This Week’s Magic Number is 85

The Blunt Bean Counter, Michael James and a few other Financial Blogging types have been discussing what the Magic Number is for retirement, and I would like to add something new, that magic number is 85. In the case of the other Financial Bloggodocio out there, they are trying to find the amount of money you need to retire (held in your RRSP, TFSA and other savings vehicles), for folks with pensions like me, there are many funny magic numbers that arise.

Pension Equation magic number is 85
Doesn’t look that magical does it? But the magic number is 85!

A major magic number is 85, which if reached is when my pension will no longer be “discounted” (if I chose to retire). This number 85 is simply:

Age of Pension Owner + Years of Service 

After cobbling together quick formula for me, that magical number arrives in about 5 years (or so), which is not that far away (remembering that does not give me the maximum pension, I would need to work 35 years to get to that). When this magical number transpires, will I retire? Not likely, more likely I’ll keep working, because I have another more important formula that I will be watching (and luckily it is a simple Boolean comparison):

Net Income Retired >= Net Income Working

When that is TRUE, I will be putting in for my “Get Me Out of Here” package. Looks like a simple comparison however it is not as simple as you might think.

Net Income Working is very simple, just look at my pay cheque and maybe include the costs of commuting (and a few other extras) to come up with that number.

Net Income Retired is a much trickier number to conjure up in a spreadsheet. When I retire I stop paying for a boot load of things including:

  • Pension payments, I no longer have to pay   (which is increasing quickly thanks to new rules for the Public Service Pension)
  • Employment Insurance Premiums (I never have got dime one from this system)
  • Canada Pension Payments (I will get something from here, luckily, as will we all, but will it start changing soon too?)
  • Union Dues (no comment)
  • Group Medical (ends up being a wash, since I have to pay for a medical plan when I retire, and now the government seems to be targeting those benefits in the latest budget)
  • Lower Income Taxes

The last one is the really important point that is very interesting. I can effectively “Income Balance” my pension income between my wife and myself, and it is simply a tax form change. This Income Sharing, should mean at least 1 (hopefully more) tax bracket drop for us, which may make retiring earlier more tasty for me.

Being a Mathematician (of sorts) I love “Magic Numbers” and as a Programmer, I really love Boolean Equations for decision points (True or False are your only choices). You’d be surprised how many of your favorite Financial Bloggers are mathematicians or programmers. In this case the Magic Number is 85 (for this calculation at least).


Financial Things to Do On Your Birthday

Yes, for me, around this time of year, another birthday transpires (mine to be specific), and I was thinking about the things (financially) that you need to do or think about on your birthday. I am confident I am missing a few, so if you read this and think of some other things I may not have thought about, please add in the comments:

Birthday Reminders and Things To Do

A Real Birthday Cake!
A Real Birthday Cake!

Just a few essential things to think about on your birthday

  1. Insurance: this topic actually has a whole bunch of interesting sub topics:
    • Life insurance, is your premium due for the year? Should you be thinking about getting more insurance, if you have more kids, or have had a life change? Have you checked to see who the beneficiary is of your policy? Might be time to just go check that (if you are divorced, or a widower).
    • Car insurance, does it need to be renewed? Is it time to shop around to get a cheaper policy?
  2. Did you get your car registration renewed? Here in Ontario that is usually when it lapses. How about your drivers’ license? If you have moved, you might not have got your reminder, open your wallet and check.
  3. Guilt, have you called your kids the day after your birthday and reminded them that it would have been nice to get a call saying Happy Birthday? Guilty kids are less likely to be bothering you about getting more money from you.
  4. Have you checked the batteries on your smoke detector? If you want to protect your house or property it is really important to check these.
  5. Maybe it’s time to make a Doctor’s appointment, if you are over 30. Don’t wait until your arm is cut off by a reciprocating saw or when you think you need little blue pills to go see  your Doctor. Having money is great, but if you are dead, you aren’t going to be enjoying it that much
  6. What the heck is in your safe deposit box? Maybe it’s time to go and check on that, maybe there is stuff in there that much be dealt with.
  7. You could always restart your New Years Resolutions too, since you most likely abandoned them by your birthday (for me it’s a lot harder given my birthday is in January).
  8. How about those deadbeat friends of yours that come over and drink your beer? Get them to buy you a drink (or 12)!

Just a few simple ideas for those with a birthday coming up.

More Birthday Ideas


In Canada Same Number of Youngsters and Seniors?

Yes indeed, Stats Canada has published their Census 2011 numbers and there are some very interesting numbers, which will affect (and even effect) Canada’s future (financially and in general).

As a result, the number of seniors has continued to converge with the number of children in Canada between 2006 and 2011. The census counted 5,607,345 children aged 14 and under, compared with 4,945,060 seniors. In the working-age population, the census counted 22,924,300 people.

The Canadian population looking more like a classic Normal Curve, with equal amounts of the population in the Kids and Seniors category.

A fun little add on to this statement is:

The main factors behind the aging of Canada’s population are the nation’s below-replacement-level fertility rate over the last 40 years and an increasing life expectancy.

So Canada’s population is growing due to immigration more than “via our loins”, but also we are living a lot longer too.

One more point brought up to think about:

For the first time, census data showed that there were more people in the age group 55 to 64, where people typically are about to leave the labour force, than in the age group 15 to 24, where people typically are about to enter it.

