Tag Archives: GIC

Why people aren’t saving – an interview with Doug Hoyes

As co-founder of Hoyes and Michalos, a debt relief firm, and a commentator on personal finance, Doug Hoyes has seen it all when it comes to debt.

And he has a straightforward view on why Canadians aren’t saving much for retirement, telling Save with SPP that these days, “people don’t save for anything.”

The savings rate, he notes, was as high as 15 per cent in 1980 and has plunged to “less than one per cent” today. In other words, people are saving less than a penny of every dollar they earn.

“People don’t save anything; it’s just not a thing we do anymore,” he explains. “I think the cost of living is high and job security is low.” The old “job for life” days are long gone, and people now expect to have multiple jobs through their working career, he explains.

“You are seeing sporadic employment, contract work – it is hard for people to put down roots and save. And house prices are rising sharply, and everything costs more. We’re not able to save, and we are seeing more people using debt to make ends meet,” he says.

Those who do try to save tend to be punished for their efforts – savings account and GICs pay interest in the low single digits, and if savers look to invest in mutual funds “there are high fees, and they take on risk,” he explains. Since low-interest lines of credit are so prevalent, for many people, debt has replaced savings, a practice that Hoyes says just isn’t sustainable in the long term.

Save with SPP asked how this lack of saving affects retirement plans.

“It’s become uncommon to have a pension plan (a traditional defined benefit plan) at work,” he says, “unless you work for the government. It’s just not a thing newer companies offer.” He says that from an employer’s point of view, “it is a hassle to set them up, and there is a potential for liabilities that need to be funded, and more money needing to be put in.” Sears and Nortel show the potential downside for employees and DB pensioners if the parent company runs into financial trouble, he notes.

So traditional pension plans in the private sector have generally been replaced with things “like a group RRSP, where there is zero risk (for the employer).” Employees are satisfied with a group RRSP because they “know they are not going to be there, at the same employer, for 50 years,” and a group RRSP is portable and easy to transfer, Hoyes explains.

With more and more working people dealing with debt, it’s not surprising to Hoyes that more seniors are retiring with debt, a situation he says can lead to disaster.

“In retirement, your income goes down, and while some of your expenses that were related to work go down, others will go up,” he explains. “Your rent doesn’t go down when you retire, so your cost of living is about the same.”

Retired seniors, living on less and still paying down debt, face other problems, he says. It’s more common for retirees to divert savings to “helping their adult kids.” Examples of this might include a divorced child moving home, or college and university graduates, unable to find work, staying home instead of moving out. So the seniors may use up their savings or borrow to help the children, “as any parent might,” but that drives them into a financial crisis, he explains.

With debt to pay and possibly little to no workplace pension, many seniors are heading back to work. Others, Hoyes notes, are starting to have to file for insolvency.

“Maybe you only have CPP and OAS coming in, and you have a $50,000 debt that you can’t service – you may need to file for bankruptcy and make payments through a trustee,” he explains.

We thank Doug Hoyes for speaking to Save with SPP.

If you don’t have a pension plan at work, consider opening a Saskatchewan Pension Plan account. It’s like setting up a personal pension plan. The money you set aside is invested for you at a low fee, and when you are ready to collect it, it’s available as a lifetime pension with several survivor benefit options.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Jul 15: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

Women have to plan for a longer retirement

What works for a man may not work for a woman, and that sentiment is true when it comes to retirement planning.

According to the Young and Thrifty blog, women need “to know how to save more than men.”

They need to save more than the conventional 10 per cent of salary, the post notes, or else they could risk not having enough money in retirement. “Advice given to women about how much to save for retirement may be so far off base that, according to the Broadbent Institute, 28 per cent of senior women are currently living in poverty in Canada,” the article notes.

The article notes that as a starting point, women earn less than men, about 87 cents for every dollar earned by a man. That means less to save for retirement, the blog notes.

