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 BRIAN5000 » 01 May 2011 10:02

Just because your benefit is outsized it hasn't changed the fact one bit that you have contributed with your own dollars to get this benefit. A gift would imply that you had to expend nothing to get the benefit. [Added]Also, the figure you quote is likely the commuted value of your pension as it currently stands. The annual benefit that you quote will be your regular pension entitlement provided you don't opt to retire prior to reaching full eligibility. Depending on how old you are, that could be several years or even decades into the future with the investment in the plan compounding for that time frame. The numbers won't be as fanciful as they appear because the plan is required to be acturarialy sound.



No what you say is all nonsense and speculation which is all worng.
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Re: Enough to Live On (2011)

Postby scomac » 01 May 2011 10:13

BRIAN5000 wrote:No what you say is all nonsense and speculation which is all worng.


Enlighten me.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Re: Enough to Live On (2011)

Postby BRIAN5000 » 01 May 2011 10:35

Just because your benefit is outsized it hasn't changed the fact one bit that you have contributed with your own dollars to get this benefit.


I think my pension is rather small, I had no option, your right I'm not sure how many other plans/employers are the same. I was comparing her situation to mine.

A gift would imply that you had to expend nothing to get the benefit.


Yeah Yeah almost nothing then almost a gift, gift like IMHO

Also, the figure you quote is likely the commuted value of your pension as it currently stands.


No the figure I quoted is "My required contributions from 1975 till Dec 2010 $97639.42"

So dribbling in about $100,000 over 35-36 years to get $34,000 a year sounds good to me.

The annual benefit that you quote will be your regular pension entitlement provided you don't opt to retire prior to reaching full eligibility.


Nope that's what I get if I retire now, IMHO peanuts compared to gov't sector cola'd pensions which I have heard about.

The numbers won't be as fanciful as they appear because the plan is required to be acturarialy sound


WHAT

The numbers are not fanciful now never mine in a few decades

Defined by the Pension Benefits Standards Act funding is at 100% ( at the moment the future may get exciting)
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Re: Enough to Live On (2011)

Postby scomac » 01 May 2011 10:58

You're right, I was speculating about your pension because I don't have the details in front of me. Thanks for the clarification.

In terms of what's a gift and what isn't, I agree that it is a matter of interpretation.

I wasn't suggesting that you numbers were fanciful. I was assuming that the plan was actuarialy sound. The way I interpretted what you wrote was that the benefit was out-of-proportion to the contributions, hence my appears fanciful comment.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
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Re: Enough to Live On (2011)

Postby vince2 » 04 May 2011 03:05

Descartes wrote:In keeping with the recent tone of this thread:

Assets
...Total: $1.27 million.

Liabilities
None.


“I realize I have been pretty lucky,” she writes.


However, the Globe counters with:
Luck seems to have little to do with it.


http://www.theglobeandmail.com/globe-in ... le2004413/

Yes, many of us have had the good luck to be born into a fertile environment for success, but you must admit that conscious decisions had to have been made to grow something good in that environment; for example, choosing a career that virtually guarantees a secure DB or choosing to live beneath one's means.


I am underwhelmed by the great emphasis placed upon luck as a major contributory factor to success in life. I favour Seneca's definition : "Luck is when preparation meets opportunity" and I would add that the ability to acknowledge both " good luck" and "bad luck" with equanimity and deal evenhandedly with both, and consistently make good decisions, is what brings success in the long run.
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Re: Enough to Live On (2011)

Postby Nemo2 » 05 May 2011 07:43

Further to the conversation re the 'luck of being born in Canada', here's a sad tale of a young guy who died of congenital heart problems........but what caught my attention was his ambition and desire to overcome:

Kassap came to Ottawa in 2001, a teenaged runner in the Francophone Games. He stayed behind in Canada as a refugee after enduring beatings from thugs at home because of his mother’s political activism.

Kassap, skinny at 5-foot-6 and 125 pounds, lived first in a Toronto shelter for homeless youth. He struggled to make ends meet, picking up a job peeling potatoes for a fish-and-chips shop.
He got his high school equivalency, landed immigrant status, then Canadian citizenship.


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Re: Enough to Live On (2011)

Postby skepticus » 15 May 2011 11:13

In the Globe and Mail's latest Financial Facelift, Nick and Nora have $2,000,000 in assets, yet their retirement cash flow is in doubt. :roll: http://www.theglobeandmail.com/globe-in ... le2021849/

Unfortunately, the article is vague about how to go about generating the cash flow.

