Derek Foster

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
longinvest
Gold Ring
Gold Ring
Posts: 1391
Joined: 10 Sep 2012 17:26
Location: QC

Re: Derek Foster

Post by longinvest » 08 Oct 2017 16:16

NormR wrote:
08 Oct 2017 15:38
JaydoubleU wrote:
08 Oct 2017 15:04
I am silly, arrogant and narcissistic for thinking my small contribution matters?! Hmm. It is the small contributions of millions of us who pay Derek Foster's child benefits that I resent, but I am happy to pay into a pension plan that supports people who themselves contributed all their lives or to support those who are unable to work. I have no issue with pensioners or with people who retired early to follow other pursuits. I take issue with a young able person who lives off the contributions of others and is so arrogant as to boast about it in his books.
Don't disagree with the sentiment.

But fairness can be in the eye of the beholder ...
Millions of Canadians use equivalent passive-investment vehicles to duck billions in taxes. They’re called pension plans
I don't see the unfairness. Business owners can pay themselves a salary and, in the process, create RRSP contribution room. Alternatively, they can create an Individual Pension Plan (IPP).

I think that the current federal government wishes to put an end to the unfairness of corporations created solely to avoid paying taxes, with no benefit to society (no jobs created in the process). The QC government attacked this issue, recently, by increasing taxes on corporations which do not employ workers for at least 5,500 hours:

https://t2inc.ca/en/blog/quebec-coporate-tax-changes
Taxation changes: wage costs

The real change impacting corporate taxes in Quebec is the change regarding the criteria of 3 minimum full-time employees, which is replaced by some criteria regarding number of hours worked per year.

To be eligible for SBDs*, employees must have completed at least 5,500 hours of work during the tax year. A maximum of 40 hours per week per worker will be imposed.

Companies in the primary and manufacturing sectors will benefit from the highest rate of SBDs, which will be obtained either due to the ‘minimum number of hours worked per year’ qualification or for the qualification based on sector of activity: the primary sector or the manufacturing sector.

For example, if your company does not employ workers for at least 5,500 hours in 2017, the 8% tax rate will not apply. If you own an incorporated company and work 80 hours a week, you can only include 40 hours into the calculation…

* Small Business Deductions.
(I added the note in blue).
Bogleheads investment philosophy | Simple index portfolios | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Derek Foster

Post by scomac » 08 Oct 2017 16:55

Derek Foster is like a powder keg. Whenever he returns to the news it's never long before the animus appears from those quarters that have issues with all manner of perceived injustices of a financial nature particularly when it comes to gov't sanctioned benefits and taxation policy that makes them possible. The comments from the linked FP op-ed are quite telling of the growing divide within this country. :(
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

Taggart
Gold Ring
Gold Ring
Posts: 6198
Joined: 05 Dec 2005 07:34

Re: Derek Foster

Post by Taggart » 08 Oct 2017 18:12

Derek did say on the last page of his book "Stop Working Here's How You Can", Although my case is exceptional, this strategy is exactly what I did to retire by 34. So he wasn't quite fibbing, he just inadvertently forgot or neglected to mention a few things in his first book. He certainly took risks I could never do, but with some luck they seemed to work out for him. I never play around with margin or debt of any kind when investing in stocks, and I've never been interested in market timing. I leave all that for others. Personally I never liked trusts, much preferring the common shares, so my dividend income didn't get whacked in the financial crisis like his did. Still, I have and still do make mistakes in my own portfolios over the last three and a half decades, but luckily for me I don't have to air out my failings in blogs or personal interviews.

