The proverb that nothing is certain but death and taxes is one that I think we’ve all heard and agree with, begrudgingly. Certainly I recall how much I hated filing my taxes when I was a freelancer, not because I resented having to pay income tax but because it just seemed so damn complicated to gather all the numbers in order to fulfill one of my civic duties. That period of my worklife left such a bad taste in my mouth that it took me years to settle my situation (i.e., finally filing retroactively) even though I was only a regular worker with a few simple tax slips.
Now I’m the total opposite of how I used to be. As of December 23, I downloaded the Studio Tax application and prepared my 2017 return because I already know all the numbers to fill in except one or two which will be confirmed when I get all my tax slips. In the meantime, I entered educated guesses for those few unconfirmed numbers based on my last three previous filings, and the one certainty I do have is that the final result won’t be wildly different once I get the accurate figures in late-January or early-February.
My thinking has changed a little since the last of my eight-post series last year on how to get out and stay out of debt. In that post, I explained how, once out of debt, I distributed my savings so that I could live well before retirement yet be assured of having a comfortable retirement starting at 60. Then, in the “Counting My Blessings” section of my “disjointed thoughts” post last October, I wrote that “it’s not like I’m deferring toward retirement every dollar I save like a zealot praying to a skybound entity in the hope of gaining entry into a blissful afterlife.”
Sometime after that post, however, I stared at the numbers in my spreadsheets and began wondering two things:
Will I really have enough when I retire?
If I did max out my RRSP contributions, would I be cutting too close to the bone?
So I made copies of my spreadsheets and used them to work out alternate scenarios. If I didn’t like how the numbers played out, I would toss out those copies and not think about it again. But I did like what I saw, I would alter my originals to reflect the new scheme I came up with.
Although the last year at work has been challenging, there’s one thing I can safely count on: I’ll still be there by this time next year. That’s an important point because one principle of my financial strategy has been to ensure not only that I don’t live paycheque to paycheque or month to month but also that I should have access to at least six months’ net salary should the unthinkable (being dismissed from my job) happen. Thus I made a few styling adjustments to one sheet of my workbooks in order to highlight how often and how long I would:
be under that 6-month minimum figure, and
have less than $2,500 unsheltered, easily accessible cash on hand for emergencies and unplanned incidentals.
It turns out that, under my new distribution scheme, the former would only happen twice (from January to mid-July 2018 and from September 2020 to early-May 2021) and the latter would only happen twice as well (from January to late-June 2018 and two of five two-week periods from January to mid-March 2019) — and that’s all based on very conservative income estimations and the continuation of ultra low interest rates. Then, thinking back to the 23 months (November 2011 to October 2013) during which I held the reigns so very tightly in order to get out of debt, I realized that this new scenario is not only bearable but in fact infinitely better than when I was struggling out of debt since the two conditions are at least partially met right through retirement in late-2025.
How lucky I am! I can max out both my RRSP and TFSA by late September 2018 and still live well. There are definitely perks to being single and having a decent job.
Pensions and Savings
The other way in which I’m lucky is that I’m among the last ones at work who has a defined benefits pension, meaning that I already have firm figures on how much I’ll receive from it per year if I retire at 60. It would obviously be a much nicer amount if I stayed until 65, but by now I can’t countenance the thought. The last estimate I could get my hands on dates back to a year ago and is likely slightly better now. Then, one morning this December, the Québec government pension plan sent me a statement showing me how much I would get at 60 or 65 if all remains roughly equal. And, starting at 65, I would get Old Age Security from the federal government, which is currently just under $584 a month and will likely be a bit more by the time I retire since it’s indexed to the Canadian Consumer Price index.
All these amounts are taxable, but even if I add up the raw numbers, I wouldn’t have nearly enough to get through a year at the level to which I’ve become accustomed.
Remember that unlike a lot of people, I won’t need a pre-retirement period to get used to earning less since I already know exactly how much I need per year to sustain my current (comfortable but not outrageous) lifestyle. That’s where the retirement savings will need to kick in, but I couldn’t help wondering, “How long would they last?”
The Certainty of Taxes
The idea behind an RRSP is that you will have to pay income taxes when withdrawing from it, but given how one would be at a much lower tax bracket by that time (aided as well by extra breaks from age 65 and older), the amount of taxes paid will be much less than it would be now. And while any interest on savings in a non-registered account is also taxed, those in a TFSA never are since contributions to it are made after tax. The best situation, if it can be achieved, would be not to touch the RRSP until forced to convert it to a RRIF at 71 and withdraw a certain percentage every year as shown below.
But the need to convert to a RRIF would be 11 years into my planned retirement date, so could I pull off waiting until 2037 before starting to withdraw from it?
Enter my 2017 tax return, my geekiness, and my almost infinite patience to work out a long and complicated idea.
After carefully studying the forms for several years of tax filing in Studio Tax, I noticed that as much as there are some changes over time — new taxes or breaks, an ever-increasing personal deduction amount, and varying maximum deductions amounts and percentages of allowable deductions — the calculation from year to year is eerily similar and some changes are easily predictable. For example, the annual factor applied to the personal deduction amount is 1.013 federally and 1.0109 provincially.
So, I added a new sheet in one of my two financial workbooks and replicated all the formulas that would summarize exactly my 2017 return in Excel, simplifying it by entering only the lines that I would ever be likely to use and ignoring all the others. Then, since I have worksheets predicting my income for every pay period until my retirement and what will likely be my allowable contribution room in my RRSP, I calculated the likely results of all my filings up to and including 2025, highlighting the cells that will likely require an edit to a different amount or percentage when that time would come. As a result, any change in future calculations — major or minor —
can easily be integrated into that sheet. The only variable that’s up in the air right now is tax on dividends, as I’ve put off joining my employer’s shares savings program to 2018, meaning I don’t yet know the impact of that at tax time.
Still, when that all seemed to work well and make sense, I added the rows that would be applicable when my income would consist of pensions or would become applicable once I reached 65. My goal is to have $42.5K per year of spendable cash plus whatever income tax I would need to pay for the previous fiscal year. As expected, as I started plugging the numbers, since no deduction would be taken at the source from that point, I would have to start paying taxes rather than receiving returns from 2026 onwards. That being said, I got to see with my own eyes the veracity of Québec government officials’ assertion that a sizeable percentage of people here don’t pay any income tax because there’s not only an age-based deduction but one for people who live alone year-round and earn little. (That’s about the only tax break singles get given politicans’ constant emphasis on “middle-class families.”) In fact, it would seem that Québec will only be wanting its pound of flesh from me once I reach 71.
I then entered the percentages in the second table above to my RRSP worksheet and added another sheet to that workbook to replicate the first table above for each year in order to see how much I would need to take from general or TFSA savings and find out if indeed I could hold off to 71 before touching my RRSP/RRIF, and how long would my TFSA and other savings would last. All my predictions on interest earnings were based on today’s historically low rates of return and my legendary low-risk appetite when investing. However, since most experts agree that the currently low interest rates won’t be staying that way for much longer, I’m confident that my estimate on that front is very low-balled, which is consistent with my approach of underestimating income and overestimating expenses.
Just so you know, I didn’t grab that figure of $42.5K/year plus the previous year’s tax bill out of thin air. I have three projected revenue figures in one of my spreadsheets: all sources of income including interest (taxable and non-taxable), take-home pay if I don’t participate in my employer’s share savings program, and take-home pay if I do. I also know from another spreadsheet how much I spend on average each year, which excludes what I sock away in savings, not to mention the percentage of all income I tend to save on a normal year (i.e., 27-30 percent, which I gather is higher than the average Canadian). So that $42.5K figure is based on my projected 2025 take-home pay and is roughly the median between if I were and I weren’t to participate in my employer’s program. In other words, it should be an amount far greater than what I’d be accustomed to spending each year.