By the way, does anybody know why the Globe chooses the advisory firms (in this case Weigh House) that provide the facelift? Do you consider the fact that the Globe has chosen the advisor as an endorsement for that advisor? On the basis of the Globe choosing this firm, would you hire it too?
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Re: Enough to Live On (2011)

Postby Springbok » 15 May 2011 11:39

skepticus wrote:In the Globe and Mail's latest Financial Facelift, Nick and Nora have $2,000,000 in assets, yet their retirement cash flow is in doubt. :roll: http://www.theglobeandmail.com/globe-in ... le2021849/

Unfortunately, the article is vague about how to go about generating the cash flow.

By the way, does anybody know why the Globe chooses the advisory firms (in this case Weigh House) that provide the facelift? Do you consider the fact that the Globe has chosen the advisor as an endorsement for that advisor? On the basis of the Globe choosing this firm, would you hire it too?


At first that article seemed to be of interest because in some ways it mirrors where we were a while back. But I found it very superficial. Some of the expenses look suspect - No allowance for income taxes and $2100/month for vacations! Advisor probably didn't offer much in way of advice because couple were DIY investors!

I wouldn't put any weight on G&M's choice of advisor.
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Re: Enough to Live On (2011)

Postby steves » 15 May 2011 12:05

Very few of these facelifts (NP or G&M) represent tax in any way. It is as if income tax dropped off the face of the earth. Also, they make no attempt to publish a link to the actual solution so that those interested could see the entire plan laid out in detail. Drives me nuts.
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Re: Enough to Live On (2011)

Postby couponstrip » 15 May 2011 12:44

steves wrote:Very few of these facelifts (NP or G&M) represent tax in any way. It is as if income tax dropped off the face of the earth. Also, they make no attempt to publish a link to the actual solution so that those interested could see the entire plan laid out in detail. Drives me nuts.


I find this to be the case with the vast majority of discussions of retirement cash flow, SWR, net worth, and others, even on this forum. What does it mean to have 2 million net worth? Is that enough to retire? Well where are the assets? Registered, unregistered, CCPC, IPP, Real estate? Are they liquid (if illiquid, they may have overvalued the calculated net worth)? If it is buy and hold equities, what is the cap gain liability in those assets? What tax bracket can they expect in early retirement or later retirement (when mandatory RRIF withdrawals take place)? Creating a financial plan without considering taxes seems like trying to build a table with only three legs. On the other hand, planning the minute financial details of your entire life from age 30 or even at the age of retirement doesn't strike me as the right approach either. Some flexibility to adjust to personal changes (health, cash flow, job loss) and market changes (poor market returns, investment loss, helping out family/children) is certainly necessary, but at least thinking about tax would seem to give a more accurate prediction of required savings and what kind of lifestyle those savings would provide.

Otar does a good job of considering tax implications in his book Unveiling the Retirement Myth. Financial calculators generally do a poor job of including tax considerations (generally not at all) including the venerable FIREcalc.
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Re: Enough to Live On (2011)

Postby steves » 15 May 2011 13:16

It isn't just the tax, it is the interaction of all the other discontinuous cash flows... loans, cpp/oas/gis, pensions, partial salary in post retirement, future cash windfalls (downsizing home, selling the cottage). Coupled with the different forms of capital coming in and out of play over time, and the vastly different way that capital interacts with income tax makes the simple web-based calculators virtually useless. Unless the calculation is needs-based and has an accurate tax representation (preferably using the T1 calcs) then you simply won't get an accurate feel for your financial future.
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Re: Enough to Live On (2011)

Postby BRIAN5000 » 15 May 2011 13:24

They have a house outside of Edmonton and a condo in the city that serves as their office, both fully paid for. Their business will be closed rather than sold because it depends on their particular expertise.


What will they do with the Condo? Rent it out?

No one in Edmonton has THEIR PARTICULAR EXPERTISE? Maybe they should have picked someone to mentor earlier on and take over/buyout the bus., wife retire first, husband take a pay cut or whatever to have some value in the bussiness.

The planner got the info from an email so maybe not enough info. If they provided solution's people would pick a situation as close to theirs as possible and just follow it maybe reducing the need for FP's.

