Enough to Live On (2011)

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor.

Re: Enough to Live On (2011)

Postby kombat » 19 Jul 2011 08:38

kcowan wrote:Crying towel for senior

"I was at absolute wit’s end on how to pay the rent and the bills and food after that,” said Anson, who is a resident of Mount Pleasant.


For Pete's sake, the woman's only 65. Why doesn't she quit whining and get a job?

Yes, I saw the part about being a "cancer survivor" and receiving disability payments, but surely there's something she can do to earn a little extra cash to make ends meet?
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Re: Enough to Live On (2011)

Postby kombat » 19 Jul 2011 08:54

kcowan wrote:Certainly, OAS has not kept pace with rents in Vancouver


Usain Bolt couldn't keep pace with housing costs in Vancouver. I really don't think we should be considering using Vancouver housing prices as the benchmark for inflation calculations in government programs.

kcowan wrote:Maybe there is a case for regional adjustments so that the Maritimers get what they need while the west coasters do as well.


That sounds an awful lot like another federal transfer program to me. Forcing East Coasters to subsidize the carefree metropolitan lifestyle of stubborn retired West Coasters, willing to neither move, nor pay for their own indulgent choices.

The OAS formula should remain applied evenly, across all seniors, with no adjustment for regional variances in cost of living. If someone wishes to live in a more expensive area, they should cover the difference themselves. If they can't afford to, then they should have to move, regardless of whether or not it makes them sad.
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Re: Enough to Live On (2011)

Postby AltaRed » 19 Jul 2011 10:10

kombat wrote:For Pete's sake, the woman's only 65. Why doesn't she quit whining and get a job?

Yes, I saw the part about being a "cancer survivor" and receiving disability payments, but surely there's something she can do to earn a little extra cash to make ends meet?

There are many people who cannot work at even much younger ages, so I wouldn't be making any judgement on whether she could work at something or not. The real issue here is the article is terribly flawed and biased, with not so much as a comment on what more is available to her.
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Re: Enough to Live On (2011)

Postby kcowan » 19 Jul 2011 12:08

AltaRed wrote:
kombat wrote:For Pete's sake, the woman's only 65. Why doesn't she quit whining and get a job?

Yes, I saw the part about being a "cancer survivor" and receiving disability payments, but surely there's something she can do to earn a little extra cash to make ends meet?
There are many people who cannot work at even much younger ages, so I wouldn't be making any judgement on whether she could work at something or not. The real issue here is the article is terribly flawed and biased, with not so much as a comment on what more is available to her.
There is a restriction that prevents those receiving disability payments from receiving renters assistance in BC.

The outrage is that she will not face the prospect of moving to a cheaper place. (Like kombat says, make her move to Timbuktoo!) :roll:
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Re: Enough to Live On (2011)

Postby Brix » 19 Jul 2011 12:50

kcowan wrote:The outrage is that she will not face the prospect of moving to a cheaper place.

A very common outrage: the older we get, the more we tend to hunker down in our familiar fortress and fight change, as if any change at all could create a breach through which the Ultimate Alternative will sweep over us. :(

A local municipal program recruiting volunteers to drive the halt and lame to appointments, etc., cautions that many elderly 'clients' will be picked up from pretty swish-looking premises: "They're house rich but cash poor." Relatively speaking, we have a good number of such folk among the frequenters of FWF, I'll bet (myself, er, not entirely excluded).
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Re: Enough to Live On (2011)

Postby Nemo2 » 19 Jul 2011 13:59

Brix wrote:"They're house rich but cash poor." Relatively speaking, we have a good number of such folk among the frequenters of FWF, I'll bet (myself, er, not entirely excluded).


Which prompted me to calculate our position......our modest condo townhouse, (based on a couple thousand $s less than the purchase price, for rounding/convenience purposes), comprises 10.85% of our (today's) worth..........which suits us fine.
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Re: Enough to Live On (2011)

Postby Rickson9 » 19 Jul 2011 14:03

At what percentage would an individual be considered house rich/cash poor?

I know this is kind of a depends-on-the-person-answering question, but opinions?
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Re: Enough to Live On (2011)

Postby kcowan » 19 Jul 2011 14:14

Rickson9 wrote:At what percentage would an individual be considered house rich/cash poor??
I think 25% of monthly income dedicated to home mortgage/costs is a good guideline (even though banks have abandoned it).

