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Can you simplify RRSP, OAS, and Pension rules please?
February 8, 2021
6:11 am
Loonie
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Yes, I took into consideration that you would disagree with me, Bill, before I posted, and for the reasons you suggest, as they were predictable. But I can't allow that to be a muzzle.

If it were up to people who support your perspective, there would never be any increases in minimum wage, maybe no minimum wage at all. You may think that's a good thing. I don't. We are seeing the effects of it right now with low paid workers in LTC. The profit motive will always try to squeeze whatever it can out of its employees, regardless of whether it's Joe's newfangled whatever or multinational. Well, I should probably modify that. there are a few enlightened employers out there, but not many. The guy who founded Bob's Red Mill (produces all manner of grains, available in most grocery stores) recently stepped down and GAVE his business to his employees. He decided he had enough money. Ben and Jerry, founders of Ben and Jerry's ubiquitous ice creams, had a company rule that specified that the lowest paid employee had to receive at least a certain percentage of what the highest one got. I can't remember the percentage any more, but it was generous. The company has been fabulously successful despite being generous with employees, perhaps because of it. Ben and Jerry sold out to Unilever eventually.

Vaccine manufacturers have not located here because they don't want to, the market isn't big enough for them. Europe has better minimum wage laws generally than we do. Belgium, for example, which produces one of the vaccines, has had steady minimum wage increases. https://countryeconomy.com/national-minimum-wage/belgium

We used to have Connaught Labs, part of the University of Toronto, filled with innovative scientists, which had an enviable history of world leadership in communicable disease, but shortsightedness and a price tag made sure we got rid of that with no foresight from our government. https://connaught.research.utoronto.ca/history/ It seems they are more fond of bailing out things that don't work as well.

An economy that is always chasing the lowest wage dollar is not going to succeed in the long run because there is always somebody somewhere who is willing to undercut them, who doesn't want to pay for quality public education, doesn't want to pay for quality government services, doesn't give two hoots about employee health or welfare, etc. That's not the way to go.

The best products are produced by the best workers - well fed, well housed, well educated, well paid, etc., with the potential for a normal safe lifespan unencumbered by industrial pollutants and lethal materials. And the best companies look for those healthy educated competent employees.
I, for one, am glad our vaccines are at least coming from developed nations with higher standards and not from an unfortunate country where standards are not maintained and buildings are subject to collapse etc. Yes, quality costs money. It also causes more money to circulate. So?

You and I are never going to agree on this, so I suggest we leave it now. We've both stated our opinions.

February 8, 2021
6:19 am
JenE
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Well said Loonie.

February 8, 2021
10:22 am
Bill
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Couldn't disagree with you more, Loonie, on virtually every derivative idea. But, sure, I'll agree that dialogue should end when you suggest.

February 9, 2021
5:44 am
Alexandre
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Loonie said
When people work for modest wages all their lives and find that CPP and OAS and whatever they've managed to save are not adequate for a decent life in retirement, it is other Canadians who supplement their income with GIS etc.

It would make more sense to ensure they had a better wage in the first place...

I think in the case of that couple, the taxes paid by their many children and grandchildren cover way in excess what government pays back to that couple.

It might be a bit easier these days (just before pandemics, I mean), but we are talking of a woman in her early to mid 30s, with college diploma but no job experience, with kids, looking for a job in mid-1960s.

I would not say that decision to have more kids earlier in adult life, when kids are born healthier and stay healthier on average, is the wrong choice one makes in life.

I would not say that it makes more sense, from what benefits society point of view, to have couples stay childless or have just one child and later in life, so that they can put aside more money, to manage to live on their own savings in retirement.

February 9, 2021
8:38 am
rodeworthy
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Loonie said
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4 If this is not sufficient to create the incomes they are aiming for, they can split RIFs or company pensions on an annual discretionary basis.
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Loonie, this is second time I have recently come across the disjunctive 'or' when discussing qualifying incomes for pension splitting. The other one was Jim Yi in his discussion of income splitting at Retire Happy.

This 'or' is making me nervous. I have two employer pensions and RIF withdrawals that I consider Eligible Pension Income and plan to use the total of all these for pension splitting. I will use 60% of the 50% allowed for splitting to balance incomes while keeping them within breakpoints for increased marginal tax rate and below levels triggering OAS recovery tax.

Am I missing something here? Is one income exclusive of the other? If so, I have badly misconstrued the CRA information I relied on to determine our taxable incomes. Please say it isn't so!