User avatar
Spidey
Gold Ring
Gold Ring
Posts: 2998
Joined: 11 Jan 2009 19:55
Location: Ottawa

Re: Derek Foster

Post by Spidey » 08 Oct 2017 22:39

I kind of like stories like Foster's as too many of us fit into the same box and it demonstrates a lifestyle outside of the conventional. That being said, I also tend to agree with those who say that his lifestyle is not exactly the a model that most Canadians should follow and may even border on abusing the system.
If life seems jolly rotten, then there's something you've forgotten -- and that's to laugh and smile and dance and sing. - Eric Idle

User avatar
Shakespeare
Diamond Ring
Diamond Ring
Posts: 20718
Joined: 15 Feb 2005 23:25
Location: Lethbridge, AB
Contact:

Re: Derek Foster

Post by Shakespeare » 08 Oct 2017 22:59

There is a difference between accepting what the system gives you and deliberately pushing it. I think it is the latter that people here object to; I don't see many posters saying they will send OAS cheques back even if they don't need the money. :twisted:
“A wise man should be prepared to abandon his baggage at any time.” -- R.A. Heinlein, The Door Into Summer.

User avatar
NormR
Gold Ring
Gold Ring
Posts: 4002
Joined: 18 Feb 2005 11:19
Contact:

Re: Derek Foster

Post by NormR » 08 Oct 2017 23:36

Here's an argument that I'm not entirely unsympathetic to. The government sets up a system of taxes and benefit to guide people. Bad things get taxed - smoking, drinking, etc - while good things get subsidies - children, artists, etc. It hardly seems fair to complain when people take note and alter their behaviour accordingly.

I think David Mitchell adds a note of levity to the issue with his rant


2 yen
Gold Ring
Gold Ring
Posts: 2616
Joined: 09 Apr 2005 09:15

Re: Derek Foster

Post by 2 yen » 09 Oct 2017 06:59

Income sprinkling?

2 yen

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Derek Foster

Post by scomac » 09 Oct 2017 07:33

NormR wrote:
08 Oct 2017 23:36
Here's an argument that I'm not entirely unsympathetic to. The government sets up a system of taxes and benefit to guide people. Bad things get taxed - smoking, drinking, etc - while good things get subsidies - children, artists, etc. It hardly seems fair to complain when people take note and alter their behaviour accordingly.

I think David Mitchell adds a note of levity to the issue with his rant

:rofl: :rofl:
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Derek Foster

Post by Jungle » 09 Oct 2017 20:32

JaydoubleU wrote:
08 Oct 2017 15:04
As to not "contributing" to society any longer. That is both silly and a fallacy. Firstly, I am not arrogant or narcissistic enough to believe that my "contributions" matter significantly on an economic or social scale nor are they irreplaceable. Secondly, retirees do not exist in a vacuum. They consume goods and services, pay taxes, etc.. So, they are still contributing economically. Some also continue to contribute socially (volunteering, etc.
I am silly, arrogant and narcissistic for thinking my small contribution matters?! Hmm. It is the small contributions of millions of us who pay Derek Foster's child benefits that I resent, but I am happy to pay into a pension plan that supports people who themselves contributed all their lives or to support those who are unable to work. I have no issue with pensioners or with people who retired early to follow other pursuits. I take issue with a young able person who lives off the contributions of others and is so arrogant as to boast about it in his books.
He never boasted about CTB in his books, he just showed how you can retire off dividends. This forum makes this guy sound a bum.. he did work a job, attend university, and started a self-employed business of selling books and advice on website. He's doing nothing illegal. Seems like these days we wish people would take such risks to created their own jobs and independence. I applaud the spirit of that.

Nothing wrong with owning stock (or owning a passive business) and providing/trading capital for such? At least this is the right idea to have liquid assets that grow, unlike not having any savings, high debt or be like rest of Canadians who have 80% of their wealth trapped in Real Estate.

Your tax contributions do matter, because the domestic population (since 1950) and productivity of the economy is declining. It's too expensive and hard to have children now. That's why they import 300K immigrants/ year.

