All posts by Jonathan Chevreau

Why living off dividends no longer appeals to me

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Robb Engen, Boomer & Echo

By Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

When I envisioned my retirement years, I dreamed of being so unbelievably wealthy – so fabulously rich – that I’d happily live off the income generated from my multi-million dollar investment portfolio. As I began my investing journey, the idea of living off the dividends had tremendous appeal. After all, what retiree wouldn’t love the thought of collecting a steady stream of dividend cheques while their principal investment remains intact?

There were also some crazy assumptions about what it would take to generate the kind of income I’d need to maintain my lifestyle in retirement. Looking back, it was foolish to assume that a $1,200,000 portfolio can produce up to $90,000 in income each year, when less than half that amount is more realistic (assuming a 3.5% yield).

Related: Financial independence – Why I pushed it back five years

The trouble with a “live off the dividends” approach is Continue Reading…

Thinking of making a $4,500 TFSA contribution right now? Read this first

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By Jonathan Chevreau,

Financial Independence Hub

Preamble: This is an expanded version of a blog originally posted late Wednesday. I’ve retained the original beginning after this preamble, since it concerns action we can now take with our expanded TFSAs. Or can we? As the second half of the revised blog recounts, the newspapers today are full of accounts about super sized TFSAs becoming a real political issue.

According to Tuesday’s federal budget, Canadians can now put an additional $4,500 into their Tax Free Savings Accounts (TFSAs), effective immediately. However, when I made inquiries at my friendly local financial institution, I was dissuaded from this course. You can  try if you want but it’s basically at your own risk until the proposal is formally enshrined in legislation later this summer.

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Jamie Golombek, CIBC Wealth

I checked with CIBC Wealth’s in-house tax guru, Jamie Golombek, who issued the following statement:

“We are awaiting a response from Finance and CRA — here is my official comment: The Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to a total of $10,000, up from $5500, the current 2015 TFSA dollar amount. On the expectation that this legislation will pass, clients may wish to contribute this additional amount to their TFSAs. In the event the legislation is not ultimately finalized, in my view, it is unlikely that the CRA would penalize taxpayers for acting on draft legislation: however, we expect CRA to comment on this over the next few days.”

Consider transfers in kind and taking a one-time tax hit

I might add that coming up with $4,500 may or may not be an issue right now, depending on whether you expect a tax refund or have to pay taxes for the looming tax filing deadline. Keep in mind that you don’t have to fund TFSAs with new cash: if you have significant non-registered investments you can “transfer them in kind” into the TFSA. Continue Reading…

A visual guide to the Budget

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wealthbarlogoIf you prefer pictures and graphics over text, you may enjoy this visual guide to Tuesday’s federal Budget, prepared by Vancouver-based robo-advisers, Wealthbar.com.

Until we figure out how to embed it here at the Hub, we’ll just send you over to the graphic housed at Wealthbar’s site. Just click on the red link below:

http://blog.wealthbar.com/visual-guide-to-the-2015-canadian-federal-budget/

Budget 2015: The Findependence Trifecta comes home!

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Horse racingHere’s my latest MoneySense blog, covering Tuesday’s federal budget: Seniors Hit Jackpot with Budget 2015.

As you will note from the adjacent illustration of a horse race, we have focused on the big three measures we called earlier today the Findependence Trifecta.

As we noted on the Hub shortly after 4 pm, all three measures came through as telegraphed in the major media in recent days, including MoneySense. That is, almost-doubled TFSA annual contribution amounts ($10,000), reduced RRIF withdrawal rates and reduced tax on small businesses.

Now what’s all this about trifectas? Back in February, we ran a blog both at the Hub and at MoneySense about my reflections on harness racing in Florida, and its (somewhat remote) application to asset allocation. For those not familiar with the term trifecta, here is Wikipedia’s definition.

In a nutshell, horse-racing enthusiasts (“gambling” is such a harsh term!) make a bet on three specific horses placing one-two-three in a particular race. As you can imagine, this is not too likely: it’s a lot easier to bet on a single horse to “show” by coming in either first, second or third. But to  correctly identify the first-, second- and third-place winners in exact order involves considerably longer odds. So it’s a big deal if you actually get it right and win a massive bet called the trifecta.

Of course, when it comes to financial independence, the analogy breaks down a little. But as I note in the MoneySense piece linked above, I think we should all be happy with the budget. Enjoy your potential future winnings from the Findependence Trifecta! 

For convenience and archival purposes, we’ve also republished a version of the blog below: Continue Reading…

Budget 2015: Savers, retirees hope for more TFSA room, lower RRIF minimum withdrawals

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Finance Minister Joe Oliver (Department of Finance/Flickr)

By Jonathan Chevreau

Journalists and financial experts will be entering a “Lock-up” this morning in Ottawa, getting roughly a six-hour head start on the rest of us on the contents of the 2015 federal budget.

Even so, a combination of leaks and informed speculation give us a pretty good idea about the contents, which will gush forth within seconds of 4 pm, when the embargo is lifted.

Here at the Financial Independence Hub, we will be focusing on three main measures that if announced will do much to speed or improve our collective “Findependence.” Our hoped-for “trifecta” from Finance Minister Joe Oliver (pictured above) includes the much-delayed promise of a doubling of annual TFSA limits, a lowering of minimum withdrawal limits for RRIFs, and lower tax rates  for small business. Continue Reading…