Wednesday, 18 October 2017

Living a Minimalist Life

Embracing a minimalist life has a lot of benefits. Since the beginning of the year, I have adopted this approach to living my life. The following are the positive things I have seen:

Wednesday, 27 September 2017

In Search of Bond Yields and Safe Haven

In my previous post, I discussed the role of Bonds in mitigating risk in your investment portfolio. In the era of low interest rates, purchasing a Canada 10-year government bond yielding 2.1% is not going to generate the necessary income to survive unless you have several million dollars to invest. Corporate bonds probably pays 1% or more than  government bonds. I then search for other countries government bonds to see what they yield.

Thursday, 21 September 2017

Interest Rates and the role of Bonds/Fixed Income in your portfolio

With global interest rates beginning to rise due to central bank unwinding their balance sheet and low interest rates policies, this is indeed positive news for retirees, prospective retirees or investors seeking a safe haven from the volatility in investing in equities. Mind you, I think we are still in the early stages of a rising interest rate environment. Based on historical evidence, equities will continue to do well in the initial stages of rising interest rates (due to indication of economic growth).

Sunday, 10 September 2017

How to identify the FI in you?

How do you know that you are not already a Financial Independence Retire Early)(FIRE) or aspire to be one?  If you answer "YES" to most of the following questions based on my observations and my personal traits, then I congratulate you for joining the bandwagon.

Tuesday, 5 September 2017

Retirement Planning beyond just Investment

As a practicing Certified Financial Planner (CFP®), I always advise my clients to look at retirement planning on beyond just the numbers. I can always input different assumptions, i.e. return on investments, allocation between equity and fixed income, longevity and inflation rate to arrive at the desired outcome. Since these are just assumptions used to project outcome for 25 years or more, there could be adverse deviations that could drastically impact the final outcome. A significant and prolonged market correction, and we are certainly due for one, can significantly lower the investment balances.

Friday, 1 September 2017

Investing in ETFs

The cost of investing in Exchange Traded Funds (ETF) is continuing to decrease has become FREE. National Bank of Canada recently announced that investors will no longer have to pay commissions on all Canadian or US ETFs.  Prior to this, Questrade offers no commissions on ETF purchases only, while  Scotiabank’s ITrade also offers no commissions on selected ETFs.   Sooner or later, all major brokerages will follow suit.

Monday, 28 August 2017

How to (almost) double your money in 10 years doing it the old fashion way -by earning it

Chart of S&P 500 

Remember the famous phrase ‘Do As I Say and Not As I Do.’ This is easier said than done, especially in the personal investment world.  I am always tempted to chase the next Facebook stock, or try to catch a falling knife like a J.C. Penney stock thinking that there is  value in bottom fishing. The only way to save myself in this case is that I always have some 'play money' allocated for such purpose, say no more than 2% of my portfolio. 98% of my portfolio is locked in ETFs or low cost mutual fund offered through the company. And as always the case, it tends to end up being a losing proposition. Cost of doing business, I guess. Overall, my net return is reduced by less than 1% a year.  I always advise my clients not to do what I am doing.  Well, some people like fast cars. I prefer the adrenaline of testing my knowledge and chase after stocks. If I found a winner, then I consider myself smart. If I lost money, I blame it on bad luck. 

Wednesday, 23 August 2017

No Frills Retirement using OAS

To continue with the discussion of OAS, here is a good example on how one can structure his or her retirement planning using just income from OAS. Please email me if you think this is useful or not as I would really appreciate your feedback. My email address is

Tuesday, 22 August 2017

Old Age Security (OAS) Facts and Figures

Unlike the Canada Pension Plan (CPP), which is funded by contributions from employees and employers, the Old Age Security system (OAS) derives its funding by revenue from government.

Friday, 18 August 2017

The Wealth Effect

I watched a documentary on TV Ontario last night called “The Super-Rich and Us.”  Shot mostly in London, England, Jacques Peretti investigate how the rich became richer, and the poor became poorer due to economic disadvantages.  Some of the stats were quite startling. In 1970, a banker in Britain earned as much as a teacher and a GP (General Practitioner or Doctor). The richest 1% of the population controlled 6% of the nation’s wealth; in 1980s, the percentage grew to 11%, and currently the richest 1% controlled more than 15% of great Britain’s wealth.