Man they are already 70 and 63 and want to travel for 10 years. :(

I find this to be the case with the vast majority of discussions of retirement cash flow, SWR, net worth, and others, even on this forum. What does it mean to have 2 million net worth? Is that enough to retire? Well where are the assets? Registered, unregistered, CCPC, IPP, Real estate? Are they liquid (if illiquid, they may have overvalued the calculated net worth)?


These are all very good questions. It would be nice if there were some examples in the Sticky of working through and making a plan or two.
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little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns
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Re: Enough to Live On (2011)

Postby Springbok » 15 May 2011 13:41

BRIAN5000 wrote:
I find this to be the case with the vast majority of discussions of retirement cash flow, SWR, net worth, and others, even on this forum. What does it mean to have 2 million net worth? Is that enough to retire? Well where are the assets? Registered, unregistered, CCPC, IPP, Real estate? Are they liquid (if illiquid, they may have overvalued the calculated net worth)?


These are all very good questions. It would be nice if there were some examples in the Sticky of working through and making a plan or two.


I don't think that examples would work. We each have a different set of circumstances. Different ages, different personalities, different savings. What would be useful perhaps, is a "calculator" that falls somewhere between those simple minded on-line ones and more complex ones like Steves/Otar/etc.

BMOIL have one on their site, but they have not updated it. In fact they should delete it until it is fixed. However, it is along the right lines in that it determines how risk averse you are, suggests asset allocations and produces a custom plan for your specific situation. It does not know about TFSAs and income splitting and does not have the correct CPP/OAS numbers, so as it is, is very suspect. I hope they fix it.
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Re: Enough to Live On (2011)

Postby scomac » 15 May 2011 20:02

BRIAN5000 wrote:
Man they are already 70 and 63 and want to travel for 10 years. :(



So what's wrong with that? When I was in Europe last spring, there was a couple from Winnipeg in our group. He was 85 and they did all the extra excursions including the 10 km hike through "Old Rome". He told me that he and his wife had been doing these sorts of tours for 20 years and they had been pretty well around the globe. You just can't keep these old farmers down, mind you, they didn't look or move like the typical 80+ yr. old couple.
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Re: Enough to Live On (2011)

Postby BRIAN5000 » 15 May 2011 21:19

they didn't look or move like the typical 80+ yr. old couple



Nothing wrong with it if they are healthy enough to do it.
“Sometimes you are going to sell early and wish you would’ve held on, other times you will hold on a
little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns
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Re: Enough to Live On (2011)

Postby Shakespeare » 15 May 2011 21:33

Nothing wrong with it if they are healthy enough to do it.

Uncle John and Auntie Mabel
Fainted at the breakfast table.
"Children let this be a warning
Never do it in the morning."

Ovaltine has set them right,
Now they do it day and night.
Uncle John is hoping soon
To do it in the afternoon.
“Never appeal to a man's better nature. He may not have one. Invoking his self-interest gives you more leverage.” -- R.A. Heinlein, Time Enough for Love.
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Re: Enough to Live On (2011)

Postby ghariton » 16 May 2011 01:27

Shakespeare wrote:
Nothing wrong with it if they are healthy enough to do it.

Uncle John and Auntie Mabel
Fainted at the breakfast table.
"Children let this be a warning
Never do it in the morning."

Ovaltine has set them right,
Now they do it day and night.
Uncle John is hoping soon
To do it in the afternoon.

:lol: :lol: :lol:

One of my schoolmates, in Grade 7 as I recall, got into big trouble for reciting that a little too loudly in class.

George
The plural of anecdote is NOT data.

In God we trust, all others bring data (William Edwards Deming)
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Re: Enough to Live On (2011)

Postby Benchwarmer » 16 May 2011 12:21

couponstrip wrote:Financial calculators generally do a poor job of including tax considerations (generally not at all) including the venerable FIREcalc.


One of the reasons why I like RRIFmetic is that it takes into account taxation. I believe it is exact, based on taxation schedules as they exist today, which is probably the best we can do.
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Re: Enough to Live On (2011)

Postby Bylo Selhi » 16 May 2011 13:01

Benchwarmer wrote:I believe it is exact, based on taxation schedules as they exist today, which is probably the best we can do.

The best we, er our software, can do would be a lot better if, instead of pumping out "exact" numbers based on today's tax regime, it provided a range of numbers based on some reasonable guesses of future tax regimes, economic growth rates, etc. Those guesses could be based on past tax regimes and economic growth during good times and bad. A wide range of outcomes shouldn't be viewed as an indication of poor software but rather lauded for giving us insight into how uncertain the future really is.