How These Calculations Led to a Little Realignment
Many financial planners out there seem to agree that you need to prepare to have 70 percent of your income at the time retirement. Some say it can be a bit less since some of your expenses will disappear upon retirement, like work clothes and transportation, not to mention that your days of setting money aside for retirement will be over. Others try to come up with a more firm number along with a reminder among all of them that you have to plan on living 30 years into retirement.
Frankly, what I was never able to understand in that piece of advice is whether they were saying that you needed 70 percent of your pre-tax or after-tax income. It seemed to me it should be the latter since that’s what you’ve always had to work with (assuming you didn’t foolishly spend your tax return instead of reinvesting it), not to mention you’re supposed to be in a lower tax bracket by then, which is said to be the benefit of having saved into an RRSP. But having spent so much time figuring out exactly how much cash I could have spent actually ended up in savings, I realized, as I just stated, that I’m already shaving off nearly a third of any net income each year that I could have spent elsewhere if I didn’t pay as much attention as I do.
How Much “Paying Attention”
Precisely $76.75 of all my revenues in 2017 (or 0.16%) can’t be traced, but much of that is probably change I used to feed the clothes dryer, and the remainder of that are nickels and dimes that I just throw into a jar. (I have remarkably few nickels and dimes in there.) That goes to show why I’m better not handling actual cash and relying on paying everything electronically or from my debit or credit card which I consistently pay off well before the 21-day grace period on purchases.
The other thing financial planners go on about (almost to the point of scaring you) is how inflation will affect your savings. There’s a valid point there, but only to a certain extent. As I explained in my “Get Out of Debt” series last year, taking a yearly approach to your budget provides a lot of absorbency when prices do go up. In fact, that’s the reason why I don’t think my most recent number crunching was a fool’s errand in any way. I know that prices will go up by the time I retire, but I will have gradually adapted to them already and thus they’ll be buffered in. What’s more, when one of the financial institutions I use increased the return on savings by a tiny bit (0.15 percent, to be precise), the positive impact was surprisingly noticeable, just like when the Québec government decreased the tax rate by 1 percent for the first slice of one’s earnings. So even if rates go up only 2 percent by 2025, which I suspect is a conservative estimate, my savings pot by that year will be considerably greater than what I’m now predicting it will be. Plus, if you followed my logic for selecting that $42.5K/year target, that gives me a HUGE buffer for inflation right there.
So in the end, what I found is that, based on my current savings projections, my TFSA would dry up in 2040 (the year I would turn 80) and I would have used nearly $55K more than the amount I invested into it, while my RIFF, from which I would need to start withdrawing a minimum percentage in 2037 (the January 1st I will have turned 71), would dry up by 2055 (the year I would turn 90) and I would have used more than $150K than what I invested into it. Given my bad health habits and the genetic predisposition on both sides of my family, I seriously doubt I’ll reach 90, but this calculation nevertheless demonstates that I could live quite well for 30 years into retirement.
That being said, it’ll be interesting to see what will be the effect of rising interest rates in the coming years. The first three of eight announcements from the Bank of Canada in 2018 will be on January 17, March 7 and April 18, and I expect at least one 0.25 percent increase by April at the latest, and most analysts expect a total increase of at least 0.5 percent by the end of 2018, meaning two increases in that year alone. I plugged in a single 0.15 percent increase as of January 24 and that alone would extend my TFSA by a year, so all the signs are pointing to my having more than enough to retire at 60.
The bottom line is that I’m no longer in the least bit worried about retirement, if everything else stays relatively constant. This little realignment will be a minor short-term adjustment or “sacrifice” that will yield a major long-term gain — not to mention, complete peace of mind.
Now that I’m well into my early 50s, I often find myself thinking about things in the context of being older. I suspect that’s perfectly natural, yet it’s not as though I thought myself immortal when I was in my 20s or 30s, nor is it that I’m nostalgic about my days of old. It might just be the unsettling realization that I have more time behind me than I have before me.
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A “Friend” Who Never Was a Friend
About a month ago, someone from my childhood asked permission to communicate with me through Facebook. He was one of the many guys who tormented me and called me a faggot at every opportunity, except that this guy was among the worst. Then again, I remember feeling as much contempt for him one day in sixth grade when I spied that he had misspelt his own name on a test that was returned to us. (I’m not making this up.)
In broken French — he now lives in Calgary and doesn’t get to use it much — he wrote: “Bonjour Maurice it’s been more than 35 years I wasn’t nice in my youth toward you I’m sorry I’m a man now as you are I would be proud to have you as friend.”
You’ll recall how, six years ago when I took time off work, I realized with the help of my therapist, Lucy, just how much the taunting I endured as a kid shaped the adult I am now. In a strange way, upon reading his little profession of contrition, the remaining child in me felt at once vindicated and suspicious of his advance. However, at the same time, the adult Me remembered all the things I thought or said or did as a kid that still make me cringe even though they were perfectly coherent or understandable, coming from a kid. Therefore, why would it be any different for him?
We couldn’t be any more different, he and I. He’s a blue-collar worker; I’m a white-collar worker. He’s into physical training and boxing; I can go days without stepping outside my apartment and can’t think of a single sport I would enjoy. He’s married and has a small child; I’m divorced and the kid thing was never going to happen regardless of my …hummmm …propensities.
About a week ago, he put a thumbs up on a Facebook post about how it is incomprehensible that a parent could renege a transgender child. You could have knocked me over with a feather.
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GenXers No Longer Up and Coming
Statistics Canada has been releasing in bits the results of the 2016 census. It turns outs that my cohort — those between the age of 50 and 54 — was 2,678,075 people strong and the largest single group by 5-year slice. A sign of the aging of the population: The projection for 2017 is that the 55 to 59 slice is expected to be the largest.
However, in a team of six individuals at my job, only two of us are GenXers; the others are Millennials and, unfortunately for me, three of those four are prototypes of every bad trait people decry about that generation. I know that individual personalities outweigh generational trends, and I can think of several Millennials who aren’t horrible people — a former colleague and my own nephew come immediately to mind. Nevertheless, I have grown so disgusted with their antics — which include but is not limited to entitlement, judgmentalism, selfishness, “what’s in it for me” attitude, laziness, inability to admit mistakes, unwillingness to have a colleague’s back if there’s no apparent gain for them, and, worse of all, an all-too-easy readiness to throw colleagues under the bus — that I often find myself fantasizing about retiring.
But I can’t afford to retire now. I need to stick it out until 2025. December 22, 2025, to be precise. I just keep saying to myself, as guise of encouragement, that “This, too, shall pass” even though I don’t really believe it. Careerists that they are, they will likely move on to another job soon enough while I plan to stick to this one until the end, but in all likelihood their replacements will be just another bunch of Millennials because we, GenXers, are yesterday’s news in the workforce. What really keeps me going, aside from necessity, is the knowledge that my flexibility and empathy make me better at the task at hand than they could even dream of becoming.
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Counting My Blessings
While these days I might give serious thought to giving away my right nut to be able to retire by this coming Christmas, I can’t help thinking how lucky I am to have a realistic plan to retire in eight years. But that’s not the only thing for which I have to be thankful. I don’t make money hand over fist, but I’m doing very well for a single guy with no dependent. Combined with my uncanny financial discipline, I’m constantly amazed at the choices I can make now and every day.
Indeed, it’s not like I’m deferring toward retirement every dollar I save like a zealot praying to a skybound entity in the hope of gaining entry into a blissful afterlife. Quite the contrary, in fact. It’s true I’ve never been much of an impulse buyer. To this day, my idea of being impulsive is to get a beer or a glass of wine when I’m dining out! Or spontaneously buying some socks and underwear while walking through my local WalMart as I think about those three hole-filled pairs I finally threw out the other day. (Since it seems I have become a solosexual in recent years, I’m clearly not worried about who will see my underwear!)
