All posts by Jonathan Chevreau

Reflections From The Early Days Of Spending In Retirement, Part 3 — Taxes! 

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patgass
Patricia Gass

By Patricia Gass, CPA

Special to the Financial Independence Hub

This week’s skill-testing question:

What’s The One Expense In Retirement That Most People Get The Least Satisfaction Out Of Spending?

Hint:

fireplaceI love a warm fire on a cold, snowy day. But that same fire, if not properly contained, can do  damage to anything in it’s way. Kind of like taxes.

Perhaps extreme to compare a roaring fire to taxes, but hear me out. Whatever goes into the fireplace (or to the government), you will never see (or spend) again.

Fortunately, much can be done with a little knowledge and planning. It’s useful to think of taxes as yet another, substantial retirement expense that needs to be managed.

Revisit/Understand Your Overall Financial Situation

At least 10 years before retirement, do some critical thinking about your finances.

Where will your retirement income and (cash flow) come from and when? What is the breakdown between “tax-paid” and “tax-deferred” money? Will your retirement cash flow be enough to meet your needs (or too much … a nice problem to have!)? How likely are you to receive an inheritance (or other money) that could push you into a higher tax bracket? Would it make sense to retire early and withdraw some funds sooner at a lower tax rate?

Know (And Plan For) Your Tax Rate Continue Reading…

Let’s give the word Retirement an early Retirement

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Here’s a piece I did recently for Money Magazine, entitled Let’s retire the word Retirement. For the convenience of one-stop shopping and archival purposes, I’ve also reproduced the piece below, with a few changes and links added since it was originally published in the current issue of the magazine.

By Jonathan Chevreau

This magazine, like its sister web site and its competitors, is devoted to the topic of money. That’s an obvious statement but stay with me.

We all need money to live, both in the present and the future. This basic fact has created the entire financial industry, dedicated to the notion of saving for a rainy day so we’ll have enough money both for today’s needs as well as tomorrow’s. And the week after, the year after that and so on, bringing us ultimately to the concept of Retirement.

Retirement is the greatest marketing bonanza ever conceived for the financial industry. If a mutual fund company, bank, insurance firm or ETF maker runs an ad, what is the major concept behind its marketing?

senior couple of old man and woman sitting on the beach watching
How Advertising portrays Retirement

Typically, it features a mature couple frolicking on a beach or golf course, care-free, active, smiling, still in love and doing nothing that resembles work.

I don’t know when work acquired such a bad reputation but I’d venture  to say that in Canada, this phenomenon started to gather steam when London Life popularized its Freedom 55 campaign. Continue Reading…

Weekly wrap: Social Security a House of Cards?, under-saving Americans & workaholic Boomers

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at the Netflix "House of Cards" Season 2 Special Screening, DGA, Los Angeles, CA 02-13-14
President Underwood wants to take away your Social Security

By Jonathan Chevreau

If you’ve been binge-watching the new third season of House of Cards on Netflix, you’ll know that the nefarious Frank Underwood — now the fictional president of the United States — has decided Social Security is a luxury the nation can no longer afford, as is Medicare and Medicaid.

Instead, a new program dubbed AmWorks (for America Works) aims to provide a job for anyone who wants one. The Washington Post poses the question Could the House of Cards America Works program actually work?

Probably not, but there’s been a lot of online commentary on the very notion of killing the 80-year old Social Security program, given how many Americans have little retirement savings resources other than it. One is this piece from the Independent Women’s Forum, entitled House of Cards gets Social Security policy right, but messaging wrong.

If the prospect of losing Social Security doesn’t frighten you, maybe this will:  New York Times reports that many Americans will run out of money in retirement unless at least two things happen: one, they need to save more, and two, what money they do need to save needs to be invested more wisely, which means avoiding high-fee mutual funds. It blames mutual fund expense ratios of 1.12% of assets and that’s in the United States. Canadian mutual fund MERs are roughly twice that high.

So the solution is to just keep working, perhaps in an Underwoodian variation of AmWorks? Not so fast! Personal finance author and columnist Helaine Olen writes an insightful piece in Slate on what she calls the “Semi-Retirement Myth.” As the online site puts it, “Don’t buy the tales of meaningful work into your 70s. Your retirement is inevitable — and bleaker than the last generation’s.”

Better hope for “Freedom Six Feet Under.” Unfortunately, as the Hub’s Longevity & Aging section continually reminds us, odds are we’re all going to be living longer and healthier than we once may have imagined. Perhaps the canary in the coal mine is Irving Kahn, who passed away last week at age 109. One of the world’s oldest active investors, Kahn was around to experience the crash of 1929. Here’s the obituary from the Telegraph.

On the same subject, sadly comes news of the death of Thomas Stanley, co-author of the groundbreaking bible of personal finance, The Millionaire Next Door. Here’s a good tribute on him from the New York Times.

Globe & Mail on Reforming Retirement

North of the border, the Globe & Mail has been running a series on reforming retirement. Last week it weighed in to the TFSA debate. Continue Reading…

Life after Employment: what’s your Encore act?

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Encorecover

By Jonathan Chevreau

I’ve been reading several books on Encore Careers, second acts and the like. A few weeks ago, we reviewed Marc Freedman’s The Big Shift. Over a one-week break in Florida, I read Freedman’s earlier book, Encore, subtitled Finding Work That Matters In the Second Half of Life.

Last year, on our sister site, we also reviewed Stephen Pollan’s 2003 book on the same topic:  Second Acts.

All these books start with the premise that the baby boom generation may end up living a lot longer than they may have once imagined, which goes double for their own children and the generations coming after them.

Work that matters

If you believe that living to 100 is a distinct possibility rather than a one-in-a-thousand outlier event, then it follows that financial planning needs to take these extra years into account. Continue Reading…

How to overweight your portfolio for an oil comeback (and avoid Gambler’s Ruin)

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Oil pumps on sunset

By Jonathan Chevreau

Here’s my latest Motley Fool blog, entitled (nicely by them, I thought!) How to overweight your portfolio for an oil comeback — and avoid Gambler’s Ruin.

Gambler’s ruin is a phrase popularized by Rotman Business School finance professor Dr. Eric Kirzner and refers to having a good idea about a sector (example energy) but choosing the wrong individual stock to capitalize on it (example Enron back in the day or in the telecommunications sphere a stock like Nortel Networks). The risk reduction via diversification is the strength of specialized ETFs focused on particular sectors.

The piece explores the idea of whether Canadian investors already have sufficient exposure to oil and gas via ETFs or index mutual funds based on the broad indices.

Because the Motley Fool requires full disclosure of the individual holdings of the writer, those curious can see my personal holdings in the energy sector in the disclaimer at the end of the piece. As per the full article, there will of course be more exposure to the energy sector via the broad ETFs.