Posted by Canadian Dream on December 22, 2010
If I read just one more story about pension reform I might just have to scream. Why? Because the main reason they are looking at it is basically everyone collectively realized many of the boomers have failed to save for retirement. Yet ironically any of the proposals coming out to either expand the CPP or this new Pooled Registered Pension Plans fail to address the original reason.
Let’s for example look at expanding the CPP. If you did so, the system is based on a pay as you go model now. So even if you doubled the benefit (in some extreme proposals) the boomers would see almost no increase into their benefit since they will only pay in a for a few more years. Only kids just out of high school would ever see the full increase regardless of the increase of benefit chosen.
While I appreciate the idea behind the Pooled Registered Pension Plans (PRPP) and making people default to opt in with them I think the government is is needlessly complicating matters. Saskatchewan for example already has a low cost, pooled plan that happens to be voluntary and heck even available to non-Saskatchewan residents. All you would need to do is add on a default opt in for anyone who didn’t have a pension plan in the province and you would have created the same idea as the PRPP’s. Yet the same problem will occur with the boomers, they won’t put in enough to make any significant difference to their retirements.
Basically the boomers that didn’t save are already fucked. They will have to work to at least 70 in order to max out any CPP they get and save what ever they can for their last working years and hope to God that a future government doesn’t cut back OAS on them. It isn’t nice, but it is true: they won’t be saved by any pension reform. At best we can take the lesson to younger generations to get your act together or have the government force you to save at some point. Forced savings isn’t nice for those that do have their act together, but the option for governments is starting to look better and better to solve the issue. The carrot of RRSP’s has failed to partly do its job, now it will be the stick.
So are you sick of hearing about pension reform? Or have you heard any good ideas yet on what to change?
Posted by Canadian Dream on September 29, 2010
I was at a training seminar yesterday that brought up some interesting conclusions that was found by some behavioral scientists which consisted of the follow two statements:
- You don’t have to change an attitude to change a behaviour
- Or the reverse, changing an attitude doesn’t mean you will change a behaviour.
So how is the useful for you? You don’t have to change your attitude overnight to change what you are doing. The classic example would be a teenager and staying out late. They may not agree with being home by midnight (attitude), but if you put in a strong enough deterrent they will come home by midnight anyway (behaviour).
So you may not agree with how much you need to save for retirement, but that doesn’t stop you from saving more for retirement now. Or you may not agree with how to invest your money in index funds for you to try it anyways. Or you don’t have to agree a budget will work in order to try it. Agreement doesn’t preclude action, so you can stop using that as an excuse for not getting your financial situation in order.
So you can start:
- using cash for spending money (so you can see you are broke and stop overspending)
- stop paying fees on your bank account (find a no fee account or product rebate to get around it)
- if you are not at your maximum contribution at work for matching pension money fill out the paper work today to get it (don’t let free money pass you by).
The other interesting fact I learned was we primarily make decisions by just assessing the situation and then deciding. We often don’t consciously compare our options in a methodical method all that much (except perhaps engineers and personal finance geeks – damn I’m screwed). So you don’t worry about how you get yourself to do a good behaviour, just find out what works for you and use it. If it means putting a pink ribbon or kitty stickers on your credit card so you are embarrassed to take it out and use it, then go ahead and glue it on. Nothing is silly if it works.
So don’t you feel better now realizing you likely aren’t rational or logical in most of your decisions and no wonder your life was/is a mess at one point or another? I know I’m likely going to approach problems a little differently now that I know how my mind works.
Posted by Canadian Dream on January 6, 2010
I’ve heard from several people that the first $100,000 of investments are the worst and after the last three years I can believe it. It’s been a very long road to get here. Back in Dec of 2006 my investment net worth were a mere $32,100. By the end of 2007 I was at $50,700 and then 2008 knocked me back down to $49, 100. So the majority of my growth was in the last year. So what happened exactly in 2009?
Well I’ve been looking at the numbers to sort that out since in my mind I didn’t do very much different than the previous years. Yet this is the factors that leap to my mind when I looked at the numbers in detail:
- Do Not Underestimate a Bottom in the Market. During the market drop in 2008 and into 2009 I never stopped investing. Was it scary? Hell yes! But I keep buying stocks that looked attractive and kept putting money. The pay off was a huge surge in growth. For example my TFSA did a 54% return while my wife’s TFSA managed a 30% return.
- A Good Pension Plan. I took a new job at the end of 2008 with a damn good defined contribution pension plan. I contribute 5% and they put in 6%. Yet I can also tap two other programs to boost my employer’s contribution from 6% up to a total of 11%. So grand total that’s equal to 17% of my salary going into my pension plan. So when you add that to a bit of growth its easy to see how it went from nearly $0 to over $15,000 in a year.
- Have a Plan. In 2009 I wanted to add $25,000 to our various accounts (I’ve yet to confirm if I made that goal). That goal helped me to stay focused on adding to our investments regardless of everything else in my life. I kept at it and made sure to keep investing even when I had doubts (which trust me I had them).
- Luck helps. I won’t lie to you my TFSA result was more about dumb luck than skill. I picked three stocks for that account which I bought mainly for their distributions (on average a 10% yield) and they just happen to do very well over 2009. Also me getting the second job at the School Board obviously helps with boosting my cash available for investing for the last two months of 2009.
So overall I would say the three things that got me to my first $100,000 was having goals, being stubborn enough to follow the plan and a bit of luck. So I’m sorry to say I don’t have any investing secrets to share or a plan to make you rich fast. It all comes down to deciding your goals and keep working for them even when things get hard.