Wednesday, 9 August 2017

My Path to Financial Independence

Building a sustainable retirement income portfolio that can withstand market shocks and meet your future expenses requirement is the ultimate goal for everyone seeking financial independence (FI).

For those closer to the normal retirement age of 65, it may be an easier goal to reach compared to millennials seeking early FI.  Given the number of early retires that have been blogging their successes on the internet, one would be forgiven to think that the path is easy to reach.  I truly admire them, but for the vast majority of people, achieving early FI seems an elusive goal.

Saturday, 5 August 2017

Buying USD the professional way

With the recent surge in the Canadian currency against the US greenback, I consider this an opportunistic time to purchase US currency for your trip to the U.S. or for investment purposes i.e. buying U.S. listed stocks. The following charts illustrate the most cost effective way by using Horizon USD ETF. Many thanks to prior threads discussing this option, but I actually executed the trade below using my TD Waterhouse account, purchasing US$10,000 and saved over C$200 over buying the US currency from the bank.  Here goes!

Sunday, 30 July 2017

Do I have enough to retire?

For many people who spent a working lifetime accumulating wealth in order to retire to the sunset, the decumulating phase represents a major challenge. Is the $1 million or $2 million that I had saved enough to last me during retirement? What if the stock market collapses like it did back during the credit crisis in 2008 and my portfolio decline more than 30 percent?

Friday, 28 July 2017

When is your time up?

Unless you have been working for a long time for a company, you would probably not understand this.  In these days of constant corporate restructuring, when you start reading announcements about long serving employees departing, you often wonder when your turn would come.  Such is my predicament. Do I wait for the tap on the shoulder to indicate that my time is up or do I be brave enough and walk out the door myself instead?  I can’t help but recollect the times I worked together with people who have recently left the company (mostly not by choice).

Thursday, 27 July 2017

Canada Food Guide

The new and improved Canada's Food Guide is now available. Do check it out. I find it much easier to determine the variety and amount of food to consume on a daily basis.

Wednesday, 26 July 2017

Health and Retirement Years

The doctor finally uttered the word “Remission.” All I could felt was joy beyond comprehension. After being on medication for over a year and a half to treat my hyperthyroidism, I can finally stopped taking the tapazole medication to lower my overactive glands. However, I will still need to have T3 and TSH blood testing done to ensure that the recovery is a permanent one.

Tuesday, 25 July 2017

Do you need life insurance for estate planning?

Being an insurance professional, I always try to approach the topic carefully, especially with friends and relatives because they are afraid that I am trying to sell them insurance policy. I feel the same way too,  sometimes, that I am no different from an ordinary salesman or another annoying telemarketer.  The cold calls that I made to prospects that the insurance agency had purchased from a reliable source ultimately proved once and for all that people genuinely dislike dealing with life insurance phone calls.

Monday, 24 July 2017

Preparing for a Market Crash during Retirement Years

What is the best preparation for a stock market crash? Unless you have a crystal ball in front of you, I don’t believe anyone can predict when that will happen. I know for sure it will happen one day, just like the meteorologist that predicts rain will eventually get it right one day.

Monday, 17 July 2017

Options Trading

Stock Options in the forms of call and puts can be a great tool for risk mitigation. Call it a form of insurance. The auto or house premiums that you keep paying ensure that you are compensated in the event your car is involved in an accident or that your house catches fire.

Thursday, 13 July 2017

Funding Your Retirement

When planning for retirement, it is important to estimate where your sources of income are coming from.  You would also need to determine how much you expect to spend. Take a look ath list below, try to estimate how much you would get and need.
Sources of Income (assuming age 65 and above and maximum benefit as of July 1, 2017):
Canadian Pension Plan (CPP) per month:1,114
Old Age Security (OAS):                            584
   Total CPP and OAS                             1,700

Guaranteed Income Supplement (GIS) if applicable: 524.85 maximum
Defined Benefit (DB) Pension Plan if applicable
Dividend or interest income from investment portfolio
Part-time work if applicable

Monthly Expenses for 1 assuming frugal lifestyle:
Housing, transportation, food, clothing, and misc (basic lifestyle):            (1,700)
Add: another $800 for travel, dining and other lifestyle needs

If your sources of income exceeds your expenses, congratulations!

