Comments on: Retirement Comes Sooner Than You Think http://gailvazoxlade.com/blog/archives/436 Tue, 22 May 2012 16:11:49 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Remus http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-20063 Remus Mon, 23 Nov 2009 18:06:05 +0000 http://gailvazoxlade.com/blog/?p=436#comment-20063 I can't give you a sure-fire formula for success, but I can give you a formula for failure: try to please everybody all the time. I can’t give you a sure-fire formula for success, but I can give you a formula for failure: try to please everybody all the time.

]]> By: Geoff http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6808 Geoff Wed, 04 Mar 2009 16:14:06 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6808 @ MelaniesD -- be careful about your asset allocation. Many financial people advise against having more than 5% of your total investments in any one particular company. Many employees of WorldComm or Enron had lifelong investments of stock purchases in these companies and were completely wiped out and made no other investmetns along the way (in other words, a 100% allocation to a single company). Although it's true that its unlikely a bank might fold, I suspect I would have written about US banks three years ago too. Investing in RRSPs is a good way to diversify your portfolio especially if you invest in index funds or another widely diverse mutual fund. As for your pension question re benefits, it depends on your pension, it will be outlined in your husbands pension terms. You should also make sure you have survivors benefits so that you get a % of his pension if he dies first (usually about 60%). @ MelaniesD — be careful about your asset allocation. Many financial people advise against having more than 5% of your total investments in any one particular company. Many employees of WorldComm or Enron had lifelong investments of stock purchases in these companies and were completely wiped out and made no other investmetns along the way (in other words, a 100% allocation to a single company). Although it’s true that its unlikely a bank might fold, I suspect I would have written about US banks three years ago too. Investing in RRSPs is a good way to diversify your portfolio especially if you invest in index funds or another widely diverse mutual fund.

As for your pension question re benefits, it depends on your pension, it will be outlined in your husbands pension terms. You should also make sure you have survivors benefits so that you get a % of his pension if he dies first (usually about 60%).

]]> By: Melaniesd http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6703 Melaniesd Sun, 01 Mar 2009 18:20:34 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6703 I contribute a minimum amount to my RRSP because I have a stock option with my employer where they give me 50 cents to each dollar I contribute up to 4% of my salary. I actually contribute 8% and the other 2% goes into my RRSP. Right now, bank stocks are down a lot, but I look at it as an opportunity to buy more shares. Once they go up, it's going to be a nice profit! It is hard to wrap my head around the numbers when I check my balance and it's down considerably, but I remind myself that it's only the total on paper. It's not the big a deal until I'm ready to withdrawl. I would love to max out my RRSP but right now debt reduction and building an emergency fund is more important. Gail, I'd love to see a post on what to look for in a pension plan. What IS a good plan? For example: My husband doesn't believe in RRSPs because he has a pension plan - but how good is it going to be? Will he still have medical/dental etc? I realize you can't answer those questions, but a guide to what to ask our employers about might be a benefit to your readers. I'm so far from retirement that I haven't given it a lot of consideration. I contribute a minimum amount to my RRSP because I have a stock option with my employer where they give me 50 cents to each dollar I contribute up to 4% of my salary. I actually contribute 8% and the other 2% goes into my RRSP. Right now, bank stocks are down a lot, but I look at it as an opportunity to buy more shares. Once they go up, it’s going to be a nice profit! It is hard to wrap my head around the numbers when I check my balance and it’s down considerably, but I remind myself that it’s only the total on paper. It’s not the big a deal until I’m ready to withdrawl.

I would love to max out my RRSP but right now debt reduction and building an emergency fund is more important.

Gail, I’d love to see a post on what to look for in a pension plan. What IS a good plan? For example: My husband doesn’t believe in RRSPs because he has a pension plan – but how good is it going to be? Will he still have medical/dental etc? I realize you can’t answer those questions, but a guide to what to ask our employers about might be a benefit to your readers. I’m so far from retirement that I haven’t given it a lot of consideration.

]]> By: Saver Queen http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6592 Saver Queen Thu, 26 Feb 2009 18:57:20 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6592 donnarino and diana - keep in mind that rrsps are just a holding cell for your money - the outcome (gains/losses) will depend on what you invest in. whether your money is gone into a high-interest savings account (which actually is not a bad place to start in my opinion, if you are looking to make a profit in the next couple of years and roll it into your mortgage through the homebuyer's plan), GICs, stocks, etc. The outcome will depend on the investment choices you make on the money inside your RRSP. the 5% is just an average number. obviously the amount of interest you make will depend on what you invest in and the length of time. winkwink - true, but then again it depends on your life stage. you might continue to contribute to an RRSP right up to the time of your retirement. Your investments will change as your needs and risk tolerance change also. donnarino and diana – keep in mind that rrsps are just a holding cell for your money – the outcome (gains/losses) will depend on what you invest in. whether your money is gone into a high-interest savings account (which actually is not a bad place to start in my opinion, if you are looking to make a profit in the next couple of years and roll it into your mortgage through the homebuyer’s plan), GICs, stocks, etc. The outcome will depend on the investment choices you make on the money inside your RRSP.

the 5% is just an average number. obviously the amount of interest you make will depend on what you invest in and the length of time.

winkwink – true, but then again it depends on your life stage. you might continue to contribute to an RRSP right up to the time of your retirement. Your investments will change as your needs and risk tolerance change also.

