With the deadline for Registered Retirement Savings Plans quickly approaching, thousands of Canadians will be getting out their cheque books to make their annual RRSP contributions. While saving for the future is always a good thing, the choice between RRSP or the Tax-Free Savings Account (TFSA) is not that simple.
Too many Canadians blindly make RRSP contributions without knowing if they will be better off in the future by making a TFSA contribution instead. Future RRSP withdrawals count as income and could increase your marginal tax rate whereas TFSA withdrawals do not count as income.
Here are five reasons why you should consider investing in your TFSA instead of your RRSP: Continue Reading…
We’ve been hearing a lot of a new type of investing management model. A “Robo-Advisor” is an online-oriented service that automatically selects and manages a portfolio that is conducive to an investor’s risk tolerance.
There has been a lot of commentary about the prospects of this type of service gaining traction, especially with younger people or those with minimal assets but who want to get exposure to the overall stock market without doing all the legwork.
Much of this revolves around offering investors more transparency as it pertains to costs as well as back-office efficiencies and back-office savings that investors can leverage. The robo-advisor investment ideology revolves around a passive investment strategy by utilizing low commission Exchange Traded Funds (ETFs) allocated across various asset classes and that are held for long periods of time. Periodically, the asset mix is automatically adjusted if certain percentage makeups become too high or too low. A wealth of research has shown that a passively managed portfolio of ETTs can outperform a portfolio of actively managed assets.
This is all well and good. Ultimately, what will drive this service is the performance of these algorithm-managed portfolios. Instead of writing about these services in theory, I thought I would put my money where my mouth is and actually invest some money with a Robo-Advisor service and blog about the whole experience. More importantly, I will track the performance and costs these services generate. Continue Reading…
Sheryl Smolkin’s Retirement Redux site passes on recent financial institution surveys that show The Majority of Retirees Enjoy Their Lifestyle. Well I should hope so, after spending decades slaving and saving for this pivotal life event!
But in this weekend’s lead editorial, on behalf of the Canadian economy, the Globe & Mail begs the nation’s seniors to “please don’t retire yet.” It invokes Sun Life’s Unretirement index survey reprised in Friday’s blog here at the Hub. Well, actually, Mr. Economy, there’s a lot of age prejudice in the workplace and people don’t always choose to retire.
For those just starting on their journey to financial independence, take heart from Punch Debt’s declaration that saving up The first $100,000 is the hardest. I dare say your first million is no walk in the park either!
Via Sliced Investing, The Chicago Financial Planner (aka @rwohlner) provides this primer on hedge funds.
Earlier this week there was extensive mass media coverage of the latest Sun Life “Unretirement” survey, which found more Canadians now expect to work full-time at age 66 than the number who are retired.
Given that the traditional retirement age has been 65, and remains the age many older investors think of collecting Old Age Security and the Canada Pension Plan, the general tone of this coverage was that the idea of working to such an “advanced” age is in itself scandalous.
Regular readers of the Hub will know what I’m about to say, and did say Wednesday night on a CTV item on the survey, which you can find here at Findependence.TV’s Video Hub. With rising trends to longevity, more and more people are choosing to work longer or feel financially compelled to do so. Indeed, governments around the world generally would love to see us all work longer and pay taxes longer, which is why the age of OAS onset is being bumped up to 67 for younger Canadians.
Plan for Longevity, not Retirement
I still love the positioning of Mark Venning at ChangeRangers.com, who says we should be planning not for Retirement, but for Longevity. Continue Reading…
We all know how the story goes: You get a hot stock tip from your uncle who works in the oil & gas industry, or from your brother-in-law who works in the tech space, or from your mortgage broker (who’s an idiot).
I’m sorry, but just stop right there. No, Tiger Mike’s Drilling Co. is NOT going to be the next Suncor, and Flappy Bird (or whatever the kids are playing these days) is definitely not going to be the next Facebook or Instagram. And your mortgage broker is still an idiot, no matter what his day-trading recommendation was this time. So why are you listening to him?
Many investors obsess over fees, trying to shave tenths or even hundredths of a percentage from their mutual fund or ETF expenses. But some investors are willing to throw away those benefits by trying (and failing) to hit a home run picking junior mining stocks on the Venture Exchange.
“Play money” doesn’t belong in your retirement plan
The problem with a core-and-explore approach is when investors view “explore” as play money to gamble on risky penny stocks or the next up-and-coming trend. Was it play money when you first decided to save instead of spend your hard-earned dollars? Why is it different now that the money is in your brokerage account?
Why take that kind of risk with your investments? If you feel like gambling, go to a casino. “Play money” does not belong in your retirement plan.
I get it – it can be fun to try and find the next Microsoft or Google from a list of up-and-comers. But the odds of that happening are overwhelmingly not in your favour.
There’s a reason why most “hot stock tip” stories end up as cautionary tales for investors. So why do we keep doing it?
Remember, you don’t need to swing for the fences when a base hit will do just fine.
In addition to running the Boomer & Echo website, Robb Engen is a fee-only financial planner. This article originally ran on his site [note the comments that follow it] and is republished here with his permission.
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