February 9, 2021
1:42 pm
pooreva
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rodeworthy said
Am I missing something here? Is one income exclusive of the other? If so, I have badly misconstrued the CRA information I relied on to determine our taxable incomes. Please say it isn't so!  

Why don't you enter your data into tax software (TurboTax for example) and let it do income splitting and see what is going to happen?

February 9, 2021
2:22 pm
Londonguy
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rodeworthy said

Loonie said
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.
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4 If this is not sufficient to create the incomes they are aiming for, they can split RIFs or company pensions on an annual discretionary basis.
.
.
.

Loonie, this is second time I have recently come across the disjunctive 'or' when discussing qualifying incomes for pension splitting. The other one was Jim Yi in his discussion of income splitting at Retire Happy.

This 'or' is making me nervous. I have two employer pensions and RIF withdrawals that I consider Eligible Pension Income and plan to use the total of all these for pension splitting. I will use 60% of the 50% allowed for splitting to balance incomes while keeping them within breakpoints for increased marginal tax rate and below levels triggering OAS recovery tax.

Am I missing something here? Is one income exclusive of the other? If so, I have badly misconstrued the CRA information I relied on to determine our taxable incomes. Please say it isn't so!  

Fret not. Both a company pension and payments from your own RRIF represent qualifying pension income, and it's that total pension income that can be split under the rules. Its only CPP or random RSP withdrawals that can't be split

February 9, 2021
5:05 pm
Loonie
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Sorry for the confusion. I think I used "or" because I was thinking to show that a person had more than one option.
Maybe I should have said "and", but then someone might have thought they needed to split both in order to meet their needs.
Perhaps "and/or" would have been best.
Use all you want!

February 9, 2021
5:56 pm
Loonie
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Alexandre said

Loonie said
When people work for modest wages all their lives and find that CPP and OAS and whatever they've managed to save are not adequate for a decent life in retirement, it is other Canadians who supplement their income with GIS etc.

It would make more sense to ensure they had a better wage in the first place...

I think in the case of that couple, the taxes paid by their many children and grandchildren cover way in excess what government pays back to that couple.

It might be a bit easier these days (just before pandemics, I mean), but we are talking of a woman in her early to mid 30s, with college diploma but no job experience, with kids, looking for a job in mid-1960s.

I would not say that decision to have more kids earlier in adult life, when kids are born healthier and stay healthier on average, is the wrong choice one makes in life.

I would not say that it makes more sense, from what benefits society point of view, to have couples stay childless or have just one child and later in life, so that they can put aside more money, to manage to live on their own savings in retirement.  

I hear what you are saying.
Here are my thoughts:

I think it would be a misconception to equate the tax contributions of children and grandchildren to GIS for parents and grandparents. Everyone's taxes are intended to support the entire budget; it's not a system for redirecting ones personal funds to elderly family members. If that were the case, there would be a line for it on the tax forms. The number of descendants one has and their employment status is not relevant on that score.

Canada does need families to have more children. It is one of our economic weaknesses as a country that our population is not growing enough. There are innumerable reports on this topsy-turvy situation and its implications.

I don't have a problem with this couple receiving GIS, just to clarify. And I have never suggested that anyone should remain childless.
There may be a reasonable limit to how many children one should have, but I'm not going to say what it is because there are too many factors involved. However, as you have mentioned, having children earlier, but not too early usually makes for healthier children and healthier mothers. If that is your criterion, then continuing to have them at the upper age limit is also a limiting factor. I'm sure we can all think of examples where having 10 or 15 children worked out well, but the implications of deciding to do so need to be considered by the parents. A lot of parents struggle with the question of how many children they can afford and how many health risks they are willing to take in having them. And everyone needs to consider how they will finance their retirement, knowing that the government provisions that exist when you are 25 may not be the same when you are 65. There are no simple answers.

Time spent out of the paid workforce raising children has always been a controversial issue because it is not well compensated and is usually seen as a personal decision to stay home with the kids. In many cases, however, child care costs are so high that going back to work isn't an option for several years.

The only provisions I am aware of that deal with this are EI, which pays a certain amount to parents who leave the work force temporarily to have children, and CPP, which allows them to deduct a certain number of years of contributions which would otherwise be required to maximize their pension benefits. Another provision would be Quebec's child care policies, which I understand make child care affordable. In Quebec, because of the desire to preserve French culture and the relatively early awareness of a declining birthrate led to the belief that having children needed to be supported.

However, none of this means that inadequate wages should be acceptable.