All kidding aside, though… Even if I physically could clean my own apartment, I pay someone to do that every two weeks. Even though I physically could shovel my own driveway, I pay someone to do that every time at least 3 centimetres of snow falls. Even if there’s a hose in my garage and I own a bucket, I still go to the car wash. Although I seldom go out, I still choose to spend $400 on a bottle of perfume and wear it at home. While I could probably find free articles online to relearn PHP/MySQL, I didn’t think twice about spending $100 on two books on the topic. I didn’t need to buy a (vinyl) record player so that I could haul out my 100+ vinyl records from storage, but it seemed fun to get it since I do spend so much time at home. I do go on vacations and don’t always rely on friends’ sofas. Yet despite having made these choices that were by no means necessary, I still managed to save $1,600 in the last three months so that I can either make more such choices …or retire.
So yes, I consider myself a very lucky man to have such means, but I’m also a man with a plan. I just accused Millennials of being judgmental, but if there’s one way in which I’m judgmental, it’s toward those who, when given an opportunity to get ahead, just piss it away. About a year-and-a-half ago, the guy who cleans my apartment inherited about $10K. In that time, he’s been twice to the Dominican Republic and he just came back from three weeks in Greece, and he said himself that the $10K is now long gone. Oh, and by the way, he’s on welfare and he’s always talking about how it’s unfair that some people are just born with a talent that earns them millions and millons of dollars. Now I understand that $10K isn’t much these days but I’m judgmental in this case because I simply can’t understand how he couldn’t see it as a cushion that he could have stretched out to top up so many more months. Then again, I believe there have been studies on poverty that explain this type of behaviour.
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Thoughts of My Demise
Not a single day goes by that I don’t think about my mother. Sometimes I see her, mouth ajar, drawing her last breath. (I remember thinking at the time how the proud and dignified woman she was would have probably liked us to gently close her mouth.) Other times I picture her at home, talking to me on Skype. (“Hold on, let me turn down the sound on the TV.”) Most times, my memories of her bring a smile to my face and a pang in my chest. Thankfully, I still remember the sound of her voice, and probably always will.
Ever since she died, I’ve thought a lot about my own passing and that of my siblings — not so much the physicality or circumstances of our death, but the practicalities that will follow. On the one hand, while I hope I will get to enjoy several years of retirement, I realize that the choices I’m making to indulge in some simple pleasures today is because I don’t want to be that guy who sacrified everything for retirement and dropped dead the week after his retirement date. On the other hand, whether my passing occurs sooner or later, I want to make sure, as my parents did, that mopping up behind me will be easy for those who survive me.
Several years ago, my friend Da Big Goof got on my case about getting my will done. Actually, that was six years ago, around the time of my leave from work. What was funny is that, back then, he got on everyone’s case about that but didn’t have a will of his own. However, he confirmed when I visited him in Yarmouth this summer than he now does.
One thing I mentioned as a concern was, “Who’s going to clear my apartment if I were to die suddenly,” to which he replied in his typical gruff manner, “Don’t worry about that! At worse, your landlord will just haul everything out to the curb and find another tenant.” Of course he’s right on that point, although my mind did wander to what I might be mortified to have strangers (or family) wade through in my stuff, although it’s kind of hard to be mortified if you’re already dead.
I guess that, when it comes down to it, I have two preoccupations. First, and after giving this much thought, I would like my ashes to be disposed of at the place I have loved the most: the Atlantic Ocean, off the moors of Crystal Crescent. I don’t know who would be left and able to do that, but I’ve come to realize that is my most fervent wish. And second, I want to be sure that even though I won’t be leaving behind a fortune, I want it to be clearly mapped out, easily accessible, and divided in three equal parts to my siblings and their family, just as my parents did.
About a year after my father died, my mother arranged to sell the family house to us (in four equal parts) for a dollar. I remember how frustrated she was when her lawyer kept stalling the transaction. “Things get messy after someone dies,” her lawyer would say to her. “It’s never that easy.” But without hesitation, my mom retorted, “But it will be with MY kids!” And she was absolutely right. When we were going through the house, we didn’t fight over a single item. In her will, Mom had asked that everything be liquidated and divided in four equal parts, except for her jewelery, china, and kitchen battery that she earmarked for my sister. “I object!” I said in feigned outrage. “I want her rings!” We laughed because we imagined Mom laughing along with us, but later that day when we found my father’s wedding band on a cup hook in the kitchen, my older brother and executor of the will suggested, “Well since you’re the only one who’s not married, I think you should get his ring. Everybody else agree?”
I wear it to this day, on my ring finger.
It certainly helped us a great deal that my brother is a chartered accountant and knew exactly what had to be done in terms of taxes and so on. But despite the fact it took him a year and several trips from Grand Falls to Edmundston to get back one tiny investment at another financial institution, he divided absolutely everything in four equal parts — just as my mother had predicted that he/we would. Hence I have the absolute certainty that the same thing will happen when I pass, whether or not I’m the first sibling to go.
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Why Are You Being So Morbid?
I don’t know why I’ve been thinking about such things lately. What I can say is that it’s not because I’m having dark thoughts or have any kind of premonition about my pending doom, if that’s what you’re worried about.
The best explanation I’m able to offer is that I’ve been disgusted with work lately. While I’m an enviable position of having some choices financially, an early retirement is not one of those choices. I’ve often said that I would keep on working even if I won the lottery (which would be difficult since I never buy lottery tickets), but lately I’ve been thinking otherwise. I would quit today if I could. However, since I can’t, there’s a part of me that’s looking forward to the next eight years passing, but an equal part of me that doesn’t want time to go by any faster than it already is. I’m in the third year of my 50s but my mind hasn’t caught up to this fact; I still think of myself in my mid- to late-30s. So I certainly don’t want to rush hitting 60.
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Anything You Could Do to Speed Things Up?
I suppose there is… Two options come to mind.
Seeking a promotion at work
Bringing my PHP/MySQL skills back up to speed and freelance on the side
The problem with the first option is that I have trouble imagining it could be done while retaining the ability to work from home. It might also bring the obligation of having to manage staff. As for the second option, the reason I dropped freelancing soon after starting my current job is that the latter is mentally exhausting. I was 11 years younger back then and I couldn’t do both, so what makes me believe that I could pull it off 11 years later?
However, as I mull over these options, I prefer the second and it could maybe accelerate my plan by a year, maybe two. The question is whether it would make me more reclusive than I already am, and that wouldn’t be a good thing.
Or I could simply accept that things are the way they are, that they could be a heck of a lot worse, and that my plan toward retirement is fundamentally sound, so just stick it out. After all, there are fewer years to go than I already banked in, pardon the pun. But if $250K suddenly dropped in my account — that’s all I ask! 🙂 — then this Christmas would be very merry indeed!
I’ve been driven to distraction for several years now at work by people who have drunk and want everybody else to drink the Lean Six Sigma (LSS) kool aid. My initial reaction, without knowing what the ins and out of LSS were, was that it sounded like an industrial process that people were trying to force on us working in a service industry in which there are so many outside human variables that it couldn’t possibly be appropriate in our non-widget-making industry. However, I paid little attention to this push in favour of LSS and went about my job. So yes, from the start and with no real empirical evidence, I was dismissive of LSS.
Then, more recently, in an environment in which traditional financial institutions are facing competition from Fin Tech start-ups, another methodology has become all the rage: Agile. Unlike my initial reaction to LSS, my impression upon reading a few blurbs from Agile advocates and converts on our intranet brought me to think that this methodology made more sense in our context. However, reading something through the filter of the company intranet is also akin to mindlessly drinking the company kool aid, so I resolved to do some research on my own one day to understand it a bit better and to compare it with LSS. Are the two complementary or two different beasts?
