Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.
The all-virtual summit, now in its 7th year, features more than 35 speakers, including Yours Truly, as well as several other financial commentators pictured to the left: Ellen Roseman, Rob Carrick, Preet Banerjee, Ed Rempel, Lisa Hannam and many more.
Other familiar names that will be familiar to Hub readers include Dale Roberts, Jason Heath, Robb Engen, Kornel Szrejber and Barry Choi.
Here are some of the topics:
How to plan your own retirement at any age
How to save money on taxes by optimizing your RRSP to RRIF transition
Get Into Your First House with the New FHSA (First Time Home Savings Account)
Retirement Decumulation Strategies
Adjusting to the World of High Interest Rates
Using Annuities and Equities to Create a Retirement Paycheque
The Pension Paradox: Lump Sum vs Cash for Life
Plan your personalized combination of a DIY portfolio alongside an annuity for a customized stream of retirement asset growth + monthly income.
What Canadian real estate investments looks like in 2023
How to deal with inflation on your bills and in your investment portfolio
The best Canadian personal finance books of all time! (That’s my topic).
When to take your OAS and CPP
Travel for free with Canada’s loyalty rewards programs
The founder of the Summit is Kyle Prevost (pictured right), who is also a writer at Million Dollar Journey, and writes the weekly MoneySense Making Sense of the Markets column, among other things.
Kyle also is the creator of a multi-media course titled 4 Steps to a Worry-Free Retirement, which I’ll be featuring in my next MoneySense Retired Money column.
The All-Access pass costs $89 if you act quickly enough. Plus, there’s a no questions asked money-back guarantee for those who change their mind.
Prevost will be sending email updates most of the week. Here’s what Monday’s said (in part):
Individuals with less than $200,000 in non-housing assets immediately before retirement had spent down (at the median) about one-quarter of their assets.
Those with between $200,000 and $500,000 immediately before retirement had spent down 27.2 percent.
Retirees with at least $500,000 immediately before retirement had spent down only 11.8 percent within the first 20 years of retirement at the median.
About one-third of all sampled retirees had increased their assets over the first 18 years of retirement.
The natural conclusion from these results is that retirees aren’t spending enough, or that they oversaved before retirement. However, reading these results left me with some questions. Fortunately, the study’s author answered them clearly.
At what moment do we consider someone to be retired?
People’s lives are messy. Couples don’t always retire at the same time, and some people continue to earn money after leaving their long-term careers. This study measures retirement spending relative to the assets people have at the moment they retire. Choosing this moment can make a big difference in measuring spending rates.
From the study:
Definition of Retirement: A primary worker is identified for each household. For couples, the spouse with higher Social Security earnings is the assigned primary worker as he/she has higher average lifetime earnings. Self-reported retirement (month and year) for the primary worker in 2014 (latest survey) is used as the retirement (month and year) for the household.
There is a lot to unpack here. Let’s begin with the “self-reported retirement” date. People who leave their long-term careers tend to think of themselves as retired, even if they continue to earn money in some way. Depending on how much they continue to earn, it is reasonable for their retirement savings either to decline slowly or even increase until they stop earning money. What first looks like underspending turns out to be reasonable in the sense of seeking smooth consumption over the years.
The next thing to look at is couples who retire at different times. Consider the hypothetical couple Jim and Kate. Jim is 6 years older than Kate, and he is deemed to be the “primary worker” according to this study’s definition. Years ago, Jim left his insurance career and declared himself retired, but he built and repaired fences part time for 12 more years. Kate worked for 8 years after Jim’s initial retirement.
Their investments rose from $250,000 to $450,000 over those first 8 years of retirement, declined to $400,000 twelve years after retirement, and returned to $250,000 after 18 years. Given the lifestyle Jim and Kate are living, this $250,000 amount is about right to cover their remaining years. Although Jim and Kate have no problem spending their money sensibly, they and others like them skew the study’s results to make it seem like retirees don’t spend enough.
What is included in non-housing assets?
From the study:
Definition of Non-Housing Assets: Non-housing assets include any real estate other than primary residence; net value of vehicles owned; individual retirement accounts (IRAs), stocks and mutual funds, checking, savings and money market accounts, certificates of deposit (CDs), government savings bonds, Treasury bills, bonds and bond funds; and any other source of wealth minus all debt (such as consumer loans).
So cottages and winter homes count as non-housing assets. This means that a large fraction of many people’s assets is a property that tends to appreciate in value. Even if they spend down other assets, the rising property value will make it seem like they’re not spending enough. It is perfectly reasonable for people to prefer to keep their cottages and winter homes rather than sell them and spend the money. Continue Reading…
Things appear to be looking up for members of Defined Benefit [DB] pension plans in Canada, despite inflation and rising fears of a looming recession.
In the third quarter, Canadian defined benefit (DB) pension plans continued to improve, according to the Mercer Pension Health Pulse (MPHP), released on Monday.
The MPHP, which tracks the median solvency ratio of DB pension plans in Mercer’s pension database, finished the third quarter at 125%, up from 119% last quarter. At the beginning of the year, the MPHP was at 113%, as shown in the chart above left.