March 1, 2021
5:30 pm
Bobbyjet11
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Any thoughts on the relatively new Vanguard ETF for retirement, VRIF.... as an alternative (and perhaps better) option for retirees?

https://www.moneysense.ca/columns/retired-money/the-lowdown-on-vanguards-retirement-income-etf-can-you-rely-on-its-4-payout-target/

March 1, 2021
10:30 pm
Loonie
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Bobbyjet11 said
Any thoughts on the relatively new Vanguard ETF for retirement, VRIF.... as an alternative (and perhaps better) option for retirees?

https://www.moneysense.ca/columns/retired-money/the-lowdown-on-vanguards-retirement-income-etf-can-you-rely-on-its-4-payout-target/  

I think the main advantage of this ETF is low fees.

If you need to turn your capital into a guaranteed income stream, that goal is better met with other monthly income funds which guarantee consistency. In either case, keeping the income consistent will be at the cost of capital if necessary, and there will be market risk to capital regardless. No free lunch! (An RBC rep tried to sell me their similar fund last year as if it were indeed free lunch - X% forever regardless of market gyrations!)

I think it comes down to cheaper (VRIF) vs consistent income (competing monthly income funds).

The advantage of any fund of this general type is that you don't have to manage anything, especially as you age and are less able to do so. The income just rolls in.
But if I were depending on that 4% income, I'd be looking for that, guaranteed, in another fund, knowing it would impact capital and the MER might be higher. I don't need capital at the end of my life.

The article says they expect they will not meet the target approx every ten years. Therefore there is the risk that the average return might not reach 4%. Hopefully, in a good year, there would be enough profit into the fund to allow for years that are less rewarding, but it is not clear in this article how they will incorporate that into their payout plan.

For those retirees who are able to manage their own investments and don't require this kind of income stream to be set up for them, I wouldn't bother with this ETF.

Very interesting that the market for this is much large in Canada than in the US.

March 2, 2021
5:16 am
topgun
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Loonie said

I think the main advantage of this ETF is low fees.

If you need to turn your capital into a guaranteed income stream, that goal is better met with other monthly income funds which guarantee consistency. In either case, keeping the income consistent will be at the cost of capital if necessary, and there will be market risk to capital regardless. No free lunch! (An RBC rep tried to sell me their similar fund last year as if it were indeed free lunch - X% forever regardless of market gyrations!)

I think it comes down to cheaper (VRIF) vs consistent income (competing monthly income funds).

The advantage of any fund of this general type is that you don't have to manage anything, especially as you age and are less able to do so. The income just rolls in.
But if I were depending on that 4% income, I'd be looking for that, guaranteed, in another fund, knowing it would impact capital and the MER might be higher. I don't need capital at the end of my life.

The article says they expect they will not meet the target approx every ten years. Therefore there is the risk that the average return might not reach 4%. Hopefully, in a good year, there would be enough profit into the fund to allow for years that are less rewarding, but it is not clear in this article how they will incorporate that into their payout plan.

For those retirees who are able to manage their own investments and don't require this kind of income stream to be set up for them, I wouldn't bother with this ETF.

Very interesting that the market for this is much large in Canada than in the US.  

There are plenty of ways of stabilizing your monthly income. For starters have 3 blue chip stocks paying a dividend in a different month of quarter. Total invested in each stock makes the dividend equal monthly. Very low cost. This is actually complex for a starter stock investor. One reason I believe you do not need many good stocks. No time to work out details when we were younger. Did many/any of us do this? Probably not. The ratios would DEFNITELY change over the years. I know individuals that adjust their portfolio on a regular basis.

Have a Great Day

March 2, 2021
6:49 am
Bobbyjet11
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Loonie said

I think the main advantage of this ETF is low fees.

If you need to turn your capital into a guaranteed income stream, that goal is better met with other monthly income funds which guarantee consistency. In either case, keeping the income consistent will be at the cost of capital if necessary, and there will be market risk to capital regardless. No free lunch! (An RBC rep tried to sell me their similar fund last year as if it were indeed free lunch - X% forever regardless of market gyrations!)

I think it comes down to cheaper (VRIF) vs consistent income (competing monthly income funds).

The advantage of any fund of this general type is that you don't have to manage anything, especially as you age and are less able to do so. The income just rolls in.
But if I were depending on that 4% income, I'd be looking for that, guaranteed, in another fund, knowing it would impact capital and the MER might be higher. I don't need capital at the end of my life.