But doing this research was never a great priority of mine. I had real work to get done and I didn’t relish the idea of spending much of my off-work time on such a research endeavour. Maybe I would have been more motivated if I were younger or a careerist, but I’m no longer young (though I’m not ancient) and I’ve never been a careerist. Being a careerist is not inherently bad even though the term certainly has some negative connotations, but the focus of all my hard work in life, whether as a freelancer or today as an employee paid to do a specific job, has always been about providing exceptional service to others. I get more out of the gratitude of others than from climbing the echelons of power.
In recent months, however, I started to pick up on a trend. That trend is seeing how some people at work who are very good at articulating all the right “high level” ideas that those above them in the hierarchy want to hear but who are in fact quite bad at handling details, complexity, outside-the-company perceptions, and real-life highly variable work flows are all proclaiming on their email signature that they are yellow belts (or whatever colour belts) in LSS. Mere coincidence or a damning indictment of LSS?
To be totally blunt as is usually my way (at least in this blog or when I vent with someone in person), these people are often so feckless that I doubt their ability to organize a wet dream. Worse, when I hear some tell clients that they’re “just following standard procedures,” I doubt they have any idea how badly clients receive such lines.
Six Sigma started out in 1986 as “a set of techniques and tools for process improvement” at Motorola. LSS is a breakaway from Six Sigma that attempts to blend in notions of Lean, which is often referred to the Toyota Production System. In short, in both cases, the origins of these methods are strongly rooted in manufacturing. Proponents of LSS are eager to explain at great lengths how those principles are applicable in the service industry, but often their arguments lack the academic rigour that would be required to be convincing.
The roots of Agile, on the other hand, is in software development. There I can see the appeal of this method for large financial institutions that are slowly but surely having their ass handed to them by Fin Tech start-ups. To remain relevant and not lose their large share of the market, large FIs need to be able to provide better online services, faster — a tall order within an environment where processes have become rigid, complex, and highly siloed. But already I’ve witnessed some remarkable achievements with this methodology in which changing process midway if it will better meet consumers’ demands is par for the course.
That’s not to say that I’m a total nay-sayer with regard to LSS and a total devotee with regard to Agile. Outside nature, any system depends on identifying all the variables and trying, if possible, to minimize their number. Abstraction allows to give a variable X different values yet still end up with a similar outcome each time. If you bother to notice the difficulties well-heeled scientists are having with developing artificial intelligence, then it becomes clear that humans and nature are astonishingly complex and extremely difficult to define and replicate.
In my view, if LSS has any merit, it’s that it has the potential of providing a framework for those who have problems with visualizing complexity or having a consistent methodology where details matter even though each detail, on its own, may seem trivial or not worthy of attention. However, the emphasis on the process itself (Define, Measure, Analyze, Improve, Control) leaves me cold for being far too formulaic to my liking. On the other hand, from what I’ve seen at work, those who have embraced the Agile methodology have shown signs of being much better and adaptable.
But my overall conclusion on the merits of LSS is indeed damning. From what I’ve seen, those who have bought into it have, by the time they’ve achieved yellow belt status, gone from being able to organize a wet dream but not yet mastered the complexities of organizing a three-house paper route. As such, their inability to grasp the impact of the vagaries of human behaviour and, in turn, their impact on organizing anything leads me to having a rather dim view of their alleged achievements. But if in 2017 you still use “automate” as a buzzword, then you’re likely going to love the LSS kool aid and won’t be able to get enough of it.
It was my second date with Momma Tee this summer while she was visiting her hometown of Montréal from Vancouver. We’d agreed that I’d pick her up late that afternoon from where she was staying in the West Island, take her to my place, walk down the street to dine at a nearby South Indian restaurant, and come back to my place to share a bottle of red. Our first date was some 10 days earlier in the Village, and that had been the first time we’d seen each other since 1988 — yes, 28 years before.
She wasn’t Momma Tee back then, at least not yet. We’d met at university in Halifax the previous fall when we found ourselves in the same American Literature class that was taught by The Grand Poobah of Culinary Delights, whom I didn’t call by that monicker at the time and who was still years away from becoming the life partner of my BFF, The Queen of Sheba, whom I hadn’t met yet.
In many ways, Momma Tee and I were the two most unlikely individuals to become friends, yet friends we did become. She returned to Montréal at the end of the Winter 1988 session, thinking initially that she would be coming back in the fall and be admitted to the PR program, but her plans changed that summer and she didn’t come back. But we kept in touch for many years afterwards, mostly by mail, for those were still the days when people wrote letters and avoided long-distance calls because they were prohibitively expensive. In that summer of ’88, her letters were filled with deliciously salicious details of her life back in Montreal, while mine waxed poetic as I was assuredly and absolutely falling in love with Hiker, whom I didn’t come to call by that monicker until many years later.
So back to that second date some 28 years later, I gave her the obligatory tour of my apartment. In the room I call my office, she noticed a picture of my mom on the bookshelf and, knowing that I had fairly recently lost her, she advanced to comtemplate it. (She’s particularly sensitive to grieving and loss, she herself having to grieve for that most unspeakable kind of loss: that of her 7-year-old son to cancer.) Then she looked at the other pictures on the shelves when suddenly the quasi-solemnity of the moment got broken when she practically sucked all the air out of the room, pointed at a photo of a guy in his graduation robe and asked, “Who the HELL is that?!” So I told her: that’s the infamous but much younger Hiker, to which she kept saying over and over, “Oh. My. God.” Once she recovered, she said something to the effect that she remembered thinking when reading my letters so many years ago that he must have been quite something to have me in such a state, but she had never imagined that he was so handsome.
Interestingly, that same picture had triggered a similarly strong but negative reaction eight years earlier. It’s funny in a way because I hardly notice the picture anymore. It’s just part of my stuff. But mere minutes after NowEx first set foot in my Halifax apartment after that horrible, horrible plane ride that night from Montreal, he noticed the picture and demanded — he never asked — “Who the FUCK is that?!” Unaccustomed to such blatant displays of jealousy, I had to pause for a few seconds to understand what was happening and recall what I may have said about Who-The-Fuck-Is-That until I simply told him that it was Hiker, about whom I had already spoken along with his nearly 20-year partner Bello.
* * * * * * *
I had a truly wonderful vacation trip this past summer. First I spent two days in the Québec City area. Then I drove through the Charlevoix region to cross the Saint Lawrence by ferry to Rivière-du-Loup to visit relatives. The next day I drove to Fredericton and stayed a few nights at Hiker and Bello’s before spending several more days in Halifax and then slowly driving back to Montréal. I think what made the trip so wonderful is that although I was only gone for 10 or 11 days, it felt, even during the trip itself, as if I’d been gone much longer. I avoided freeways as much as possible and my attitude in general was, “I’ll get there when I get there.”
One evening after dinner, sitting at the Queen and the Poobah’s table in Halifax, I reflected on how and perhaps why this trip was so enjoyable. About my Fredericton segment, I told them about how I didn’t get to see The Quad because he, too, was on vacation and out of town, but instead I did get to have lunch with one of my former PR students. Of course, the Queen then asked after Hiker and Bello, and I quite enthusiastically shared their big news: in the spring, after 25 years together, they finally decided to get married. Theirs was a super low-key affair with only a few friends on their back deck — no fancy suits or anything.
— So how do you feel about that?” the Queen asked me.
Her question puzzled me, for sometimes the Queen knows me better than I know myself. I stammered something or another, even joking that it was perhaps time after 26 years together, but I think I was stammering because the question — “How do you feel about that?” — simply didn’t compute in my head. She kept looking at me as I was answering, and once I’d finished she continued looking at me and finally dropped what felt like a non sequitur:
— He was the love of your life.” To which I said, after a sigh:
— That was so, so long ago. Like a lifetime ago.”
We were so desperately young back then. I was 22 going on 23; he had just turned 21. I had been his first.
