No pension, small inheritance, age 53... to RE or not to RE?

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No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

Hi everyone

I'll try to keep this short, but it may go a little long.

I'm 53 years old, with no dependents and 0 debt. I'm a musician and music transcriber and have no pension plan. I saved some money over the past 15 years, but not much and unfortunately I didn't put it in the markets, just kept it in extremely low yielding instruments.

I recently got a small inheritance. My liquid net worth is now about $250K. Think of it as basically being in cash right now.

I've never owned a home. I thought now might be the time to buy a condo here in Toronto. The chartered banks just laughed at me because as a as a self-employed person, my T1's don't look like much. The non-bank lenders have been much more receptive and my mortgage broker tells me I can get a loan for a condo worth up to (max) $400K, probably paying 3.4%. However... to get that loan I have to put a huge chunk down. He said 'assume 50% and I can maybe get it down to 43%'. I'm looking at putting up to $200K down when all expenses are figured in.

So here's my question. Is this even a good idea at my stage in life? I know that capital gains on a primary dwelling are tax-exempt. That has to be huge. Even if the Toronto RE market corrects, I feel like it will be okay over the next 20 years. But then I read articles which ask the question 'Are you sure you shouldn't just keep renting'? It feels kind of bad to have to put this huge chunk down.

I know that at age 53, $250K isn't enough to magically create a decent retirement nest egg. I just want to be sure that I'm doing the optimal thing here. I've often wondered what would have happened to my parent's RRSPs if they hand't been fortunate enough to live through the multi-year (secular??) bull market in stocks we've had since whenever.

Hope this question makes sense. Thanks for any input.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

You haven't said much about your net worth and how you plan to fund your retirement when you no longer want, or can, work. CPP and OAS by itself is not likely to cut it, especially if you don't qualify for full CPP.

The problems, as I see them with home ownership for you, include:

1. Taking on a mortgage at age 53 and making payments potentially into your '70s is a risky proposition (e.g. 20 year amortization) if you may not have the earning capacity to make the payments.

2. Buying a condo is only the start of the costs. Besides the fees to purchase, there will be monthly condo fees and property taxes which you don't have now. You will keep paying these as long as you own the property. If this is a medium/high rise condo, condo fees can becaome exorbitant to maintain corridors and elevators, and special assessments in 5 or 6 digits can happen to re-do electrical, plumbing cladding, windows, etc. some time in the future can be a killer. Amateur condo boards are not very capable at managing a complex/complicated high rise building and much has been written on these issues. Be very careful of what you pick and why.

3. I've never believed it to be a good idea for someone about to wind down their earning capacity to have a disproportionate amount of their net worth in RE, and especially when leveraged with a mortgage, albeit you have not said whether you have a sizeable nest egg set aside or not. If this condo might be more than 50% of your net worth, I'd call that being 'house poor'.

4. You have no dependents and thus no 'need' to leave a legacy for someone. If you do buy, you should also ultimately have an exit plan to monetize this wonderfully appreciating asset (if it does appreciate) at some age, to enjoy the net proceeds from that investment and go back to renting, pehaps a retirement resort at some advanced age. Your objective should be to die broke at 95.

I recognize there is a particularly obsessive North American culture around RE ownership, and the sense of security it seems to bring, and for the most part, without many instances of pricing collapses. I get that (having both rented and owned throughout my lifetime - currently owning). That said, with rent controls, rent increases have some limiting factors, and renting long term eliminates a lot of home ownership worries (I call it boat anchor baggage) behind for others to lose sleep over.

Bottom llne: You need to work out a financial plan to see how you willl fund your cash flow needs over the next 30-40 years and whether a mortgage might shackle you excessively (I do recognize the total costs of home ownership may end up being less than renting if you keep the mortgage component less than 50% of total cost).
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

AltaRed, thanks a lot for taking the time to compose that detailed response. A few points. My total net worth as mentioned is $250K in cash, plus my car (worth maybe $14K) and some art worth about $10K and some very high quality jewelry/watches worth about $10K. I consider my musical instruments my most valuable asset and they're appreciating, not depreciating, but I never see them mentioned when one is figuring net worth so I don't include them.

Re: how I plan to fund my retirement, the sad fact is that I have really just started thinking about these things in the past 18 months, so the answer is 'I don't know. I have this $250K as a starting point and no matter what else happens, I need to make sure that this money is used optimally'.