Secondly, women “tend to invest more conservatively than men,” the article advises. Women, the article notes, tend to shy away from riskier market investments in favour of GICs and high-interest savings accounts. “While these can be great short-term strategies, these investments offer a lower return, stunting the growth of the money over the long term,” the blog reports.

So the problem is that women “are earning less, saving less, and generally choosing investment strategies that yield less,” the article notes. “But because women generally live longer than men, they need to squirrel away more money in their nest egg.”

The article notes that women tend to live four years longer than men, meaning a more expensive retirement. “Four years longer doesn’t seem that long, but if you assume a retirement age of 65, that’s 28 per cent more years spent in retirement,” the article warns.

A final factor – women tend to leave the workforce to raise children, meaning they don’t have as long a career or as many opportunities to save, the article says.

What to do?

The article advises women to consider sharing some of their parental leave time with their spouses, so that they aren’t off work as much. If you are off on a leave, a spouse can open a spousal RRSP to ensure that retirement savings continues while you are caring for a child. The article urges “more aggressive investments” by women, including the use of exchange-traded funds or ETFs, so that you are getting more benefit from the stock market.

And finally, the article says the savings target for women should be 18 per cent of income, as opposed to 10 per cent for men.

Interestingly, the Saskatchewan Pension Plan was invented with women in mind. The SPP started out as a way for busy women and moms to have their own way to save. The SPP offers professional investing at a very low cost, is scaleable (you can put more in when you make more, and less in when you make less) and very importantly, offers a simple way to turn those savings into reliable monthly lifetime income when you leave the workforce.

It’s an ideal tool for women who want to upgrade their retirement savings – check them out today.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Sept 24: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

Debt beginning to restrict retiree cash flow
When the boomers’ parents got set to retire, they advised their kids to – like them – be sure to not bring a penny of debt into retirement. They dutifully paid off their $25,000 mortgages, saved in their double-digit interest GICs, and merrily rode into retirement.

Easier said than done for those of us who are younger.

According to Which Mortgage, citing Equifax Canada statistics, the debt on Canadian credit cards alone is a whopping $599 billion. As interest rates on those cards begin to tick up, people are less and less able to pay the full credit due each month, the article notes. In fact, only around 56 per cent do pay the full amount owing, and the rest are nudging into delinquency, the story continues. And the total debt of Canadians including mortgages is $1.83 trillion, the article says.

So we’re not able to emulate our parents and grandparents.

A CBC story from earlier in the year found that 20 per cent of retirees are still paying mortgages, and 66 per cent are “still carrying credit card debt.” On average, the report says, citing Sun Life data, Canadian retirees had $11,204 in non-mortgage debt.

Experts disagree as to whether this means retirees are facing hardship. Theoretically, as long as they can still pay off the bad debt (credit) and good debt (mortgage) they will eventually be OK. But an obvious lesson for younger retirement savers is this – try not to be like your parents, and try to get to retirement without debt. You have to try and do both.

A rule of thumb that Save With SPP has heard over the years re debt and retirement savings is the 80/20 rule. While you are young, direct 80 per cent of extra money onto killing debt, but put away 20 per cent for retirement. The same ratio works for retirees trying to pay down debt. You can tweak things once the debt is gone.

A nice way to build your retirement savings gradually while killing off debt is through the Saskatchewan Pension Plan. You can start small and increase your savings rate over time.

Top retirement goals
The Good Financial Cents blog talks about “good retirement goals that everyone should have.”

These include:

  • Have a well stocked emergency fund
  • Get out of debt completely
  • Plan to retire early
  • Have multiple income streams

Some great advice here. It is very difficult to visualize life in retirement when you are still working, so planning is a great ally to a low-stress future.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

 

Group vs Individual RESPs: What’s the difference ?

The “holy trinity” of tax-assisted savings plans available to Canadians are TFSAs, RRSPs and RESPs. RESPs (Registered Educational Savings Plans) are primarily designed to help families to save for post-secondary education.

