Monthly Archives: June 2017

Turning 65 soon? Service Canada wants to give you OAS benefits!

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Turning 65 in the next year? These things do eventually happen, God Willing!

The bad news is you are now considered by the Government to have reached Old Age; the good news is that also means Ottawa wants you to consider starting receiving Old Age Security (OAS) benefits the month after you officially turn 65.

My latest MoneySense column provides all the details, starting with a letter Service Canada should be sending you automatically shortly after you reach 64. Click on the highlighted text for the full column about how to get ready to receive Old Age Security benefits and possibly the Guaranteed Income Supplement (GIS) to OAS: What to expect when receiving OAS at 65.

As you’ll see, no action at all is required if they did send you this initial package and you’re happy to receive gross (pre-tax) cheques mailed to the address they have on file. If you want the funds deposited electronically to your bank and/or have tax deducted at source (as I did), then you either have to go to the web site provided or call them on the phone.

I have to say my initial attempt to do this on the Internet was a frustrating one. It turned out to be far easier to call them on the telephone on the English-language helpline listed in the letter: 1-800-777-9914. Due to “high call volume” I was put on hold for 15 minutes, during which time the automated voice advised listeners to apply for OAS at least six months before their 65th birthday and no more than a year in advance. It also said the maximum monthly OAS benefit is currently $578.53.

I chose to have 25% tax withdrawn at source so with no further action on my part, I can expect my first OAS deposit of $433.90 (net of tax) to arrive magically in my bank on or about May 29, 2018, and every month after that for as long as I live, like any other pension. By then it may be slightly more, as it may be indexed to the cost of living.

Take OAS early, CPP late if you can possibly swing it

Keep in mind that, like the Canada Pension Plan (CPP), you can opt to defer receipt of OAS benefits to as late as age 70, thereby raising the payout. I revealed my reasons for taking OAS as soon as it’s on offer in an earlier MoneySense column last summer: Why I’m taking OAS right at 65. Continue Reading…

Bad investment advice & clichés you should ignore

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If you take bad investment advice from others, you may end up selling a stock too early or engaging in unprofitable investing strategies

Most investor sayings and clichés have at least a hint of truth. But they can still lead you to take good or bad investment advice, depending on how you apply them.

For instance, you’ll sometimes hear investors say that you shouldn’t fall in love with your stocks. This seems to make sense. You should keep an open mind on your investments, rather than falling in love with them and holding them forever, despite any adverse changes in their business or the field in which they operate. However, investors sometimes use this tidbit of advice as a justification for selling a stock that has shot up unexpectedly.

Unexpected strength in a stock you like is a bad reason to sell

The stock may be stronger than you expected because you underestimated the growth potential or competitive advantages that led you to like it in the first place. Experienced investors can tell you that some of their best stock picks started going up out of proportion to what they expected, and kept outperforming for years. By the time the first significant “dip” or setback comes along in a stock like this, it may have tripled.

Continue Reading…

U.S. Corporate Bonds: Taking all the credit

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Investment-Grade Spread (RS) vs. High-Yield Spread (LS)

By Kevin Flanagan, WisdomTree Investments

Special to the Financial Independence Hub

Without a doubt, one of the better-performing sectors in the fixed-income arena over the last year or so has been the U.S. corporate bond market. Indeed, both the high-yield (HY) and investment-grade (IG) asset classes have enjoyed visibly positive returns both in 2016 and thus far in 2017, with HY registering specifically robust readings. Against this backdrop, questions have surfaced as to whether these types of performance can be sustained for the remainder of 2017.

And here we are, roughly five months into the calendar, and the question remains: Can the U.S. corporate bond market continue to produce positive outcomes? Oftentimes, market participants tend to focus on more recent trends, and in the process apply their findings to determine whether an asset could be overbought or oversold. In order to put recent developments in U.S. corporates into some perspective, we thought it would be a useful exercise to take a look at how HY and IG spreads have fared over a longer period (See chart at the top of this blog.)

So, where exactly are U.S. corporate bond spreads? According to the Bloomberg Barclays U.S. Aggregate Corporate Index, IG spreads have narrowed by 10 basis points (bps) since the end of the year, and stood at 113 bps as of this writing. This is the lowest level since the latter half of 2014. On the HY front, the Bloomberg Barclays U.S. Corporate High Yield Index shows the spread at 376 bps, a decline of 33 bps from the year-end 2016 tally, and also resides at levels last seen almost three years ago.

A slightly more dramatic way of looking at the current readings is to focus on how much these spreads have come in since the recent high watermarks were posted in February of last year. From this key risk-off period, IG spreads have declined by more than 100 bps, and an eye-popping 463 bps for HY. It is this combination of recent spread-narrowing and current levels that has prompted the aforementioned questions.

Some historical perspective

This is where some historical perspective is in order, specifically: Have we entered uncharted territory? Continue Reading…

Time to stop following the Retirement herd

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We are all social animals: we crave interaction and generally don’t like being alone. We crave that feeling of togetherness and being part of something bigger,  the added comfort and safety that comes with being part of a group or a  herd.

The herd protects individuals from being singled out, and in the animal kingdom provides safety from being killed by a predator.

Many people have developed a “herd” mentality in life deriving comfort by going with the flow and if everyone else is going in one direction they must know something that we don’t. It is easier not to complicate things by forging our own path based on what we learn or believe. What happens if we are wrong and the herd is right?

When it comes to retirement the “herd” has been doing this retirement thing for a long time. So they must be right, right?

I used to be a follower, part of the herd if you will. I was willing to put my fate in the hands of others and follow along blindly. Then I realized the retirement herd was heading in the wrong direction, and this wasn’t going to work for me. Let me explain.

Retirement worked when life expectancy was much lower

When the concept of retirement was created just over a hundred years ago, it worked.  The reason it worked was because life expectancy was much lower and if you were one of the lucky ones to reach the retirement finish line, you could expect to enjoy a couple of years in the proverbial “rocking chair,” watching the world go by.

Continue Reading…

Millennial Money: Can Money buy Happiness?

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By Brandon Hill, CFP

Special to the Financial Independence Hub

Do you believe the saying money can’t buy you happiness? Most people laugh at that notion, while some of the wealthiest people sing its praises …

I recently read a book called Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton.

The book set out to tackle the question – “Just because money often fails to buy people happiness, does that mean that it can’t?”

Luckily it can:  it just depends on how you go about spending it. It turns out that our everyday spending choices releases a variety of biological and emotional effects – either positive or negative.

This book covers five specific spending strategies to spark positive effects and increase happiness. You may have heard of some – such as buy experiences, not “things.”

The goal is to maximize the amount of happiness you get out of every dollar you spend.

Some of the wealthiest individuals have mastered these tactics (Bill Gates / Warren Buffett) and don’t let their wealth become a source of anxiety or stress.

It’s important to note that these ideas aren’t supposed to encourage you to spend your way to happiness. All strategies are meant for your discretionary spending, after your needs and future savings goals are taken care of (see my previous article on Guilt-free Spending).

All of the ideas written about here are completely attributable to the authors of this book and include paraphrased ideas and/or direct quotes from the authors. I don’t take credit for the concepts written here. The full book is a quick read and if you are interested in reading more in-depth, you can buy a copy here.

Buy Experiences

A study found out that once an individual makes $75,000 or more (in the US), any increase in income has no effect on their everyday general happiness. Isn’t that crazy?
Continue Reading…