This strengthening appears somewhat counterintuitive, as pension fund asset returns were mostly negative in the quarter, Mercer said in a news release. Over the quarter, bond yields increased, which decreases DB liabilities. This decrease, along with a fall in the estimated cost of buying annuities, “more than offset the effect of negative asset returns, leading to stronger overall funded positions.”
Plans that use leverage in the fixed-income component of their assets will not have seen this type of improvement, it added.
Of plans in its database, at the end of the third quarter 88% were estimated by Mercer to be in surplus positions on a solvency basis (vs. 85% at the end of Q2). About 5% are estimated to have solvency ratios between 90% and 100%, 2% have solvency ratios between 80% and 90%, and 5% are estimated to have solvency ratios less than 80%.
Ben Ukonga
“2023 so far has been good for DB pension plans’ financial positions,” said Ben Ukonga, Principal and leader of Mercer’s Wealth practice in Calgary [pictured on right],” “However, as we enter the fourth quarter, will the good news continue to the end of the year?”
The global economy is still on shaky grounds, Mercer says. “A recession is not completely off the table, despite continued low unemployment rates. Inflation remains high, potentially back on the rise, and outside central banks’ target ranges.”
Geopolitical tensions also remain high, reducing global trade and trust and fragmenting global supply chains – which further reduces global trade. And the war in Ukraine “shows no sign of ending – adding economic uncertainty atop a geo-political and humanitarian crisis.”
Mercer also questions whether recent labour disruptions at U.S. auto manufacturers will be resolved quickly, with Canadian workers expecting large wage increases, leading to further inflationary pressures.
Interest rates may stay at high levels
Mercer also worries that central banks globally may continue to keep benchmark interest rates at elevated levels.
“Given the delayed effect of the impact of interest rate changes on economies, care will be needed by central banks to ensure their adjustments (and quantitative tightening) do not tip the global economy into a deep recession, as the full effects of these actions will not be known immediately. As many market observers now believe, the amount of quantitative easing during the COVID-19 pandemic was more than was needed.”
Most Canadian DB pensions are in favourable financial positions, with many plans in surplus positions, the release says: “Sponsors who filed 2022 year-end valuations will have locked in their contribution requirements for the next few years, with many being in contribution holiday territory (for the first time in a long time).”
That said, it added, DB plan sponsors should not be complacent: “Markets can be volatile, and given that plans are in surplus positions, now more than ever is the time for action, such as de-risking, pension risk transfers, etc. These actions can now be done at little or no cost to the sponsor.”
Mercer also said DB plan sponsors should “remain cognizant of the passing of Bill C-228, which grants pension plan deficits super priority over other secured creditors during bankruptcy and insolvency proceedings.” Continue Reading…
Every day, the United States welcomes people worldwide who epitomize the American dream. After settling into their new country, many buy homes, launch businesses, become outstanding citizens and live prosperous lives.
However, moving to another country often presents financial challenges. Those new to the U.S. should remember these tips when setting up and managing their assets after immigrating.
1. Open a Spending Account
A spending account will allow you to store your money and make everyday transactions safely, such as clothing or groceries. It may help to see if your bank in your native country has international branches. In that case, you could likely open an account in the U.S. without changing institutions.
TD Bank and RBC Bank are just some of the Canadian financial institutions with U.S. branch offices. If not, many banking institutions simplify opening a new spending account and may even offer some perks.
2. Ask Questions
There is much to know about financial management in a new country. The best way to learn is to reach out for support. Some experts — bankers, accountants and financial advisors — specialize in helping immigrants and will offer guidance on taxes, investing, and other benefits.
Likewise, seeking community organizations or local government agencies to bring yourself up to speed is a good idea. Community groups in particular are an excellent way to connect with other immigrants, and learn with and from one another.
3. Build Credit
Building credit will allow you ample opportunities in your new country: a daunting feat if you’ve established excellent credit in your native country and must start over. Fortunately, some apps allow you to import your previous credit.
Like any U.S. borrower, establishing legal residency and maintaining good credit is crucial for loan eligibility. Lenders require at least two to three years of credit history to qualify. With excellent credit, newcomers can take out a loan to purchase a home, refinance or take out a second mortgage. You can use a second mortgage to pay off credit cards or fund home projects.
4. Set a Budget
Immigrating to the United States can be expensive, with international relocation costs totalling anywhere between $2,000 USD and $10,000 USD. With these and the various expenses that follow, it’s important to create a budget for your relocation.
U.S. goods may cost less or more than your native country. Once you arrive, you’ll have a much better idea of what to expect from your monthly spending. Items you may not consider at first are car and health insurance, or the fees to obtain a driver’s license. Creating a budget by categorizing your spending — food, medical, housing and transportation — will help you determine how much you’ll need to set aside from your paycheck. Continue Reading…
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The founder of the Summit is Kyle Prevost (pictured right), who is also a writer at Million Dollar Journey, and writes the weekly MoneySense Making Sense of the Markets column, among other things.
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