If your only sources of income consist of CPP and OAS (total $1,700), you may be able to still afford a minimalistic lifestyle (Expenses = $1,700).  I know I can live like a King! In addition, there are other social benefits that one can qualify at that income level, which would include GIS, hydro rebate, Ontario Trillium drugs and healthcare benefits and others.  

This just goes to show that you should not just blindly be led to believe that you need $1 million dollars in the bank to be able to afford to retire. But of course, we want to retire and travel the world, and live in luxury! This is when the extra planning and savings during your working years will pay off in the latter years. 

Saving an extra $100 per month for 40 years assuming a 5% annual return would provide $150,000. The same $150,000 when used to buy an annuity from a life insurance company would provide a monthly income of almost $700.

Alternatively, find a job with the government (local, provincial or federal), work for 30 years, and you can qualify for at least a  $4,000 a month pension for life! In order to receive $4,000 a month at retirement, one would have to save almost $800,000 lifetime and use the amount to buy an annuity to generate the same $4,000 income.  I know what I will do. Hope you do as well. Problem solved! And good luck getting the public servant job unless you know someone internally. 

Thursday, 6 July 2017

Another reason why you should opt for commuted value payment from Defined Benefit Pension plan

As I reiterated before, it is best to receive lump sum payment or commuted value (CV) from the defined benefit plan when you leave the company and invest in annuity. Note that there are some taxable events to consider. Sears Canada, which filed for bankruptcy protection, recently filed a motion with the courts to suspend certain monthly payments to its pension plan and post-retirement health and life insurance benefits, citing cash constraints. At stake is $3.7 million worth of cash payments to various DB plans, postretirement health and benefit plans.

Wednesday, 5 July 2017

Defined Contribution (DC) Pension Plan

For the unfortunate majority of workers who do not participate in company sponsored Defined Benefit (DB) pension plans, but instead contribute to DC plan instead, below are a couple of watch-outs. The typical DC plan includes a 50% matching contribution from the Employer up to 5% of salary (or 2.5% Employer + 5% Employee).  This is great because you get to double your money from get go.  However, unlike a traditional DB plan where future benefits are promised, you have to roll the dice with a DC Plan and select your own investments, ranging from targeted benefit investments to various equity and fixed income funds. And the biggest drawback is that future benefits are not certain despite the constant belief that the stock markets have always provided an average return of 10% or so. Tell that to the folks who suffered a 30% haircut in 2008 during the U.S. credit crisis when they were about to retire.

Thursday, 29 June 2017

Pension and Insurance Revisited

For those lucky enough eligible to receive benefits from a Defined Benefit pension plan,  a decision will sometimes have to be made to either receive monthly pension payments or commuted value/lump sum payments (CV).

Let me summarize for you the pros and cons as I see it.

Thursday, 22 June 2017

Minimum Wage in Ontario

While I appreciate the Ontario Liberal’s Party intention to increase the standard of living for lower income wage earners by increasing the minimum wage to $15 an hour effective January 1, 2019, I can’t help but wonder if the plan is going to succeed, never mind the hundreds of thousands of dollars wasted invested paying consultants to justify the idea in the first place.  

Don’t get me wrong. I am all for paying someone a decent wage, but this is the incorrect approach.

By increasing the minimum wage, you must also increase wages at all levels to keep pace. Otherwise, it creates a disincentive. Take for example, wages for a lifeguard. Depending on which city or private facility you work for, the current wage starts at $13 an hour. Do you know the amount of time and investment required to qualify as a lifeguard, and the requirement to maintaining your qualifications through continuing certifications?  I know that for a fact because both my daughters used to be lifeguards, but stopped as soon as they went to university and found better paying positions. This is also why there is a shortage of qualified lifeguards because of the disparity in pay to the minimum wage standards, which have risen considerably over the years, while the pay scale for lifeguards has stagnated.  

