Tag Archives: Financial Independence

Retired Money: What I’m reading this summer in personal finance

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My latest MoneySense Retired Money column is a mini review of roughly a dozen personal finance or Retirement books I’ve been reading of late, or intending to finish. You can find the full column by clicking on the highlighted headline here: 12 Top Personal Finance books to read this summer.

First up are a couple of macroeconomics books: Graham Summers’ The Everything Bubble: The Endgame for Central Bank Policy, first published in 2017. It describes what the author calls “serial bubbles” – not just stocks but virtually every asset class, including fixed income and real estate. The book also tackles the two sources of financial repression for retirees hoping to live on interest income: ZIRP and NIRP, which stand respectively for Zero Interest Rate Policy and Negative Interest Rate Policy.

Like it or not, the November 2020 U.S. election is likely to have an impact on investors and would-be retirees, no matter how it works out. Two years ago, my MoneySense column reviewed several other Trump books in an attempt to understand the investment implications of his presidency.

Have we reached Peak Trump?

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Since then, I’ve also read Peak Trump: The Undrainable Swamp and the Fantasy of MAGA, by David Stockman, published in 2019.  Peak Trump includes a chapter also titled The Everything Bubble. Stockman believes the Trump boom – aided by the Federal Reserve’s “rotten regime of Bubble Finance” — has been a mirage and is fated to fade away. Presidential incumbents usually win re-election if the economy and stock market stay strong, but that’s hardly a slam dunk after the depression-level unemployment and social unrest that has come about in the wake of Covid-19.

Dual citizen and political pundit David Frum has just released his second Trump book: Trumpocalypse: Restoring American Democracy, a followup to his earlier Trumpocracy, which was mentioned in the link above. The blizzard of online and media reviews seem to suggest Frum believes Trump has lost the plot and may be vulnerable in the upcoming election.

With all this talk of asset bubbles and negative interest rates, it seems everyone is fated to worry about money and not just near-retirees. Worry-Free Money, by financial planner Shannon Lee Simmons, was published in 2017, and will primarily interest younger investors with a long time horizon. Simmons declares “everyone is worried about money” and says social media has only aggravated the situation. But if you’re worried she will nag you about things like budgeting, fear not: she gives reasons why “you need to stop budgeting.” Rather, you have to control your spending, living within your “hard limit” and say “No” to unhappy spending.

The Joy of Being Retired

For those closer to Retirement The Joy of Being Retired, by the prolific Edmonton-based international self-publishing master Ernie J. Zelinski, is a light read, with 365 reasons (and cartoons) on why Retirement Rocks “and Work Sucks.” Continue Reading…

How to fail at Early Retirement

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OPEN to your opportunities

By Billy and Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

First, let me say Billy and I don’t really use the word “fail.”

We believe every situation offers learning opportunities and calling that experience a failure just doesn’t jibe with who we are. In our lives, we want to move forward with the knowledge and wisdom we’ve gained : not benchmark it emotionally by calling it a failure.

We read Financial Samurai’s Sam Dogen’s  piece on how he claims to have failed at early retirement.

We have great respect for anyone who puts their personal life out there to the public as a source of education and benefit for others, and Sam has done that.

Sam retired at age 34 with 3 million dollars (US$): six times more than we had, 30 years ago. Now, at age 42, he claims that he “failed” at early retirement (even with $250k passive annual income: 5 times what the average retiree has, for the following reasons:

They had a child (with all the costs involved including education at kindergarten level at $2k month)

He underestimated how low interest rates would go (he’s invested in bonds, real estate and dividend-producing stocks)

Rising health insurance premiums for his healthy family (which continue to rise in order to subsidize those who are less healthy)

The bliss of early retirement didn’t last as long as he thought it would, or in other words, he now wants to do more than play tennis and sleep in. (This statement is bewildering to us.)

Options, Choices, Opportunities

We at Retire Early Lifestyle have always focused on providing our readers with options. There is no one-size-fits-all for anything, so why try to fit into a limited description of your retirement?

We don’t believe Sam has “failed” at early retirement; we think he is locked into his own personal version of “limited thinking.”

Eliminate your Stinkin’ Thinkin’

For the continuing education of our readers, let’s look at his reasons one at a time. Continue Reading…

10 Millennials on how they approach planning for their Retirement

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The importance of planning for retirement is something every parent, mentor, and financial advisor will reiterate time and time again. While the general concept makes sense, it isn’t always accessible or palpable for all parties, especially millennials. Previous generations seem to have prioritized their finances, so what about millennials? How are they handling it?

Below, 10 millennials talk about their approach to retirement planning.

Admit that you don’t know

As a millennial, I think the greatest service that someone in my generation can do is admit that they don’t know what they don’t know: and then find someone who can teach them. Let’s face it, retirement planning is a convoluted phrase that doesn’t express its various nuances. My advice: if it is accessible, partner with a fiduciary financial advisor to help map out your future financial goals and create a plan. If it isn’t accessible at this moment, make it a habit of setting aside a few dollars each payday until you can hire a financial advisor. Action is important; however, informed action is what will serve you best in the long run. — Desiree Cunningham, Markitors

Avoid high fees

If you are an investor, you want to earn income on your retirement balance. Whether you are identified as a “Boomer” or “Millennial,” that desire doesn’t change. What you do tend to see with millennials in regards to their retirement plan is the avoidance of high fees. With a long road ahead to retirement, retirement planning fees can eat into a retirement balance.  — Kimberly Kriewald, AVANA Capital

