Tag Archives: Financial Independence

Debt-free in 30 podcast on Victory Lap Retirement

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Doug Hoyes (in red), Mike Drak (C), Jon Chevreau (R)

As of Saturday morning, you can find a half-hour podcast conducted by Debt-free in 30’s Doug Hoyes about the new book, Victory Lap Retirement.

My co-author, Mike Drak, and I were in Waterloo last week to tape the session and sign a few books.

Click on the highlighted text here to listen to Victory Lap Retirement. EXCLUSIVE First Podcast Interview.

Or you can scroll down below for a lightly edited transcript of the proceedings.

But first, here’s an overview written by Doug Hoyes, co-founder of insolvency trustees Hoyes Michalos:

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Doug Hoyes

Doug Hoyes:

Today’s podcast is the first ever podcast interview with Jonathan Chevreau and Mike Drak together, talking about their new book Victory Lap Retirement.  This is so exclusive an interview that the book won’t even be officially released until October 10, 2016 but it is available for pre-order at amazon.ca, and the Kindle version is available now.

Jonathan was a guest back on Show #5 where we discussed his previous book, Findependence Day.

Mike Drak created the concept of a Victory Lap as an alternative to retirement, and teamed up with Jonathan to write their new book.

So what is a Victory Lap?

You will have to read the book for a full description, but as Jonathan and Mike and I discussed the concept of retirement has changed significantly.  Our grandparents and parents had a good chance of working at the same company until aged 65, and then retiring with a full pension before dying at age 70.

Today almost no-one works at the same company for their entire working life, and most employers no longer offer full pensions, so the old fashioned view of retirement at age 65 with a full pension is no longer reality for most workers.

Instead, we are working longer, and living longer.

The essence of Victory Lap Retirement is to leave corporate employment, which usually entails working for someone else, and enter a new and different phase of your life.

Mike and Jonathan wrote Victory Lap Retirement to show readers how to transition from a high stress work environment to a low stress sustainable lifestyle to enjoy a happier, healthier life.  For many, that may involve turning a hobby or passion into income during your “retirement” years, or working part time to “stay involved.”

Debt and Retirement

Debt is a prominent subject in Victory Lap Retirement, including this quote:

…make breaking free from the chains of debt your first priority.  Not only will debt limit your financial freedom severely, it will suck the life right out of you.

As we discussed, debt and retirement don’t mix.  When you retire your income decreases, so it’s likely you won’t be able to afford payments on a mortgage or other debt in retirement.  Get out of debt long before retirement.

Unfortunately that’s not always possible, which is why seniors are the fastest growing age group of people filing bankruptcy and consumer proposals. Older debtors, aged 50 and older, now account for 30% of all insolvency filings, up from 27% two years ago, and that number keeps growing.

Senior debtors, people aged 60 and over, have the highest amount of unsecured debt of any age group when they go bankrupt, almost $70,000.  A growing percentage of them even resort to payday loans to stay afloat.

If you’ve got debt, retirement is very difficult.  If you have trouble making your debt payments while you are working, it may be impossible to keep up when you retire and your income drops, which is why we all agree that eliminating debt is essential long before retirement.

In addition to eliminating debt, Mike and Jonathan suggest you ask yourself “what do I like to do?” and start planning your Victory Lap now. 

For more, listen to the podcast or read the transcript.

Transcript: 

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How much will my Defined Benefit pension pay in Retirement?

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depositphotos_5971382_s-2015I contribute to a defined benefit pension plan at work. How much will I get from the pension plan in retirement? That depends on when I retire or leave the plan. Hang on, we’re about to get math-y.

Normal retirement age is 65 and I joined the pension plan in 2009 at age 30. Retiring in 2044 (the year I turn 65) would give me 35 years of pensionable service.

The pension plan has a retirement calculator on its website. Curious about the amount of retirement income I’d receive at various ages, I took a look. The calculator just needed a couple of inputs: current salary, plus an assumption for future annual salary increases (I used 2 per cent).

