All posts by Financial Independence Hub

Create a Money Machine: The Effect of Compounding

Posted By Financial Independence Hub | October 5, 2015

effect_of_compounding1 — Billy Kaderli, RetireEarlyLifestyle.com

By Billy Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

Our adventures around the world allow us to interact with many younger travelers in cafes and restaurants. Travelers are a great source of information about where they have been, places to stay and where to avoid. Things to do and the best way to get to a destination are often the topics of conversation.

Many times we are asked about how we can afford to travel for so long and then there’s the predictable wistful response: “I wish I could do what you’re doing.”

That’s when I tell them they can.

I explain in simple terms about investing and how they can create their own pension or annuity or as I like to call it a “personal money machine.” It is right about now when their eyes glaze over like they are speaking with their crazy uncle at a Thanksgiving Dinner.

I bring their attention back by saying they have something that I do not have; time. Usually I get a nod and a blank stare. I go on and ask if they know what “compounding” is. More often than not, they do not have a clue. These are college grads or they are taking a break from school to pursue their traveling bug. But to my surprise they do not understand the concept of compounding, which, in my opinion, is the easiest way to build wealth.

According to Investopedia, the definition of compounding is “the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.”

Bingo!

Sweet simplicity.

The earlier you invest, the sooner Findependence

A second home in the U.S. — good investment idea or not?

Posted By Financial Independence Hub | October 2, 2015

by Patrick McKeough, TSINetwork.ca

Special to the Financial Independence Hub

Now that it’s October, thoughts of winter may flit across the collective minds of Canadians. Last winter lasted much longer than usual across most of the country, and a large number of Canadians spent part or all of that harsh winter in Florida or other southern locations.

Many Canadians are buying second homes in Florida and other parts of the U.S., often with the belief that this will be a good investment idea as well as a winter haven.

Good lifestyle decision, bad investment

I was interviewed about this trend on CTV. Apparently I surprised everybody when I said that buying in Florida might make sense as a lifestyle decision but was liable to be a bad investment.

Here are a couple of the “buts” they raised, and my responses:

“But even if prices take years to move up, you’ll have use of your vacation home whenever you want.”

That’s right, and this may make it a good lifestyle choice. But there are always plenty of Florida rentals to choose from if you aren’t tied down to going to the same place on every visit. It’s much cheaper to rent for a month or two than to pay a full year’s cost of ownership.

“But you can rent the place out to generate income.”

Understanding Your Retirement Benefits: Part 1 – CPP

Posted By Financial Independence Hub | October 1, 2015

By Marie Engen, Boomer & Echo

Imagine celebrating at your retirement party without a clue as to how much you can expect to receive in pension income. It sounds incredible, but many people who will end their career in a few years are in just that situation.

When you work for an employer you receive your salary, but once retired your income can come from multiple sources. You need to know how much you will receive from these sources.

Since CPP is one of the cornerstones of retirement income, this is where I will begin.

A brief history of the CPP

The Canada Pension Plan (CPP) is a national public plan that covers people in all provinces except Quebec. It was created in 1966 by the government under Lester B. Pearson. Quebec wanted its pension monies to be under their control and so became the only province with its own program.

When CPP was created the contribution rate was 1.8% of pensionable earnings, to be shared by employers and employees; self-employed persons were on the hook for the full amount. The first deductions were so minuscule that they were unsustainable to fund the retirement costs of the baby boom generation that was just beginning their working years. Also, life expectancies were starting to increase substantially. Continue Reading…

Optimizing CPP: how to avoid missing out on $100,000 of retirement income

Posted By Financial Independence Hub | September 29, 2015

Because the Financial Independence Hub was moved Monday to a new server to accommodate ever-rising volumes of web traffic, we took the liberty of posting the normal Monday “Hub” blog at sister site FindependenceDay.com. The guest blog below is on optimizing CPP benefits: the same subject as my Financial Post column that ran online Monday under the headline: Optimizing Your CPP is no trivial exercise. Now let’s get it from the horse’s mouth: Doug Dahmer. — Jonathan Chevreau

By Doug Dahmer, Emeritus Retirement Income Specialists

Special to the Financial Independence Hub

Canadians are an easy going and trusting people. Every year thousands of people, across the country, carelessly start their CPP payments and in the process forego hundreds of thousands of dollars in payments to which they are entitled.

I call this “The Great Canadian Pass Up.”

To ensure you fully appreciate the value of making the right decision, before you elect to a start your Canada Pension, Emeritus Retirement Income Specialists has created a powerful tool called the CPP Optimizer. Give it a try at: www.cppoptimizer.com.

Most people seriously underestimate their lifetime CPP income entitlement:

Your CPP benefits are a big deal. For a couple, where both spouses have regularly contributed to the CPP plan, the lifetime CPP income they can anticipate will likely exceed $700,000. Consequently it represents an important strategic contributor to the creation of a sustainable retirement income. Therefore, decisions about this benefit need to be taken seriously.