Weekend Reading – More dividend raises, Boomers not savvy, TFSA vs. RRSP and more #moneystuff
Welcome to my latest Weekend Reading edition – where I share some of my favourite articles from the week that was across the personal finance and investing blogosphere.
These were my posts from the past two weeks:
Here’s what you need to know about life insurance this year.
Here is an update on our financial goals for 2018 – including what we invested in so far this year. One goal down, another huge goal to go.
The following link highlighted six BIG mistakes people make in retirement and/or planning for retirement. This is what I’m doing to avoid those failures.
This was our January 2018 dividend income update – some nice raises for doing nothing this year!
Enjoy these articles!
CIBC increased their dividend this week. Another nice raise to add to my 2018 list! I have full confidence more Canadian bank dividend raises are coming next week…
GenY Money shared some Boomer parents are not investing-savvy.
Like Dividend Growth Investor, this is how I think, act and behave when it comes to my dividend investing journey:
- I don’t focus on interest rates because I have no control over them. If you’re gonna worry about something in life, worry about things you can control.
- I don’t care or worry about short-term market changes. Why? My investing time horizon is another 30-40 years.
- I don’t focus on the value of my portfolio very much. I care about the income derived from my portfolio instead because that’s the money I need to cover life’s expenses.
Dividend Earner shared what he believes is the ultimate TFSA or RRSP infographic. It was well done.
Here is what I consider to be the linchpin in the TFSA vs. RRSP investing debate. Never forget the RRSP-generated refund you get is really a government loan at your current tax rate. Use that loan wisely!!
Andrew Coyne reminded investors to do – nothing – when it comes to the stock market. I like that advice including this: “The return of a world in which rates can sometimes rise, just as stock markets can sometimes fall — a world of risk, that is — is to be welcomed.
Want to invest in low-cost ETFs and buy your own buy-and-hold dividend paying stocks like I do? These are the types of ETFs I invest in.
Now for other articles from my library…
These are my personal finance rules of thumb.
With “RRSP season” now here – it’s good time to review how to build a fat RRSP nest egg.
All the best and enjoy your weekend with family and friends.
Mark
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.
Hey, kinda off topic but I made a minor change to my spreadsheet as a result of reading here. I’ve added a couple of columns to show DRIP shares per distribution payment, and an annual forecast of how many and what those new shares will generate over the following year. Anyways, I have the number of DRIP shares calculated to two decimal places. I now find myself almost cheering when it crosses over to an additional full share and downcast when it falls below. I know, it isn’t exact due to the average price versus the spot price I use but hey, a guy’s gotta find entertainment where he can. Good argument for real DRIPs versus the pseudo-DRIPs.
I personally love seeing in my spreadsheet the number of shares I can get reinvested when dividends are paid. It’s great to see those shares add up commission-free! Nothing wrong with full DRIPs vs. synthetic DRIPs – I listed those pros and cons here:
https://www.myownadvisor.ca/drips/
re: this is how I think, act and behave when it comes to my dividend investing journey:
I don’t focus on the value of my portfolio very much. I care about the income derived from my portfolio instead because that’s the money I need to cover life’s expenses.
The value of your portfolio and its ability to pay dividends are inherently connected.
As a very Canadian example, I’ll always bring up the infamous “Halloween Massacre” — stock valuations got chopped in half (or more) and dividend payouts followed suit.
Ignoring value is not advised.
Good morning.
Andrew Coyne is probably right.
That’s an understatement with the example of the boomer parents lacking investing saavy. Lack of investing saavy seems to cut across all generations.
Yes, focusing on the things you can control is a pretty good tact.
Re RRSP contributions/TFSA. Do your homework to determine your path and make the best use of them.Your present tax rate and projected future rate are important. Investing chart from dividend earner although his tax rates shown should have gone down lower to 15, 20, 25% where many retirees are more likely to be in RRSP/RRIF withdrawal stage. Not doing this understates the benefit of the RRSP.
Dividend increases are good!
Re 6 big mistakes, I’m not sure I agree with the dividend statement. Jason seems to ignore “retirees” are looking to generate income in a steady more predictable fashion.
I suspect Jason’s bias is for indexing, although I haven’t talked to him in many years nor really discussed this subject with him (meet him at a conference once).
Ultimately people need to invest with their objectives in mind. My/our objective focuses on rising income to cover expenses. This means dividend increases are VERY good 🙂
You have done very well with your portfolio and other early retirees that write/comment on this site are investing role-models for my (Gen X) cohort. We should all be so lucky by our early 50s to own our homes, have a healthy retirement portfolio and better still have our health.