]]> By: winkwink http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6589 winkwink Thu, 26 Feb 2009 18:15:32 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6589 Diana C - I feel your pain about the loss of value of RRSPs, but they have never been presented to me as a way to make money in 2-3 years. My understanding is they are meant to be for long-term plans, like retirement. Diana C – I feel your pain about the loss of value of RRSPs, but they have never been presented to me as a way to make money in 2-3 years. My understanding is they are meant to be for long-term plans, like retirement.

]]> By: Toby http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6582 Toby Thu, 26 Feb 2009 14:45:53 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6582 Diana C - I tend to agree with you....as of Sept 1st I had an RRSP with almost $60K in it that is now less than $30K. That money was $11K I rolled over from a pension plan that I had in 1996, plus added about another $10K of my own money, so it grew about $40K in 12 years, and I've lost almost all of that. I still contribute to an RRSP but fortunately the company I am working for gives me 10% of my salary a month to save as I like (no pension plan) and I don't have to match it, so I am using their money, not mine. That's over $10K a year going to an RRSP, that's enough for me. My own savings now is going to top up my emergency fund to have one year of expenses saved instead of 6 months and after that I will finish paying off my mortage. As far as I'm concerned right now that's a better investment - it might not bring me a tax refund, but my house has increased in value $300K in 13 years so a much better return on my investment (in my uneducated opinion). Diana C – I tend to agree with you….as of Sept 1st I had an RRSP with almost $60K in it that is now less than $30K. That money was $11K I rolled over from a pension plan that I had in 1996, plus added about another $10K of my own money, so it grew about $40K in 12 years, and I’ve lost almost all of that.

I still contribute to an RRSP but fortunately the company I am working for gives me 10% of my salary a month to save as I like (no pension plan) and I don’t have to match it, so I am using their money, not mine. That’s over $10K a year going to an RRSP, that’s enough for me.

My own savings now is going to top up my emergency fund to have one year of expenses saved instead of 6 months and after that I will finish paying off my mortage. As far as I’m concerned right now that’s a better investment – it might not bring me a tax refund, but my house has increased in value $300K in 13 years so a much better return on my investment (in my uneducated opinion).

]]> By: Geoff http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6579 Geoff Thu, 26 Feb 2009 13:52:48 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6579 Donnarino -- Gail is probably taking that 5 or 6% as an example, not a specific RSP account. And I think it's important that it's an average return of 6% over many years, which will include some years at -10% and some at +10% historically. Donnarino — Gail is probably taking that 5 or 6% as an example, not a specific RSP account. And I think it’s important that it’s an average return of 6% over many years, which will include some years at -10% and some at +10% historically.

]]> By: Gail http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6575 Gail Thu, 26 Feb 2009 10:51:46 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6575 Mike, the rules are very different under a defined benefit plan. When you belong to any pension plan, a Pension Adjustment (PA) is made to offset your RRSP contribution limit. With a defined benefit plan a formula is used to calculate the value of the PA. Only your benefits administrator can explain this to you since only (s)he has the formula used under your plan. Go and find out more. BTW: most people would kill for a defined benefit plan. Mike, the rules are very different under a defined benefit plan. When you belong to any pension plan, a Pension Adjustment (PA) is made to offset your RRSP contribution limit. With a defined benefit plan a formula is used to calculate the value of the PA. Only your benefits administrator can explain this to you since only (s)he has the formula used under your plan. Go and find out more. BTW: most people would kill for a defined benefit plan.

]]> By: donnarino http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6571 donnarino Thu, 26 Feb 2009 02:22:41 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6571 Gail, which bank is offering 5%? Do you mean in one of those Stepper RSPs or GICs where the rate starts at 1% and grows to 5% in its fifth year because that's the best I've been able to find. Gail, which bank is offering 5%? Do you mean in one of those Stepper RSPs or GICs where the rate starts at 1% and grows to 5% in its fifth year because that’s the best I’ve been able to find.

]]> By: Marie http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6564 Marie Wed, 25 Feb 2009 20:05:41 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6564 Mike: Under the defined contribution plan, that row (contribution room used up)in your taxes should read $3000 (your contribution + your employer's). Check your T4 slips and pay stibs. If it reads $18000 instead, I would go back an question. They should be able to explain your T4 slip. Under defined benefit pension plan, the rules might be different. Mike:
Under the defined contribution plan, that row (contribution room used up)in your taxes should read $3000 (your contribution + your employer’s). Check your T4 slips and pay stibs. If it reads $18000 instead, I would go back an question. They should be able to explain your T4 slip.
Under defined benefit pension plan, the rules might be different.

