually it could be a huge liability – just look at Greece. The homeowners got waxed with a supposedly one time per sq m tax to plug the billion euros hole in the budget…Then you have the regular property taxes on grossly overvalued assessments (like 5x)…

All this leads to people actually refusing their property inheritance…

#112 BD on 01.04.19 at 3:18 am

And marry tall men. BWAHAHAHAHA. thanks garth you are the best.