Each year, on every dollar up to $2,500 (to a life time maximum of $50,000) that you contributed to an RESP for a child’s education after high school, a basic amount of the Canada Education Savings Grant of 20% may be provided. Depending on the child’s family income, he/she could also qualify for an additional amount of CESG on the first $500 deposited, which means $100 more if the 2017 net family income was $45,916 or less and up to $50 if the 2017 net family income was between $45,916 and $91,831.

In total, the CESG could add up to $600 on $2,500 saved in a year. However, there is a lifetime CESG limit of $7,200. This includes both the basic and additional CESG. Lower income families may also be eligible for the Canada Learning Bond (CLB) that could amount to an additional $2,000 over the life of the plan.

Contributions to RESPs are not tax deductible, but the money in the account accumulates tax-free. Contributions can be withdrawn without tax consequences and when your child enrolls in a university or college program, educational assistance payments made up of the investment earnings and government grant money in the RESP are taxable in the hands of the student, generally at a very low rate.

When our children were young, we purchased Group RESPs for them and their grandparents also purchased additional units. I was so impressed with the program that I even took a year before transitioning from family law to pension law and sold RESPs.

Each child collected about $8,000 from the plan over four years of university, which helped them to graduate debt free. Fortunately, both my daughter and my son took four straight years of university education so there was no problem collecting the maximum amounts available to them minus administrative fees.

However, I’ve come to realize the potential downside of Group RESPs so we started contributing $200/month to a self-administered plan with CIBC Investor’s Edge for our granddaughter soon after she was born. She is now 5 ½ and as I write this, there is already $22,000 in the account.

Our decision to self-administer Daphne’s RESP was influenced in part by what I learned from other personal finance bloggers about the potential downside of group plans.

Robb Engen notes that group plans tend to have strict contribution and withdrawal schedules, meaning that if your plans change – a big possibility over 18 plus years – you could forfeit your enrollment fee or affect how much money your child can withdraw when he/she needs it for school.

With a Group RESP, contributions, government grants and investment earning for children the same age as yours are pooled and the amount minus fees is divided among the total number of students who are in school that year. Typically the pool is invested in very low risk GICs and bonds.

In contrast, there are no fees in our self-administered plan other than $6.95 when we make a trade. The funds are invested in a balanced portfolio of three low fee ETFs. We can easily monitor online how the portfolio is growing and as Daphne gets closer to university age we can shift to a more cautious approach.

Macleans recently reported that the total annual average cost of post-secondary education in Canada for a student living off-campus at a Canadian university is $19,498.75 and it will be much higher by the time your child or grandchild is ready to go off to college. So learn as much as you can about RESPs, get your child a social insurance number, set up a program and start saving.

However, as Engen suggests before you choose a group or individual RESP provider make sure you read the fine print and ask about:

  • Fees for opening an RESP;
  • Fees for withdrawing money from a RESP;
  • Fees for managing the RESP;
  • Fees for services and commissions;
  • What happens if you can’t make regular payments;
  • What happens if your child doesn’t continue his or her education; and
  • If you have to close the account early, do you have to pay fees and penalties; do you get back the money you contributed; do you lose interest and can you transfer the money to another RESP or different account type.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Jan 8: Best from the blogosphere

Welcome to a wonderful New Year. Most of the country has spent the last few weeks in a deep freeze with Saskatoon temperatures dipping below -30 C. It’s even -21 C in Toronto!

Nevertheless, residents of Spy Hill, Saskatchewan where the temperature was -43 with the wind chill on Christmas morning displayed their very warm hearts when they sprang to action on Christmas Day to help passengers on a frozen train.

Here is what a few of our favourite personal finance writers have been writing about during the holidays.

Jonathan Chevreau on the Financial Independence Hub reviewed the New York Times best seller Younger Next Year – Live Strong, Fit and Sexy Until You’re 80 and Beyond. Chevreau said, “The book is all about taking control of your personal longevity, chiefly  through proper nutrition but first and foremost by engaging in daily exercise: aerobic activity at least four days a week and weight training for another two days a week — week in and week out, for the rest of your life.”

