We at the Hub have always said frugality is the key to saving and ultimately building wealth. But according to the most-emailed New York Times article this week, it’s tough for millionaires to dump the frugal habits that got them there: Millionaires who are frugal when they don’t have to be. Shades of the book, The Millionaire Next Door!
Don’t believe various reports that Canadians are saving too little for retirement, says C.D. Howe senior fellow Malcolm Hamilton in a report issued Thursday. You can get the full 30-page report on PDF by clicking here.
As is typical of Hamilton, now a retired actuary, the report is insightful and entertaining. While there are exceptions, generally speaking, “Canadians are reasonably well prepared for retirement,” he writes.
Right under the report’s Headline (Do Canadians Save Too Little?) the answer is delivered in small Italic type on the title page: “Reports of undersaving by Canadians for retirement are exaggerated. They rely on faulty assumptions, questionable numbers and ignore the diversity of individual retirement goals.”
Among the various reports cited, one is the Ontario Government’s backgrounders that served as its rationale for launching its own Ontario Retirement Pension Plan, more on which below. Continue Reading…
Liberal deputy leader Ralph Goodale (National Post.com)
The Financial Post ran an op-ed written by me today (A10), titled simply How to Max Out your TFSA. We’ve written on this topic before of course, but it specifically addresses an oft-repeated Liberal comment that few middle-class Canadians have “$10,000 lying around” for a TFSA contribution.
On the contrary, I argue, many middle-aged middle-class Canadians have hundreds of thousands of dollars in non-registered or “open” investment accounts, money that is subjected to annual rounds of tax on interest and dividends, and often capital gains, and which would love to find a tax-free home in a Tax Free Savings Account.
Similarly, many seniors already in retirement have large RRSPs or RRIFs that can also be a source of funds for a TFSA, once withdrawals are made and a one-time tax hit is sustained.
In fact, this weekend, I spent time with a 98 year old friend (a woman), who proudly informed me she recently put $10,000 into her TFSA and is saving up from her part-time job to put in another $5,000. Why? She felt she needed a bit of cushion in case some medical problem arises.
As the end of the FP piece notes, there are plenty of other potential sources too, including sale of a principal residence (perhaps in a downsizing situation), severance payments, life insurance proceeds, sale of a business, lottery wins and — this one’s for you, Justin — inheritance.
“Be very mindful of your RRIF. Understand its purpose. Then review it periodically to make sure it’s on track to deliver.”
It’s time to start paying special attention to RRIFs.
Even if you don’t yet need one.
RRIFs (Registered Retirement Income Funds) are income withdrawal plans, while RRSPs are savings plans.
No deposits are allowed to be made into a RRIF after the RRSP conversion.
The venerable RRIF remains firmly entrenched as a prominent retirement planning vehicle.
It has become an essential foundation of many a retirement nest egg.
Starting a RRIF at age 71 implies long-term planning, say to age 90 and beyond, especially if there is a younger spouse.
That’s one very good reason to be aware of the details.
Two major changes were proposed in the recent Federal Budget, starting in 2015:
Minimum RRIF draws are reduced for ages 71 to 94 (See highlighted figures in table below).
Re-deposit of the difference in draws is allowed by Feb 2016.
If you prefer pictures and graphics over text, you may enjoy this visual guide to Tuesday’s federal Budget, prepared by Vancouver-based robo-advisers, Wealthbar.com.
Until we figure out how to embed it here at the Hub, we’ll just send you over to the graphic housed at Wealthbar’s site. Just click on the red link below:
Posted By 