For properties owned outright, it becomes an asset allocation question. How much of your assets should be dedicated to one class. I like the 25% guideline for that too but it is much more judgemental. For us, we are around 8%.
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Re: Enough to Live On (2011)

Postby kombat » 19 Jul 2011 14:22

kcowan wrote:For properties owned outright, it becomes an asset allocation question. How much of your assets should be dedicated to one class. I like the 25% guideline for that too but it is much more judgemental. For us, we are around 8%.


Hmm. I just ran the numbers for myself, and our home currently comprises 151% of our net worth (possible only because of a mortgage). That is, the value of our home is 151% of the total value of all of our assets (including the home) minus debts (the mortgage).

We're working on it.
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Re: Enough to Live On (2011)

Postby kcowan » 19 Jul 2011 14:35

In 1991, home real estate was about 40% our our assets. We have been working on it!
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Re: Enough to Live On (2011)

Postby Brix » 19 Jul 2011 15:17

Confessing to gross imbalance is a tough job, but somebody's gotta do it: we're about 60% house at the moment.

The house is (1) the ancestral manor, to support which we'd try to sell tours with tea and salmon sandwiches if we had to, and (2) irresistibly lush by our standards. Of course it's reasonable to expect that the local real estate market will act as a mighty force of, um, moderation. :)
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Re: Enough to Live On (2011)

Postby flywaysuzy » 20 Jul 2011 10:13

$850/month for rent isn't that bad, my son pays $800 in Kamloops. There could be some sort of seniors society or group that could hook up roommates, maybe the rent is a bit cheaper for a 2 bedroom apartment. The shared utilities would be a savings. At least they could stay in their same neighborhood...
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Re: Enough to Live On (2011)

Postby big easy » 29 Jul 2011 20:09

Latest Financial facelift:

http://www.theglobeandmail.com/globe-investor/personal-finance/financial-facelift/reaching-their-retirement-target/article2114619/

80% in GICs, assumes 5% compound annual return over next 5 years. I doubt it.
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Re: Enough to Live On (2011)

Postby AltaRed » 29 Jul 2011 20:15

I think that is a stretch too. Maybe 4-4.5 tops. 3.5 percent on GICs and 6 percent on equities. The weighted average is then 4 percent.
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Re: Enough to Live On (2011)

Postby BRIAN5000 » 29 Jul 2011 20:58

When they retire and start to draw on this money, it will generate pre-tax cash flow of about $29,000 a year, assuming 3 per cent GIC interest and 2 per cent dividend income.



If they could bump their GIC's to 4% and their dividend income to 4% on a 20/80 portfolio that would give them an extra $1000 a month case flow! Maybe no need for part time jobs unless they wanted to.
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Re: Enough to Live On (2011)

Postby uhoh » 31 Jul 2011 13:16

BRIAN5000 wrote:
When they retire and start to draw on this money, it will generate pre-tax cash flow of about $29,000 a year, assuming 3 per cent GIC interest and 2 per cent dividend income.



If they could bump their GIC's to 4% and their dividend income to 4% on a 20/80 portfolio that would give them an extra $1000 a month case flow! Maybe no need for part time jobs unless they wanted to.


that's a good point !

but tough to find GICs at 4% these days..
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Re: Enough to Live On (2011)

Postby Jo Anne » 31 Jul 2011 21:13

uhoh wrote:
BRIAN5000 wrote:
When they retire and start to draw on this money, it will generate pre-tax cash flow of about $29,000 a year, assuming 3 per cent GIC interest and 2 per cent dividend income.


If they could bump their GIC's to 4% and their dividend income to 4% on a 20/80 portfolio that would give them an extra $1000 a month case flow! Maybe no need for part time jobs unless they wanted to.


that's a good point !

but tough to find GICs at 4% these days..


I haven't checked the yield recently, but on my investments I've been getting approx. 4.8% on XCB, and 3.9% on XBB. Also, 5.7% on DPS.UN, if you wanted to get into some preferreds.
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Re: Enough to Live On (2011)

Postby Shakespeare » 31 Jul 2011 21:29

Jo Anne wrote:I haven't checked the yield recently, but on my investments I've been getting approx. 4.8% on XCB, and 3.9% on XBB. Also, 5.7% on DPS.UN, if you wanted to get into some preferreds.
The distribution yield may be 4.8% on XCB - but some of that is ROC; the YTM is 3.33% with an MER of 0.4%, giving just 2.9%.
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Re: Enough to Live On (2011)

Postby Bylo Selhi » 31 Jul 2011 22:53

uhoh wrote:tough to find GICs at 4% these days..