Benefits, Benefits, Benefits

As a staffing agency, we’ve worked with hundreds of employers in helping them attract and retain talent. We have placed many millennials in roles over the years. The thing that helps put employers over the top in terms of ability to attract talent relates to the strength of an employee benefits package. When discussing benefits, a “401k” is often the first thing millennial candidates ask about. At this point, it’s almost an expectation that an employer offers a retirement plan as part of their offering. — Ryan Nouis, TruPath

Start early

Retirement has always been top of mind when financial planning. The earlier you start, the more time your money has to compound interest and accumulate wealth. This smart financial philosophy only gets stronger when you consider that most employers offer a dollar for dollar match up to a certain percentage. — Megan Chiamos, 365 Cannabis

Make ends meet

Many millennials are in a tough spot: they are trying to make ends meet in a difficult economy. Most millennials I know value building meaningful lives and experiences: above accumulating wealth. — Rebecca Longawa, Halong Esports

It varies

Before diving in, I think it is important to highlight the fact that the age range that constitutes a millennial is vast. Some are in their young ’20s and just entering the workforce, while others are in their ’30s and may have a family of their own. With that said, everyone’s financial situations are different. Some people have student loans, medical bills, family obligations, etc. and may not have the means to put away as much as they like. Others may have more freedom and the capacity to save up more. It really depends on the individual. — Shiela Lokareddy, UCSD Health

Compound interest

From what I understand, millennials are not putting as much money or thought into their retirement planning as generations prior. Continue Reading…

15 ways to flourish financially in a Covid-19 world

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T.E. Wealth

By Aaron Hector, B.Comm, RFP

Special to the Financial Independence Hub

COVID-19 has brought wide-sweeping change. The silver lining with any change is that it opens the door to new opportunities. Here are 15 thoughts on how a financial planner views moments in a time like this:

1. You now have more time to get your taxes prepared. You also have more time to pay your taxes for 2019 and your instalments for 2020.

2. Those of you with RRIF or LIF accounts are familiar with your requirement to take a minimum withdrawal each year, which is fully taxable as income. This year, the minimum payment will be adjusted downward by 25%, which will allow you to report less income on your tax return. Given the situation, this may also preserve some of your OAS if you’re currently being fully or partially clawed back. Cash flow could potentially be replaced by withdrawing the additional 25% from your non-registered account this year.

3. Somewhat surprisingly, the Government of Canada has recently confirmed that if you had previously withdrawn your original RRIF minimum payment earlier in 2020, that you will not be permitted to re-contribute the 25% excess withdrawal back into your RRIF.

4. Let’s recognize that stock markets are down. Let’s also recognize that they’ll go back up. How can we turn this moment into an opportunity?

5. If you make more money than your spouse, spousal loans are a great way to shift income. Now might be a great time to initiate new spousal loans because portfolio values are lower than they used to be and the eventual recovery could be captured by your lower income spouse.

Pension Splitting

6. In other circumstances (typically in retirement after age 65+ when RRIF, LIF, and pension income can be split between spouses), previous spousal loans can lose their merit. In some cases, it’s too costly from a capital gains perspective to repatriate funds back to the original spouse, so these loans remain in place for longer than they need to. If your portfolio has fallen in value then the capital gains cost to unwind a spousal loan may no longer be a detriment. You could look at this time as an opportunity to repatriate the loan and tidy up your overall affairs.

7. If you reported taxable capital gains on your previous three tax returns, you may look to trigger a capital loss today, which you could carry back against those gains. The losses could also be carried forward and applied against gains in the future.

8. If you have a plan to unwind your RRIF, LIF, or investment holding company over the next several years, then you could look at this as an opportunity to extract some money out of those accounts now at their lower values (pay the tax on the dividend or RRIF/LIF income) and then shift your money into a personal non-registered account or TFSA to be better positioned for recovering equity values as we move forward. Continue Reading…

Retired Money: The trouble with playing with FIRE

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My latest MoneySense Retired Money column looks at the trouble with playing with FIRE. Click on the highlighted headline to retrieve the full column: Is Early Retirement a realistic goal for most people?

FIRE is of course an acronym for Financial Independence Retire Early. It turns out that Canadian financial bloggers are a tad more cynical about the term than their American counterparts, some of whom make a very good living evangelizing FIRE through blogs, books and public speaking.

The Hub has periodically republished some of these FIRE critiques from regular contributors Mark Seed, Michael James, Dale Roberts, Robb Engen and a few others, including one prominent American blogger, Fritz Gilbert (of Retirement Manifesto).

No one objects to the FI part of the acronym: Financial Independence. We’re just not so enthusiastic about the RE part: Retire Early. For many FIRE evangelists, “Retire” is hardly an accurate description of what they are doing. If by Retire, they mean the classic full-stop retirement that involves endless rounds of golf and daytime television, then practically no successful FIRE blogger is actually doing this in their 30s, even if through frugal saving and shrewd investing they have generated enough dividend income to actually do nothing if they so chose.

What the FIRE crowd really is doing is shifting from salaried employment or wage slavery to self-employment and entrepreneurship. Most of them launch a FIRE blog that accepts advertising, and publish or self-publish books meant to generate revenue, and/or launch speaking careers with paid gigs that tell everyone else how they “retired” so early in life.

How about FIE or FIWOOT or Findependence?

Some of us don’t consider such a lifestyle to be truly retired in the classic sense of the word. Continue Reading…