Weekend Reading – When to take #CPP, dividend growers, and the power of why
Welcome to my latest Weekend Reading edition. I hope you had a good week.
In cased you missed it, I was busy on this site with these articles:
Given the income we need, the viability of my defined benefit pension plan (so far, so good), the fixed income it should deliver at age 55, and the other assets we have, I have concluded we might be in a position to draw down our RRSP assets in our 50s before taking any pension income – but that’s many years away. What say you?
Should most 30-somethings have a net worth of $150,000? What about most 50-somethings having half a million saved? I think you should throw most retirement savings factors out the window.
Lastly this past week, thanks to CPP and OAS expert Doug Runchey, we provided some insights into when to take your Canada Pension Plan (CPP) benefit.
Enjoy these reads and see you here next week!
Dividend Growth Investor outlined seven dividend paying companies in the U.S. While he outlined some dividend growers, I’m not confident in my U.S. stock picking abilities. Outside of a few U.S. stocks like JNJ, PG, KO, DUK and a few others, I invest in the U.S. predominantly through a low-cost U.S.-listed ETF like VYM that provides both income and growth.
Here are five unpopular personal finance truths courtesy of Ryan Modesto, CEO of 5i Research. I liked what Ryan said here: “Yes, at all times you should keep fees and costs as low as possible and pay down as much debt as you reasonably can. But it’s much easier to pass judgment on someone who struggles to buy a house, put food on the table or presents under a Christmas tree when far removed from that individual’s situation. While the numbers can offer a guideline, the answers to personal finance questions are rarely black and white.” Personal finance will always be very personal.
CBC Marketplace shared how not to buy a car. I find the entire long-term financing deals/scams offered by car dealerships now very predatory. As recently as this summer, we chose not to play that game – we paid cash for our newest used car. Sure, it was a lot of money to us but we intend to keep this 2014 car for another 10+ years. Besides, we weren’t going to fall into this financing trap. As one car salesman actually said to my wife: “Why buy used – why not keep more of your money and buy a new car? The financing is so cheap now!” Pathetic. She laughed and walked away.
Method to Your Money had an interesting post about the power of why when it comes to our finances. From the article: “When it comes to our behaviour, once we put on our analytical glasses to view the world, we react to emotional appeals differently; reason hinders our ability to feel and to act.” No doubt math should trump emotions when it comes to money management but it’s rarely that easy in life. I believe there is a happy balance that can be had.
Andrew Hallam tells us why international stocks are leaving U.S. assets in the dust – this year. Thoughts on 2018 Andrew? I’d say our Canadian market could soar.
Michael James on Money wrote about the dividend puzzle.
From the ModernAdvisor blog – here’s what to do with your RESP if your child doesn’t pursue post-secondary education.
Sure Dividend wrote about dividend stud Procter & Gamble.
Last but not least, want to keep more money in your pocket? Dumb question!
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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.
re: I suspect Doug can help you out since he is very good at what he does. Drop him a line for a quote.
Would be very interesting (very important?) to see which end provides the biggest bang for our buck — a financial advisor (making money) vs a tax accountant/pension consultant (saving money). Know if anyone has ever done any kind of analysis on this?
Interesting question. My bias is someone that can help from a tax optimization perspective.
How is the best way to put your RRSP’s so you can withdraw an monthly because all you are living on is C.P.P. AND O.A.S. Without paying a bunch of tax and inflating you income and loose any assistance but you need a lump sum to pay a yearly Bill?
The ideal way to structure your RRSP withdrawals Diane is to do so when your taxable income is at the lowest possible amount. You would simply need to “play with the numbers” and determine what that might be over a period of time. Have you tried this free calculator?
http://www.taxtips.ca/calculators/rrsp-rrif/rrsp-rrif-withdrawal-calculator.htm
Otherwise, I suspect Doug can help you out since he is very good at what he does. Drop him a line for a quote.
http://www.drpensions.ca/
Diane, in addition to what Mark said you may want to consider converting some of your RRSP to a RRIF in order to receive monthly payments, if I understood you correctly. Most places charge a fee for each RRSP withdrawal otherwise, and also withhold tax at specified rates. Minimum withdrawals for LIF or RRIF don’t have withholding taxes. However RRSP & RRIF are indeed taxable income in addition to CPP/OAS and have to be included or reconciled as such when tax is due in April.
“reconciled as such when tax is due in April.”
Also be aware of triggering the installments requirement.
Good point, although the “requirement” seems to be left to the institution to determine using their discretion. I may be wrong??
I’ve 23 RRSP and 1 min RRIF (no withholding) withdrawals in 3 years – most at minimum withdholding tax (much lower than my effective rate) and no issue so far.
http://www.taxtips.ca/rrsp/withholdingtax.htm
The installments I am referring to are the quarterly installment payments if one has a larger year end balance owing on their taxes. If there are no taxes withheld for example in the case of some RRIFs then a person *could* encroach on the threshold to trigger the payment requirements.
https://turbotax.intuit.ca/tips/do-i-have-to-pay-tax-by-installments-124
Thanks Lloyd. I’ve been over that all 3 years – no issue- so we’ll see if something happens this year. Easy for me to adjust in future to keep below threshold.
So there I was this morning, reading the news online over a cafe mocha like I do every day and in the The Star I see an article about RESPs. Now it’s waaaay past the time I’d normally be considering an RESP but a nephew and his wife recently had a child and I want to set up an RESP for him. Figuring it’s been a while, I should do some reviewing to see if much has changed (not really). Anyways, I get down to the bottom and I see who the author is. Robb Engen. Not being the sharpest tool in the shed I scratched my head knowing I’ve seen that name before but can’t recall where. So a quick Google to find his website and two hours of reading later it comes to me that it must have been through MOA that I’ve seen (and noticed) this name. Now I understand the background to the name of their website (and subscribed).
I’m a big fan of Robb’s (BoomerandEcho.com). He is a friend of mine and passionate DIY investor himself. All the best Lloyd and talk again soon.
Yes, a good man with a good site.
re: the power of why…
As stated in the article, “The more deeply you can internalize the why, the more vivid the why is, the better you can understand the psychology behind the why, the greater the chance the behaviour will stick.” The most important phrase being “the greater the chance the behaviour will stick”. Most behaviour is, after all, most likely a automated habit, so even if your ‘Why’ is earth-shattering that still isn’t enough to create a permanent change in behaviour. You still have to work at creating and engraining the habits which will eventually become the autonomous behaviour(s) to support your ‘Why’.
This now becomes an even more daunting task as most people are not that proactively introspective let alone diligent or focused enough to ensure habit stickiness. One rule of thumb is to ask Why? seven times in order to get to your “real” why. I’d argue that in certain situations you should skip the Q&A altogether and simply trust tried and true methods, e.g. saving 10% of income…so you don’t spend your last 20 years living in poverty. Some times you don’t need to ask, you just have to do.
As Michael James comments in his dividend article, “The problem comes when you satisfy expressive and emotional needs but try to delude yourself that you’re not sacrificing financial returns.” If you have to, split the duties of your money into piles of logic and emotion, then you’ll satisfy both.
“Some times you don’t need to ask, you just have to do.” I’m all for that SST.