My idea with RE was that it is always better to be building equity into a piece of RE as opposed to burning equity on rent every month, but I didn't know that this is the case. When you mention 6 figure special assessments... well, that is very scary. Even mid 5 figures would be devastating and probably force me out of it. Is this fairly common? I've just started working with a RE guy who knows of my hesitation. He's a very understanding guy. Because I'm basically a night shift worker I need a quiet space so we are thinking of older, solidly built buildings that have been converted into condos as opposed to the crap I've seen thrown up i.e. in the Fort York or Square One area. I suppose the next idea will be that these buildings have more, not less of a chance of needing expensive upkeep.

The other option is just to plow it into the financial markets, right? I mean, minimize fees and all that of course, but really that's what we're talking about? Max out the TFSA and keep contributing the max? I have no RRSPs and the question is, do I make enough money to make it worthwhile to contribute? I get taxed at the other end anyhow.

Never thought that there would be so much angst about buying RE in Toronto but I get so much conflicting advice on this. Of course the RE agent has all the reasons why it's best to go that route. That's why I'm here. I definitely hear you and I have absolutely no objection to renting other than the fact that as I get older, I find it less appealing to have changing neighbours and more noise etc, but of course that can happen in a condo as well. Maybe slightly less. Co-ops are great because there's a limited number of people that can buy one, vetting by the existing residents, they're cheaper, etc., but everyone is telling me it's a bad investment.

Let's say someone said 'If you take this $250K and invest it and leave it alone, you have a decent chance of it doubling in 10 years and then doubling again in the next 10 (pre tax of course)', I might be okay with that. But according to this calculator , $1000 invested in 2000 would only be $3315 now for a 245% return. Before tax, right? And markets have been good. For a long time.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

You really don't have any 'liquid' assets beyond the $250k that you have. Material goods obviously are worth something but selling them is a bit of a mug's game and uncertain if/when you need the money. I won't lecture here but I'd never have quality material goods and minimal liquid assets in the bank. What you should have and need to do regardless of whether you buy, or not, is to maintain a 6 month cash flow emergency fund to tide you over in lean times of low, or no, work and/or unforeseen expenses. That could be a High Interest Savings account, potentially within a TFSA itself. Whether you consider a RRSP or not really depends on your current Marginal Tax Rate. If you are in the lowest Federal bracket of 15%, the tax deduction is hardly worth it given only 17 more years of contributory room. Whatever you do, max out your TFSA contribution room first.

As for the RE, I can only say I would not have the bulk of my net worth in an RE investment, with virtually no reserve (see emergency fund), at an age of 53. It works when one is 33 or so because there are so many years of earning years and compounding years left to make it work. Not so much at 53. That said, IF you can find something where your mortgage payment (including interest), plus condo fees, plus property insurance, plus property taxes will be less than your current rent, then you are cash flow neutral. I can't say that is a bad idea.

My point on special assessments was simply to point out that large high rise condos can experience horrible problems and be horribly mis-managed. IT would be much better to get into a more conventional 'multi-family housing' low/medium rise complex where property management is more 'normal' and manageable in complexity and size. Most special assessments shouldn't exceed mid-5 digits and likely low 5 digits.

As for financial markets, if you are not familiar with investing, you need to do some reading. Starting with our own finiki would serve you well. And staying in a low (MER) cost Couch Potato balanced portfolio of TD e-series funds, or ETFs, would likely best serve your interests. The problem with markets is they can go down more severely than they go up. Equities dropped over 40% in the 2008/2009 finnacial crisis. If you had a 50/50 balanced portfolio, could you tolerate the equity 50% of it dropping almost in half in a matter of a few months? Would you have the stomach to 'stay the course' on the upswing? It could take 10 years for equities to return to that higest value (the US S&P500 of the last decade is a case in point).

Rule of 72: Compounding value doubles when the rule of 72 is met. E.g. 8 years of 9% growth, or 12 years of 6% growth. You probably should not assume more than a 5-6% compounding growth rate on a balanced portfolio going forward and perhaps more like 4-5*%. Part of that depends on how well the fixed income part of the portfolio will deliver. Getting more than 2.5-3% on the FI part of the portfolio will be hard, and yet it is the FI part of the portfolio that provides the stability from the volatility of equity markets.