Retiring at age 65 would max-out my pensionable service and give me an annual retirement income of $46,000 in today’s dollars. But what happens if I don’t make it until 65? Retiring five years earlier at age 60 changes the equation substantially.

 

Retiring at 60

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Top 5 Credit Card myths Busted

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by Kevin Chu, RateHub.ca

Special to the Financial Independence Hub

Credit cards, much like any financial product, seem to create anxiety for many. With so many rumours surrounding credit cards, we decided to turn to top influencers in the community for help on busting these myths and sharing the facts.

Here are your top 5 credit card myths busted once and for all:

Myth #1: Having a credit card means you are financially irresponsible

Credit cards are a great way for you to start building credit and earn rewards from everyday purchases. If you’re spending wisely and are paying off your balance each month, credit card debt won’t be an issue.

Myth #2: Getting a credit card will hurt your credit score

The exact opposite is actually true here. The best way to establish credit is to start by getting a credit card. By paying off your debt in full each month, there’s nowhere but up for your credit score. Be wary of credit utilization though. A high utilization ratio will affect your credit score negatively.

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Robo-Advisers disrupting wealth management industry but Service could determine how much

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Male hands on the keyboard in front of computer screen with financial data and chartsAs my article in the print edition of Monday’s Financial Post goes into in some depth, the recently released DALBAR study on North American robo-advisers highlights several challenges the pioneering industry faces with new customers, or in poaching them from the established wealth management industry.

See the headline Service ‘gaps’ in robo advice: Dalbar study (page FP1). You can find the online version here under the headline ‘Robos are getting a pass’: Study points to gaps in automated investment advice.

Many older and wealthier clients may get “poached” from the traditional wealth management industry, whether retail mutual funds, banks, investment counsellors, full-service brokerage or other segments. Of course, in some cases, robo-advisers are landing “new” money from young people who may never have invested before. Millennials are a big focus of some robo-advisers (such as Toronto-based Wealthsimple).

Last Tuesday, the Hub ran a blog outlining the major points issued in the Dalbar press release, and we also published reaction from three Canadian robos: JustWealth, NestWealth.com, Wealthbar and the aforementioned Wealthsimple. See Becoming a Robo-Advisor Client may be challenging, Dalbar finds.

The 126-page study — which not all robo-advisers have seen — contains plenty of information that couldn’t be summarized in the FP piece. It begins by noting that these services are “one of the fastest growing segments in the wealth management space” and that they have “managed to capture significant share of wallet from the established wealth management providers in … a short period of time.” The report mentions that Wealthsimple has grown to $500 million in assets from a standing start in 2014.

The report has a relatively small sample size: 45 mystery shoppers  (15 US, 30 in Canada) were asked to sign up to various Robos. Almost half of them were in their 30s. To assess risk, Dalbar directed these mystery shoppers “to ask for high returns in a short time period to test risk response mechanisms.”

Below, I present some more highlights that have not yet been covered:

Robo firms covered in the Dalbar report

First, the report looked at five American robo-advisers and ten Canadian ones (interesting that there weren’t more US ones!)

The US firms were Betterment, Charles Schwab, Future Advisor, TradeKing Advisors and Vanguard. (interesting that the oft-cited Wealthfront is not in: Dalbar told me it was based on what clients chose.)

The Canadian firms were (in the order Dalbar listed them): BMO SmartFolio, Invisor, JustWealth, Modern Advisor, NestWealth, Questrade Portfolio IQ, RoboAdvisor Plus, Smart Money Capital, Wealthbar and Wealthsimple.