If we have no incentive to increase population, who's going to pay for your social services and health care when population declines? They need tax revenue. Not all immigrants come here rich-they need incentive too. We are all subsidizing future population. (most modern countries do)

If you think he (or people) are getting free ride on CTB, you are greatly underestimating how much is costs to raise children (today). And also the time and energy and how hard it is. The consumption from increase population (which IS a positive to economy) and on-going costs of raising a family is not cheap. After paying for shelter, taxes, food, clothing, medical, etc he the CTB may barely net anything "free". Most certainly he can't work now because he's got 7 children! In most cases I believe the CTB helps cover some costs. And it does end at 18 and reduce after 6 years age.

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Derek Foster

Post by Jungle » 09 Oct 2017 20:38

longinvest wrote:
08 Oct 2017 11:00
Koogie wrote:
08 Oct 2017 10:14
A lot of the members of this board retired before the traditional age of 65. Should they have kept working for "pride" and because work is the only thing that can "define" their lives ?
I have expressed nothing against that. What I said is that retiring "extremely early" to end up under the line of poverty all life long is nothing to aspire to, and it's quite frankly depressing.

Let me put some numbers behind my claims.

I'll build a realistic scenario using the spreadsheet presented in The After-Tax Spending Plan. As it is currently limited to QC calculations, I'll pick an average young person living in Montreal, for which Statistics canada provides the average employment income - Montreal region.

All calculations will be in 2017 dollars.

So, this person is lucky enough to leave his parent's house at age 25 with no debt whatsoever (net worth $0) and an annual salary $39,000 from age 25 to age 35.

Based on the spreadsheet, this person can't even save enough money to fill the gap in QPP and OAS payments from age 35 to age 70. So, let's pick, instead, the earliest age at which he'll accumulate enough money to fill the gap in CPP and OAS from retirement to age 70. Through trial and error, we discover that it's age 42. But, this would require our young worker to have a 47% savings rate, letting him try to survive on $1,060 per month:

spendingplan-25-42.png

It's equivalent to live on a gross annual income of less than $15,000. Can we agree that this is nothing to aspire to?

Now, is it possible to retire super early with dignity, let say at age 35 starting from $0 (e.g. without a windfall)? Yes, but here's the type of scenario this requires:

spendingplan-20-35.png

Our young worker has to find employment with a $130,000 salary from age 20 to age 35. He'll have to save and invest 48% of his gross salary. At age 35, he can retire on an annual gross income of $40,000.

It's a nice objective, but it's an unlikely scenario for most people of age 20 living in Montreal.

Extreme early retirement is a pipe dream. The only way to make it work for young people with an average salary is to live way below the poverty line during work years and probably live on welfare during their so-called retirement.

As it happens, Derek Foster seems to be quite dependent on welfare (Canada child benefit)... :?
Well no, if a couple lives frugally and efficient its still possible. You are talking about single person which seems like unlikely scenario to run off. Also depends on how much you need/want to spend.

And the costs of kids are free right so the CTB is pure gravy/ welfare ?

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Derek Foster

Post by Jungle » 09 Oct 2017 20:42

slim wrote:
07 Oct 2017 12:29
From the government website:Basic benefit for July 2016 to June 2018
"We calculate the Canada child benefit (CCB) as follows:

$6,400 per year ($533.33 per month) for each eligible child under the age of six
$5,400 per year ($450.00 per month) for each eligible child aged 6 to 17"

These amounts are tax free. They begin to reduce after $30,000 per year in family net income.
So if the Foster dividends amount to $30,000 split equally between the spouses. There is no taxation at all.

Assuming an annual tax free CCB estimate for them of $5000 X 7 = 35,000
they would have $65,000 tax free.