* Example: 50% of equities @ 6% plus 50% of FI @ 3% = 4.5%... OR 50% of equity @ 8% plus 50% of FI @ 3% = 5.5% Don't count on more.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

Very helpful stuff here, thanks AltaRed.

Yeah, it's too bad, I enjoy the 'stuff' I own that's high value. There's not a lot of it. But these days, I'm looking at everything in terms of how much it could bring if I sold it.

The lenders aren't stupid, right? Even though they're approving me on a 'stated income' basis, which they use for self employed/sole proprietorship types like me, they're trying to get my monthly payments down to a manageable level. So yes, with a down payment of this size (let's say 45% which would be about $171K on a $380K condo), which represents 70% of my net worth, I can keep the total outflow/month to (very close to) what I pay per month now.

And... that would be it. My chips would be in the middle on that condo. But it's encouraging to hear you say that you can't say it's a bad idea even with that much of my net worth going to down payment. All I can do is try to buy smart in this scenario and mitigate the risk of catastrophic special assessments and/or board mismanagement.

I would then do everything I could to hammer my mortgage down over and above what I am required to pay.

I am absolutely on it with regard to maxing the TFSA. It's a few thousand short of being totally maxed.

The rule of 72 is frightening, but I absolutely agree with you about not assuming more than 5.5%. I talked to a financial planner who was basing his performance estimates on 7% every year for the next xx years. I wanted to ask him 'How many money managers do you think return that level over years and years?' I actually know more about the markets than the average guy walking down the street. I tore apart some ETFs just for interest's sake and did a simple correlative analysis of the holdings of various big bank Income-oriented mutual funds when picking some stocks for my TFSA. It's doing fine, most of it is in index funds.

Best thing I got out of this was the hope that if I can hold monthly outflow to where it is now, it may not be a huge error to buy a condo. I do hear you when you say you wouldn't hold the bulk of your net worth in RE at my age.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by OnlyMyOpinion »

M-set,
Do you have the capacity to save but just never have? Are there life style or living chnges that could give you the capacity to start saving so that you can establish some savings? I would be very conerned about taking on the costs of RE ownership when you have no income flexibility (as would be demonstrated by having some savings*).
*seems to be a disconnect here as your recent post says your TSFA is nearly max'd out?

On the other hand, in spite of having no savings, it appears that you have always managed to makes ends meet and keep a (rented) roof over your head? So, could you not consider living as you have been and keeping the $250k inheritence intact as your retirement fund? Properly invested within an overall plan and with CPP?/OAS/GIS government sources it could fund a modest retirement.
Certainly before doing anything drastic with the funds, you should establish a long term plan for your financial future. Consider how many years you expect to be able to continue working, if you have contributed to CPP - how much is it likely to provide you, are you aware of OAS and GIS and the qualifications for those when you are 65, etc.

I would be very leery about taking on real estate and a mortgage in the absence of any other savings at your age. You need to make this money count. As you have already found out, you are not a good conventional 'bet' as a RE owner from the perspective of conventional mortgage lenders. Do you have a good estimate of the costs of ownership (mortgage, condo fees, condo insurance, utilities, etc) as they compare to your current monthly costs? Do you plan/able to to work the number of years it will take to pay off a mortgage?
Remember also, your RE agent is only interested in selling you RE at the end of the day. They don't care beans about your larger finances or future.

Added: I ould not necessarily discount your musical instruments if they are genuinely worth 10's of thousands of dollars. But how you would realize value from them to pay the bills if/when you no longer work?
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Re: No pension, small inheritance, age 53... to RE or not to RE?

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The other thing that I don't believe other posters have mentioned is that rates are pretty much at an all time low( or very close). If rates rise by 2 or 3% over the next 5 years, could you handle that. You would also be responsible for any repairs inside the condo as well as tax, condo fees, insurance etc as previous mentioned. Just like rent, these things go up each year but are not controlled like rent is ( assuming you live in a rent control province)

I am not sure how much CPP you will qualify for but OAS and GIS at age 65 would be about 1450. per month if you have no other income. This is tied to inflation.

If your 250,000 only kept up to inflation until you turn 65 and you gradually move it to your TFSA you could look at as 25 years of $10,000 annual tax free income ( todays Dollar)on top of your OAS and GIS. and that is assuming no growth. If your investments churn out 3.5%, you could keep the pricipal intact and get 8,750 get a year. 3.5 to 4% is quite acheivable using dividend paying stocks today. And this should at least keep closevto inflation.

