Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.
At least one of Canada’s big banks is giving clients the go-ahead to top up their Tax-Free Savings Accounts by the extra $4,500 amount specified in Tuesday’s federal budget.
CIBC Wealth’s Jamie Golombek says the Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to $10,000, up from $5,500, the current 2015 TFSA dollar amount. But critically, he added:
CIBC’s Jamie Golombek
“We have received confirmation from the Canada Revenue Agency that, while the legislation is subject to Parliamentary approval, consistent with its general approach for proposed income tax changes, it is administering the measure on the basis that $10,000 is the new TFSA annual contribution limit. Clients may therefore proceed to contribute to their TFSA based on this proposed law.”
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).
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…
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…
So you and your spouse have decided to retire. At some point in your retirement planning you must ask yourself where you would like to spend your Golden Years. The following questions and insight should place you on the right path for finding just the location that suits your needs.
First things first
The first question you must ask yourselves is whether you want to stay in the home in which you are currently living or would like to move elsewhere. Retirement is a big step. Sometimes people feel more secure staying in familiar surroundings because it makes the transition to your new lifestyle smoother. Others, for financial reasons, a change of pace, health reasons, or for better weather, want to relocate. In this case, the next decision you must make is whether you want to stay in your home country or move overseas.
If you want to stay in your home country you must decide what sort of climate is most attractive to you. Do you want to experience the four seasons or have a more moderate, year-round climate? Do you like mountains or beaches? What size of city or town do you most enjoy? These questions are important because they automatically exclude places you won’t need to research. Knowing what you prefer in climate, city size and geographical configuration carries a lot of weight in terms of your happiness quotient.
Another thing to consider is that if you choose a town or small city, are there adequate medical facilities nearby? Larger cities tend to have a full range of medical care. Smaller towns generally have clinics and a variety of doctor’s offices, but perhaps not the equipment needed for complex medical situations.
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