Leonard Cohen a Cautionary Retirement Story

I was saddened to hear that Leonard Cohen, yet another famous Montrealer has passed on, but his  music will leave a legacy that will live long past all of us.

Leonard Cohen
A Poet and a Canadian Treasure
Link to Amazon

Mr. Cohen, unfortunately, was also a victim of losing his retirement nest-egg. In 2005, the news of how Mr. Cohen’s retirement funds had disappeared, allegedly due to impropriety from a former manager came to the public eye. Mr. Cohen, lost over $5 million dollars, and was forced to go back to work. Luckily, Mr. Cohen’s talents allowed him to try to recover from this set back, however, it meant his retirement evaporated.

We are continually barraged with stories of athletes and celebrities who have lost their money, due to financial impropriety (or even worse, simple overspending), but don’t get too smug.

It is easy for us to say, this won’t happen to me, but as a former Nortel employee, many folks I worked with (and retirees that I know) have had to dramatically change their retirement plans due to the Nortel Pension (and Stock) collapse.

Are you confident that your retirement plans are safe, and that when you retire, you can stay retired? Will you be healthy enough when you retire? Some good questions that need answering.

Tangerine Money Back Credit Card


Does Forced Saving Work ?

The title is paraphrasing a study from Stats Canada entitled, “Do Workplace Pensions Crowd Out Other Retirement Savings? Evidence from Canadian Tax Records” . This implies that forcing folks who don’t save for retirement, to save for retirement by increasing their Retirement Pension Plan (RPP) contributions works quite well. A better question is does forced savings work?

The study finds:

Is the Pension Tree’s fruit not good for You?

For workers who do not save much for retirement on their own, the $1.00 automatic increase in RPP contributions increased net savings by about $0.95. For workers who save regularly for retirement, the $1.00 automatic increase in RPP contributions was largely offset by a similar reduction in RRSP contributions. The study was designed in such a way that these results do not simply reflect program rules, such as contribution limits.

So if you make someone who doesn’t save much, save more, they save more. If you make someone save more, who already saves, they will save less? Wow

Given we have this interesting perspective on Money and saving, where does the new Ontario Pension Fund fit in this equation? Food for thought?


RRSP Rebalance Season

I have given up ranting about how the whole concept of “RRSP Season” is idiotic (you should be putting money in your RRSPs (if you that is how you want to save) all year long, not just in February), so if we assume that you still might want to put money into your RRSP now, maybe now is the best time to do a Rebalance of your Couch Potato RRSP Portfolio?

Mr Miyagi
Find Balance in Investing and in Life (and don’t stock pick)

Wait a minute, if you have a Couch Potato Portfolio, aren’t you supposed to just leave it alone, once your money is in there? Yes and No, is the short answer to that question. When you first put your money into your portfolio you made a decision about how you wanted your money to be allocated in the portfolio. There are many great examples of portfolios, but let’s go with a basic one:

Canadian Equities  25%
US Equities  25%
International Equities 25%
Canadian Bonds 15%
Cash  10%

Let us not get hung up on how the portfolio is set up initially, however, given a year has now passed since you set up your RRSP Portfolio (since this is RRSP Rebalancing season), and we have a look at the portfolio and are aghast to see the following percentages of our total portfolio:

Canadian Equities  15%
US Equities  35%
International Equities 33%
Canadian Bonds 10%
Cash  7%

Now that is an out of balance portfolio. As with Karate (in the words of Mr. Miyagi), in investing, balance is everything so here is a portfolio in dire need of rebalancing. What do I mean by rebalancing? Simple get your portfolio back to being close to what your initial allocations were (when you set it up, see the first list).

Rebalance? How?

  1. Cash out all of the funds, pool the money and restart the portfolio with our initial allocations. This is drastic, and fraught with costs, not a good way to find balance.
  2. Sell off enough of the US Equities and International Equities funds and spread the funds between the remaining members of the portfolio to find balance. This works well, and the Canadian Capitalist has an excellent spreadsheet on how to to help you do that. This way you find balance.
  3. Bring in external money and rebalance using that, and hence the thematic premise, of Rebalancing Season! If you have extra money to put into your portfolio, take advantage of this and rebalance your portfolio, without having to do too many sell orders! Balance is restored.