With some part time work for the first few years of retirement....

You have more flexibility to move out of the city later if this becomes attractive to you after retirement for financial or lifestyle reasons.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

OMP, thanks a lot for the response let me try to provide some info.

Re: maxing my TFSA,this was done last year after I got this inheritance. I called up Revenue Canada and asked how much I could put in - they told me $40K so I immediately transferred about $38K.

I absolutely have the capacity to save more than I do through lifestyle changes. To give you an idea, in the 10 years before the inheritance last year, I had saved about $4K per year. This is why I think I could actually hammer the mortgage down beyond my monthly payments.

Again, to my shame, I don't know how much I have contributed to CPP but I think it's nothing much. I've been self employed for most of my adult life.

With regard to monthly costs of condo ownership vs my current monthly output for rent, if I put down 50% on a condo, my monthly outflow for all expenses including mortgage, taxes, condo feess, utilities and phone/internet and property insurance will be within $200 of my current charges. How does that sound to you? Let's say I can anticipate maintaining this level of income comfortably for the next 15 years. Does this mitigate the risk of having the majority of this small windfall in the down payment?

Just to be clear, if I put the 50% down on a condo worth $375K. I will have about $60K left including the TFSA. In a pinch I can raise another $15K.

Liquidating my instruments would be fairly easy but I really don't want to do that, ever. I just wish I could claim them as net worth for the purposes of the lenders so that I could put less down.

Any and all comments are very welcome even if they're hard to hear.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

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twa2w wrote: 01 Oct 2017 23:41 The other thing that I don't believe other posters have mentioned is that rates are pretty much at an all time low( or very close). If rates rise by 2 or 3% over the next 5 years, could you handle that. You would also be responsible for any repairs inside the condo as well as tax, condo fees, insurance etc as previous mentioned. Just like rent, these things go up each year but are not controlled like rent is ( assuming you live in a rent control province)

I am not sure how much CPP you will qualify for but OAS and GIS at age 65 would be about 1450. per month if you have no other income. This is tied to inflation.

If your 250,000 only kept up to inflation until you turn 65 and you gradually move it to your TFSA you could look at as 25 years of $10,000 annual tax free income ( todays Dollar)on top of your OAS and GIS. and that is assuming no growth. If your investments churn out 3.5%, you could keep the pricipal intact and get 8,750 get a year. 3.5 to 4% is quite acheivable using dividend paying stocks today. And this should at least keep closevto inflation.

With some part time work for the first few years of retirement....

You have more flexibility to move out of the city later if this becomes attractive to you after retirement for financial or lifestyle reasons
Yeah, this is the other side of it that I need to understand. Believe me, doing it this way is preferable to me. Yes, there's some solace in owning my own place and not being asked to move out of a rental unit at my age. But I'm not tied to ownership for its own sake.

You make a good point about interest rates.

So please understand, what follows is not based on some belief that RE is inherently better.

What about the idea that capital gains on RE are tax exempt? Let's say we assume that a condo purchased today will gain 4%/year in value. At the end, that's a big difference vs. The Rule of 72 thing because those gains are taxable right?

Also...what about the idea that if I live in a condo for 10 years and then want to move to a beach for winter, I can rent the condo for 6 months no let someone else pay the mortgage. In fact...this is going to sound dumb to you guys but last year I moved after living in the same apartment for 10 years. Why move? Because the owner died, left the place to his son who lives overseas, and the place went downhill in 6 months. So I tried to rent a condo because I could afford a bit more. What I learned is that a huge number of condos in the GTA are rental units owned by investors.

So why can't I do this? Buy a condo for way less than $375, say in Ajax or Brampton, tough it out and live in it for a few years and then rent it out? Here's where I don't believe for one second that the GTA is going to lose its status as one of the most desirable places on the planet for hundreds of millions of people living in other countries who eye the west with envy. Europe? It's only going to get harder for immigrants there.

Anyway... I was told this doesn't make sense but I still don't see why.