Boomer & Echo’s Robb Engen wrote Save More Tomorrow: The Procrastinator’s Guide To Saving Money. He discussed behavioural economists Shlomo Benartzi and Richard Thaler’s Save More Tomorrow program which not only suggests that monthly savings be automated but that savings rates be automatically increased when individuals get raises or earn more money from side hacks or freelance gigs.

Bridget Casey from Money After Graduation encouraged readers to see through their financial blind spots. “Reducing your spending and increasing your income by any amount is always good for your net worth, but if you’re looking to get the most bang for your buck, your efforts should be directed towards major wins ahead of small victories. A good exercise is to identify the three largest expenses in your budget and try to reduce them by 15% each or more,” she suggests.

Barry Choi explained on Money We Have why he is changing careers after 18 years. It was hard to walk away from a well-paid job in television but with a young baby, working the 3 PM to midnight shift was no longer sustainable. He got a part-time position as an editor for RateHub three days a week and he plans to continue writing for a variety of travel and other publications. Although he took a pay cut to leave his full-time position, his financial advisor helped him to realize he doesn’t need to make nearly as much as he thought to maintain the family’s lifestyle.

And finally, Globe and Mail personal finance columnist Rob Carrick offers the following  eight dos and don’ts for your personal finances in 2018:

  • DO brace for higher borrowing costs.
  • DON’T expect much improvement on savings rates.
  • DO expect more hysteria about cryptocurrencies
  • DON’T buy in unless you have the right mindset
  • DO be cautious with your investment portfolio
  • DON’T forget bonds or GICs
  • DO emphasize fees as a controllable factor in your investing
  • DON’T forget the value proposition

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Dec 18: Best from the blogosphere

It seems impossible that is our last Best from the Blogosphere for the year. The next one is slated for January 8, 2018! I wish all savewithspp.com readers a very happy, healthy holiday season and a new year full of promise and exciting adventures.

If you are starting to think about tax season already, you will really appreciate Janine Rogan’s Professional CRA Hacks. With only 36% of calls actually answered it’s no wonder Canadians are frustrated with the tax system. Furthermore, up to 30% of the time the tax information you receive from an agent may be incorrect, which is as concerning for taxpayers as it is for professionals. A few of her hints are:

  • Hit redial 10x in a row.
  • Call the French line but ask for help in English.
  • Ask for your agent’s direct number and agent ID.

On another income tax-related matter, Andy Blatchford reports in The Toronto Star that during the election campaign, the Liberals promised to expand the Home Buyers’ Plan to allow those affected by major life events — death of a spouse, divorce or taking in an elderly relative — to borrow a down payment from their RRSPs without incurring a penalty.

However, a June briefing note for Finance Minister Bill Morneau ahead of his meeting with the Canadian Real Estate Association lays out the government’s concerns that low interest rates and rising home prices have encouraged many Canadians to amass high levels of debt just so they can enter the real-estate market. “Policies to further boost home ownership by stimulating demand would also exert more pressure on house prices,” says the memo,

Firecracker writes about The Five Stages of Early Retirement on Millenial Revolution. According to the self-styled youngest retiree in Canada (age 31), these stages are:

  • Stage 1: The Count Down (1-2 years before early retirement)
  • Stage 2: Honeymoon (0 – 6 months after retirement)
  • Stage 3: Identity Crisis (7 months – 1.5 years after retirement)
  • Stage 4: The New You (1-2 years after retirement)
  • Stage 5: Smooth Sailing (2+ years after retirement)

The Globe and Mail’s Rob Carrick considers the new retirement era and questions How many years past 65 will you work? Carrick says, “Retiring later is bound to be seen as negative, but it’s actually quite unremarkable unless you have a physically demanding job or hate your work. Previous generations may have retired at 65 and lived an extra 10 or 15 years. Retire at 70 today and you might look forward to another 15 or 20 years.”   