Although I still can’t wrap my mind around it, I’m 51 now. But that comment by the Queen catapulted me into memories of the summer of ’88 in that 13th-floor apartment on Gerrish Street in Halifax. And worse, it reminded me of a train ride from Moncton to Halifax the following late-October or early-November that seemed to last forever and through which I had to fight back my tears, for just a few hours earlier, Hiker had asked that we “just be friends.”
I entered a fog that lasted 18 months through which I somehow managed to finish my degree. When I came out the other side, I had been changed. In each significant relationship I had in the following decade, the shadows of my memories of Hiker hovered over those relationships… until they didn’t anymore. They didn’t anymore not only because I stopped believing in what we euphemistically call “relationships” but also because I couldn’t find or understand the point of them for me, a fact I painfully demonstrated with my quicky marriage and divorce with NowEx.
* * * * * * *
I first met Hiker in the spring of 1987 and the first thing I saw on him was his crotch, but that was an accident.
I was sitting in a conference room at the library at the Université de Moncton, where I was mounting for printing the latest issue of the newsletter for the association of Gays and Lesbians of Moncton, when my friend !!!!! — there’s definitely an inside joke in that nickname — called my name as she entered the room and noticed me. She walked behind my chair to go sit in front of me and I turned my head to the right as she and — it turns out — Hiker were walking behind and around me. So my head just happened to BE at his crotch level, which is why I maintain to this day that it was an accident.
Trust me: when I saw the tall, slim, dark-haired mustachioed guy sitting next to her, I first had to quickly find the most gracious way of picking up my jaw from the floor and then I had to figure out how not to sit and stare at him in awe. Then !!!!!, bad girl that she was and had long known by that time that I’m gay and active in the community at the time, kept insisting on asking me what I was doing since I’d quit the U de M several months before. Now remember: this was in 1987, and back then it wasn’t easy to just casually say as you could now — at least I couldn’t! — that you’re putting the final touches on the local fag rag!
Time passed. I don’t know if we’re talking days, weeks, or months, but “some” time passed. I had gone out with The Quad and we ended up sitting at a park bench on Main Street in Moncton when suddenly !!!!! and Hiker came walking down the sidewalk. We chatted for a bit before they went on their way — to or from a movie, I don’t recall — and then I just gasped to The Quad something to the effect that I’d gladly give my right nut to be with Hiker but that he’s probably not gay, to which The Quad said, “I wouldn’t be so sure about that.” But rather than comfort me, that comment made me despair: a snowball in hell would have a better chance than I would with him.
Then several months passed and, truth be told, I didn’t think much if ever about the gorgeous francophile anglophone demigod although it had been clarified with absolute certainty that he’d preferred to kiss boys although he hadn’t yet. I had already had my figurative good cry over him and moved on. By this time, both The Quad and I lived in Halifax and were enrolled in the PR program at MSVU, and Hiker was supposed to come visit The Quad on the May long weekend. Except that a few days before that visit, The Quad fell ill and ended up in hospital.
That’s when I concocted the ballsiest plan in my entire life — so ballsy that it was unprecedented and never surpassed since. Feigning disinterest and pure altruism, I managed to get Hiker’s phone number in Fredericton and called him to invite him to stay at my place so that he wouldn’t have to cancel his trip to Halifax and could get to visit The Quad in hospital. He was a bit hesitant at first but finally accepted my invitation after I assured him that it was no trouble at all. I’m pretty certain that at that precise moment, Jesus either wept or shat the bed.
* * * * * * *
I know no one in the peanut gallery will believe me, but I was a perfect gentleman that whole weekend and I do have a witness: Hiker himself. Although we didn’t end up visiting The Quad in hospital that much, we spent the weekend drinking lots of coffee, exploring the city, eating at home and then staying up late, talking the night away while listening to music. On more than one occasion I wanted to take him in my arms and seduce him to my bed, but I didn’t because I knew he’d never been with a guy and, even though I could tell that we were getting on like a house on fire, I still wasn’t convinced he’d want to make that leap with me. So every night I’d make my bed on the sofa and send him to my room, by himself. It took every ounce of my strength not to enter my room that one morning I got up before he did and saw him sprawled on my bed sleeping and wearing only bikini briefs. In fact, the sight of him there seemed so surreal.
In 1988, few had ever heard of e-mail, let alone used it. He had a summer job in Fredericton and I studied full-time through the summer sessions. So began our exchange of long letters as neither of us could afford long-distance calls, as well as the inevitable staple of relationships in the ’80s: The Mixed Tapes. I introduced him to Michael Franks and Jane Olivor; he introduced me to Helen Merrill. I challenged him to figure out which Michael Franks song reminded me of him and, to this day, I get carried into thoughts of Hiker and the summer of ’88 each time I hear “Tell Me All About It.” Yet, at the same time, I find myself blushing: We were SO damn young!
I still have all the letters he sent me, along with all the cards and letters anyone ever sent me when people still did that. I may re-read them every 10 years or so. The last time was about a year after I moved to my new apartment, but whenever I do, I always keep his for last, as if they were some kind of dessert. In them, we weren’t professing our neverending love; we were just continuing the conversation, talking about the most mundane things, although I suspect we would have just as assiduously read the phone book if we’d thought the other guy had written it.
The intensity of the whole thing was such that he inevitably came back to Halifax a few weeks after his first visit, for the Canada Day long weekend. By then it was clear where all of this was heading, but I still harboured this fear that if I moved too fast, I would, as RuPaul would say, fuck it up. So the night he arrived we stayed up impossibly late — dawn was starting to break — as if we — but especially I — were afraid to broach the topic of sleeping arrangements.
Finally at one point he got up to go to the bathroom and I took that as my cue to start making my bed on the sofa. But when he came back out and saw me getting some bedding out of the linen closet, he asked me what I was doing.
— I’m making my bed. It’s late…” I stammered.
That’s when he came behind me, took me in his arms, and with his bristly cheek against my bearded cheek he softly said as only a francophile anglophone would: “Je te l’interdis…” (“I forbid you.”) That was the Torch Song Trilogy moment of my life, except that for my unspoken, “What am I going to do …with my beer,” substitute “beer” with “bed linen.”
And so we went to my room, but you know what? We undressed, got into bed in each other’s arms, and simply fell asleep. And while this song hadn’t been written yet, it’s of that precise moment I think whenever I hear it.
* * * * * * *
I have to tell you something: It feels weird for me to be writing about this. Specifically, why am I writing about this? Moreover, why now?
Hiker met Bello two years, give or take a few days, after he had asked that we “just be friends.” He had finished his university studies and landed a job which he still holds to this day. Between me and Bello, he had a fling with a guy studying in Halifax whom some of us very affectionately nicknamed the Cyprius Fruit, and this brief pairing turned out to be the electroshock treatment I needed to get out of my aforementioned fog and accept that my proverbial ship called Hiker had sailed. Being still in my mid-20s at the time, I assumed that more and better was yet to come.
But then I changed. By the early ’90s, I began to question if I even believed in “relationships” or what having a relationship really meant. I began to notice how most of my friends were forever seeking this elusive thing, going from one to the next and the one after that, completely unable to picture themselves alone or single, while I rather enjoyed extended periods of time on my own. At some point between the age of 25 and 30, I began to make a distinction between sex and lovemaking and wondered if I might be polyamorous. (I think I am but never got to test it out.)
Then I look at the life I’ve had after Hiker until now. My professional life influenced my so-called love life a lot, not only because I had at least a decade of financial precariousness but also because of the intensity with which I work — or used to work up until a few years ago. I found myself not falling in love so much as falling into relationships. This is an awful, terrible thing to say, but I think I’ve had a few particularly intense infactuations that I mistook at the time as falling in love. But setting aside that thing with NowEx, which was so entirely different from everything else that it’s like comparing a galaxy to a planet, I always seemed to reach a point where I needed more time to myself to do nothing but be by myself.