There are as many folks about to leave the work force as there are trying to enter it, yet we have a large unemployment rate in the younger age group? Will this change? Lots of arguments on both sides.

So what does this have to do with personal finance? Allow me a few simple observations:

  • The financial support system for the Government has been mostly modeled on a growing population supporting a diminishing population size (i.e. the young folk supporting the seniors), this model seems to be changing (this is the infamous CPP can’t support the Baby Boomers argument).
  • Can the medical system support an aging population? Instead of a Children’s Hospital of Eastern Ontario, will we see a Geriatric Hospital of Eastern Ontario?
  • Can Casinos be the answer for flagging Government income, since their main customer base seems to be senior citizens?

A beautiful hand made clock

Time Waits for No One....

All very interesting, but I believe Stats Canada has now confirmed what pretty much of us already knew, Canada’s Population is aging.


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Seniors and Debt

Retired with Debt?

One of my goals is to retire with no debt (not sure whether I can pull it off, but it is a goal), however TD Economics posted a disturbing report on Canada’s Aging Household Debt Burden which suggests my dream may be harder than I think it will be (or maybe I just won’t ever retire, thus making the goal always achievable).

The report is quick to point out that they are not singling out our Seniors as becoming spendthrifts and money wasters, every age group has their debt-to-income ratio increase, however, the problem with seniors is so many are on fixed incomes, paying off debt becomes a much more painful experience for them to endure. The 65+ group is also the group with the largest debt growth over the past little while.

An interesting twist on this debt increase being better is in the report:

Notwithstanding the rising household vulnerability, the
fact that a substantial share of the new borrowing has been
tilted towards the older age segments might lessen the overall
risk compared to what would be the case if concentrated
in the younger age groups. That is because older Canadians
tend to have lower debt balances and larger asset bases
which to fall back on.

TD Economics – October 11, 2011

So because seniors typically have lower debt balances to begin with, it’s not as bad that they are building up debt now? That’s an interesting point of view to have (which I do not agree with). It’s kind of like my argument that since I have lost weight before, it was OK to pack on a few pounds, because I wasn’t that fat to begin with, and I have proven I can lose weight. To say the argument is optimistic is an understatement (but then again it does use a lot of stock pricing logic (i.e. if it went up before, it will go up again), so who knows, maybe it is correct).

The authors do put a more sensible statement in the next paragraph:

Lastly, the trend towards retiring with debt increases
uncertainty with respect to these households’ longer-term
financial outcomes.

TD Economics – October 11, 2011

Precisely the point I worry about, if I retire with debt how can I pay it off, and what happens when interest rates go back up? Yes my CSBs will increase but my debt will grow even faster than that (note my humorous view that by the time I retire I will be using CSBs to save, just to be careful).

Are you planning on retiring with debt? If so, why?!??


Financial Time Machine List

After watching yet another Sci-Fi movie about Time Travel I started to wonder what would happen if I could go back in time in my life whether I would change anything?

I think any answer to this question is purely speculative since I will never get access to such a device, so let’s just play along for now, and say yes there are things in my life I would go back and tell my younger self to review some decisions.

Given I have made some horrendously bad decisions in my personal life (until I met my wife of course), let’s leave this interesting exercise solely in the Personal Finance spectrum, just to make this less of a Jungian exploit (and this post doesn’t turn into a novella)

Hour Glass
Time Waits For No One

You Don’t Need That Many LPs!

Yes in University, I spent a lot of the money that I had built up as a “nest egg” from age 12-19 on Vinyl LPs. Why did I do this, mostly because I could.  I do love music, and some of those albums I still treasure, but holy crap dude, that was a lot of money spent in a short time on something you don’t use any more!

To quote the Men in Black, “…This is gonna replace CD’s soon; guess I’ll have to buy the White Album again ….“, you know how many different formats I have Exile on Main Street ? I can’t find my 8-track version though.

Discretionary spending can be destructive.

Money Doesn’t Buy Friends

Yup, I spent a lot of money on girlfriends and alleged friends, thinking that is what you do, and in hindsight, given how pissed off I felt about those friends when they turned out as “fair weather friends” and the girlfriends dumped me, that money was truly wasted. I view that money lost as mostly a learning experience, but at the end of it, the price was more likely more than my tuition for University.

Everybody is your best buddy, when you have some cash (yes, that is an incredibly cynical statement, but unfortunately a true cynical statement).

Your Finances are not an Experiment

Thinking that you can experiment with financial ideas is stupid. I put money in some very odd investments and savings vehicles without fully understanding what the ideas entailed. I should have done more investigation first and then gone in with my eyes open.

Money lost, is money lost, there is no infinite money reserve, and I should have been much cheaper in my younger days (in this area). As you get older the cost of your mistakes are cheaper, but only because the money you spent has a shorter time to grow.

If I blew $1000 when I was 25 it would be worth about it could be worth about $16,000 or more by the time I am 65, however if I blow $1000 when I am 45, it would only be worth $4000 when I am 65, so make your financial mistakes later in life (yes, I am being facetious).

Thinking that you have plenty of time to recover lost moneys is a decreasing return equation. I should get that put on a T-Shirt or something, I might recuperate some funds with that.

What’s With the Hair?

OK, I’ll indulge myself that as well, having looked back at pictures of me at a younger age my other comment might be, “Get a normal haircut, ya freak!”.

If you could go back 30 years, what would you advise yourself (financially)?


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