How much do you know about financial independence?

Posted by: XXX_er

And all the banks are selling the same 250 or so products,  but many people have trusted bankers and bought too many RRSP, you get a guy making 100K every year for 30 yrs and he just keeps maxing the RRSP

I wouldn't buy anything from a bank, but a guy making $100K/yr should be maxing his RRSPs for most/all his working life as it's only 18% of his income. That plus maxing his TFSA plus CPP/OAS will get him someplace reasonable financially by the time he retires. As we discussed above if he got lucky and his investment returns were amazing he might decide to change course at the end, but if I was going to advise someone I'd rather see them over-invest in a RRSP than under-invest overall.

I steer everyone I know to Questrade. No fees to buy ETFs and you can access any investment products you want without sales pressure.

Posted by: heckler

The VUN vs VTI tab in my spreadsheet has a $28,750 MER, and $98,162 withholding taxes delta, all for a $1072 increase in trading fees over our lifetime. Although Im pretty sure we can minimize that drastically by just cashing dividends and using USD accounts to travel.

Needless to say, I spent a bit more than 30 minutes, but it’s well worth the effort to understand what you are buying, vs signing whatever RSP form the bank guy tells you is best to sign!

The 30mins was actual time required to make the change ie. Call brokerage, sell VUN, buy DLR, do Norbert's Gambit to get DLR [USD] and buy VTI. Doing the researching on withholding taxes and Norbert's Gambit is another few hours if you take your time.

If my memory serves me right my annual performance gain is a bit over $2K vs. holding VUN. If you work with the 4%WR Rule that's like having an extra ~$50K saved and invested. Depending on how much you can save per year that's a year or two less working/saving you need to do to retire by being efficient.

Your numbers are great. Earning an extra ~$127K is huge. Especially when it doesn't require a lot of work or any extra risk.

Posted by: [email protected]

Yes that's a sensible strategy. Also we don't have kids and don't need to leave anything behind so the idea of never running out of money is not a hard requirement.

I imagine starting with conservative withdrawals, supplementing with additional income from casual 'fun-work' and adapting to the market while we are still relatively young and flexible. As we get older we can be increasingly more aggressive and slowly start drawing down the principal since ultimately we don't need to preserve it. There are also CPP and OAS as safety nets.

Bottom line, not too worried about running out of money, now we just need to stay healthy to enjoy all that future free time. There's a lot one can do to increase the odds but unfortunately it's not all within our control.

Sounds like a good plan. Enjoying time now while you are healthy is important. Hopefully you both remain healthy a long time, but there are no guarantees. Plus once you get down to a relatively small amount of work per week most of the negatives about FT work drop away. If you live a modest lifestyle and don't need to save money you can coast while living off your PT income and let your investments grow. I think it's a great strategy.

Posted by: Vikb

Posted by: XXX_er

And all the banks are selling the same 250 or so products, but many people have trusted bankers and bought too many RRSP, you get a guy making 100K every year for 30 yrs and he just keeps maxing the RRSP

I wouldn't buy anything from a bank, but a guy making $100K/yr should be maxing his RRSPs for most/all his working life as it's only 18% of his income. That plus maxing his TFSA plus CPP/OAS will get him someplace reasonable financially by the time he retires. As we discussed above if he got lucky and his investment returns were amazing he might decide to change course at the end, but if I was going to advise someone I'd rather see them over-invest in a RRSP than under-invest overall.

I steer everyone I know to Questrade. No fees to buy ETFs and you can access any investment products you want without sales pressure.

well actualy what happens is joe at the mill trusts the same guy at the bank who sells him a mortgage,

so bank guy sells joe whatever the bank is selling the only thing he might miss out on is lifeinsurance

but yer right its probabably better to at least be overinvested rather than not invested

If the bank can make the #'s then I deal with a bank last mortgage was Tangerine

I got the figure of 250 products from a banker whose computer i was fixing

Buddy said to me "we are all selling the same 250 products"

^^ there's no such thing as 'overinvested'

RRSP is the account.  You seem to be talking about mutual funds (the product).  Yes, mutual funds suck, high percentage fees and a bunch of fund managers all copying each other.  People in here are talking index funds... low fees, just aim to track the market index.

Nobody should be counting on CPP/OAP as it may not be there in another 30 years - we're all in our 30's right ;) Besides it's a pittance compared to what the cost of living is and will be. People counting on that to survive in their retirement will probably not be retiring. For people that feel they don't have enough knowledge to manage their own portfolio there is more than enough info in this thread and links to resources that will give you better overall returns than any sales person at a bank or credit union.

Posted by: [email protected]

"Financial advisors" at banks are basically salespeople. As I understand it, strangely enough, financial advisors in Canada do not have fiduciary duty (duty to act in the best interest of their clients).