If I were to be totally honest with myself, however, I would have to admit that Hiker loomed over all those others who weren’t Hiker. To this day, that man is capable of saying things that make my heart melt all over again. I remember a comment he once made to me about Bello that some people might have viewed as criticism but was in fact so disarmingly sweet and loving. Meanwhile, I once had a colleague at work who couldn’t be any more different than Hiker except for one thing: they have a very similar laugh, and whenever I’d hear him laugh, I inferred that he had as kind a soul as Hiker.
So that’s where it all stops making sense to me. While it’s clear that Hiker is prime long-term relationship material — I mean, 26 years and counting! — was I ever? I can’t convince myself beyond a shadow of a doubt that I would not have come to the same questioning about myself by my late 20s, and I don’t think that would have flown over very well with Hiker even though he, himself, is also a fiercely solitary type. Then again, monogamy aside, it’s not like he and Bello are anywhere near being joined at the hip: they maintain very separate interests and even vacation separately at times because of those different interests. Meanwhile, as much as it’s true that my professional choices had an influence on my love life post Hiker, wouldn’t my choices have been different had there not been a post-Hiker?
These questions can’t ever be answered. At 51 I might have a house and have travelled as much as Hiker and Bello have, but do I yearn for that now at 51? Honestly? No, I can’t say that I do. Do I wish I could fall in love like I did nearly 29 years ago? Yes …and no. I mean, yes, of course, it’s the most wonderful feeling in the world! But the older I get, the more time and space I need for myself and I can see my capacity to share my intimacy and privacy dwindling after each passing year.
Then that brings me full circle, doesn’t it? It sounds like I want my cake and eat it, too. Or as we say in French, le beurre et l’argent du beurre (the butter and the butter money).
Maybe that’s what it is! They say that to write a good story, there has to be conflict. Perhaps I feel compelled to write this because there’s a conflict. On the one hand, I think I’m finally reaching that point where I’m ready to have a significant man in my life, but on the other hand, I’m not ready for compromise. And by that I don’t just mean compromise on the time and space I need for myself, but also merely “settling” for a kind, handsome, intelligent, independent guy who just doesn’t quite light my fire.
That might be the conflict, but I’m not sure it’s making for a good story.
Both those cases are admittedly extreme. That’s the reason they made headlines. However, I was struck by the number of haters these stories attracted. Some critics ridiculed Cooper’s choice to live almost as a pauper in the basement of his own house. Other critics assumed Shen and Leung must have had a head start and pointed out that they had far higher paying jobs than most people so it was “easy” for them to get rich so quickly.
On the opposite end of the spectrum, my reaction was, “Good for them!” Moreover, I can’t understand why some people can be so resentful of other people’s success. It’s as if they feel entitled to the same thing but without making the least effort or sacrifice to get it. That said, for me those cases demonstrate a point that my own mother taught me when I was just a kid or teenager, and that point is that you need to learn how to save — in the “not spend” sense of the word — if you want to get ahead.
You might find the anecdote I’m about to share with you really, really weird, but one year I got a $500 GIC (term deposit) from my parents at Christmas. I was perhaps 11 or 12 years old, so I remember not quite understanding what the gift was when I opened it, and I remember my mother looking over to me and saying as she continued distributing gifts from under the Christmas tree, “I’ll sit down and explain it to you later.”
It was at a time when returns on bonds and GICs were very high and government incentives like a registered education savings plan didn’t exist, yet my parents knew that I would be seeking a post-secondary education. I still remember that talk with my mother as we sat on the couch in the den, in front of the Christmas tree: “The gift is that your dad and I are giving you $500. That’s yours, but it’s for when you’ll be going to university. And since you’re still years away from university, we put that money for you in a certificate, which is like a special account, so that this $500 will grow to $850 in five years just for promising to leave it there and not touch it. Then, since you won’t be ready for university yet in five years, we’ll take that whole amount and put it into another certificate for another two years to make it grow even more.”
I understood her explanation — I totally got that $500 was a huge amount back then — but I admit it didn’t seem too sexy when my classmates were all comparing what they got for Christmas when we went back to school in January. When I look back to this gift today, I’m in awe because that wasn’t just a huge sum for me but for my parents as well back then. I only figured that out as a young adult when I discovered just how modest my father’s yearly income was. Clearly, having been children during the Great Depression and World War II had taught them valuable lessons.
* * * * * * *
My mom was also pretty good with math. She could do fairly complex mental calculations quickly. She also turned out to be an excellent bookkeeper in her senior years.
That said, she wouldn’t have been able to explain to you (or even know what was) exponential growth as explained so clearly here by the late U.S. physicist Albert Bartlett, but she understood it instinctively. While Bartlett applied this notion to express his concerns over population growth and the exhaustion of petrochemical resources, exponential growth, even if modest, is the cornerstone of generating wealth.
Listen to this clip. Pause and rewind as many times as you need to, but don’t plead that you just can’t get wrap your head around math. This is NOT a difficult concept.
I tried mutual funds within my RRSP (see below) for a very short while but, even though I stood the chance of making a lot more money over 15 years if I stuck to them, I couldn’t stand two things:
not knowing exactly how much I would have at the end of 15 years, and
the possibility of having zero or even negative growth when I’d be ready to cash in.
In other words, as far as financial planners are concerned, I’m your classic scaredy-cat when it comes to investments, but I own that label and I’m fine with it. Maybe I wouldn’t have been that way had I started to save in my early-30s and thus had a 30-year timeframe to work with. But once I’d gotten out of debt and was ready to save, I only had 15 years to work with and I’ve since reduced that timeframe to only 10 years. In short, I had no tolerance for wild market fluctutions and what-ifs; I wanted certain results.
At this date, through looking carefully at how much I spend and on what, I have managed to set aside in 2016 just a hair under $14,000, which includes interest earned and tax refunds. From cash I could have spent had I not been paying attention and wrongly assumed to be my discretionary income, the figure is more along the lines of $8,500 — on average, one out of five dollars that I get in net pay. My plan is to repeat this in the next 9 years — that is, up to and including 2025, at the end of which I plan to retire. With numbers like that, however, if something comes up one year and I don’t get to save nearly as much, I will still be in good shape as long as I’m able to get back on track after that “bad” year. By eshewing credit, saving and paying cash even big-ticket items like my car, and investing all tax returns and unexpected income (like the estate from my mom), I will by retirement day have three times more than the sum of that one-in-five dollars from my take-home pay.
The sad truth is that, in today’s economy, savers don’t get the rewards they used to. After much research, the best rate I can find in Canada on a non-refundable (5-year fixed-term) GIC today is 2.3 percent — it was 2.5 percent at the beginning of 2016, which wasn’t extraordinary either — so using the formula to figure out how long it will take my investment to double, I come up with the figure of about 30 years (70 / 2.3 = 30.43). Right there, that makes many people throw in the towel, figuring there’s no use.
I disagree, of course. Some financial planners have told me, “You’re hardly keeping up with inflation,” as they tried to lure me into what I deem their Russian-roulette world of mutual funds. But in fact, exponential growth at a rate ranging from 1.7 to 2.3 percent will in fact keep pace with inflation, assuming it stays at roughly the same rate as we’ve seen in recent years. As to those who assume that there’s no point in saving for such paultry returns, I retort that I would rather have $100,000 (assuming near-zero growth) in 10 years than $0 to top up my two skimpy monthly pension cheques, thank you very much!
* * * * * * *
Safe Diversification for Scaredy-Cats Like Me
While retirement nine years from today is the main focus of my efforts, I would be foolish to stash everything into a registered (closed and inaccessible) retirement fund. On the one hand, I do plan to have a life before retirement and, on the other hand, I have to plan for a disaster before then, like losing my job.
From everything I’ve read, I gathered that you should have a minimum of three months of your current net income saved up in case you lose your job overnight. Six months would be better; nine to 12 months would be glorious. After careful study, I opted for six months and that’s excluding what would be in my “reserve account” at that point.