The article says they expect they will not meet the target approx every ten years. Therefore there is the risk that the average return might not reach 4%. Hopefully, in a good year, there would be enough profit into the fund to allow for years that are less rewarding, but it is not clear in this article how they will incorporate that into their payout plan.

For those retirees who are able to manage their own investments and don't require this kind of income stream to be set up for them, I wouldn't bother with this ETF.

Very interesting that the market for this is much large in Canada than in the US.  

Thank-you for the comments:
I am looking for a relatively risk-free alternative to my maturing GICs, both registered and non-registered. Once the rates dipped below 2.5 % it became obvious that inflation will be equivalent to or greater than the GIC rates being offered. I don't need a steady income from these investments but I don't like the idea of losing money in a savings portfolio. The VRIF seems to be a better option than renewing any GIC in the current environment. If anyone could recommend a better option in ETFs I'd welcome their input.

March 2, 2021
8:18 am
Norman1
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The Vanguard Retirement Income ETF (VRIF) and other similar ETF's are not a risk-free alternative to maturing GIC's.

Don't fall for that "retirement" or "monthly income" labeling!

VRIF is a balance fund with a monthly distribution gimmick. According to its product page, the fund is currently 53% in stocks and 47% in bonds.

If one thinks 1.8% from a 5-year GIC is inadequate, then it is really stupid to invest $100,000 in VRIF where $47,000 of the money will end up in bonds yielding a lower 1.3% to maturity and the average maturity is 10.3 years!

Market for such products may be bigger in Canada because people here may be more gullible. RBC had a few "successful" monthly income mutual funds. They were successful for RBC. Not so much for the investors. The monthly payouts exceeded portfolio returns and the payouts were eventually cut.

March 2, 2021
8:57 am
Bobbyjet11
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Thank-you for your response Norman1.

Are you insinuating that a GIC at 1.3 - 1.8% is a better alternative to most low-risk ETF's in general?
I guess my biggest concern is a looming major market correction and/or a recession (though most analysts seem to think that the bull market has quite a bit of life left in it. I'm not as sure.)
I am sure however that in these low-interest times that many retirees have the same dilemma.... and are looking for the best solution.

March 2, 2021
9:05 am
topgun
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It is best to keep to the plan that you use. Not worth risking good money when retired. No time to make back the losses.

Have a Great Day

March 2, 2021
10:11 am
Bill
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"Vanguard Retirement Income ETF Portfolio seeks to provide a combination of consistent income with the possibility of some capital appreciation by investing in equity and fixed income securities." Unstated, of course, is the possibility of capital losses too, corrections and recessions, etc can never be ruled out. To compare this thing to a GIC is like apples to oranges, buyers of each have different motivations.

I agree Canadians could be more gullible, the market-dominant big banks tend to offer similar products so can more easily steer Canadians into their similar, currently-popular products they've decided to promote more easily perhaps than in USA where there is maybe more diversity of products available from a greater diversity of financial institutions.

March 2, 2021
10:32 am
Bobbyjet11
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Thank you for your thoughts Bill ... though I don't necessarily agree with your statement "To compare this thing to a GIC is like apples to oranges, buyers of each have different motivations."

When it comes to many retirees, I'd say the motivations are quite similar. I.E. Not to get rich but to also not let inflation eat away at their portfolio in real value.

March 2, 2021
4:01 pm
Bill
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Bobbyjet11, to clarify, VRIF holds stocks and bonds, they both go up and down in value, depending on what's going on in the markets, the economy, the world. GICs are nothing like that.

High or low rates, I'm not convinced it's clear that GICs ever beat, or even keep even with, inflation, after taxes. I get that you don't want to get rich, I know what most retirees want, but I don't see there's any way to not let inflation erode your pile without taking on some risk to capital via market participation. Again, that's a totally different animal than a GIC.

I agree with topgun, that a good way to keep up while taking on a bit of risk has been via blue chip dividend payers that regularly increase their dividends. Zero ongoing fees or other costs after purchase. Especially if you hold the view that I've seen regularly expressed on here, that the big banks run the show, pull the strings, in Canada. Holding that view makes investing/saving VERY easy - put every dollar you can into being an owner of those you think are running the place.

March 2, 2021
8:08 pm
Bobbyjet11
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I hear you Bill, and I do partake in stock trading to a degree but I want to also keep a stable nest egg that is resilient to the market.

If I did invest in an ETF like VRIF it certainly would only be a percentage of my portfolio; say around 20 percent for argument purposes (but the exact percentage is also something to be considered). I certainly do not intend to abandon my GIC's completely but I do plan to shrink that commitment somewhat.

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