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Want to save money on Energy Bills? Go Solar

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By Gary Bordeaux

Special to the Financial Independence Hub

Most people are well aware that solar power is better for the environment, but did you know it can have a positive impact on your wallet, too? Start saving today by converting your home to solar.

Affordability

Year after year the cost of installing a solar panel system has been decreasing dramatically. In the last decade alone costs have dropped nearly 70 per cent, putting solar energy well within the financial reach of most homeowners. More options for ownership have also become available, and you can now finance or lease a system. That means you can see immediate savings on your energy bill with lower upfront costs. Contact the most trusted Colorado solar provider to learn how you can affordably convert to solar today.

Reduced utility bills

It’s almost a given that when you rely on a traditional energy source your bill will increase each year. What if instead of paying more and more you could watch that payment decrease instead? With a well-designed solar installation, your utility bills will shrink: potentially even down to zero if your system generates all of the energy your home requires.

No dynamic pricing

What is dynamic pricing? It’s when a service provider raises rates at peak times, and it’s becoming the norm in the energy industry. Instead of one flat rate for energy usage throughout the day, utility companies increase pricing when the demand is highest. Most home energy consumption occurs from 4 p.m. to 9 p.m. on weekdays, so utility companies raise the cost of electricity during that time period. It’s meant to discourage use during high-demand hours, but what it really does is drive up the total you see on your bill.

When you’re off the grid, you aren’t subject to paying more during peak periods. You’ve generated your own abundant supply of solar energy that is 100 per cent free to use, regardless of when you choose to use it.

Usage rebates

Savings are provided to solar owners through a process called net metering, which makes it possible for you to profit from the energy made by your panels. Continue Reading…

The MoneySense ETF All-Stars 2020

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After a slight delay because of the Coronavirus and the bear market, MoneySense.ca has just published the 2020 edition of its annual feature, the ETF All-Stars. You can find the full report by clicking on the highlighted headline: Best ETFs for Canada 2020.

There you’ll find an overview of the changes this year as well as how our 8-person panel of ETF experts view the bear market. You can click on each tab (example Canadian equities, fixed income, etc.) to find the chart of the updated All-stars list. Each of the subheadings below contain hyperlinks to the underlying MoneySense content.

While our expert panel added a number of new ETFs this year – some in global fixed income, several low-volatility ETFs and two new families in the One-Decision Asset Allocation category – virtually all our last year’s picks returned, most unanimously. The only 2019 pick that was removed for the 2020 edition is ZPR, as preferred shares had another year of disappointing performance.

This seems to vindicate our long-term approach. Our list now consists of an elite 42 “All-Star” picks: a big jump up from 25 last year, plus 8 more individual “Desert Island” picks. So in total, we have 50 recommended ETFs, which should be a good start for readers in narrowing down the wealth of possible choices in this growing cornucopia of choice.

Canadian Equities

All four Canadian equity ETFs return: VCN, XIC, HXT and ZCN (See accompanying chart for full ETF names) plus we added BMO’s low-volatility Canadian equity ETF,  ZLB. See discussion on Low-vol ETFs further down. Remember that Canadian stocks are also amply represented in the One-Decision Asset Allocation ETFs discussed below.

US equities

The panel opted to retain all four of our 2019 US equity ETF picks, while adding three low-volatility ETFs. Returning picks are the U.S. Total US Market XUU from iShares, and three low-cost plays on the S&P500 index: VFV and VSP from Vanguard, and BMO’s ZSP. Readers should also check the latest crop of desert island picks: several panelists went with specialty US equity ETFs, such as HXQ.U from Mark Yamada and, — new this year — Yves Rebetez selected NXTG as a 5G (fifth generation wireless) Nasdaq play. The PWL team of Felix and Passmore picked a US small-cap value play: Avantis U.S. Small Cap ETF (AVUV/NYSE Arca).  And Dale Roberts chose the Vanguard Dividend Appreciation ETF (VIG/NYSE Arca).

International and Global equities

The panel retained our five international or global ETF All-stars from 2019: two from iShares (XAW and XEF) and three from Vanguard (VXC, VEE and VIU). But we also added the three low-volatility ETFs: ZLI, RWW/B and XMW. See the extended discussion of all these new low-volatility ETFs in the relevant section below. Continue Reading…

Reassessing your Retirement plans in the COVID-19 era

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By Scott Evans

Special to the Financial Independence Hub  

Living through a global pandemic magnifies the importance of being prepared for the unexpected in your financial future. In light of upcoming months of potential economic instability, whether you have only begun to think about retirement or already have a comprehensive plan, now is the time re-assess your retirement strategy.