Thanks for my and all comments. Please be honest even if you have to tell me I'm naive.
Last edited by m-set on 02 Oct 2017 00:08, edited 1 time in total.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

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And once again, thank you all for taking the time to post these detailed replies. This is helping me a lot.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

m-set wrote: 02 Oct 2017 00:02The Rule of 72 thing because those gains are taxable right?
The rule of 72 is just that, a compounding forumla for doubling value. It has nothing to do with taxation. Indeed, on an after tax basis in a taxable investment account, taxes will take more years to double than the rule of 72 on an 'after tax' basis. Course a TFSA is a tax free account, as is a principal residence.

Added: Being a landlord is a high risk business when one is operating on a thin cash flow stream. What happens if the bum doesn't pay the rent? What happens if you can't rent it for a few months? What happens if the place is trashed? All those things can, and do, happen. The odds are they won't but can you even take a 1 in 10 risk of a 'tenant from hell'?
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

AltaRed wrote: 02 Oct 2017 00:11 The rule of 72 is just that, a compounding forumla for doubling value. It has nothing to do with taxation. Indeed, on an after tax basis in a taxable investment account, taxes will take more years to double than the rule of 72 on an 'after tax' basis. Course a TFSA is a tax free account, as is a principal residence.

Added: Being a landlord is a high risk business when one is operating on a thin cash flow stream. What happens if the bum doesn't pay the rent? What happens if you can't rent it for a few months? What happens if the place is trashed? All those things can, and do, happen. The odds are they won't but can you even take a 1 in 10 risk of a 'tenant from hell'?
Okay, I was assuming that there's a difference because with the rule of 72, in a non TFSA account, your money may double in the 12 years x 6% but as long as you don't sell year after year, you don't pay tax? Then you pay on the other end?

Basically I assumed that if I invest $200K in the markets in a non RRSP, and invest the same amount in a principal residence, and they return the same year over year, I'd be better off with the tax protected capital gains situation with the principle residence.

Maybe I misunderstand this, I'll figure it out.

Yeah, the renter from hell. 1 in 10? Not sure.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

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m-set wrote: 01 Oct 2017 23:49With regard to monthly costs of condo ownership vs my current monthly output for rent, if I put down 50% on a condo, my monthly outflow for all expenses including mortgage, taxes, condo feess, utilities and phone/internet and property insurance will be within $200 of my current charges. How does that sound to you? Let's say I can anticipate maintaining this level of income comfortably for the next 15 years. Does this mitigate the risk of having the majority of this small windfall in the down payment?

Just to be clear, if I put the 50% down on a condo worth $375K. I will have about $60K left including the TFSA. In a pinch I can raise another $15K.
What type of amortization are you looking at? Realistically your mortgage needs to be paid off by the time you retire. Are you saying that even after subsidizing half the property cost through a large downpayment you will be paying $200 more than by renting? Are you comparing the same buy vs rent property?

You need to get your CPP statement and make a reasonable projection of what your income will be in retirement. Only if you are likely to heavily rely on GIS would I consider buying in your situation but even then only if the numbers make sense.

If possible please post all the numbers involved in the buy vs rent scenario. Of considerable importance is what the two scenarios will look like in retirement. Are there significant savings once the mortgage is paid off or are the condo fees, taxes, higher insurance and utilities(?) eating up most of the equivalent rent?

I would put all RE shopping on hold until this has been thoroughly analyzed. The excitement inherent in such shopping messes with our minds and is not conducive to good decision making.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by gobsmack »

OP, it seems like you are in a very low tax bracket already so any tax benefits resulting from the ownership of RE will not be worth much. The $250K invested in CAD blue-chip dividend payers, if done correctly, would provide you with a good, reliable, and nearly tax free (assuming very low tax bracket) income stream that you can use to offset your rent. I find that a much more appealing proposition. If you don't want to pick stocks, you could consider investing on dividend ETFs.

If you do want to own RE though, I would suggest:

1) This calculator does a decent job comparing rent vs buying: https://www.nytimes.com/interactive/201 ... lator.html

2) If moving out of Toronto is an option, I would consider doing so. You may find that there are other markets around Canada where ownership would be a more advantageous proposition.

3) If for whatever reason you absolutely want to have exposure to RE, I would also compare ownership of RE against investing on something like ZRE in your TFSA.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by Spudd »

Given that interest rates are expected to rise over the next few years, it is not likely that condo prices will continue to keep increasing at the rate they have been. They may even decrease as there has been a huge condo building boom in Toronto so supply is increasing as well. So I would say counting on the condo to provide tax-free capital gains is not a sure thing.

