Tag Archives: Financial Independence

How a Personal Pension Plan can mimic gold-plated DB pensions

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Jean-Pierre Laporte

By Jean-Pierre Laporte

Special to the Financial Independence Hub

There are approximately 1.2 million Canadians capable of saving for their retirement and mimicking the ‘gold plated’ pensions of federal civil servants and teachers.  Are you among them?

It’s well-known in policy circles that traditional defined benefit (“DB”) plans are better for employees but worse for the employers that underwrite them.

Why? Because the nature of the pension promise itself builds in an assumption that there will be sufficient assets, on an actuarial basis, to replicate a certain level of income, well into retirement.  If markets do well, the promise is met.  If markets underperform, these DB plans require that the employer  dip into its corporate pockets to make up the difference through ‘special payments’.  Short of a corporate insolvency, the DB model offers a guarantee of financial security that does not exist in any other type of tax-assisted plans (such as the RRSP, DPSP, PRPP or Defined Contribution plans).

While the mention of DB Plans conjures up visions of large public sector behemoths like the Ontario Teachers’ Pension Plan or the Healthcare of Ontario Pension Plan, they also exist at the other extreme:  small professional corporations created by a single individual to carry out a given profession.  Recently, small business owners and professionals are turning to the Personal Pension Plan (“PPP”), a type of registered pension plan that offers both DB and Defined Contribution (DC) accumulation methods under a single roof, with the freedom to select between the two each year.

The reason why the PPP works so well at the individual professional corporation (“PC”) level is that the interests of the plan member and of the shareholder are perfectly aligned. In years of market underperformance the requirement that extra tax-deductible contributions (special payments) be made, is simply a transfer of wealth from the owner’s taxable corporate pocket to his/her tax-deferred personal pension pocket.  Likewise, strong market performance can lead to a “contribution holiday” for the PC and an even safer retirement pension for the shareholder/member.

Upgrading from RRSP savings to PPP savings

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Survey finds financial security beats milestones like buying a home and a car

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Laurie Campbell, Credit Canada Debt Solutions

In one of my books I’ve argued that young people should adopt the slogan “Freedom, Not Stuff” as a way to remind themselves that financial independence beats accumulating possessions via debt.

Now a survey being released by Credit Canada Debt Solutions and Capital One Canada has released a survey saying Canadians think financial security beats milestones like buying a home or a car. The two organizations are celebrating ten years of building financial literacy through Credit Education Week, which runs this week (Nov 7 to 11th).

The survey of 600 in four major regions of Canada asked consumers to share insights into their financial wins. While there’s a perception that Canadians hold the goal of home ownership above all else, the survey found that in reality, they rank milestones like buying a home (12 per cent) or car (8 per cent) as less important financial wins than feeling financially secure in their daily lives (25 per cent).

“There is so much to learn from the positive, everyday financial experiences of our friends and family,” says Brent Reynolds, Managing Vice President of Capital One Canada. “Milestone moments like a new home or car may garner more ‘likes’, but it’s the experiences not easily shared in 140 characters that are most impactful – like how we took charge of our finances or recovered from a financial stumble.”

80% reported a financial win this year

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FindependenceHub.com turns 2 today

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depositphotos_114420670_s-2015It’s hard to believe, but the Financial Independence Hub (aka FindependenceHub.com) is now  two years old, a veritable toddler!

We launched the evening of Nov. 3, 2014, several months after I declared my Findependence Day on May 20, 2014.

This is post number 802, which means we have more than exceeded our original goal of providing fresh content every day (Sundays excepted). While I try to write one or two blogs a week myself, this wouldn’t have been possible without the many guest contributors who have lent their time, energy and names to the project.

Thanks also to the early supporters of the Hub: you know who they are from the banner ads that provide a little operating cash and a lot of moral support.

Thanks too to the many individuals who registered on the site and subscribed to our daily news email. There is no charge for this service (that’s why we need some banners to defray costs): all that’s needed is to supply a valid email address.

What’s next? 

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Financial Independence, Zen and the Art of Wealth

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zenw_fr_500_773I was recently asked to review a new book, Zen and the Art of Wealth, by Warren MacKenzie. It’s the story of two friends who chat while one helps the other build his drystone wall.

It’s a good book and reminded me of some important life lessons that I had forgotten over the years. The book also triggered some memories about how I was first exposed to the world of Zen.

My first exposure to Zen was as a child, when I watched the TV show “Kung Fu” starring David Carradine as Kwai Chang Caine. In the first episode, Caine is accepted for training at a Shaolin monastery, where he grows up to become a Shaolin priest and martial arts expert. Caine fights for justice, protects the underdog and has a strong sense of social responsibility, something that is sadly lacking today. Flashbacks were often used to reveal specific lessons from Caine’s childhood training in the monastery, from his teachers: the blind Master Po and Master Kan.

I loved the lessons from Caine’s training in the monastery and those lessons have stuck with me for some reason over the years: Continue Reading…

Can’t retire? Semi-retirement is more fun anyway!

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Jon Chevreau on Peter Armstrong’s On the Money: CBC.ca

My recent blogs on Semi-Retirement seem to have struck a chord.  After I wrote this online piece for MoneySense.ca: Semi-Retirement is the Future (and a version here on the Hub, under the headline The Next Boomer Wave: Semi-Retirement), I was interviewed by Peter Armstrong at CBC TV’s On the Money Show.

The context of the CBC’s Tips for Boomers segment was in part my new book Victory Lap Retirement, written with Mike Drak, who describes it as a “retirement book about NOT retiring.” The first of several excerpts ran in the Financial Post on Monday.

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CBC’s Peter Armstrong (Twitter.com)

After the CBC segment aired, Peter published his own blog covering similar territory, which you can find under the headline You’re Never Going to Retire — and Here’s Why. He picked up on my statement that the Millennials are going to live a long time and therefore will have an 80-year investment time horizon. I mentioned that a few weeks ago, when I gave a talk to T.E. Wealth in Ottawa about financial advice for Millennials.

Long-lived Millennials need to be mostly in stocks

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