A couple with one income earner would have to earn $90,000 to have 65,000 to spend.
But the Foster income will decline after the children pass age 17, and the costs to feed clothe and educate are going to be very high.
Canadian Dividend gross up greatly reduces CTB by. (gross up 42%?) So huge reduction there, especially if his portfolio is 7 figures.

longinvest
Gold Ring
Gold Ring
Posts: 1391
Joined: 10 Sep 2012 17:26
Location: QC

Re: Derek Foster

Post by longinvest » 09 Oct 2017 21:38

Jungle wrote:
09 Oct 2017 20:38
Well no, if a couple lives frugally and efficient its still possible. You are talking about single person which seems like unlikely scenario to run off. Also depends on how much you need/want to spend.
Effectively, it's possible for a couple with two salaries to achieve financial independence faster than a single person. But, it can be quite risky to have one's well-being dependent on never divorcing and having both spouses die on the same day in the future. :?
Bogleheads investment philosophy | Simple index portfolios | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VAB/ZRR

Jungle
Bronze Ring
Bronze Ring
Posts: 84
Joined: 17 Aug 2010 02:51

Re: Derek Foster

Post by Jungle » 16 Oct 2017 15:02

POLOZ says some positive things about CTB:

"Growth has been driven in part by the fiscal policy of Prime Minister Justin Trudeau’s government, which is running budget deficits to finance, in part, expanded child benefit payments aimed at low-income families.

The Canada Child Benefit has had a “pretty significant” impact on the economy, Poloz said, adding it could be one of the reasons the country has seen rising labour-force participation. “What it did is put a floor under some folks,” Poloz said, adding it may have allowed formerly stay-at-home parents to afford child care or a second car and therefore more easily re-enter the workforce. "


https://www.thestar.com/business/econom ... -says.html

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Derek Foster

Post by scomac » 16 Oct 2017 16:57

Jungle wrote:
16 Oct 2017 15:02
POLOZ says some positive things about CTB:

"Growth has been driven in part by the fiscal policy of Prime Minister Justin Trudeau’s government, which is running budget deficits to finance, in part, expanded child benefit payments aimed at low-income families.

The Canada Child Benefit has had a “pretty significant” impact on the economy, Poloz said, adding it could be one of the reasons the country has seen rising labour-force participation. “What it did is put a floor under some folks,” Poloz said, adding it may have allowed formerly stay-at-home parents to afford child care or a second car and therefore more easily re-enter the workforce. "


https://www.thestar.com/business/econom ... -says.html
Am I the only person that thinks this is the most daft statement I've read in some time? We send people with children a benefit payment so that they might be able to afford to go to work? It doesn't even begin to make sense on so many levels. Increased labour participation is likely in the low end of the pay scale. It will just be like shuffling deck chairs for the families involved is this is actually going on as Poloz describes. It's cause for concern that this sort of thinking is coming from the man charged with directing interest rate policy! It seems to me that if you don't have a good answer then no answer at all is preferrable to this sort of speculation.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

zeno
Silver Ring
Silver Ring
Posts: 154
Joined: 17 Jun 2008 23:47

Re: Derek Foster

Post by zeno » 16 Oct 2017 19:34

scomac wrote:
16 Oct 2017 16:57
Jungle wrote:
16 Oct 2017 15:02
POLOZ says some positive things about CTB:

"Growth has been driven in part by the fiscal policy of Prime Minister Justin Trudeau’s government, which is running budget deficits to finance, in part, expanded child benefit payments aimed at low-income families.

The Canada Child Benefit has had a “pretty significant” impact on the economy, Poloz said, adding it could be one of the reasons the country has seen rising labour-force participation. “What it did is put a floor under some folks,” Poloz said, adding it may have allowed formerly stay-at-home parents to afford child care or a second car and therefore more easily re-enter the workforce. "


https://www.thestar.com/business/econom ... -says.html
Am I the only person that thinks this is the most daft statement I've read in some time? We send people with children a benefit payment so that they might be able to afford to go to work? It doesn't even begin to make sense on so many levels. Increased labour participation is likely in the low end of the pay scale. It will just be like shuffling deck chairs for the families involved is this is actually going on as Poloz describes. It's cause for concern that this sort of thinking is coming from the man charged with directing interest rate policy! It seems to me that if you don't have a good answer then no answer at all is preferrable to this sort of speculation.
Poloz didn't say that we send people with children a benefit so that they might be able to work. He said nothing about intention. He said that it "could be" a cause of increased labour participation. It's an interesting speculation and the reasoning doesn't seem especially "daft". I've read many more daft statements today.
Do you not like the Child Tax Benefit?