Appreciate that. Lots of factors involved including some luck. Health… luck too but I work very hard to stay in shape and keep up with the 20-30 year old somethings!
I’m not against indexing whatsoever and as you know have more of my equity portion doing just that than individual stocks (the US/Int portions). As a hybrid investor, much like you (albeit with a large chunk of FI) for the CDN portion individual equities paying dividends work together with other index equity and FI assets to generate cash flow and help provide a steady and growing stream of income. Simpler…less work/cost than selling the equivalent # of shares and also lessens sequence of return risk. Overall I see it as enough diversification.
I’m not against indexing at all and I encourage any investor (new, experienced, in between both) that when in doubt – do use low-cost, diversified ETFs for their portfolio.
I’ve just decided for us, it’s much easier to invest in a hybrid approach than not – earning a nice blend of income and growth from the combination of stocks and ETFs we own.
If we reach one of our big financial goals (of owning a $1 M portfolio) in the coming years I know I will have taken the correct approach.
May: BNS should up their div in Apr.
Looking forward to it. BNS is my biggest holding with banks.
Yes they should!
Royal bank also raised the dividend. Good that I have both. Bad none of it I had enough. Weird I had BNS the most. Plan to buy more RY and TD.
Yes it did 🙂 We own a few hundred shares of all CDN banks, pipelines, telcos and utilities. Boring stuff – but boring works long-term! More raises coming from TD and BNS next week I think!
DE sure put a lot of effort into what I feel is a simple choice between the TFSA and RRSP. One area where he is wrong, is assuming the tax rate 30 years from now will be the same. History shows that taxes have risen not just the basic tax rate, but all the hidden taxes which have been added over time (tax on gas, liquor, GST/HST, property tax, etc). No way will taxes be less in 30 yrs.
So as there is a limit TFSA, then I believe one should max it out then add any additional monies into an RRSP to max it out. Get the benefit from both and hedge your bets that taxes will be higher by getting as money protected from future tax.
When it comes to RRSPs the only tax rate that matters is the marginal income tax rate. Over my RRSP investing time rates have in fact decreased. Not to say they won’t increase in the future.
Llyod is correct. It’s the marginal tax rate that matters for the accounts as it’s the tax applied to withdraw from the account. He is also correct that it has gown down in general by pushing the brackets up.
The process for choosing an account or running scenarios is not about general consumer tax, that’s more to help understand how much you need in the future.
“pushing the brackets up”
The rates themselves have fallen as well. Back in ’98 for example the federal rates were $0 – $29,590 = 17%, $29,590 – $59,180 = 26% and over $59,180 = 29%. If a person plans it well they can get it out now at 15%. From 29% to 15% is a good deal IMO.
Yes, and I wouldn’t necessarily make it a “tax” argument either. Really, you try and max out both if you can but if you absolutely have to choose – lower-income earners focus on TFSA and higher-income earners use RRSP and throw the RRSP-generated refund into the TFSA. That’s just me!
He did. Honestly, although I liked his post, I would distill it down to this – when it doubt – pick one and max it out! 🙂
For younger folks, max out TFSA as much as you can. For older folks, once TFSA is maxed out then catch up on your RRSP and max it out.
It doesn’t have to be complicated but that’s just me!
All the best,
Mark
Thanks for the mention Mark! Before I have boomers hating on me, I would like to clarify that I was talking about my own boomer parents not all boomers in general lol! Have a great weekend 🙂
I know, I read the article, I thought it would be fun with the title. See what reactions I get! Many Boomers are very savvy, as are Gen X, as are Gen Y!
Cheers,
Mark
Haha, very good title! 🙂 Xennials are very savvy too! I learned a new term today 🙂 It is a 6 year period amalgamating Gen X and Gen Y
That depends who you talk to about the different generational gaps. I don’t think there is a perfect answer on that one but generally speaking anyone over age 35 is not a millennial.
I know I’m definitely Gen X because I’m the son of Boomer parents!
“Before I have boomers hating on me,”
Made me laugh. Many of us Boomers have poor memories when it comes to slagging the X’s and Millennials and we tend to hate on them just on spec. We conveniently forget how good we had it. I wouldn’t have wanted to have been an X or Millennial, bad enough being a tail end Boomer.
And to be serious for a minute, our generation is likely going to be the first in modern times to “hand down” a world worse than we got it. We’re now too old to repair the problems and it will be up to the Millennials and those that follow to fix a LOT of stuff (if it can be fixed). I’m not sure our parents (The Greatest Generation) would be proud of what we’ve done.