]]> By: Mike http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6562 Mike Wed, 25 Feb 2009 18:50:33 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6562 Not sure if anyone can answer my question. Gail stated in this article that, "Some people don’t bother with an RRSP because their company pension plans eat up almost all their RRSP contribution room." In my situation, a few years ago I was contributing about $1500 / yr to my company DB pension plan, and the company contributed about another $1500 / yr = $3000 / yr. Yet, this $3000 pension contribution ate up almost my ENTIRE RRSP contribution room (at that time, likely about $18,000). Why is this? What is the correlation? I have asked the HR/Pension people at my company, and no one really has an explanation. Anyone have an idea? Not sure if anyone can answer my question.

Gail stated in this article that, “Some people don’t bother with an RRSP because their company pension plans eat up almost all their RRSP contribution room.”

In my situation, a few years ago I was contributing about $1500 / yr to my company DB pension plan, and the company contributed about another $1500 / yr = $3000 / yr. Yet, this $3000 pension contribution ate up almost my ENTIRE RRSP contribution room (at that time, likely about $18,000). Why is this? What is the correlation? I have asked the HR/Pension people at my company, and no one really has an explanation.

Anyone have an idea?

]]> By: Geoff http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6560 Geoff Wed, 25 Feb 2009 18:19:02 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6560 @ Diana - it's a bit of a misnomer to say that RRSPs are bad because you are down on yours. An RRSP is simply a type of account, you could hold a GIC in an RRSP, what you mean is you choose low-risk equities to invest in and those are down... but low risk isn't no risk. For me personally, I take the approach that I don't want stocks to be doing well in my 30s or 40s and so am actually putting more in right now, but hopefully they start going up in my 50s and 60s... but we'll see. It's a risk but so is if I'm going to see my 60s or 70s, you never know. @ Diana – it’s a bit of a misnomer to say that RRSPs are bad because you are down on yours. An RRSP is simply a type of account, you could hold a GIC in an RRSP, what you mean is you choose low-risk equities to invest in and those are down… but low risk isn’t no risk. For me personally, I take the approach that I don’t want stocks to be doing well in my 30s or 40s and so am actually putting more in right now, but hopefully they start going up in my 50s and 60s… but we’ll see. It’s a risk but so is if I’m going to see my 60s or 70s, you never know.

]]> By: Danny Jellis http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6559 Danny Jellis Wed, 25 Feb 2009 17:40:53 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6559 RRSP's are an individual matter, we are not all cookie cutter products. Some folks, like the people I deal with in the entertainment industry will be in a low tax bracket now, and then nearing age 65 or more, may be in a higher tax bracket,so an RRSP won't make any sense. Also some "starving actors" get no benefit from an RRSP, yet if they are union members, and get automatic RRSP contributions, they are discouraged from removing funds from their RRSP by the Administrators of the Plan, and the actor is penalized/taxed by CRA for having too much money in their RRSP. They should be educated to look at their RRSP situation once a year and make movements for their best interests RRSP’s are an individual matter, we are not all cookie cutter products. Some folks, like the people I deal with in the entertainment industry will be in a low tax bracket now, and then nearing age 65 or more, may be in a higher tax bracket,so an RRSP won’t make any sense. Also some “starving actors” get no benefit from an RRSP, yet if they are union members, and get automatic RRSP contributions, they are discouraged from removing funds from their RRSP by the Administrators of the Plan, and the actor is penalized/taxed by CRA for having too much money in their RRSP. They should be educated to look at their RRSP situation once a year and make movements for their best interests

]]> By: Diana C http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6558 Diana C Wed, 25 Feb 2009 17:28:31 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6558 I'm not feeling that great about RRSP's right now. I put $17K in an RRSP in 2006 and I now have $15K to show for it. No high risk investments either. It was only a one time investment in RRSP's because we are a duo pension plan couple with guaranteed pensions. I think I'll stick with the pension plan contribution. I’m not feeling that great about RRSP’s right now. I put $17K in an RRSP in 2006 and I now have $15K to show for it. No high risk investments either. It was only a one time investment in RRSP’s because we are a duo pension plan couple with guaranteed pensions. I think I’ll stick with the pension plan contribution.

]]> By: Pol* http://gailvazoxlade.com/blog/archives/436/comment-page-1#comment-6557 Pol* Wed, 25 Feb 2009 17:23:29 +0000 http://gailvazoxlade.com/blog/?p=436#comment-6557 My brain hurts! (just kidding) All fooling aside, RRSPs are a tough decision. Too much thinking for the average impulsive person. How much of today are you willing to sacrifice for tomorrow? 10% or more? Especially in this volitile market where it feels like the money is just getting tossed in the fire. It doesn't help when there are the high-pressure sales people trying to confuse you with universal plans and scare tactics (it has happened to me). I have tried since the beginning to put away at least 10% (and on maternity leave that was only $50 a month that hurt like hell to part with)! My brain hurts!
(just kidding)
All fooling aside, RRSPs are a tough decision. Too much thinking for the average impulsive person. How much of today are you willing to sacrifice for tomorrow? 10% or more? Especially in this volitile market where it feels like the money is just getting tossed in the fire. It doesn’t help when there are the high-pressure sales people trying to confuse you with universal plans and scare tactics (it has happened to me).

I have tried since the beginning to put away at least 10% (and on maternity leave that was only $50 a month that hurt like hell to part with)!

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