User avatar
scomac
Gold Ring
Gold Ring
Posts: 5918
Joined: 19 Feb 2005 09:47
Location: The Greenbelt

Re: Derek Foster

Post by scomac » 16 Oct 2017 23:21

zeno wrote:
16 Oct 2017 19:34
scomac wrote:
16 Oct 2017 16:57
Jungle wrote:
16 Oct 2017 15:02
POLOZ says some positive things about CTB:

"Growth has been driven in part by the fiscal policy of Prime Minister Justin Trudeau’s government, which is running budget deficits to finance, in part, expanded child benefit payments aimed at low-income families.

The Canada Child Benefit has had a “pretty significant” impact on the economy, Poloz said, adding it could be one of the reasons the country has seen rising labour-force participation. “What it did is put a floor under some folks,” Poloz said, adding it may have allowed formerly stay-at-home parents to afford child care or a second car and therefore more easily re-enter the workforce. "


https://www.thestar.com/business/econom ... -says.html
Am I the only person that thinks this is the most daft statement I've read in some time? We send people with children a benefit payment so that they might be able to afford to go to work? It doesn't even begin to make sense on so many levels. Increased labour participation is likely in the low end of the pay scale. It will just be like shuffling deck chairs for the families involved is this is actually going on as Poloz describes. It's cause for concern that this sort of thinking is coming from the man charged with directing interest rate policy! It seems to me that if you don't have a good answer then no answer at all is preferrable to this sort of speculation.
Poloz didn't say that we send people with children a benefit so that they might be able to work. He said nothing about intention. He said that it "could be" a cause of increased labour participation. It's an interesting speculation and the reasoning doesn't seem especially "daft". I've read many more daft statements today.
Do you not like the Child Tax Benefit?
I have no particular issue with the child tax benefit. I did not take his statement to be a statement of intent, but rather a speculation of how it was being used.

I for one have a difficult time seeing many folks taking the gov't benefit and deciding, gee, now I can afford to send my kids to daycare so that I can take on a part-time minimum wage job in the service sector and end up with even less money in my pocket. we have had many discussions on here before about how tax inefficient many gov't benefits are for low income earners as the marginal tax rate can be extreme once you factor in means testing that can result in benefit clawback.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830

zeno
Silver Ring
Silver Ring
Posts: 154
Joined: 17 Jun 2008 23:47

Re: Derek Foster

Post by zeno » 17 Oct 2017 19:56

scomac wrote:
16 Oct 2017 16:57
I for one have a difficult time seeing many folks taking the gov't benefit and deciding, gee, now I can afford to send my kids to daycare so that I can take on a part-time minimum wage job in the service sector and end up with even less money in my pocket. we have had many discussions on here before about how tax inefficient many gov't benefits are for low income earners as the marginal tax rate can be extreme once you factor in means testing that can result in benefit clawback.
Fair enough. I had the same objections to the tax credits for children's sports fees and for public transportation. I doubt they were significant enough to convince anyone to buy a transit pass or to sign their kid up for soccer. It just threw some loose change at those who already did so.

As for whether CCTB affects workforce participation, I think that would make for an interesting study. I have actually seen it go both ways... and here you will have to trust that I'm not inventing people for the sake of saying something interesting on an internet forum. One acquaintance takes the CCTB and stays home with her kids, writing a smug blog about how she sustains her family solely on bartered services and her backyard garden. On the other hand, a family member was able to give up her own home based daycare and get a "real" job, because she was sick of only talking to kids all day. My conclusion: people will find justification to do what they want to do.

Post Reply