So here’s how I distributed my savings to balance enjoying life while having a calamity fund and a retirement fund at the same time.
(1) Dividends Sharing Plan (DSP)
This is an option your employer might not offer, but if it does, try not to ignore it, although I would argue that if you’re curerntly in debt, you should first get out of debt before entering a scheme like this one.
For the next nine years starting in 2017, my employer claws back 6 percent of my official annual salary that will be used to purchase common shares. Given that I’m opting for a non-registered plan, that 6 percent will be taken from my pay after deductions — I could have chosen 100 percent registered for retirement or 50/50 for savings and retirement, but I figure I had retirement covered already (see Points 3, 4 and 5 below) — but it’s amazing how quickly you get used to not having access to that 6 percent. For participating in this plan, my employer matches 50 percent of my contributions up to a maximum of 3 percent, effectively giving me a 3 percent pay increase, which also goes into purchasing common shares. Then, every quarter, dividends get paid.
Of course, that number could be postive or negative, but it would have to be a HUGE negative before it would start eating into my initial 6 percent and historically it hasn’t taken such a nosedive — even during the Great Recession of 2008-2009. That’s as much risk as I’m prepared to take and you have to admit: Given the 50 percent match up, it’s hard to even call that a risk!
There are a bunch of conditions governing when I can touch the money (i.e., when the employer’s share becomes “vested”) and what happens if I do, but I’m just viewing this thing as an account I can never touch until I retire in December 2025. Everything becomes vested when I do retire, so I’ll have a whack of shares to liquidate at that point but will only do so in January 2026 so that I’ll be taxed on capital gains only in 2026 — when my income will have taken a dive.
Also, the 50-percent match-up will be taxable but my employer won’t be making any tax deductions on that portion, so I’ll arrange to have Payroll take about $30 extra per paycheque toward income tax in an attempt to more or less break even at tax time. Dividends will also be taxable but at a totally different rate than income, so I’ll play it by ear for the first year or two and determine later if it’s worth having more than $30 retained each paycheque.
(2) Electronic-Only High-Interest Savings Account
When my bank introduced its electronic-only high-interest savings account, the annual interest rate was somewhere between 4.2 and 4.5 percent. That was before the Great Recession. Today it stands at only 0.5 percent. It was 1.1 percent as recently as two years ago today. Still, this is the bank account I use as my reserve account into and from which I move money each paycheque for near-future needs spending, plus a $1,000 contingency fund.
Given the ridiculously low “high” rate at my bank, I looked for similar accounts at other financial institutions to put away a good part of my “loose” savings (i.e., my “if-I-lose-my-job” fund). I opened an account at Tangerine Bank but then, about a month later, I found a credit union in Manitoba called Implicity that offered much better rates. The thing about deposits in a federally regulated bank is that you’re guaranteed up to $100,000 by the Canada Deposit Insurance Corporation (CDIC), but the guarantee for deposits in a credit union is determined provincially. In Manitoba, that guarantee is 100 percent, which is incredible but fantastic. On the other hand, twice and sometimes three times per year, Tangerine offers a considerably better rate than Implicity for a few months at a time on new deposits, so that motivated me to keep both accounts.
In late 2014, the rate was 1.1 percent at RBC, 1.3 percent at Tangerine, and 2.0 percent at Implicity, giving Implicity a 0.9 percent edge over RBC and a 0.7 percent edge over Tangerine. Since then, with the Bank of Canada’s prime rate having gone down twice by 0.25 percent in 2015 to settle at 0.5 percent, the rate at RBC has gone down 0.6 percent (more than the BoC) to 0.5 percent, Tangerine’s has gone down by 0.5 percent (same as the BoC) to 0.8 percent, and Implicity’s has gone down by 0.3 percent (less than the BoC) to 1.7 percent.
That gives Implicity a 1.2 percent edge over RBC and a 0.9 percent edge over Tangerine and it shows that banks are certainly meaner than credit unions! (Remember my rant in Part 3? “‘Loyalty’ is a word that has meaning to banks only if it helps their bottom line, so you owe banks shit in terms of loyalty [once you’re out of debt] when it comes to your financial health.”) However, whenever Tangerine runs one of its short-term offers that makes its rate at least 0.5 percent better than Implicity’s, I take the time to move my loose savings there since those funds are just as easily accessible from either account.
01 Jan–02 Feb ’15
Worse differential so far.
03 Feb–31 Mar ’15
Bank of Canada drops from 1.00 to 0.75 percent on 21 Jan 2015. RBC’s normal rate drops from 1.10 to 0.80 percent. Tangerine’s normal rate drops from 1.30 to 1.05 percent. Implicity’s normal rate drops from 2.00 to 1.85 percent.
01 Apr–30 Jun ’15
01 Jul–22 Jul ’15
Bank of Canada drops from 0.75 to 0.50 percent on 15 Jul 2015. RBC’s normal rate drops from 0.80 to 0.65 percent on 20 Jul 2015 and from 0.65 to 0.55 percent on 2 Dec 2015. Tangerine’s normal rate drops from 1.05 to 0.80 percent. Implicity’s normal rate drops from 1.85 to 1.75 percent.
23 Jul–30 Nov ’15
01 Dec–31 Dec ’15
01 Jan–17 Mar ’16
Implicity’s rate drops from 1.75 to 1.70 percent on 18 Mar 2016 without any clear external factor.
18 Mar–31 Mar ’16
01 Apr–30 Jun ’16
01 Jul–30 Sep ’16
Best differential so far and a full 1% more than RBC’s basic!
01 Oct–31 Dec ’16
RBC’s rate drops from 0.55 to 0.50 percent on 9 Nov 2016 without any clear external factor.
01 Jan–?? ??? ’17
In late-spring 2016, seeing that I still found myself using my Tangerine account more than I thought I would after finding Implicity, I decided to deposit and maintain my annual $1,500 gas fund in the Tangerine account so that I can earn at least 0.8 percent on that amount, and I tabulate the “new” deposits separately in my Tangerine ledger so that I can easily identify the funds to move back and forth between Tangerine and Implicity. The Tangerine account is also where my monthly pay back on my new MasterCard gets deposited, so since 2016, those paybacks plus any interest from any of my three high-interest savings accounts go to replenish my gas fund.
Interest in such an account is considered income; therefore, it is taxable. Financial institutions do not emit a tax form if that income is under $50, but you are still responsible to report ANY income at tax time. So don’t be foolish: I declared the $28 I made last year in one of these three accounts because the last thing I want is to get in trouble with the Tax Man for a measly $28! It’ll only be about $13 on that same account for 2016, but again I’ll declare it. The trick is to move as much as possible into legal, totally transparent tax-sheltered accounts.
(3) Tax-Free Savings Account (TFSA)
“Account” is not the right word for this instrument introduced back in 2009. It’s more of an umbrella under which you can have a savings account, GICs, or any other types of funds. Whatever you earn in this account is, as the name suggests, tax-free. But the catch is that there’s a ceiling, and beware: a TFSA is not automatically a panacea. The returns can be lousy if you don’t shop around, so you could end up legally not paying tax on an insignificant amount — and what would be the point of that?!
When this instrument was introduced, the cap was $5,000. The following year, another $5,000 was added, giving a cap of $10,000. There were blips over the years, but the cap on January 1, 2017 is $52,000.
In late-April, the Conservative government increased the yearly increment to $10,000 effective immediately, but the Liberal government that took power later in the year returned the yearly increase to $5,500 for subsequent years but let the 2015 increment stand.
The cap is one’s contribution room, meaning that when I opened my TFSA in January 2015, I was allowed to start with a $36,500 deposit if I had it. Then, when $4,500 was added in April, I could top it up, too. The catch if you are able to max out your TFSA is that you cannot register deposits exceeding the annual amount between 1 January and 31 December. In other words, I’m free to withdraw from my TFSA, but given that I had reached the cap at the time of my withdrawal, I couldn’t deposit it back until 1 January of the following year.