Yabbut if you set up a 5-year ladder 5 years ago your average yield would currently be around 3.5% to 4%.
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Re: Enough to Live On (2011)

Postby Jo Anne » 01 Aug 2011 12:01

Shakespeare wrote:
Jo Anne wrote:I haven't checked the yield recently, but on my investments I've been getting approx. 4.8% on XCB, and 3.9% on XBB. Also, 5.7% on DPS.UN, if you wanted to get into some preferreds.
The distribution yield may be 4.8% on XCB - but some of that is ROC; the YTM is 3.33% with an MER of 0.4%, giving just 2.9%.


That may well be so, but I paid $19.40 for it, it's currently trading at $20.80, and it's currently paying me a $0.90/year dividend (that's 4.33 as of today). I don't care how much of that is ROC as long as the market price doesn't go down because of it.

The same ROC argument is often given for REITs, but any REIT I or any member of my family own has appreciated quite a bit in value plus maintained or increased their dividend.
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Re: Enough to Live On (2011)

Postby like_to_retire » 01 Aug 2011 12:57

That may well be so, but I paid $19.40 for it, it's currently trading at $20.80, and it's currently paying me a $0.90/year dividend (that's 4.33 as of today). I don't care how much of that is ROC as long as the market price doesn't go down because of it.

But the price will go down. XCB's yield to maturity is 3.33%. Its coupon rate is 5.19%. That means it holds a lot of premium bonds that it paid more than PAR for to enjoy the higher coupon. When they mature they only return PAR, so there's less money to re-invest.

The yield to maturity is the only measure you should use.

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Re: Enough to Live On (2011)

Postby uhoh » 13 Aug 2011 08:13

gag

this week's financial facelift

“Unfortunately, at his age 55 their total assets given the RRSP contributions and a 5-per-cent return on investment only total $690,000,” Mr. Baldwin notes. Even with Judith working until she is 55, by which time her income will have risen to nearly $100,000 a year, their assets when Judith retires would only be $790,000. They would run out of savings when John turns 72.
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Re: Enough to Live On (2011)

Postby Jack's Girl » 13 Aug 2011 10:27

uhoh wrote:gag


No kidding.
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Re: Enough to Live On (2011)

Postby zinfit » 13 Aug 2011 12:28

I had 25k of corporate bonds mature this past week. I have been using a 8 year laddered corp/government bond strategy. I believe the Japanese problem will duplicate itself. So I reinvested this cash into the best GIC that RBC AD offered. It's 2.85%. Government five year bonds are yielding around 2%, to get 4% corporates you have to buy 8 year stuff with double bbb ratings. If you buying corporate bonds that pay 3 or 4 seems to me you better buying defensive big blue chip common shares that can be paying anywhere from 3.5 to 6. We live on$6500 after tax per month. We net about $4000 per month from pension income and take out about 30k per year from our investments. We currently have 610k in investments. 400k is RRSPs and we don't expect to start on these until we reach 71. I have 15% of my RRSPs in USA blue chips with high dividends. My TFSA accounts and taxable accounts are a mix of preferred, reits and common shares. The common shares all pay solid dividends. We started our retirement in the fall of 2008 and our strategy seems to be working.
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Re: Enough to Live On (2011)

Postby bootsie » 24 Aug 2011 13:14

http://www.financialpost.com/personal-f ... story.html

Two teachers in Alberta we’ll call Thomas and Georgia are in their mid-50s and facing a disaster in their retirement plans caused by poor real estate investments that could literally eat up their retirement savings. If not fixed, the properties will leave them rich in real estate and poor in cash.


The problems begin with previous successes in real estate speculation. Figuring that property always goes up, they bought three rental condos for a total of $1.3-million at the peak of the Alberta property market and put $120,000 down on a property in Costa Rica.

Monthly after-tax income $9,490


Assets
House $ 850,000
3 condos curr. price $874,917
...
]


Yikes!! :shock: I was surprised to see that their LOC (mortgage) was only at $659,700 given that they are making interest only payments but boy...are they ever deep in RE. Thank God for those pensions...
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