How the new expanded CPP can speed your Findependence Day

rpcvr-cppyr-engOn June 20th, as reported by Canadian Press here via the National Post, it was announced that the federal Government has reached an agreement with most of the provinces to expand the Canada Pension Plan, or CPP. Manitoba and Quebec have yet to agree.

As the Globe & Mail reported here, this is the first significant increase in CPP benefits since the program was launched half a century ago. CP also reported that Ontario plans to drop its controversial new Ontario Retirement Pension Plan (ORPP). Once fully implemented, maximum annual CPP benefits would rise by about a third to $17,478.

The seven-year phase-in is expected to start on Jan. 1, 2019, and will require workers and employers to pay higher contributions. Once implemented, the upper earnings limit would rise to $82,700 by 2025. That would replace one third of income up to the new higher ceiling, compared to the 25% that the current CPP replaces. See also Rob Carrick’s Globe article: The Reality of CPP Reform: We Can’t Afford Not to Make These Changes.

What follows is a guest blog by Boomer & Echo’s Robb Engen, which ran this weekend just before the announcement. Minor edits to reflect that have been made but as you can see Robb — who is also a fee-for-service financial planner — pretty much expected this to happen and is generally positive about the prospect. I certainly concur that for the Echo generation he represents, this is a positive step, and since I have a 24-year old daughter, am happy for her as well. (By the way, she is also the Hub’s Millennial blogger: you can see her recent posts that run here Saturdays, such as this one).

Added 1:30 pm. You can also find my take on this announcement online at FinancialPost.com, under the (highlighted) headline Why we should be celebrating the decision to expand the Canada Pension Plan. — Jonathan Chevreau  Read more

How Buying a Home makes you Financially Independent

Home insurance concept and family security symbol as a bird nest shaped as a house with a group of fragile eggs inside as a metaphor for protection of residence or parenting.

By Jam Michael McDonald, Zoocasa

Buying a home takes a lot of planning and can be an expensive endeavour. You have to think about your down payment, your mortgage and mortgage payments, your expectations on your space, your timeframe, your closing costs—the list is endless.

So if you’re spending a bunch of money, how can buying a home make you more financially independent?

First, change your perspective

Some investments are a lot clearer: put your money into this GIC and you’ll receive this return in this many days. It’s easy to see, easy to calculate, and easy to do.

Investing in real estate is an entirely different game, so you have to think of it differently. You’ll have initial costs, you’ll be forking out money, and you’ll feel kind of broke. And that’s okay. These “expenses” when buying a home should be looked at as part of the overall investment. There are some that are pure cost—home inspection, lawyer fees, other closing costs—but they all allow the transaction to occur, and they’re not extravagant compared to the cost of the home.

Think of a real estate investment as long-term, not short-term; complex, not simple; hands-on, not passive.

You can make real decisions about your home to save you money

Read more

What every woman needs to know about Retirement

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Akaisha Kaderli

By Akaisha Kaderli, RetireEarlyLifestyle.com

Special to FindependenceDay.com

 

The other day I read an article about women and retirement. In this piece, the number one premise for motivation was that we should be afraid. Very afraid. It said that for the most part, men did the planning for retirement and that we as women rely on them blindly.

I dislike reading articles such as this, first, because it is fear-based but second, it doesn’t take into consideration the talents women contribute to the mix of partnership and planning. While it might be true that men are “wired to provide for the household,” women have moved into professions which pay grandly. Many marriages today are a different blend of partnership than what our own parents or grandparents enjoyed. Along with their jobs, many women still run the household, so why not get involved in retirement planning in a proactive manner?

Retirement is a boring word

The word “retirement” conjures up images of old people on pensions or perhaps pictures of those who no longer contribute powerfully to society with their expertise and knowledge. I prefer the description “financially independent” for the freedom, influence and self-reliance it implies.

One can choose financial independence at any stage of life and it’s an exciting and worthy goal. The younger a person begins on this path, the more you have in your favor.

Women, listen up

Read more

How much do you REALLY need to retire?

MarieEngen

Fee-only planner Marie Engen

How much money do you really need to retire? On sister site Financial Independence Hub today, we ran a guest blog by Boomer & Echo’s Marie Engen on this topic, something I also mentioned in a talk last week at Durham LifeLong Learning.

Here’s the link to Marie’s blog at the Hub.

I also referred extensively to this blog in a piece at Money.ca, although I couldn’t locate the actual link. As I said in the piece, when determining how much you need to retire, it all depends on your lifestyle expectations. The short answer is that a Canadian with very modest needs can get by without saving a penny. The catch is you’ll have to wait till age 65, at which quite generous Government pensions like Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) kick in.

The bad news is that if you have expensive tastes and have no employer pension, you’ll need to be a millionaire, or even a multi-millionaire to retire with the kind of lifestyle you enjoyed when working.

Those who have toiled at one or two employers with Defined Benefit pension plans can enjoy a more lavish middle-class lifestyle strictly on those pensions, CPP and perhaps some OAS. Again, if you don’t want to travel in luxury or eat out in expensive restaurants, you may not need to save much extra, although of course the more you sock away in an RRSP and ideally a TFSA, the better.

If you’re reading this, odds are you’re still working, have expectations for a more lavish retirement lifestyle and perhaps are not fortunate enough to have a DB pension, or switched jobs too often for a single one to really “take.” If you earned a decent salary along the way hopefully you maxed out your RRSP throughout, as well as your T Read more

Exploring the ExPat lifestyle in Mexico’s San Miguel de Allende

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View of San Miguel from top of the Rosewood Hotel (Photo J. Chevreau)

Last week, my wife Ruth and I enjoyed a week’s vacation in San Miguel de Allende, which is located in central (and landlocked) Mexico. We’d been to Mexico several times over the years but never this particular community, which is not handy to a major airport.

It was also our first trip to Latin America in about five years, since we had been taking our February breaks in Florida in more recent years.

Ironically, San Miguel was prominently featured in the old magazine I published around the year 2000: The Wealthy Boomer. At the time, I remember being impressed by the fact the cost of living for semi-retired American and Canadian baby boomers was roughly half what it was in our home countries. This theme was also applied to various Asia locations in a Hub blog last year featuring the book Planet Boomer. See also my post, titled 5 Asian locations where retirement is more affordable than North America.

Trading high taxes for crime?

Back during the days of the tax-and-spend Jean Chretien Liberals, I found the Mexican expatriate fantasy quite compelling, so much so that I listened to Spanish instructional tapes on my long commutes to the National Post’s bunker then located in Don Mills. But the fantasy of becoming a tax exile/early retiree faded once the Conservative Party achieved power and at least the hope of reasonable levels of taxation (the TFSA being a major positive example.)

Meanwhile, the unremitting press over drug-cartel-related crime in Mexico reached a crescendo in the last few years so we stopped visiting for several years.  Read more

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