I don't know how much you make, but in Ontario, if you make less than 66k/year, dividend payments you receive from stocks actually decrease your taxes rather than increasing them.

I would want to see all the exact numbers you have in mind (current rent, condo price, condo fees, property taxes) but my gut instinct on the matter is that it would be better for you to keep renting.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

I've taken the OP at his word that Principal, Interest and Taxes (property taxes, property insurance, condo fees) will only be about $200/month more than current rent. But of course, the OP has not discussed amortization length nor has acknowledged what will change with a 1-2% increase in mortgage interest rates. His 3.4% 'quote' is not going to last long (sounds like a variable rate mortgage to me that has nowhere to go but up). Presumably he is, or should, be factoring in the rate mortgage brokers use for quaifying purposes, e.g. 5 yr fixed? 5% or? in his cash flow calculations.

I do not worry much about amortization length IF his 'full in' costs are about what he currently pays in rent....because he will have to live somewhere anyway paying rent, whether he is working or not. I have a relative who has been doing the same thing some years into retirement BUT with considerably more financial resources to backstop the mortgage if times got tough. With someone in a stretched cash flow scenario, it is often better to have a longer amortization, e.g. 20 years, to keep payments low(er) and then use surplus cash flow to buy down principal if/when it comes. [[Note: The OP has also not said anything around expectations around any more inheritances, not that such funds should enter into the calcuations, but anything else he might get in the distant future could be used to buy down remaining mortgage.]]

I agree with Spudd and Gobsmack that income taxes off a dividend stream could be zero (or negative) in Ontario at his likely income level and at least some of that is already in a TFSA. Even cap gains taxes on stock appreciation will be small.... 50% on a 25% marginal tax rate is not much. I also agree the OP needs to do a comprehensive buy vs rent analysis with realistic numbers and not get too mesmerized by perceived joys of ownership. As already mentioned, RE prices in TO may well be topping out for condos albeit the OP is clearly not considering the 'wild west' concrete skyscrapters polluting the central core.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

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m-set wrote: 01 Oct 2017 23:49Again, to my shame, I don't know how much I have contributed to CPP but I think it's nothing much. I've been self employed for most of my adult life.
If you have been declaring your self-employed income and filing tax returns every year, you will have contributed to CPP. It's called "contributions on self-employed income" and you have to pay both the employee and employer share.

If you have your taxes done by a tax preparer, you may not be aware of having paid this. Check your past tax returns to find out.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

Everyone, this is more helpful than I can say. I very much want to take advantage of the knowledge here by providing all the data you're asking for. I will provide as much as I can tonight and will get the rest from my accountant.

Jo Anne, yes I have been using a very conservative tax accountant. Thanks for the info on CPP. I'm sure he's been taking it off.

The other thing I want to say is this. Today I went to look at 3 condos in the LIberty Village area of Toronto. What a slap in the face. All 3 were $399K. I am certain that at least two are rental units being sold by an investor. They were in not-very-nice condition, overlooking the Go Train tracks. To call these units '1 bedroom' is to stretch things - really they're one room with a sort of two wall partition built into it, with sliding doors completing the 'bedroom'. All in all a depressing experience. $400,000 for that? How many rental units are in these buildings? I get a sense that there are quite a few. So this is a quasi-apartment building anyhow.

I will be back here later tonight with responses to everyone who posted since my last post. Once again, thanks so much.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

gsp_ wrote: 02 Oct 2017 07:40 You need to get your CPP statement and make a reasonable projection of what your income will be in retirement. Only if you are likely to heavily rely on GIS would I consider buying in your situation but even then only if the numbers make sense.

If possible please post all the numbers involved in the buy vs rent scenario. Of considerable importance is what the two scenarios will look like in retirement.

