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Book Review: Just Keep Buying

When it comes to big questions about saving and investing, author Nick Maggiulli is critical of the answers given by the financial industry.  In his book, Just Keep Buying , Maggiulli brings data and evidence to answer these questions in interesting new ways.  I find myself agreeing with most of his conclusions, but not always with how he arrives at them or expresses them.  Whether you agree or disagree with his conclusions, Maggiulli adds to the discussion with thoughtful points of view. This book is organized around 21 questions that many people ask, including “How much should you save?”, “Should you ever go into debt?”, "Should you rent or should you buy?”, “What should you invest in?”, and “How soon should you invest?”  The discussion and answer to each question is its own chapter. In the rest of this review, I’ll examine some of these answers. Save what you can How much money should you save?  Maggiulli says to “save what you can.”  On its own, this is...
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What Does Generation Squeeze Have Against Couples?

An organization called Generation Squeeze is calling for big cuts to Old Age Security (OAS) .  For some reason, these cuts are aimed exclusively at senior couples.  Digging into the numbers, the proposal makes no sense. The stated goal of the proposed OAS changes is to free up government money for other priorities.  Whether or not OAS is the right target for reducing government spending is a different discussion.  The puzzling part of this proposal is having all the cuts apply to senior couples. Currently, OAS will get clawed back from any senior whose 2025 net income (Line 23400 of the tax return) is over $93,454.  For each dollar over this income threshold, OAS payments are reduced by 15 cents.  The current rules make no distinction between singles and couples.  The calculation is based on each person’s own income without regard to whether they have a spouse. Generation Squeeze wants to change the threshold to $100,000 for total household income....
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Book Review: The Art of Spending Money

Whether you agree or disagree with his arguments, Morgan Housel tells entertaining stories, and his latest book, The Art of Spending Money: Simple Choices for a Richer Life is no exception.  What I liked most about this book is it caused me to think.  Mostly, I agreed.  Occasionally I disagreed.  Sometimes I recognized my own ideas, and sometimes I had something new to ponder.  The book flew by. Most people I know will find that the way they think about spending aligns well with Housel’s recommendations.  The readers who will likely benefit the most are those who give up too much of what matters in their lives to amass wealth.  Such wealth builders are the type of person the financial industry seeks out, and it’s not surprising that writers from the financial industry tend to write for this type of person.  These writers often exaggerate how common it is for the general population to have their type of money obsession.  We all tend to speak ...
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Group RRSP Fees Matter

The high MERs charged by some employers’ group RRSPs can be frustrating.  But these fees seem small compared to the employer matching of employee contributions.  A recent guest on The Wealthy Barber podcast said “those [group RRSP] fees aren't going to eat that [contribution matching] up over time.”  Challenge accepted!  People, including experts,  consistently underestimate the corrosive effect of high MERs over long periods of time. It’s not my intention to be overly critical of David Chilton or his guest Brian Orlando.  They gave some great information for helping Canadians with their finances.  But I do want to explain how high fees can consume an employer match faster than we might expect. An example The podcast segment began with the example of 2.5% MERs in the group RRSP.  So, let’s compare two scenarios for a hypothetical employee Evan: Group RRSP Evan’s contributions are invested in a crappy closet index global stock fund with 2.5% MER....
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Dalbar’s Measure of Retail Investor Underperformance

Lately, I’ve heard a few references to Dalbar’s measure of how much retail investors underperform the investments they hold due to poor behaviour.  I suspect that if the people making these references understood how Dalbar calculates this measure, they’d be embarrassed at having mentioned it.  There can be legitimate academic debate about the best way to measure investor underperformance, but Dalbar’s simple method is just nonsense. A simple example to illustrate the problem Ann has invested in ABC fund for the past 5 years.  Her initial investment was $10,000.  Over the first 4 years, she left her investment alone and it grew 50% to $15,000.  Ann then got an inheritance of $20,000, which she put into ABC fund to give her a total of $35,000.  In the final year, ABC went up 6%.  Ann now has $37,100. By any reasonable method of analyzing Ann’s investment behaviour, she exactly matched the performance of her fund.  She was always fully invested with ...
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How I Manage my RRSP in Retirement

Spending from retirement savings, or decumulation, in a way that maximizes what you have left to spend after taxes is surprisingly complex.  I’ve done extensive simulations of various strategies for my situation, including strategies that change over time, to find what works best for me.  Here I describe how I’m managing my RRSP in retirement, but it’s important to remember that it may or may not work well for you depending on your particular circumstances. Looking for the fully optimal financial strategy is futile.  I ran my simulations and chose a simple enough strategy that worked well across a wide range of investment outcomes.  The only reason for changing my strategy is if something happens that is far outside my expectations.  Those who constantly seek perfection waste their time and hurt their outcomes with constant tinkering. Our portfolio and goals My wife and I have RRSPs, TFSAs, and non-registered accounts.  I prefer not to discuss exact amounts...
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Book Review: The 5 Types of Wealth

In his book The 5 Types of Wealth , Sahil Bloom makes the case that there is more to life than money, and that it is a mistake to sacrifice too much to get more money.  To most of us, this is so obvious that it’s not worth saying.  But a minority of us need to think about this message. Bloom lists the 5 types of wealth as “time, people, purpose, health,” and money.  Like much writing on this subject, the author presents the insight that there’s more to life than money as though it’s a new idea: “Where the old, default scoreboard was entirely based on financial wealth, the new scoreboard is grounded in the diverse pillars that define a truly wealthy existence.”  This isn’t news to the majority of people.  This majority never needed this insight, because they have never over-valued money. But for those who toil away for most of their waking hours at their jobs or running their businesses, Bloom’s ideas are important.  Perhaps for them, when they realize they’...
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