Who wants to spend all the money to be a lifeguard when you can make more money working at McDonald’s?  Guess what, you may not even get a minimum wage job at McDonald’s that easily. Just take a look at the number of self-ordering kiosks that have sprung up lately.  

In addition, small business owners and retailers suffer the most as they will not be able to pass on the increased cost of payroll to consumers easily. To make ends meet, they must reduce the number of hours or eliminate workers. The business owners are the true risk takers, and if Ontario wants to continue to encourage entrepreneurship, increasing minimum wage to such levels will be counter-intuitive.

The only way to increase one’s standard of living is not by waiting for handouts. One must upgrade one’s education, skills and be relevant in this changing world. The gap between the haves and have nots have widened.  But sadly, our government policies have not kept pace.  Life is tough, suck it up!  

Tuesday, 9 May 2017

Words of Wisdom from Warren Buffet

When I first began working in the financial reporting department of a publicly traded company in Minneapolis, U.S.A. many decades ago, my first assignment was to read the Plain English Handbook. It is a document published by the Securities Exchange Commission (SEC) on how to write annual reports and other financial information in plain (spoken) English.  

I still have many fond memories of reading it over and over again.  Warren Buffet, the second wealthiest person in the world, well-known investor and Oracle of Omaha is credited with helping SEC create this footprint for companies to write in simple and understandable English.

Things such as dangling modifiers, action verbs, run-on sentences are considered taboos by Buffet as he was amazed on how complicated, wordy, and utterly incomprehensible annual reports and disclosures were being written.  As a result, when I was first talked with writing the draft Management Discussion and  Analysis (MD&A) section of the annual report, I had to double and triple check my grammar. I have to always emphasize the use of personal pronoun such as “We” instead of using “The Company.”  Instead of constantly using commas to join three sentences into one, I had to try and create sentences with no commas, semi-colons, and etc where possible (lawyers, please take note!). 

Thirty years later, Warren Buffet, at the young age of 85, is still outsmarting everyone in the investment world.  What I admire his most however, is his act of generosity and his simple way of life. He had pledged to give more than 99% of his wealth to philanthropic foundations. He has donated billions of dollars to the Melinda and Bill Gates Foundation.
Below are some of his famous quotes that I like to share with you not only because it makes sense from a financial perspective, but it also teaches me to be a better person and to contribute to mankind.
·        Look for a job that you would take even if you did not need the money – His advice to the younger generation looking for advice on career.

·        Be fearful when everyone is greedy, and be greedy when everyone is fearful – Buffet’s investment philosophy

·        I will not bet against America - Spoken during the height of the U.S. credit market crisis in 2008.  

·        Rule number 1: never lose money, rule number 2: never forget rule number 1 – enough said!

·        It takes 20 years to build a reputation, and only 5 minutes to ruin it.  

·        Price is what you pay, and value is what you get – another investment philosophy

·        Only buy stocks that you would be perfectly happy to hold if the market shuts down for 10 years – Buy and hold strategy that almost always pays off. One exception may be IBM.

·        It is difficult to compete with companies using high leverage and low equity - spoken recently on why Berkshire Hathaway is holding on to so much cash when interest rates are at historic lows and valuations are sky high.

·        I buy expensive suits. They just look cheap on me –All his suits are made by a lady from China that he has known for many years.

·        Risk is part of God’s game, alike for men and nations – General Re, his main insurance company,  re-insures a lot of risky but carefully measured and calculated events.  

·        Diversification is only necessary if you don’t know what you are doing – The reason why the majority of portfolio managers never even beat the S&P 500 index.

·        If you get to my age in life and nobody thinks well of you, it does not matter how big your bank account is, your life is a disaster – Well said, money is not everything!

Friday, 7 April 2017

Happiness and Retirement – The End Goal

When planning for retirement, managing the amount of spending is key as income from retirement vehicles such as government and company  pension (for the lucky few that are members of defined benefit plans), withdrawals and annuities from RRSP/RRIFs will be somewhat fixed.

Here are the different phases one can expect to go through…….