I would put all RE shopping on hold until this has been thoroughly analyzed. The excitement inherent in such shopping messes with our minds and is not conducive to good decision making.
I will provide as much as I can within 24-48 hours. I need to talk to my accountant tomorrow so I can properly answer all questions here. Thanks for the response.
Spudd wrote: 02 Oct 2017 10:41 I would want to see all the exact numbers you have in mind (current rent, condo price, condo fees, property taxes) but my gut instinct on the matter is that it would be better for you to keep renting.
For whatever reason, I have been inundated with the messaging that it's always always better to own than not. AltaRed made reference to this in the first reply, this idea that we are told it's always better. This thread combined with what I saw today has planted a seed in my mind. Believe me, I have absolutely no objection to continuing to rent iof it's the optimal thing to do.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

I think you will have to move much further away from the central core. The far reaches of Etobicoke or similar (end of subway system) perhaps. We lived in a rental unit on Eglinton in Etobicoke at one time a few centuries ago. You should also avoid any place which bylaws allow rental units, and perhaps even VRBO/BNB although most bylaws are way too ancient to include the latter. Absentee landlords do not care about the buildings. They are looking to minimize condo fees and thus vote down upgrading/maintenance projects. May be difficult to achieve.

Regarding JoAnne's comment on CPP, do you not review your T1 returns before you sign and file? Do you not keep copies?
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

AltaRed wrote: 02 Oct 2017 18:10 I think you will have to move much further away from the central core. The far reaches of Etobicoke or similar (end of subway system) perhaps. We lived in a rental unit on Eglinton in Etobicoke at one time a few centuries ago. You should also avoid any place which bylaws allow rental units, and perhaps even VRBO/BNB although most bylaws are way too ancient to include the latter. Absentee landlords do not care about the buildings. They are looking to minimize condo fees and thus vote down upgrading/maintenance projects. May be difficult to achieve.

Regarding JoAnne's comment on CPP, do you not review your T1 returns before you sign and file? Do you not keep copies?
AltaRed, with regard to my returns... I have a lot of wealthy clients, some of whom have become friends over the years. One of my clients did me a favour and asked his tax accountant to take me on and do my taxes. This guy is super conservative. We have fun meetings every year because I think he gets a kick out of doing taxes for someone like me after doing complex returns for his clients. We talk guitars.

I know for a fact that my fellow musicians pay less taxes than I do but my guy won't let me write anything off without cause. I also have the feeling that for Revenue Canada, seeing my returns coming through from the same CA firm year after year is a good thing. Many of my friends have been audited. I haven't and I want to keep it that way. Maybe misguided, I don't know.

Do I review the returns line by line? No I don't, I trust him. You might say it's not a matter of trust, it's a matter of knowing what's going on with your finances. I maintain thorough records and have copies of all my T1s for many years back. I'm guilty of not paying as much attention to my finances as I should have, that much is absolutely true. I have a feeling that this is the beginning of the end of that way of thinking for me.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by AltaRed »

I am not objecting to who or why someone else does your tax returns. I am just surprised you don't know what is in your tax return, or if you are making CPP contributions every year or not (no doubt you are). The only point of having this discussion is for you to get some feel for the status of your CPP account and what you might receive for CPP when you turn 65.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by pmj »

Do you have a CRA "My Account" or a Service Canada "My Account"? CPP contributions - and lots more - are available there.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by Jo Anne »

m-set wrote: 02 Oct 2017 17:59The other thing I want to say is this. Today I went to look at 3 condos in the LIberty Village area of Toronto. What a slap in the face. All 3 were $399K. I am certain that at least two are rental units being sold by an investor. They were in not-very-nice condition, overlooking the Go Train tracks. To call these units '1 bedroom' is to stretch things - really they're one room with a sort of two wall partition built into it, with sliding doors completing the 'bedroom'. All in all a depressing experience. $400,000 for that? How many rental units are in these buildings? I get a sense that there are quite a few. So this is a quasi-apartment building anyhow.
Sounds like you may have been looking at the building my son lives in. The units are being converted to condos and sold as tenants move out. They aren't bad as far as rentals go, but I sure wouldn't pay $400k for one.
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Re: No pension, small inheritance, age 53... to RE or not to RE?

Post by m-set »

AltaRed wrote: 02 Oct 2017 18:50 I am not objecting to who or why someone else does your tax returns. I am just surprised you don't know what is in your tax return, or if you are making CPP contributions every year or not (no doubt you are). The only point of having this discussion is for you to get some feel for the status of your CPP account and what you might receive for CPP when you turn 65.
I'm embarrassed by my lack of attention to these things. In other areas of my life I'm actually reasonably detail-oriented. Certainly when it comes to gig prep. Anyway, now's the time to change. I'll get numbers soon.
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