Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

5.8 million working Canadians will see 20% drop in income in Retirement

Posted By Jonathan Chevreau | June 2, 2015

Almost 6-million working Canadians risk losing the “retirement of their dreams,” according to a CIBC report getting lots of attention today at the Globe & Mail website. CIBC deputy chief economist Benjamin Tal (pictured) says some 5.8 million working-age Canadians will suffer at least a 20% drop in their standard of living once they leave the full-time work force.

The short article is listed as one of the most popular today on the site and has attracted dozens of comments and social media mentions.

Stop me if you think you’ve heard this before but it seems the bank believes the country’s retirement system needs to be reformed as quickly as possible. The most recent move in this direction came from an apparent about-face by the Conservative Government, whose apparent refusal to consider an expanded or “Big” CPP motivated the Ontario government to launch a new retirement system of its own, the ORPP or Ontario Retirement Pension Plan. Then last week, Finance Minister Joe Oliver floated a trial balloon for a “voluntary” expansion of the CPP, which the Hub reprised on the weekend.

Younger middle-income workers with no DB plans at risk

Mr. Tal told the Globe that “it’s not just CPP,” but expressed concern that Canadians still aren’t saving enough money. While many Canadians close to the traditional retirement age of 65 are “on a path to the retirement of their dreams,” Tal’s data also shows millions others, especially younger workers in the middle-income brackets, “are headed for a steep decline in living standards in the decades ahead.”

Conscious Clients don’t put Retirement plans at Risk

Posted By Financial Independence Hub | June 1, 2015

By Doug Dahmer, Emeritus Retirement Income Specialists

Special to the Financial Independence Hub

One of the most exciting and rewarding aspects of my job is working with my clients as they learn what I call ‘Conscious living.’ It’s a skill that has tremendous impact on their quality of life and their retirement plan.

My ‘Conscious’ clients have a retirement plan and clearly defined goals. They know what they want to do, when they want to do them and how big they want to do them. They also have the tools to explore the implication of each financial decision or potential alteration to their plan. And they understand the future impact that an ill-considered, near-term expenditure will create – in most cases putting some element of their goals and retirement plan at risk. Continue Reading…

The 6 stages of Financial Independence

Posted By Jonathan Chevreau | May 29, 2015

By Jonathan Chevreau

The Financial Independence Hub

I’ve been doing lots of reading lately about a new stage of life between MidLife and traditional Retirement. You can read the details in Marc Freedman’s The Big Shift, which confirmed what I’ve been slowly piecing together since my career change this time last year.

The Financial Independence Hub organizes blogs in six categories that are quite similar to the Ages & Stages that MoneySense has long espoused, both in its articles and in its Special Interest Publication, Guide to Retiring Wealthy. You can find these six blog categories in the horizontal grey band that appears below the horizontal blue band at the top of the Hub’s home page.

Ages & Stages: The Life Cycle approach to Investing

Voluntary CPP contributions will favour high earners

Posted By Financial Independence Hub | May 27, 2015

By Sheryl Smolkin, Retirement Redux

Special to the Financial Independence Hub

When I heard the announcement that the Conservative government is considering allowing Canadians to make additional voluntary contributions to the Canada Pension Plan, my first reaction was that maybe that’s not a bad idea.

After all, the CPP Fund reported last week a return of 18.3% for its latest financial year, its best showing ever. I don’t know about you, but I’d be happy if CPP was managing and investing more of my retirement savings.

But the fact is that I already have retirement savings. I have a pension, my RRSPs and TFSAs are maxed out and our house is paid off. However, for Canadians who do not have a workforce pension and are living from paycheque to paycheque, another opportunity to save voluntarily is not going to make a difference.

In fact, if voluntary CPP contributions are locked in until retirement, even when middle or low earners finally bite the bullet and set up a payroll savings plan, chances are they will opt for an RRSP or TFSA so they can get at the money in an emergency. Because employers probably won’t have to match contributions, there is little incentive for employees to contribute more money to CPP.

Unanswered questions Continue Reading…

Bring it on! Tories to launch voluntary CPP expansion

Posted By Jonathan Chevreau | May 26, 2015

Details are still sketchy but both major daily newspapers are reporting a plan by the Conservative Government that would let Canadians boost their payouts from the Canada Pension Plan by letting them voluntarily contribute more.

You can find the Globe article here under the headline Tories propose voluntary Canada Pension Plan expansion, and the FP article (via Bloomberg) under the headline Ottawa to consider voluntary Canada Pension Plan expansion, Joe Oliver says.

Whether this constitutes enough federal action to get the much-criticized Ontario government proposal for an Ontario Retirement Pension Plan (ORPP) overhauled or aborted remains to be seen. All along, it seems, Ontario went out on a limb with ORPP out of frustration that the federal government seemed disinclined to expand the CPP. Certainly an involuntary expansion that would have forced businesses to take on higher payroll expenses would not have been an easy sell but a voluntary scheme is quite a different matter.

Consultations will be held in the summer to flesh out the details, Finance Minister Joe Oliver said in the House of Commons Tuesday. The Globe observes that labor groups and seniors advocates like CARP do not believe that voluntary savings vehicles work and that therefore a mandatory expansion of the CPP is needed to make sure Canadians save enough for retirement.

Oliver sees the voluntary expansion working in concert with the new improved TFSAs as well as Ottawa’s PRPPs (Pooled Registered Pension Plans).

Voluntary CPP expansion makes sense, especially for those who lack true DB pensions Continue Reading…