Weekend Reading – RRSP deadline advice, bucket strategies, great U.S. ETFs and more #moneystuff
Hey folks!
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.
I was very inspired to write after coming back from my winter vacation to Barbados this week, these were my posts:
I can appreciate other bloggers enjoy posting their net worth on their sites – that’s great. I still don’t post net worth on my site for these key reasons. Should I change my tune?
Instead of obsessing over net worth – I do really enjoy monitoring the cash flow that can be generated from parts of my portfolio – namely dividend income from our non-registered account and TFSAs. So much so, I continue to post my monthly dividend income updates. Here is January’s update where we surpassed another HUGE milestone on our way to semi-retirement.
Enjoy the weekend with family and friends and see you here next week!
Mark
I liked this U.S. article about “bucket strategies”. Recall, the idea behind bucket approaches is to divide your retirement portfolio into several different buckets – allowing the buckets to work together for long-term retirement withdrawals. The first bucket would contain enough cash and liquid assets to fund several years of retirement, with other buckets containing riskier assets. You replenish the first (cash) bucket only when those riskier assets perform well. From the article, only one approach was foolproof or had a 0% failure rate over time.
“Bucket approaches have great intuitive appeal, since they insulate the retiree from concern about the impact a bear market might have on their retirement.”
I’ve got my own “bucket approach” designed for semi-retirement. It goes like this:
I figure my approach might be foolproof since with a “live off dividends” approach and/or sell assets as I please approach since I will have already created a very secure income stream in retirement this way. Thoughts?
I almost fell over when I read this stat recently: on average, two of every five Canadian households do not pay anything towards federally and provincially funded expenses such as health care, education, community and social services, national defence, public safety and even the good old Canada Revenue Agency. One household of every five pays much more than 70 per cent of all of those costs. Something is seriously broken with our tax system. This implies most tax cuts to help any “middle class” are not effective because many Canadians (2 in 5) do not pay any meaningful income tax.
Here is a great, comprehensive post about understanding U.S. equity ETFs.
I have my own posts about a similar list of low-cost U.S. equity ETFs for your portfolio, and more, here on this Exchange Traded Funds page. I’m investing in the U.S. market more via U.S. ETFs (like VYM, HDV) because 70-75% of the companies in Canada, are concentrated in financials (think banks and life insurance companies), energy, and industrials and materials. A U.S. ETF gives me great exposure to healthcare, consumer stocks and much more – cheap.
Last but not least, more Canadians are expecting to retire on a lower income – for many reasons. Here is Preet Banerjee discussing that very subject.
Earlier this week I got asked how I might manage a $1 million portfolio – here is my answer!
Another reader question:
Mark, maybe a dumb question, but how do you actually designate a TFSA as tax free? When you open a trading account to purchase dividend paying stocks, is there a box you tick off for TFSA or RRSP or other? Does Canada Revenue Agency (CRA) know it’s tax free? Am I missing something? Thanks!
Answer: You bet CRA knows it’s tax free – just like CRA knows when you open an RRSP account – both the TFSA and RRSP are registered accounts subject to contribution room and certain rules monitored by CRA.
Partnerships and Deals!
Thanks to my passion for personal finance and investing, some great companies want to offer deals. As always, never an obligation…
From my Deals page:
- As a My Own Advisor reader you get full-access, during your FREE trial, to all of 5i’s research reports, all the model portfolios, top companies and best ETFs to own.
- You can use my promo codes when you invest with BMO to save hundreds of dollars right away!
- You can get $50,000 managed free with ModernAdvisor.
- Sign up for commission-free investing with Questrade.
Happy investing and see you in the comments section!
Mark
My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and now investing beyond the 7-figure portfolio to start semi-retirement with. 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.
Rant…lol.
Thanks Mark, you can pull that last one out as its just a duplicate I posted after thinking I had done something wrong trying to post.
All good.
Another one added by Mark – another rant 🙂 Kidding of course.
Well, the info was from the Fraser Institute which some would not believe or agree with. I don’t doubt it.
I’m not holding my breath on substantial reform on our tax system. Every successive budget from all goats complicte it further with different changes, programs etc. Would take a very ballsy govt that wouldn’t care about re-elected.
Last night we had friends over for dinner. He was a senior Corp. auditor for CRA. He was telling me the act is so massively complex they each all only specialize in a very small area. He spent large amounts of his time just reading the act. There are huge teams devoted just to researching and answering their questions, reviewing the case files for ALL of their investigations because it impossible for auditors themselves to know all of the rules. He is doing a little consulting for a financial advisor firm now. He said he asked a few questions, their eyes glazed over at and he laughed at them referring to their cards “tax specialists”; telling them there is no such person and even he only knows a tiny amount on all the different types of taxes, rules etc.
Sorry for digressing.
Added by Mark from RBull – when to spam for some reason? Maybe a rant? 🙂
I wrote a long reply and thought I added it but doesn’t seem to be here.
Simply:
Number are from Fraser Institute. Some might not trust them or agree with them. I don’t have any reason not to.
Yes, it’s crazy.
Complex=understatement. No government will tackle it because its political suicide. Every budget, every govt tinkers and adds more complexity.
Friends were over for dinner yesterday. He was senior CRA auditor. Many stories from him on complexity, huge teams of people devoted to researching/answering questions from auditors since impossible for them to know even a tiny fraction of overall act. Much of his time spent time trying to stay current on act changes. All files reviewed by that big team to deal with confirming accuracy of rulings/act compliance etc. He is now consulting for financial advisor firm. Laughed at his clients cards “tax specialists” and said there is no such person after asking a few basic questions they couldn’t answer, telling them even he only knows a tiny fraction of tax rules only specializing in a few little areas. Heard many stories from him.
Good looking bucket strategy Mark. I’m betting you will stick to your plan and exceed your goals.
I think TRP delivered a 8.7% raise – .69 to.75. Even better!
Yes, that FP article had a similar impact on me. I don’t know where to begin with that other than to say the formulas for wealth distribution seem to be increasingly distorted providing too much benefit for too many, and dependant on too few for too much. Doesn’t sound like a recipe for a strong, durable, sustainable, and fair revenue base to pay for what we have in this country. But everyone probably thinks they’re being treated unfairly. Some are right.
And while the government fixes that (fat chance) they may as well do a complete tax system overhaul to reduce complexity.
That FP article was crazy, if the data is true. Our tax system is unbelievably (and unnecessarily) complex. When will governments tackle this monster they’ve created? Nuts.