The COVID-19 pandemic has added a new level of uncertainty and fear to many retirement portfolios. There is the potential for more volatility or declines in retirement assets resulting in the need to save more prior to retirement, or work longer than originally planned. With that being said, now is not the time to panic. Now is the time to take the time to re-assess, and if necessary, adjust your plans so that your retirement goals stay on track.

Reassessing your plans

A comprehensive financial plan should do a lot more than just forecast returns on your investment assets.  Your retirement plan should have a solid foundation that starts with being prepared for the unexpected. For example, having an emergency fund of three to six months income should provide you with a buffer if you lose your job or face a major expense. Life and disability insurance can protect your family from unexpected health issues that would otherwise derail retirement plans. And creating a will ensures the assets you’ve built up will go to the right people.

Once you’ve got your foundation you can turn to your retirement plan. To get started, you should be considering your future cash flow requirements during retirement, and the assets and sources of income that will be available to you. These may include your personal retirement savings, real estate, as well as pensions and government benefits.

Securing your retirement investments

A well diversified investment portfolio is key to battling uncertain times, both now and in the future. Below are some tips to keep in mind to handle volatility:

  • Your asset allocation should be based on your own retirement goals and your own risk tolerance. The recent market volatility is a good time to reassess your comfort level with your current allocation. If you have been losing sleep at night over the market volatility be sure to share that with your advisor. Continue Reading…

Retired Money: Should seniors take the 25% RRIF reduction option in 2020?

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My latest MoneySense Retired Money column looks at a specific Covid-19 measure the federal Government provided to seniors with RRIFs: the option to take 25% less than usually required in 2020. you can get full details by clicking on the highlighted text: Should retirees reduce RRIF payments during COVID-19?

Normally, seniors must convert their RRSPs to a RRIF or a registered annuity before the end of the calendar year they turn 71. Then they must start withdrawing a certain mandated annual percentage of the value of the RRIF each year, starting the year after it was set up. In recent years, it has started at a 5.28% rate at age 71, rising steadily until it hits 20% at age 95.

These withdrawals are fully taxable, and there have been concerns that this may deplete capital faster than can be replenished by the miniscule returns on fixed income.

On March 25, 2020, soon after the Coronavirus panic became apparent, the federal government’s COVID-19 Economic Response Plan gave RRIF owners the option of taking 25% less than the mandated annual minimums in 2020. (This also applies to Life Income Funds and locked-in RRIFs.)

Matthew Ardrey, vice president and wealth advisor with Toronto-based Tridelta Financial, cites the hypothetical example of Dave, who has $100,000 in his RRIF on Jan 1. 2020 and turns 72 later in 2020. Normally his 5.4% minimum withdrawal would be $5,400 but with the change in legislation he can choose to take out just 4.05%, or $4,050. He can also choose to take more than the minimum if he wants.

Various reasons to take out less than required

MoneySense.ca/Photo created by freepik – www.freepik.com

Why go this route? The main reason is to reduce taxes payable for the year, keeping in mind RRIF payments are fully taxable income. RRIF income may impact OAS benefit repayments: a client near the OAS threshold for repayment may end up under that threshold it if the election is chosen.

Apart from tax and OAS considerations, there may be valid investment reasons. If the RRIF holder is heavy in equities and underwater after market declines, Ardrey says the reduced minimums may give the portfolio a chance to recover, and on a tax-deferred basis. Continue Reading…

Debunking the 4% withdrawal Rule

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The 4% rule is a framework to think about how to safely draw down your retirement savings without fear of outliving your money. It was developed in 1994 by financial advisor William Bengen, who concluded that retirees could safely withdraw 4% annually from their portfolio over a 30 year period without running out of money.

Critics of the 4% rule argue that it doesn’t hold up in today’s environment because, one, bond yields are so low, and two, because it fails to account for rising expenses (inflation) and investment fees (costs matter). We’re also living longer, and there’s a movement to want to retire earlier. So shouldn’t that mean a safe withdrawal rate of much less than 4%?

Financial planning expert Michael Kitces takes the opposite view. He says there’s a highly probable chance that retirees using the 4% rule will come to the end of 30 years with even more money than they started with, and an extremely low chance they’ll spend their entire nest egg.

The problem lies in the data and testing for the absolute worst case scenarios, which in Bengen’s research included the Great Depression. Bengen looked at rolling 30-year periods to test the safe withdrawal rate and found the worst case scenario was retiring right before the Great Depression in 1929. Even with that terrible timing, a retiree could safely withdraw 4.15% of his or her portfolio.

Are FIRE savers bad at math?

Kitces broadened the data set and found two more ‘worst case scenarios’ which included 1907 and 1966. But what was interesting is the average safe withdrawal rate throughout every available period in the data set was 6% to 6.5%. Continue Reading…