And finally, Tom Drake at maplemoney goes back to basics and provides a Guide to Guaranteed Investment Certificates. GICs are a form of investment where you agree to lend money to a bank for a set amount of time. The bank agrees to pay you a certain percentage of interest to borrow this money. You are guaranteed a return as long as you keep your money in the bank for a specified period. Terms on GICs generally run from as little as 90 days to as much as 10 years. “It’s important to weigh the pros and cons of GICs. While you probably don’t want to  build an entire portfolio of GICs (especially if you are trying to build a nest egg), they do have their place in a diversified portfolio,” Drake says.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

When is the 4% rule safe? Interview with Ed Rempel

 

Click here to listen
Click here to listen

Today I’m interviewing Ed Rempel for savewithspp.com. Ed has been a Certified Financial Planner for over twenty years, and an accountant for thirty-three years. After building one of the largest financial planning practices in Canada, he partially retired in his fifties to focus on his passion for writing.

On his blog Unconventional Wisdom, Ed recently discussed his very interesting research* which reveals that if you want to withdraw 4% a year from your retirement portfolio without running out of money in 30 years of retirement, you need to hold significantly more equities than bonds in your portfolio. And that’s what we’re going to talk about today. Welcome, Ed.

Thanks a lot Sheryl.

Q: So how do you define a successful retirement for the purposes of your study?
A: For the purpose of the study, I defined a successful retirement as providing a reliable income rising with inflation for 30 years. That means you retire at 65 and your money lasts to age 95.

Q: Many financial planners use the 4% rule, which essentially says that you can withdraw $40,000 a year plus inflation for life from a $1 million portfolio. What do you think?
A: I have 146 years of data on stocks, bonds, cash, and inflation. I looked back at all those years to see what would have happened in the past if people retired that year, with each type of portfolio – e.g 100% bonds, 100% stocks plus various other permutations and combinations. 

I also tested these scenarios with inflation, to see what actually happened in the past. And the surprising result was that the more equities you actually have the safer your portfolio is. My whole blog is about “unconventional wisdom.” I love challenging ideas that most people believe aren’t really true and that’s one of them.

Q: So, to what extent does retirement success link to whether or not retirees follow the common of rule of thumb which suggests that they shouldn’t invest more than 100 minus their age in equities? For example, the portfolio of a 70-year old should include 70% bonds and 30% stocks.
A: We call that the age rule and its one of the things I tested in the study. I found that it actually gives you a significantly lower success rate. If you have 70% bonds at age 70, and the bond allocation is growing as you get older, that’s a very low component of stocks. In these circumstances you will have a much lower retirement success unless you withdraw a lower amount of income each year. 

Q: And what would the lower amount of income be in your view?
A: If you are more comfortable with a conservative 70% bond/30% stock portfolio, I would suggest you use a 3% not a 4% annual withdrawal rate. 

Q: Then what is the stock/bond allocation with the highest success rate, which we defined earlier as having enough money to withdraw 4% annually plus inflation, for thirty years?
A: The highest success rate will result if you are invested 70% or more in stocks. This is a very heavy allocation. And if you plan to withdraw more than 4% (i.e. 5% or 6% annually) the highest success rate will occur if you have 90% or 100% stocks. 

Q: What about bond or GIC investors? What percentage of their accounts can be safely withdrawn so their money will last thirty years?
A: I would suggest bond and GIC investors stick with 2.5%. That’s a little bit more than the interest that they’ll get, so they would be encroaching on their principal.

Q: Many financial advisors tell investors to keep cash equal to two years income, to draw on when their investments are down. Will that improve the possibility that these people won’t run out of money?
A: That is another example of “conventional wisdom” that people subscribe to. And I agree it kind of sounds logical, but my study found that holding two years’ worth of cash will not enhance your chances of making your money last for 30 years. In fact, there were a number of cases where keeping cash actually meant investors ran out of money, when without cash they didn’t.