Phase 1 (age early 20s) - We found our dream job, work our tails off, pay off student loans, pay rent, climb the corporate ladder and hope to save enough for the inevitable down payment in a runaway, crazy real estate market in Toronto .

Phase 2 (age late 20s) - We get married, form a family with children, purchase a home and enter the debt accumulation phase where it felt like you would never be able to make ends meet with mortgage payment and childcare costs (assuming two working spouses) taking a huge chunks of your after-tax take home pay.  It is estimated that it costs $250,000 to bring up a child.

Phase 2A (age mid to late 40s) – Kids grow up, enter university. Just when you think you have paid off most of the mortgage debt, you would now have to finance your kids’ education as well.  You better hope that you have wisely contributed to the RESPs and that the earnings have been growing steadily, net of fees.  

Although your career has continued to blossom, you may start felling tapped out and concern that the whizz kid that the company just hired may replace you soon.  Anxiety creeps in. You probably weigh 20 or more pounds then you should. Your health also starts to suffer.

Phase 3 (age early 50s) -  Finally, you pay off your mortgage and your kids complete their university studies… and you start thinking about retiring. But guess what, your kids can’t find a job in this ultra-competitive and specialized job market because they studied the wrong field of study. They moved back in with you (case of the boomerang kids)

Phase 3A (age early to mid-50s) – Congratulations! You survived all the previous layoffs and corporate restructuring, but unfortunately, you could not escape this one. You are faced with a dim prospect of securing similar employment with another company, and not having saved enough during all these years.  I hope not a lot of people fall into this situation, but I personally know people who are experiencing this right now, and how painful it feels!
But please do not despair. There are a lot of social safety nets available in Canada. 

Do talk to a social worker , ask for help, be humble. I doubt if anyone dies of hunger in Canada because he or she cannot afford to buy food or seek shelter.

I thought of finishing here because it gets too discouraging, but let me re-write the script with a slight twist and some self-promoting that have a happy ending.

Revised (do read the adds/changes in RED)

Phase 1 (age early 20s) - We found our dream job, work our tails off, pay off student loans, no loan to pay since you have been paying your school expenses with earnings from co-op jobs while at school, pay rent, stay at home to minimize rent expense, climb the corporate ladder and hope to save enough for the inevitable down payment in a runaway, crazy real estate market in Toronto.

Enjoy, but also start to plan ahead by investing wisely. Take advantage of TFSA, RRSP, company matching plans, work with a financial advisor , who is a CFP like myself, continue to further your education (at company’s expense), and finally spend wisely. And if you have not purchase any life insurance policy up to this point, do consider buying one as it is a lot cheaper to buy when you are young and healthy.

Phase 2 (age late 20s) - We get married, form a family with children, purchase a home and enter the debt accumulation phase where it felt like you would never be able to make ends meet with mortgage payment and childcare costs (assuming two working spouses) taking a huge chunks of your after-tax take home pay.  It is estimated that it costs $250,000 to bring up a child.

You and your significant other are able to put a large down payment (no CHMC insurance for down payment higher than 20%) on your starter home.  You also use your Home Buyer’s Plan (maximum $50,000 per couple). You get your parents and in-laws to help out with childcare.  Both of you continue to build equity on your home as well as your investments.  You continue to work with your investment advisor, who advises you to review your life insurance and other financial needs.  You and your spouse continue to be active in work as well as enjoying working out in the gym.

Phase 2A (age mid to late 40s) – Kids grow up, enter university. Just when you think you have paid off most of the mortgage debt, you would now have to finance your kids’ education as well.  You better hope that But since you have wisely contributed to the RESPs  since your children were born and that the earnings have been growing steadily, net of fees,  you need not worry.             Although your career has continued to blossom, you may start felling tapped out and concern that the whizz kid that the company just hired may replace you soon.  Anxiety creeps in. You probably weigh 20 or more pounds then you should. Your health also starts to suffer. Because you have taken care of yourself, both professionally through continuing education as well as keeping healthy, you shrug it off. Everyone feels threaten as this age. It is only natural, but you have to focus on the positive side of things. Ask for a lateral move to another department or position to rejuvenate your career. 

