How Much is Enough 2015

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
Locked
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: How Much is Enough 2015

Post by kcowan »

We just completed another kick at the can as to whether we would buy a million dollar condo and decided to continue to rent. This was partly motivated by the need to change the floors indoors and outdoors, 3300 sq.ft. in all. We confirmed that, even if someone gave us the condo, we would sell it. And add the money to the legacy for the heirs (or hairs as JT called them) and charities.

Yes we have more than we need (with the possible exception of extended LTC but anything longer than 8 years is highly unlikely).

(One thing that surprises me is my friend who has more money than god and still takes a leap on high flyers. I think he feels inadequate because he inherited a bunch of money and is still trying to prove himself. Because all my money came from grit, determination and hard work with more than my share of luck, I have nothing more to prove.)
For the fun of it...Keith
cardhu
Contributor
Contributor
Posts: 726
Joined: 05 Mar 2005 21:07

Re: How Much is Enough 2015

Post by cardhu »

CROCKD wrote:I presume that the point he was trying to make is that fixed income alone will not accumulate as quickly … as will a combination of fixed income and equity investment.
Seems self-evident at this point in the rate cycle … hardly worthy of a published article … my point was that the central premise of the article, that one cannot expect to retire UNLESS they invest in equity, is false … it is not impossible to save one’s way to retirement, it merely means one would have to either (a) save more aggressively, or (b) delay retirement for a few years, to achieve the same endpoint, or (c) accept a lower standard of living in retirement … exactly the same choices that affect many decisions in retirement planning … there are many ways to get to the same goal, some just take longer than others.
hamor wrote:Everyone's biased. Looks like cardhu's early saving years were fruitful and fell on high interest years in the cycle.
My early savings years are irrelevant … and to clarify, I merely pointed out that failing to invest in the stock market does NOT prevent retirement … that’s not a bias, it’s a fact.

BTW … interest rate cycles cut both ways … I did happen to have a few $$ in GICs earning double-digit interest in the early days, but the sequence –of-returns effect meant that that had almost no influence on where I sit today … double-digit interest on nothing is still nothing … also, I was at the time paying 11% interest on a $200k mortgage.
hamor wrote:
cardhu wrote:My 90 year old MIL is still in "savings" mode, spending far less than she takes in every year
I hear Buffet is having trouble spending all his money also.
Not sure what to make of this … I don’t see the connection.
hamor
Veteran Contributor
Veteran Contributor
Posts: 1225
Joined: 09 Mar 2013 23:12

Re: How Much is Enough 2015

Post by hamor »

Not sure what to make of this … I don’t see the connection.
Sorry. I will explain. Individual needs/wants differ, still some have not enough to cover the basics and some have so much, they live comfortably and cannot spend what comes in. Making claims about someone spending less than they bring in is meaningless without some sort of scale. Clear?
"Speculation is an effort, probably unsuccessfully, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little." Fred Schwed " Where are the Customers’ Yachts?"
cardhu
Contributor
Contributor
Posts: 726
Joined: 05 Mar 2005 21:07

Re: How Much is Enough 2015

Post by cardhu »

Clearly, you missed the point ... your comparison of my MIL to Warren Buffet is absurd.
hamor
Veteran Contributor
Veteran Contributor
Posts: 1225
Joined: 09 Mar 2013 23:12

Re: How Much is Enough 2015

Post by hamor »

and you missed mine, it was an exaggeration, a hyperbole
"Speculation is an effort, probably unsuccessfully, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little." Fred Schwed " Where are the Customers’ Yachts?"
BRIAN5000
Veteran Contributor
Veteran Contributor
Posts: 9064
Joined: 08 Jun 2007 23:27

Re: How Much is Enough 2015

Post by BRIAN5000 »

How a couple with a net worth of $10 million and annual income of $215,000 can pay $0 in income tax

http://business.financialpost.com/perso ... income-tax
This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: How Much is Enough 2015

Post by AltaRed »

Interesting but a case of financial pornography. Every one of us here could have income tax of zero too given enough charitable giving and investments in growth stocks.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
izzy
Veteran Contributor
Veteran Contributor
Posts: 3019
Joined: 19 Feb 2005 19:06
Location: Winnipeg MB

Re: How Much is Enough 2015

Post by izzy »

Essentially anyone can do this.Remember charitable donations (and a few other deductions)can be saved for up to five years before claiming so if you donate 20% of your income you can have a tax free year one year in five!
"I disagree strongly with what you say, but I will defend to the death your right to say it."
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: How Much is Enough 2015

Post by kcowan »