The only possible benefit would be entirely behavioral. For example, if investments go down some people might get scared and cash them in. However, if they have cash they might leave their investments alone and just spend the cash for a little bit. But in general I don’t recommend this because I like to follow what actually works and I found no actual benefit in holding cash to cover expenses for several years after a market downturn. 

Q: Based on their risk tolerance then, how would you advise clients or readers who are nervous about holding a high percentage of equities in their portfolio?
A: They still need to stay within their risk tolerance. Therefore, even though the study showed a higher amount of equities is safer, and would give them a better retirement, that’s not what I’m recommending that everyone should necessarily do.

Q: So more conservative investors are just going to have to understand they will either need more money to meet their retirement goals or they will have to spend less?
A:
Right. Adding bonds gives you a fixed income that reduces volatility that can make you less nervous. But then you have to lower income expectations. 

Q: Say that somebody does go with a higher stock allocation, what about the risk if there’s a stock market crash early in their retirement? How much will it throw out the calculations?
A: In the study I went back to 146 years, and there were a lot of big market crashes in the last 146 years, to see what actually happened. In actual fact that I found that historically this almost never a factor except in one very clear case for people who retired in 1929. It was actually inflation that eroded buying power over the years.

Q: What’s the biggest mistake people can make if there is a market decline?
A: The biggest mistake, in fact, I call it “the big mistake,” is to sell your investments, like sell your equities or switch to more conservative investments, after a market decline. The bottom line is you must be able to stay within your risk tolerance and stay invested in the market, through the inevitable crashes. That’s the only way you’re going to get the retirement income that you want.

Q: My last question, what is your best advice to retired investors, or investors close to retirement, regarding how to structure their portfolios.
A: Well the bottom line is to have a proper retirement income plan. You have to think through what the lifestyle is you want to have and how much money you need to support it. And then look at how you are comfortable investing and come up with a plan that gives you what you need. There will be trade-offs, but once you make a proper retirement income plan, then you can have a sustainable income throughout the rest of your life.

Thank you Ed! It was a pleasure to chat with you today.

Thanks a lot Sheryl.

*For the full report of Rempel’s research discussed above, see How to Reliably Maximize Your Retirement Income – Is the “4% Rule” Safe?

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 6: Best from the blogosphere

We are again going to sample recent material from a series of bloggers who participated in The Canadian Financial Summit in September.

This week headlines across the country blared that CRA has changed their position on allowing diabetics to claim lucrative disability tax credits in certain cases.

On Your Money, Your Life, accountant Evelyn Jacks discusses why these changes are being made and how audit-proofing strategies must be implemented by tax professionals and their diabetic clients.

Andrew Daniels writes at Family Money Plan about how he paid off his mortgage in 6 years. Five of the 28 things he and his wife gave up to quickly pay down his mortgage are noted below:

  • Eating out, largely due to food sensitivities and allergies with the added bonus that they saved big bucks.
  • For the first five years of the pay down period they gave up travel.
  • They went without cell phones for four of the six years of paying off their mortgage
  • They opted to repair their old cars as required rather than buying new ones.

Jonathan Chevreau, CEO of the Financial Independence Hub notes in the Financial Post that Only a quarter of Canadians have a rainy day fund, but more than half worry about rising rates.

This is based on a survey of 1,350 voting-age adults by Forum Research Inc. conducted after the Bank of Canada raised its benchmark overnight rate from 0.75% to 1% on Sept. 6, the second increase in three months. That said, 17% believe rate hikes will have some positive aspects: Not surprisingly, debt-free seniors welcome higher returns on GICs and fixed-income investments. Another 38% don’t think it will have an effect either way.

Do you know how long it will take to double the money you have invested? MapleMoney blogger Tom Drake explains the rule of 72 which take into account the impact of compound interest and  allows you to get a quick idea of what you can achieve with your money.