On the positive side, you and your spouse are well on your way to a stable retirement life, having manage your finances well. Your investments are growing at an average rate of 5% after inflation and fees, your home continues to grow in value at an average rate of 5% (none of the Toronto crazy real estate prices applies in this example). Your CFP financial advisor tells you that you can probably retire in a couple of year if you choose to and discuss some tax savings strategies.

Phase 3 (age early 50s) -  Finally, you pay off your mortgage and your kids complete their university studies… and you start thinking about retiring. But guess what, your kids can’t find a job in this ultra-competitive and specialized job market because they studied the wrong field of study. They moved back in with you (case of the boomerang kids). Your kids are off on their own starting Phase 1 of their life (note the revised version). You and your spouse decide to retire early, but continue to live in your existing home.  

Both of you travel extensively. Because you have invested well, you can count on a steady stream of passive income from your RRSP and TFSA accounts. To supplement the income, you decide to work part-time as well with none of the corporate stress.  When you turn 65, you start collecting your government and company pension as well as review your estate planning.  Here’s to a Happy Retirement Ending!

Sunday, 2 April 2017

Executive Compensation

How much is enough? Headline grabbers such as senior executives from Hydro One and Bombardier defending 50% pay increases and compensation in excess of 100 times the average earnings of Canadians continue to baffle me.  While the peons like you and me have to suffer the brunt of  corporate restructuring, massive layoffs, lack of job security, continuing cost cuts, the few executives in C-suites are sitting back and counting their mega-millions stop options and bonuses. While our government are quick to defend that world class corporations requires world class leaders, and hence world-class compensation, in reality it is not difficult at all to do the job.

First, how often do you see the executives in office? If they are not jet-setting the world in luxury settings or playing golf, they are of hardly any use at all.

Second, do you ever see a senior executive answering customer’s call at time of crisis? Or if there an issue at the production floor, do you ever see them rolling up their sleeves trying to fix the problem? The answer is that they hire people to do the job and only reap the rewards at the end.  It is also a no-lose situation for them. If they do a half-decent job, they are rewarded immensely. If they screw-up, which is more often than not, they get the golden handshake and walk away with millions of dollars, while leaving the company in a mess.

Third, one trick I often learned whenever there is a problem, the executives would always ask questions first and never answer any.  And whenever a question is asked, the executive would look around and ask what you think instead?

Fourth, in difficult times, they always engage consulting companies to do the dirty job and to identify areas of improvement? Why are companies spending millions of dollars engaging consultants to tell them what the problems are when in fact, they should already should already know the problem and how to resolve them.

Fifth, it is true that the number of ‘qualified’ people is in short supply because the very people (Board of Directors) that hire them are also senior executives themselves. It is a very close circle of people who look after themselves first. Look at the number of executives who are also member of Board of Directors at other companies. I sometimes wonder where in the world they have so much free time to sit on other board (with huge compensation, too!). Somewhere in the world, they must be more than 24-hours in a day!

To say that I have lost faith in the ability of senior executives to lead effectively is truly an understatement. A monkey can do a better job. Just as in stock picking, the number of active fund managers underperforming the market is an astounding 80% or more on a consistent basis.  

Wednesday, 15 March 2017

Pension Dilemma (or Opportunities Abound!)

For someone facing the choice of receiving a fixed monthly pension income from a company or in the form of an annuity from an insurance company, versus receiving a commuted value and having to invest the amount oneself does present a dilemma.

Let’s look at the details using some very realistic numbers assuming one is indifferent between monthly pension income or annuity.

Monthly Pension or Annuity (Option 1)
Commuted Value (Lump Sum) (Option 2)
Amount per month
$600 fixed, guaranteed for 5 years
$130,000. Invest conservatively in fixed income to yield 4% or $433 per month
Principal remaining at end of life
Monthly amount
About $167 more than option 2
Guaranteed by insurance company for 5 years, or in the case of private company pension, guaranteed by PBGC
Default risk if company goes bankrupt. Can opt to invest in Government of Canada bond, but yield 1% less . Also face reinvestment risk if rates are lower. However, rates are at historic lows and can only go up.
Ancillary benefits
Some companies may tie in health benefits with monthly pension
May forgo health benefits if opt for CV
Dependents/(or surviving spouse)
Monthly benefits may be reduced (assuming company pension and opting for Joint and Survivorship).

