As you will note from the adjacent illustration of a horse race, we have focused on the big three measures we called earlier today the Findependence Trifecta.
As we noted on the Hub shortly after 4 pm, all three measures came through as telegraphed in the major media in recent days, including MoneySense. That is, almost-doubled TFSA annual contribution amounts ($10,000), reduced RRIF withdrawal rates and reduced tax on small businesses.
Now what’s all this about trifectas? Back in February, we ran a blog both at the Hub and at MoneySense about my reflections on harness racing in Florida, and its (somewhat remote) application to asset allocation. For those not familiar with the term trifecta, here is Wikipedia’s definition.
In a nutshell, horse-racing enthusiasts (“gambling” is such a harsh term!) make a bet on three specific horses placing one-two-three in a particular race. As you can imagine, this is not too likely: it’s a lot easier to bet on a single horse to “show” by coming in either first, second or third. But to correctly identify the first-, second- and third-place winners in exact order involves considerably longer odds. So it’s a big deal if you actually get it right and win a massive bet called the trifecta.
Of course, when it comes to financial independence, the analogy breaks down a little. But as I note in the MoneySense piece linked above, I think we should all be happy with the budget. Enjoy your potential future winnings from the Findependence Trifecta!
For convenience and archival purposes, we’ve also republished a version of the blog below: Continue Reading…
President Underwood wants to take away your Social Security
By Jonathan Chevreau
If you’ve been binge-watching the new third season of House of Cards on Netflix, you’ll know that the nefarious Frank Underwood — now the fictional president of the United States — has decided Social Security is a luxury the nation can no longer afford, as is Medicare and Medicaid.
Probably not, but there’s been a lot of online commentary on the very notion of killing the 80-year old Social Security program, given how many Americans have little retirement savings resources other than it. One is this piece from the Independent Women’s Forum, entitled House of Cards gets Social Security policy right, but messaging wrong.
If the prospect of losing Social Security doesn’t frighten you, maybe this will: New York Times reports that many Americans will run out of money in retirement unless at least two things happen: one, they need to save more, and two, what money they do need to save needs to be invested more wisely, which means avoiding high-fee mutual funds. It blames mutual fund expense ratios of 1.12% of assets and that’s in the United States. Canadian mutual fund MERs are roughly twice that high.
So the solution is to just keep working, perhaps in an Underwoodian variation of AmWorks? Not so fast! Personal finance author and columnist Helaine Olen writes an insightful piece in Slate on what she calls the “Semi-Retirement Myth.” As the online site puts it, “Don’t buy the tales of meaningful work into your 70s. Your retirement is inevitable — and bleaker than the last generation’s.”
Better hope for “Freedom Six Feet Under.” Unfortunately, as the Hub’s Longevity & Aging section continually reminds us, odds are we’re all going to be living longer and healthier than we once may have imagined. Perhaps the canary in the coal mine is Irving Kahn, who passed away last week at age 109. One of the world’s oldest active investors, Kahn was around to experience the crash of 1929. Here’s the obituary from the Telegraph.
On the same subject, sadly comes news of the death of Thomas Stanley, co-author of the groundbreaking bible of personal finance, The Millionaire Next Door. Here’s a good tribute on him from the New York Times.
Globe & Mail on Reforming Retirement
North of the border, the Globe & Mail has been running a series on reforming retirement. Last week it weighed in to the TFSA debate. Continue Reading…
Here’s my latest MoneySense blog, a followup to all the media coverage on two controversial reports that called for the Tories to renege on its promise to double TFSA contribution room once the federal books are balanced. The blog, entitled Leave the TFSA Alone, is based on an email exchange with retired actuary Malcolm Hamilton, who led off the MoneySense Retire Rich event last November. Speaking of which, another is scheduled this April.
By Jonathan Chevreau
Malcolm Hamilton (L) & Jon Chevreau, 2012, MoneySense.ca
One of Canada’s better-known retirement experts, Malcolm Hamilton, doesn’t think limits need to be doubled on Tax-Free Savings Accounts but his reason for saying so is not the fiscal consequences for Ottawa. “I just think that a larger TFSA will ultimately threaten RRSPs and that the existing TFSA is sufficiently large for most Canadians.”
In an email exchange, Hamilton said he worries about the “apparently coincidental release of two reports highly critical of the TFSA in an election year.” Given its close affiliation with the NDP party, the critique of TFSAs is to be expected from the Broadbent Institute, he said.
Feds backing away from TFSA?
But the other report, from the Parliamentary Budget Officer (PBO) is more of a concern, since “it may signal that the federal government is backing away from the TFSA.”
As every red-blooded Canadian investor surely must know by now, today is the last day to make an RRSP contribution for the 2014 tax year.
As I wrote for Motley Fool Canada/MSN Money in two pieces in February (one on RRSPs, the other on the looming tax-filing deadline), today (or better yet the weekend just passed) would be a good time to at least do a preliminary dry run on your taxes.
Why? If you’re a salaried employee, you should by now have received your T-4 slip, which means if you enter the slip into your tax program, you’ll have a pretty good idea of how much tax you’ve already paid and how much you may yet need to pay.
T-4s are here; time to stop procrastinating
Sure, the filing deadline isn’t until Thursday, April 30th, roughly two months from now. But if you wait even until tomorrow, it will be too late to check out your past RRSP contributions Continue Reading…
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