Why clients chose particular services

Asked why clients chose a particular service, 100% of Betterment clients cited convenience while 100% of Vanguard clients cited reputation. WealthSimple clients cited equally (25% each) advertising, convenience, executive team and reputation. Interestingly, 75% of BMO clients cited its bank affiliation, and 25% its reputation. Invisor was a 3-way split between advertisements, executive team and product selection. JustWealth was an even 4-way split between advertisements, reputation, convenience and — this is interesting — being the “first to return my initial contact.” The latter point also accounted for 25% for NestWealth, Wealthbar and Modern Advisor. For NestWealth, the other three reasons, all an equal 25%, were convenience, platform offered and reputation. For Questrade  Portfolio IQ it was 67% convenience and 33% reputation.

Reasons for Choosing vary with Client income levels

The report broke clients down into three clients with annual incomes that I’ll call low, medium and high: $60,000 to $75,000, $75,000 to $100,000 and $100,000 to $150,000 or more.

For the low-income clients, Convenience was most often cited, 30% of the time, followed by Platform Offered (26%) and Reputation (17%) and Pricing (9%).

For the middle-income clients, Reputation was most important, at 38%, followed by First to Return Initial Contact at 19%, executive team at 13%, and equal 6% allotments for Advertisements, Bank Affiliation, Convenience, Platform offered and Pricing.

For high-income clients, Reputation was most important in 33% of cases, followed by even 17% allotments to advertisements, bank affiliation, convenience and executive team. Remember these are small sample sizes, but none of the high-income clients even cited pricing, platform offered , product selection, or First to Return Initial Contact.

Motivations for trying a Robo-Adviser

Curiosity seemed to be a major driver for wanting to check out a robo service in the first place, Dalbar found, followed by lower fees and convenience. Not surprisingly, lower costs dominated for the high-income group, 83% citing it, followed by 17% time saving. For the middle-income group, 44% just cited the desire to try new technology; this was also cited by 30% of the low-income group. The two lower-income groups were also influenced by the fact robo-services let you start investing with relatively small amounts of money.

Cross-border differences in account opening times 

Time to open an account varied from five to more than 30 minutes in Canada. Canadian users needed up to six times more time to open than their US counterparts. 75% of US robo users needed just 10 or 15 minutes to open an account, while 70% of Canadian robo users needed 15 to 60 minutes.  Most Canadian users felt it took “too long” to open an account and US robos were perceived as being much easier to work with than their Canadian counterparts.

Dalbar singled out NestWealth as being most consistent, with most clients able to complete a risk assessment questionnaire in 15 to 30 minutes. US robo firms were faster but mostly because the questionnaires were shorter.

Aman Raina’s robo-experience

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The Great Retirement Con Game

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many water bottles on blue backgroundI don’t like to admit it, but over the years and due to circumstances largely beyond my control, I have turned into a skeptic.

I wasn’t born that way, but who here can blame me for turning into one with all the crazy stuff going on in this world? Today people seem to say anything they want. They just make stuff up. If you want proof of this, just watch the race for the presidency in the US. Enough said.

I discovered I was a skeptic one day while drinking bottled water.  I used to get clean drinking water at several places in or outside my house. I just had to pick up the hose and there it was, as much as I wanted and best of all, it was free. I think we can all agree that when healthy things are free that’s a pretty rare and good thing, especially these days.

But things changed after I married the Contessa and became “sophisticated.” Water was no longer free and I began a new routine of driving to the grocery store to buy bottled water. It didn’t stop there, because I now drink a particular brand of water called “Smart Water,” probably not a very smart thing to do as it costs more than regular bottled water.

Have you read about what’s inside your bottle of water? The nutrition label is all zeros, because there’s nothing in it besides water.

It’s incredible how advertisers have been able to convince us to start drinking bottled water when we all have free clean water to drink at home. I would love to meet the person who came up with the idea that we need to drink eight 8-ounce bottles of water a day in order to stay healthy.

In North America bottled water is a $170 billion dollar industry. I don’t know where all this bottled water is coming from, but I can’t get this image out of my head of a couple of people sitting in a bathtub somewhere filling up water bottles. That’s what being skeptical does to you.

Beware The Spin Doctors

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