I opened my TFSA at Implicity in January 2015 as a simple savings account earning 2.0 percent. Unfortunately. that rate dropped to 1.85 percent in February when the Bank of Canada dropped its rate by 0.25 percent and again to 1.75 percent in July after another BoC rate drop of 0.25 percent to 0.5 percent. By early-September, I drained that savings account and placed the whole amount in a 5-year GIC earning 2.5 percent per year, which will increase the capital not by 12.5 percent but 13.15 percent at the end of 5 years, meaning I will definitely have kept up with inflation. Subsequent deposits for 2016 and 2017 simply go in the savings account portion, whose rate is now 1.7 percent.
This one little move means that I will have earned $1,777 more in tax-free interest at the end of that 5-year period than if I’d just left that amount in the savings account. Then later, apply more exponential growth to the nearly $5,450 I will have earned just for swearing off spending that money… If yearly increments remain at $5,500 and I max out every year, and if rates remain roughly where they are now, I project that I will have increased my capital by 20 percent by the end of 2026 or by 29.4 percent by the end of 2030. It’s far from doubling but I’m fine with that.
What distinguishes a TFSA from a Registered Retirement Savings Plan (RRSP) (see below) is that TFSA contributions are made from after-tax money, which means you don’t get a tax break when you deposit into a TFSA. Your tax break is that you don’t pay any tax on the revenue your deposit generates under the TFSA umbrella.
A lot of people use their TFSA to save for big purchases or emergencies; others use theirs as a complement to their retirement savings. I fall in the latter group, but the part of my TFSA that isn’t locked into GICs forms a portion of my six-month if-I-lose-my-job fund, the other portion of said fund being in either of my high-interest savings accounts depending on which one gives a better rate at the time.
(4) Registered Retirement Savings Plan (RRSP)
Like a TFSA, an RRSP is an umbrella under which you can have a savings account, GICs, bonds, stocks, mutual funds, and so on. You pay no tax on whatever you earn under this umbrella while it’s under this umbrella, but that’s not all.
When you drop money into an RRSP, that amount becomes deductible at tax filing time. You then take that tax refund and reinvest it into your RRSP. When you retire and start withdrawing from your RRSP, you’ll have to pay the tax you’ve been given back but, by the time you retire, you’ll be in a considerably lower tax bracket than the one you’re in now, so you’ll pay less tax than you would have to pay today plus you will have considerably more to draw from than the amount you socked away because it will have grown.
You get a contribution room in your RRSP just as you do in a TFSA, but unlike the one-size-fits-all room under a TFSA, your RRSP room is determined by your income in that it increases by 18 percent of your taxable income in the year for which you’re filing, to a maximum (currently) of $26,010. But that amount is reduced by whatever you and your employer pay into its pension plan, if you’re so lucky as I am to have a pension plan at work (see below). I had some extremely bad years as a freelancer between 1996 and 2006, which means that there was about a decade when my contribution room didn’t increase very much, but there’s nothing I can do about that now and I just deal with it.
Some who have a pension plan at work assume they won’t need RRSP income upon retirement. That might be true for them. However, the question you need to answer to be sure is how much income do you need to sustain your current lifestyle. If you followed me this far, you should already know what you need (minus food).
The rule of thumb is that your income when you retire should be about 70 percent of what it was just before you retire. Based on that rule and what my current needs are, I realized that my work and government pensions wouldn’t quite cut it. However, I figured out that if I only contribute decreasing amounts to my RRSP until 2020, I could (a) fill about 70 percent of my projected RRSP contribution room, (b) still have a life before retirement, and (c) be ready in case of an employment disaster before the end of 2025 even if it’s unlikely to occur. Just like some people overspend in the purchase of a house and end up house poor, it’s possible to sock away too much into an inaccessible RRSP fund and end up deferring “life” until retirement, and I definitely didn’t want to do that.
As for which instruments you should have under your RRSP umbrella, most financial advisors will steer you toward managed mutual funds; however, because I have no risk appetite, I couldn’t stand them. Then in January 2016, Implicity got into the business of RRSPs with a simple choice that I could totally grasp: a high-interest savings account (currently 1.7 percent), GICs (currently 2.3 percent for five years), or a combination of both. If current rates stand until 2031, low as they are, I should still be able to add 33 percent on my capital by then, which is a whole lot better (and certain …and safer) than putting that capital under my mattress!
If I have a point in all of this, it’s this: I’ve done the math, and while bonds and GICs are a shadow of what they were some 15 or 20 years ago — let alone 30 years ago when they went through the roof — they do end up yielding more than what they seem to promise on the surface. However, if you have more risk appetite than I do, which most people do, then go for mutual funds for a while. For your sake, though, don’t go overboard!
(5) Employer’s Pension Plan (EPP)
If your employer offers a pension plan, it falls into one of two types: defined benefit or defined contribution, but no matter the type, it’s always registered. The former is the type that was standard until the last decade or so but is a fast-disappearing breed. Today, if an employer offers a pension plan, it’s the latter type. I would have the latter if I had joined my employer just a few years later, but I’m extremely lucky to have the former.
Under my defined benefit plan, my employer contributes to my pension and I have the option to contribute to it or not. If I decide to contribute (which I do), I do so at the rate of 6 percent of my official annual salary. My choice is all or nothing — 0 or 6 percent — no other figure — but, by contributing, my pension will obviously be better. But the reason it’s called defined benefit is that, come what may, the amount I’ll get is assured based on how much was contributed to it.
Under a defined contribution plan, my employer would contribute a lesser amount to my pension than under a defined benefit plan and I could choose to contribute any whole number from 0 to 10 percent of my official annual salary. The amount I would get would be determined on how well (or not) the contributions grow. I was given an opportunity to play out some scenarios in case I wanted to switch from defined benefit to defined contribution and found that even if I contributed the maximum of 10 percent, I would get only a little bit more than if I stuck to defined benefit and contributed 0 percent!
It was a no-brainer for me but, unfortunately, I have colleagues who didn’t do their homework and fell for the employer’s offer to switch and were influenced by other colleagues who aren’t risk-adverse and convinced them that defined contribution would be better. It never is for the pensioner; it only benefits the employer who pays in less and pays out MUCH less in pensions. A better name for this scheme would be undefined benefit but no one would fall for it because the negative would be in plain view, so an obfuscating term was coined for it instead.
No matter the type, your contribution is deducted from your gross (i.e., before tax) which is unlike the flavour for the Dividends Sharing Plan (DSP) I chose, so it’s like an RRSP in that you’re getting a tax break and that’s why what you and your employer contribute to it is counted against any RRSP contribution you can make. In other words, when I chose to set aside 6 percent on my DSP, my net (take-home) pay dropped by 6 percent; however, when I chose to contribute 6 percent on my employer’s defined benefit plan, the effect on my net was closer to 4 percent — and again it didn’t take long not to miss that amount on my net. My benefits won’t be as rich as some of my colleagues who got to contribute for 35+ years because I started my career at this employer at age 40, and that’s how I figured out that my employer and government pensions wouldn’t be enough — thus my need to save otherwise through an RRSP, a TFSA, my DSP and any other savings I could manage on my own.
But I’m not complaining! At least I have a defined benefit pension from my employer, for I’m of the last generation who’ll get that.
Add It All Up and You Get…
Three years ago, just two days after I officially dug myself out of debt, I asked myself, “Indeed, Now What Do I Do?” I think I knew that part of the answer was that I had to finally start thinking about retirement, but I didn’t really know where to begin on that front. It took my mom’s passing and finally getting my tax situation cleaned up to galvanize me into action, but now I actually get to enjoy my life and not worry about finances (other than keeping them organized).
I might be a scaredy-cat when it comes to how I invest what I have, but I’m no longer a scaredy-cat about my financial future. And boys do I sleep well at night because of that!