I think the article might have had better punch if they had been given an RX for paying tax at the lowest rate before getting the extra $45k in income from the RRIF when withdrawals become mandatory. It will all generate more OAS clawback.
For the fun of it...Keith
User avatar
EmperorCoder
Contributor
Contributor
Posts: 199
Joined: 27 Jan 2007 15:21
Contact:

Re: How Much is Enough 2015

Post by EmperorCoder »

Because it is a joint account, all of this $210,000 in investment income can be split equally between Tom and Mary.
I believe this is incorrect. Unless they have contributed equally to the account, they would have to report the income proportionally to their individual contribution. I wonder if CRA ever will ever audit these things, after all the fuss around income splitting being "such a bad thing". Can people really get away with that kind of unreported income splitting scheme?
Davis
Contributor
Contributor
Posts: 291
Joined: 15 Nov 2014 07:24

Re: How Much is Enough 2015

Post by Davis »

+1. I looked into this a while ago after setting up a joint account, and concluded that I have to track contributions and allocate income accordingly. It is a pain, but I don't want to get caught out five years from now and have to pay a bunch of extra tax, penalties and interest. That's a headache I don't need.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How Much is Enough 2015

Post by SQRT »

[quote="Davis"]+1. I looked into this a while ago after setting up a joint account, and concluded that I have to track contributions and allocate income accordingly. It is a pain, but I don't want to get caught out five years from now and have to pay a bunch of extra tax, penalties and interest. That's a headache I don't need.[/quote)

I suspect many people split income that would not be justified by contribution proportions. Works very well unless they audit you which is probably unlikely. They will only assess back 6? years . So pretty good odds, I think.
My spouse and I have been very careful to keep our funds separate but I suspect we are in the minority.

My FIL went back and determined what my MIL earned over her lifetime net of tax and simply put that amount in her account well after the fact. Seems incorrect to me but after 30 years he is safe.
Davis
Contributor
Contributor
Posts: 291
Joined: 15 Nov 2014 07:24

Re: How Much is Enough 2015

Post by Davis »

Sure, you're fine if you don't get audited. You can also save money on car insurance by not buying it since the chances of having an accident are small.

(This is not financial advice: I am drawing a parallel between similar situations to make a point.)
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: How Much is Enough 2015

Post by AltaRed »

It is my understanding CRA can go back much further if they suspect tax evasion/fraud. Anyone pushing the envelope too far (as compared to some minor innocent mistakes of minor financial consequence) deserve to be taken to the cleaners.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How Much is Enough 2015

Post by SQRT »

Davis wrote:Sure, you're fine if you don't get audited. You can also save money on car insurance by not buying it since the chances of having an accident are small.

(This is not financial advice: I am drawing a parallel between similar situations to make a point.)
I'm with you even though your analalogy may be a little extreme. I just think we may not be the majority or at least there are some(many?) who don't assiduously follow the rules, ie my FIL. Also, many don't seem to understand the rules (based on the questions we see here) and probably file with ignorance.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How Much is Enough 2015

Post by SQRT »

AltaRed wrote:It is my understanding CRA can go back much further if they suspect tax evasion/fraud. Anyone pushing the envelope too far (as compared to some minor innocent mistakes of minor financial consequence) deserve to be taken to the cleaners.
Agree. Doubt whether CRA would go back that far. Ignorance seems like a good defence against fraud given the level of understanding on this issue. Also, the assessed amounts would likely be fairly small given the nature of the issue, ie income splitting has a finite, fairly small maximum annual benefit ($15-18k depending on the province). I suspect the CRA have bigger fish to fry.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: How Much is Enough 2015

Post by AltaRed »

I agree that in most cases it would not be CRA's time to pursue small transgressions but the more sophisticated one's financial affairs are, such as a CCPC or spousal RRSP or landlord of investment properties, the more likely it is inappropriate income splitting would be seen to be fraudulent rather than simple ignorance. IOW, what is the level of demonstrated sophistication?

I tend to get pedantic about these sorts of things because I expect everyone to pay their fair share of taxes like I do.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: How Much is Enough 2015

Post by ghariton »

AltaRed wrote:such as a CCPC.
If you have a CCPC, you can do as much income splitting as you want, legally. No need to run afoul of CRA at all.

This is one tax break which I find outrageous, even though I have used it myself in the past. But it would be a brave government which will close down this loophole.

George
The juice is worth the squeeze
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33399
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: How Much is Enough 2015

Post by AltaRed »

I realize that so a bad choice to use CCPC as an example. Was really trying only to use examples of tax sophistication to suggest how CRA might treat taxpayers who do not use attrition rules correctly.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
Locked