For example, if you were expecting a rate of return of 7% you would divide 72 by 7, which tells you it would take about 10.3 years to double your money at that rate. If you want $50,000, you would need to invest $25,000 today at 7% and let it sit for 10.3 years.

Kyle Prevost explores 5 stupid reasons for not getting life insurance on lowestrates.ca. If your rationale is that you are healthy and never get sick, Prevost says, “Glass half-full thinking is a positive thing, but pretending that your full glass is indestructible is a recipe for disaster.”

And if you have avoided buying life insurance because you have so many other bills you can’t afford it, he says, “You seriously need to ask yourself what sort of situation you’d leave behind if tragedy struck. Those bills that look daunting right now would look downright insurmountable.”

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 23: Best from the blogosphere

Sustaining a blog for months and years is a remarkable achievement. This week we go back to basics and check in on what some of our favourite veteran bloggers are writing about.

If you haven’t heard, Tim Stobbs from Canadian Dream Free at 45 has exceeded his objectives and retired at age 37. You can read about his accomplishment in the Globe and Mail and discover how he spent the first week of financial independence here.

Boomer & Echo’s Robb Engen writes about why he doesn’t have bonds in his portfolio but you probably should. He acknowledges that bonds smooth out investment returns and make it easier for investors to stomach the stock market when it decides to go into roller coaster mode. But he explains that he already has several fixed income streams from a steady public sector job, a successful side business and a defined benefit pension plan so he can afford to take the risk and invest only in equities.

On My Own Advisor, Mark Seed discusses The Equifax Breach – And What You Can do About It. In September, Equifax announced a cybersecurity breach September 7, 2017 that affected about 143 million American consumers and approximately 100,000 Canadians. The information that may have been breached includes name, address, Social Insurance Number and, in limited cases, credit card numbers. To protect yourself going forward, check out Seed’s important list of “Dos” and Don’ts” in response to these events.

Industry veteran Jim Yih recently wrote a piece titled Is there such a thing as estate and inheritance tax in Canada? He clarifies that in Canada, there is no inheritance tax. If you are the beneficiary of money or assets through an estate, the good news is the estate pays all the tax before you inherit the money.

However, when someone passes away, the executor must file a final tax return as of the date of death.  The tax return would include any income the deceased received since the beginning of the calendar year.  Some examples of income include Canada Pension Plan (CPP), Old Age Security (OAS), retirement pensions, employment income, dividend income, RRSP and RRIF income received.

When the Canadian Personal Finance Blog’s Alan Whitton (aka Big Cajun Man) started investing, he was given a few simple rules that he says still ring true today. These Three Investment Credo from the Past are:

  • Don’t invest it if you can’t lose it.
  • Invest for the long term.
  • If you want safety, buy GICs.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Jan 23: Best from the blogosphere

By Sheryl Smolkin

Here we go with another series of video blogs that will help you to organize and manage your finances. Some of them are not recent, but they have definitely withstood the test of time.


In Budgeting Without Losing Your Mind, Young Guys Finance says budgeting doesn’t necessarily mean punishing yourself so you can’t spend any money. Instead he vues budgeting as an awareness tool that will help you to identify what you are spending money on and cut back on what you don’t really need.

Because Money, co-hosted by Financial Planner and opera singer Chris Enns, interviews Kyle Prevost from Young and Thrifty. Join them for a rousing trivia game that is impossible to win and find out how hard it really is to get financial literacy into the high school curriculum.

When you tune in to a Freckle Finance video for the first time, you will quickly understand why the presenter has adopted this unusual handle. In this episode she explains what a GIC is and how it compares to other investments.

At the end of the year, Rob Carrick from the Globe & Mail took a look at which financial institutions have the best deal on high interest savings accounts. However, be forewarned – it’s still slim pickings out there!

And finally, if you want to figure out how much you are really worth, tune in to How to calculate your net worth with Bridget Eastgaard from Money after graduation.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.