Remember in Investing always try to find Balance  ⚖, it is the key to a tranquil investing life. Enjoy the festive RRSP Rebalancing Season.


Debt and Financial Chains

Do you realize that you drag your financial past decisions around like Jacob Marley did in a Christmas Carol ? All of those odd decisions that you made in the past build a chain that you are now hobbled with, and will continue to be hobbled with. Dickens had Marley’s chain signify the horrible decisions he made about mankind. That is a lovely sentiment, however, the financial chain that you create for yourself here and now is just as crippling (if you continue to make bad decisions).

Save up to 50% on life insurance.

Christmas Wishes from the Past

I seem to do this a lot, so here are my Christmas wishes from years gone by:

Jacob Marley
Jacob Marley and his Chains (Sir Alec Guiness)

Getting the point across to younger folks, that pretty much all the odd decisions that they make early on in life will follow them one way or another, in pretty much all aspects of life, but especially in financial terms, is not an easy task. When you are young you have all the time in the world, and if you make a few mistakes it won’t caused you any issues later in life, or will it?

  • If you decide to forego putting money in your RRSP, and decide to get a nicer car when you were 25, you then have more links in your financial chain to carry. You will have to save more later in life to retire the way you wish.
  • If you don’t quit smoking until you are 40, you have 20 years of spending money on your habit, and shortening your life (and paying more for your life insurance as well). More links in your financial chain. You might want to look up how much term insurance costs for a smoker over the age of 50, if you think I am being alarmist.
  • Every debt that you think you will pay off at a later date, or worse each month you carry credit card debt, you forge many more strong links in your financial chain.
  • Every lottery ticket that you have bought over the years adds more links to your chain.

The financial chains you forge in your youth, are a heavy weight to carry into your golden years.


Don’t Be Afraid to Live With Your Parents

… if you are under the age of 18. If you are older than 18, why are you still living with your parents, better still, why do you want to move back in with your parents ? Pretty sure your parents won’t say no to your request, but maybe they should.

Live with Rich Parents?
Truly a pithy and topical photo

I grow weary reading these self-help articles for new grads (or worse 30 year olds who have dugg too deep a debt hole or young couples trying to “build up a nest-egg”) suggesting that your parents would love to open up their house to their adult children.  We are talking about children who have lived away from home (for a while) that are now moving back home, to live with their parents, who have also enjoyed an empty nest (most likely). (I am not speaking of kids who need to stay with their parents due to disabilities or other issues similar to that, I am not that much of an Ogre).

Question: Do you want your parents to move in with you after their “nest egg” ends up exhausted because they had to support you between the ages of 25 and 30 ? Think about it, turn about is fair play in this world, especially when it comes to you invading your parents Golden Years.

This sounds like a rather parsimonious opinion, but when did it become a badge of courage to live with your parents? I must admit, that I am a hypocrite on this matter, as I lived with my parents during most of my work terms, when I was a co-op students, however, once I graduated, I did not move back home. This did not mean I did not want to live at home, but, I also knew my parents had done their job with me. They had made sure I had a degree and they had taught me all they could, and yes, they have helped me in life financially, but I have not moved back in with them.

Moving Back Home
A Badge for Those Contemplating Moving Back Home

When I was younger, kids wanted to move away from home, and be an adult, when did staying a kid become a status symbol?

I suppose if you are in dire straights, and this is your only option, your parents will want to help however, here are a few helpful hints and tips if you are planning on moving back in with your parents:

  • You may have grown up in your parents house, but it is no longer your home, you are now a lodger, treat this house accordingly.
  • Pay rent (if you can), and pay board if your parents are feeding you, allowing you to use their utilities, and giving you a space to live in. Especially if you have a job!
  • Show your parents you are “saving” or “getting out of debt”, give them a feeling that you are trying to help yourself, you are not simply giving up. Your parents want to support you, and they will be happy to hear of your progress.
  • If you have a car, get rid of it (and no that doesn’t mean you can borrow your parents car). If you can afford to have a car, you can afford not to live with your parents. Worse don’t ask your parents to support your “car habit”.
  • Respect your parents privacy. Make sure you allocate time to NOT to be in your parents house. Your parents will thank you for it.

Big Cajun Man Lemma of Baby Boom Retirement

Kippers will be the death of the baby boom generation.


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