"It's hard to make predictions — especially about the future."(*)

IMO the quest for accuracy, certainty, exactitude, etc. is a fool's errand. About the only thing that's accurate, certain and exact is the knowledge that our world, a few decades from now, is unlikely to be the same as it is today. And I'm not even sure about that ;)

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Re: Enough to Live On (2011)

Postby adrian2 » 16 May 2011 13:27

Bylo Selhi wrote:
Benchwarmer wrote:I believe it is exact, based on taxation schedules as they exist today, which is probably the best we can do.

The best we, er our software, can do would be a lot better if, instead of pumping out "exact" numbers based on today's tax regime, it provided a range of numbers based on some reasonable guesses of future tax regimes, economic growth rates, etc. Those guesses could be based on past tax regimes and economic growth during good times and bad. A wide range of outcomes shouldn't be viewed as an indication of poor software but rather lauded for giving us insight into how uncertain the future really is.

:thumbsup: I've made a similar comment to Steve in the past. Even with today's tax regime, it's really impractical to incorporate all intricacies of taxes into a program with the target audience of RRIFmetic. Steve may think he's programmed it up-to-the-cent, but I very much doubt that it caters to all complexities found, say, in my own tax return - for starters, having an incorporated business with a portfolio of corporate investments, where you fully control the mixture of salary vs dividends, as well as which securities to hold corporate / personal / RRSP / RESP/ TFSA etc.
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Re: Enough to Live On (2011)

Postby AltaRed » 16 May 2011 13:44

No software package can provide for a wide range of scenarios, though some use probablistic approaches rather than deterministic outcomes to provide a range. I think the key is for any software package to qualify itself as providing trends given certain assumptions and to have ease of use for many 'what if' scenarios. I personally do not have any interest in running any scenarios. I work with a ~3% SWR with a view to re-visit every 5 years.

When I retired 04/2006, I had no idea when/where a market meltdown could occur. Thank goodness it was not within 6 months of retirement as I would have found that 'uncomfortable'. I was better able to 'live' with it when it came in 2008 though it meant my portfolio did very little for the next few years. The key is to be able to 'adjust' and 'change' with what life throws at you and have a diversified enough of an asset allocation to stick handle as best one can through the rough spots.
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Re: Enough to Live On (2011)

Postby steves » 16 May 2011 13:48

First of all, making my tax routine current with the T1 was about the easiest part of writing RRIFmetic. The feds put out a document twice a year expressly for payroll programmers to keep their payroll withholding tax current. It is a clerical job to revise my tax routine twice a year. The significance of the program is the 'reverse taxation/needs-based' calculation. This is why your average grunt spreadsheeter simply gives up and substitutes an average tax rate... the recursion math is just not do-able in a spreadsheet context. 100% tax accuracy is not a major issue, after all, taxes do change year over year (albeit slightly)

I have mentioned this several times.... I can take a 5 yearold version of RRIFmetic, turn my clock back 5 years and set the inflation rate to approximate what inflation transpired in those years and run a projection. Income tax and entitlement levels don't vary by much at all. The stock market isn't quite so well behaved.
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Re: Enough to Live On (2011)

Postby adrian2 » 16 May 2011 14:16

steves wrote:First of all, making my tax routine current with the T1 was about the easiest part of writing RRIFmetic. The feds put out a document twice a year expressly for payroll programmers to keep their payroll withholding tax current. It is a clerical job to revise my tax routine twice a year.

There is much more in the tax system than what's in the payroll withholding tax.
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Re: Enough to Live On (2011)

Postby steves » 16 May 2011 14:20

I didn't say that was all I used.... div tax credit, age deductions, loan deductibility, capgains, etc.... these all come from other sources.
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Re: Enough to Live On (2011)

Postby adrian2 » 16 May 2011 14:25

steves wrote:I didn't say that was all I used.... div tax credit, age deductions, loan deductibility, capgains, etc.... these all come from other sources.

Still quite far from being complete, for each province and situation. How does your compiled code (in MB) compare to TurboTax? Of course they have some frills included, but still I seriously doubt your code can handle every line from a tax return.

To give you just one simple example from a forum member, the bad interaction between deductible student loans or tuition credits and Canadian dividends.
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