So best to cut them out completely or use one that is independent and fee-based.

There's a difference between a financial advisor and a CFP - certified financial planner - which is a fairly rigorous process. There's still no guarantee you won't get the best advice, but at least with a CFP you've got someone with professional credentials and a certifying body with a complaints process.

Posted by: syncro

Nobody should be counting on CPP/OAP as it may not be there in another 30 years - we're all in our 30's right ;) Besides it's a pittance compared to what the cost of living is and will be. People counting on that to survive in their retirement will probably not be retiring. For people that feel they don't have enough knowledge to manage their own portfolio there is more than enough info in this thread and links to resources that will give you better overall returns than any sales person at a bank or credit union.

CPP is self-funded so it's going to be there. The CPP managers are audited regularly to ensure they are doing a reasonable job. OAS is a Gov't program funded by tax revenues. So if the Gov't of Canada is solvent it will be there and if they were to cut that program they would have to provide other welfare programs to support all the low/lower income folks who couldn't make up the loss from other sources. So there is no way to really save that money without causing huge suffering.

My combined CPP/OAS expectation is ~$15K/year in 2022 dollars which is not going to allow me to retire if I had no other income, but it's more than half of my minimum spend so it will definitely make a difference if the markets are not kind to me.

Posted by: Vikb

CPP is self-funded so it's going to be there. The CPP managers are audited regularly to ensure they are doing a reasonable job. OAS is a Gov't program funded by tax revenues. So if the Gov't of Canada is solvent it will be there and if they were to cut that program they would have to provide other welfare programs to support all the low/lower income folks who couldn't make up the loss from other sources. So there is no way to really save that money without causing huge suffering.

My combined CPP/OAS expectation is ~$15K/year in 2022 dollars which is not going to allow me to retire if I had no other income, but it's more than half of my minimum spend so it will definitely make a difference if the markets are not kind to me.

Right you are - I remember years back there was concern CPP might fail, seems they took care of it. I have a DBP as well as RSP's so I've never been all that concerned about CPP/OAS or followed up on it's outcome

https://www.theglobeandmail.com/globe-investor/retirement/retire-planning/most-of-you-dont-believe-this-but-the-cpp-will-be-there-for-you/article37412941/

The narrative that 'CPP may fail' was Harper gov fearmongering, from back when he triednto raise retirement age to 70. CPP was, and is very well funded, and the managers have made some very good investments, so investment returns are better than benchmarks.

COP made a 20% ROI for fiscal 2021 which is pretty damn good for a $550 billion investment fund.

https://www.cppinvestments.com/the-fund/our-performance/financial-results/f2021-annual-results

Oh, and FYI, all Canadians with funds in CPP are owners of Tesla stock. They hold 483,016 shares as of Q4 2021.

Posted by: Vikb

My combined CPP/OAS expectation is ~$15K/year in 2022 dollars which is not going to allow me to retire if I had no other income, but it's more than half of my minimum spend so it will definitely make a difference if the markets are not kind to me.

I trust you plan to hold off on claiming OAS/CPP until age 70 to maximize the benefit?

Posted by: KenN

Oh, and FYI, all Canadians with funds in CPP are owners of Tesla stock. They hold 483,016 shares as of Q4 2021.

Huh, now I know why I don't like CPP.

Posted by: KenN

I trust you plan to hold off on claiming OAS/CPP until age 70 to maximize the benefit?

Good question Ken. My estimates are for taking both at 65. I need to do a detailed calculation of my CPP. I have the spreadsheet I need, but I have to sit down and jam in the numbers to get something more accurate. One issue I have to look into is that I'll have a number of low or zero earned income years before 65-70. They will drag down my CPP benefit amount so I have to wargame it a bit and see what my likely payment will be at 60-65-70. Waiting until 70 may be counterproductive.  

The other thing I need to consider is that due to my age I have a large RRSP and a small TFSA so come 71 I could have significant mandatory withdrawals. If so high CPP/OAS payments might not be great as they'll be taxed heavily.

Lastly since my retirement is mostly funded from the stock market if I get a good run of returns between now and 60 I'll be less concerned with CPP/OAS than if I get a crappy run of returns and really need them to shore up my finances. No way to tell in advance.

Sorry long way of saying I am not sure when I'll take CPP/OAS. It's an important question. I'm just turning 53 so I have a few years until I reach 60 and I have to have my mind made up for CPP at least.

Posted by: syncro

Posted by: KenN

Oh, and FYI, all Canadians with funds in CPP are owners of Tesla stock. They hold 483,016 shares as of Q4 2021.

Huh, now I know why I don't like CPP.

That's only CAD 500M at today's closing price. A rounding difference.