Weekend Reading – More money or more pension?
I hope you had a great week…
This subject caught my eye this week, would you rather have more money now or more pension later?
Some thoughts in a bit!
First up, a few recent posts on my site:
Last weekend I wrote about the stock market being not-so-easy to beat, which I agree with – although I’ve always felt in Canada when it comes to our market specifically, you could fire any Canadian-focused money manager, buy some Canadian individual stocks for income and growth, and earn similar if not better at times returns than our TSX index.
While inflation is challenging, and high inflation is not good for anyone, I tried to look at the upsides to inflation including built-in government benefits and any tax-free savings room coming January 2024.
Weekend Reading – More money or more pension?
“Mo Money Mo Problems“?
Ha. We all wish. The quote is in reference to a song by American rapper The Notorious B.I.G., released through Bad Boy Records and Arista Records, back in 1997.
You might recall Sean John Combs founded Bad Boy Records, better known as stage names like Puff Daddy, P. Diddy, or Diddy, and there could be more!?
On a serious note, I got the inspiration for this week’s headline from Rob Carrick at The Globe and Mail. He asked:
“What do Canadian workers need more right now – higher salaries or better pensions?” – Article (subscription).
My answer: pensions or at least your own pension.
I will explain.
From my upside to inflation narrative, at the most basic level, inflation is an increase in the price of goods and services over time. Basically, the ebbs-and-flows of supply and demand in action and those actions can impact you and me.
While much more money, now, seems like a great idea for sure, I believe more spending and more money in circulation is actually not going to cause inflation to go down (where it should).
Economies and businesses within economies, cycle.
Inflation, too much expansion in fact, and contractions from time to time, are very normal.
Check out this graphic, related to this point, from the Canadian Encyclopedia:
While can I appreciate inflationary spikes and too much inflation is not good for anyone, myself included, since we all have to react vs. plan to that situation, I would MUCH rather have a viable pension in my future to rely on vs. a small cash infusion now.
The key reasons:
- There are too many unknowns when it comes to any (financial) future. The more certainty, the more dependable income, the better.
- My human capital is high now but I know my ability or capability to earn a living will decline as I age. I suspect the same for you. That’s just the way life goes.
- The top reasons, today, for offering employee retirement benefits relate to both employee retention and employee recruitment – with the objective to help mitigate overall financial stress. That’s a win for employees but also a win for employers. The first and really only rule of any responsible manager is: hire and retain good people.
Sure, I’d love more income now to spend against inflation. We all would. But the better and more responsible solution is always forward looking.
Here are some interesting comments from the Globe article. Stay for the comments. 🙂
“The average Canadian doesn’t fully understand the question, let alone have the answer. I strongly believe that the average worker would be better served by having meaningful (sufficient) defined and indexed income for life. Properly designed, a pension is the least expensive and most efficient way to make that happen. The pooling of mortality risk is the primary reason, something that is simply not available to an an individual, no matter how much they make or save. Mention an annuity, and peoples heads explode.”
“People have to learn to take responsibility for themselves. How much tax money would be saved if we cut programs and just had one universal basic income. What if we simplified the tax system and had maybe 2 or 3 tiers and that’s it. We wouldn’t need so many government workers to administer programs. The tax savings would be enormous. I know simplifying the tax system would never happen because making it complex is how the government creates jobs. And politicians wouldn’t have the power to give out money in return for subsidies, kickbacks, and votes.”
“CPP (in combination with OAS and GIS) essentially establishes a guaranteed annual income for retirees over the age of 65. CPP ensures every retiree has a pension–even if it is just a small one.
OAS ensures every retiree who doesn’t have significant additional income from other sources has some more money.
GIS ensures that seniors who have less than a certain income (currently about $21,000 per year) have their income increased to that certain income.”
Thoughts folks? Open to your comments too!!
Beyond more money or more pension…
Early retiree Carl is hardly concerned about a pension. He took matters into his own hands years ago. He shared a few big ass spending experiments here. One of them was a helicopter ride that cost $1,400 USD for the fun of it. Good on him!
I enjoyed Jon Chevreau’s summary of the FIRE movement (I have the same take) and why he keeps working, now into his 70s, as part of his Victory Lap Retirement.
I know quite a few 60-somethings that would absolutely keep working if they could, to remain engaged via reduced hours and stress – right now. Unfortunately, most organizations are not established this way – the irony is – by many Boomers themselves.
A smart set of thoughtful answers from Dividend Daddy is found here on The Passive Income Podcast.
As My Own Advisor, you know I tilt part of our portfolio towards dividend growth stocks. I believe and own dividend-paying stocks because I believe dividend investing is a common way for many investors to help build an income stream over time – myself included!
However, there are many different approaches to dividend investing. Those approaches may lead to very different outcomes and those outcomes may be better suited to certain investors, depending on their financial needs and goals.
As with investing, it always “depends”.
Well, my recent recording with TD is out!
In that webinar, I joined Adrian Starinieri from Passive Income Investing, and Henry Mah from Your Ever Growing Income where we discussed the potential benefits of dividend investing as a way to build wealth compared to other investing strategies. I shared what works for me/us as a hybrid investor and how it differs from both Adrian and Henry.
Here is the link!
Happy to hear your thoughts on what I shared, or what Adrian shared, or what Henry shared.
And finally, I enjoyed this post from Fritz over at The Retirement Manifesto – Ready Aim Fire – On taking a leap of faith to retire:
“We both instinctively knew it was the right thing to do, so we pulled the trigger without having a clue how we were going to execute the dream. We made the decision and took the first step, and it’s led to something that’s become a major purpose in our retired lives. Four years later, I’m thankful that Freedom For Fido is part of our lives.”
Save, Invest, Prosper!
As always, check my Deals page – partnerships and discounts to help you make the most out of your money – some of them you can’t find anywhere else!
Check out my partnerships with:
- Dividend Stocks Rock with me, including my lifetime discount with Mike!
- 5i Research
- and more!
As always, you can also consider hiring me for some low-cost financial projections services – anytime.
Just reach out.
Have a great weekend!