If opting for annuity, once guaranteed period ends, $0 for dependents or surviving spouse)
Dependents or surviving spouse can inherit the principal balance if included in will
Taxable income; annuity may have some tax advantage
Taxable income or capital gains at a lower rate
Life expectancy
Based on mortality tables, would be advantageous to receive monthly amounts if expected to live a long life (above 80 years of age)
Not applicable

So what is the conclusion? It all depends on the person’s situation. If I were a betting person, have a spouse or dependent, and can tolerate some risk, and assuming that we are in a historically low interest rate environment, I would choose Option 2.  I would choose to accept a lower income now, wait for rates to go higher (or at least above the $600 per month in Option 1), and then invest the whole amount and obtain more than $600 per month in later years. When I pass on (hopefully many years later), my surviving spouse or children can still inherit the principal amount of $130,000.

If one is in need of income and also cannot tolerate any risk, then choose option 1.  Mind you, in addition to this pension ,there are also other government benefits such as CPP (current maximum per month -= $1,114.17 at January 1, 2017) and also OAS (current maximum per month -= $578.53 at January 1, 2017)

There are other options that I can think of, but for now, I do think that this opportunity warrants further discussion with your financial advisor before making a decision. Because rates are at historically low, and we are starting to see the U.S. Federal Reserve Bank beginning to hike interest rates, CV or lump sum payouts may never be this high again and one can reinvest the CV or lump sum to one’s advantage.

Thursday, 2 March 2017

Stars Alignment

I can’t seem to recall when was the last time all the stars were aligned in the world of investments.  We currently have a roaring stock market reaching new highs almost every day (at least in the United States), higher interest rates , which is good for retirees or people contemplating retirement, and a irrationally exuberant real estate market (mostly in the Toronto area and part of United States).

When will this come to an end? Or is this the start of a wonderful era? I seem to recall back in November last year, the world was coming to an end once the results of the United States Presidential election were announced. If only I had a crystal ball then. Hindsight is always 20/20.
With that in mind, I would like to take a moment and put on a reality check hat and use my financial training to properly chart a long lasting and sustainable retirement plan for my clients as well as for myself.

See my assumptions below and if the situation applies to you , and if you need further assistance, please contact me at for further assistance . For full disclosure purposes, I am Certified Financial Planner professional (CFP) based in Toronto, Canada.

Assumptions (very conservative):
Age and Family: Somewhat Irrelevant, willingness to relocate is a plus!
Total Net Worth of $1 million and upwards consisting of home in Toronto or GTA (depending on your equity, approximately $750K and upwards), other financial holdings such as RRSP, TFSA ($250K and up).

List your home, expect multiple bids, and sell for at least 30% above your wildest expectations. Pocket $800K net after commissions and other expenses .

Relocate to another city, preferably  Ottawa and the long lasting winter comes to my mind.  It has been ranked the number 1 city to live n in Canada for the past couple of years.  Purchase the same type of home for $300K. Net  savings $500 to invest.

Start looking for a job, preferably with the federal government or at a municipal level. Ideally, start the process before you move.  You could potentially be earnings less (or more), or if you are retiring , does it really matter?

Oh, and make sure your better half and your kids are on board as well. I recall my daughter asking for a pony when we had to relocate for a job once.

Final analysis
The additional $500K can be invested in a combination of low cost ETF and laddered GIC and earn 5% a year almost guaranteed.   You will be surprised  at how few so-called experts financial managers fail to even attain this return. In addition, the same amount pocketed will l take one approximately a lifetime to save assuming one saves 10%-15% of his or her paycheck each month, continue working at your dreadful  job,  and pray to God that the market returns (before fees!) are in line with the mutual funds with huge fees that the  financial advisors at the bank sold you.   If you are onboard with my analysis so far, you can essentially retire early (or at least continue to have one person working while the other one stays home (notice that I did not refer to either “He” or “her” in this equal opportunity world.

Contact me at if you are interested!