tag:blogger.com,1999:blog-5465015914589377788.post3206087646912945216..comments2024-02-17T11:07:06.232-05:00Comments on Michael James on Money: Short Takes: Air Miles Problems, Return Predictions, and moreMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-5465015914589377788.post-71498804741918898782016-05-11T13:28:21.366-04:002016-05-11T13:28:21.366-04:00I'm a fan of CPP, even at a 1% real return - i...I'm a fan of CPP, even at a 1% real return - it's a good base to count on along with OAS. The future Ontario Retirement Pension Plan (ORPP) should be an even better deal since it's supposed to be self-funded from the start.Jim Turnbullhttps://www.blogger.com/profile/16141660549510415017noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-43672617900422338282016-05-10T15:18:49.086-04:002016-05-10T15:18:49.086-04:00@Blitzer68: Thanks for chasing that down. Now tha...@Blitzer68: Thanks for chasing that down. Now that we have the details straight, I'm tempted to back up again and observe that many Canadians will not achieve an average compound real return of 1% on their portfolios over their lifetimes. The main culprits are costs, poor market timing, and low fixed income returns. CPP returns may not serve savvy cost-conscious investors well, but they are good for most Canadians.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-32419309383447589442016-05-10T15:08:17.658-04:002016-05-10T15:08:17.658-04:00I gathered more info from the person who provided ...I gathered more info from the person who provided the details for this report. He is factoring in a 1% real wage growth and an extra 3.5 years of life expectancy (23.5 versus 20). This seems to do the trick and brings the real return to 2.1%. Note though that without these two factors, real return drops to about 1% according to my calculations.Jim Turnbullhttps://www.blogger.com/profile/16141660549510415017noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-35238494891643404352016-05-10T11:02:53.731-04:002016-05-10T11:02:53.731-04:00@Blitzer68: Maybe a more careful read of the repor...@Blitzer68: Maybe a more careful read of the report would reveal the discrepancy.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-83481718222091356032016-05-10T10:58:12.354-04:002016-05-10T10:58:12.354-04:00Thanks Michael, I appreciate your time on this. A ...Thanks Michael, I appreciate your time on this. A 65 year old has a life expectancy of 20 years (average of male & female) according to stats Canada life tables. Assuming no other factors like child rearing drop outs, I get a real return of 1.09% (employer contribution included) or 3.34% (just employee contribution). It's like they couldn't make up their minds so they took the average. They took a muddled approach if this is the case.Jim Turnbullhttps://www.blogger.com/profile/16141660549510415017noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-87533358317688850232016-05-10T08:27:30.807-04:002016-05-10T08:27:30.807-04:00@Blitzer68: It should be only 39 years of contribu...@Blitzer68: It should be only 39 years of contributions because there are 8 years of dropouts (17% of (65-18)). There is also the YBE which is currently at $3500. The YBE hasn't exactly scaled with inflation, but if we treat this year's figures as typical, we only contribute the fraction 1-3500/54900 = 93.6%. This scales the 9.9% down to 9.269%. The spreadsheet I put together shows the money lasting for just under 30 years at a 2.1% real return.<br /><br />This seems long, so I can only assume that other factors were taken into account. Perhaps dropouts for child rearing or the real contribution amounts in past years?<br /><br />I repeated the calculation based on only the employee contribution and got 12.7 years, which seems too short.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-27995476845722845002016-05-09T18:57:46.274-04:002016-05-09T18:57:46.274-04:00With 40 annual 9.9% contributions you need to make...With 40 annual 9.9% contributions you need to make around 35 annual 25% withdrawals to get an IRR of 2.1%. Can you check my math? It takes two minutes in a spreadsheet. Jim Turnbullhttps://www.blogger.com/profile/16141660549510415017noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-79715963960073262312016-05-08T07:57:11.262-04:002016-05-08T07:57:11.262-04:00Thanks for the mention. MDJ's article was goo...Thanks for the mention. MDJ's article was good. The TFSA should be one everyone should take advantage of. I can't use some of the other strategies at this time for a few reasons.<br /><br />Pension splitting will occur in another 25 years, long ways out for that one!<br /><br />Have a good weekend,<br />Mark<br />My Own Advisorhttp://www.myownadvisor.canoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-59550735895441113072016-05-06T14:32:56.528-04:002016-05-06T14:32:56.528-04:00@SST: My education and vocation have given me the ...@SST: My education and vocation have given me the skills to have some understanding of the challenges of creating self-driving cars. For people without technical skills, I'm not sure how they form an opinion on this subject other than simply declaring what they want to be true. <br /><br />I see this issue as similar to standard vs. automatic transmissions. When I was a young adult, almost all people with an opinion on the subject believed that human-operated standard transmissions gave better acceleration and fuel usage than automatic transmissions, and that this would always be true. I don't think it's controversial to say that automatic transmissions tuned for either acceleration or fuel economy are the winners today. Autonomous cars represent a much more difficult challenge, but today's technology is more than powerful enough -- we just need the software now.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-66614177040230912622016-05-06T14:22:19.692-04:002016-05-06T14:22:19.692-04:00Michael -- totally a non-judgemental question: do...Michael -- totally a non-judgemental question: do you think your education and vocation gives you a certain bias regarding hi-tech (advancement, superiority, etc.)?SSTnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76101737547835940762016-05-06T14:11:16.359-04:002016-05-06T14:11:16.359-04:00@Blitzer68: The paper seems to be using the full 9...@Blitzer68: The paper seems to be using the full 9.9% contribution to CPP for the calculations. They assume your first 8 years are dropout years. If you pay the maximum the whole way, they say the rate of return drops to 1.7% from 2.1%. I haven't attempted to check any of their figures myself.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-22297158439099829032016-05-06T14:03:42.429-04:002016-05-06T14:03:42.429-04:00Or better yet, defer CPP payments to age 70 and th...Or better yet, defer CPP payments to age 70 and then live to 100!Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-58266346583979517262016-05-06T13:59:56.981-04:002016-05-06T13:59:56.981-04:00The best way to improve your average return from C...The best way to improve your average return from CPP is to live longer than average. So get out there and get healthy. :)Garthhttps://www.blogger.com/profile/14367654772040176371noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-57636882042854146112016-05-06T13:26:29.183-04:002016-05-06T13:26:29.183-04:00Michael, I think the 2.1% real return applies only...Michael, I think the 2.1% real return applies only when considering the employee contribution. When the employee and employer contributions are considered, the real return drops close to 0 (I get 0.3%). I think this is relevant if you believe payroll taxes are ultimately paid by employees in the form of lower compensation. <br />Jim Turnbullhttps://www.blogger.com/profile/16141660549510415017noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-82844274676361634102016-05-06T10:33:51.824-04:002016-05-06T10:33:51.824-04:00@SST: Sure sounds like a selling point to me. Th...@SST: Sure sounds like a selling point to me. There will surely be some challenges on the path the self-driving cars, but it will all be worth it to get to full autonomy.<br /><br />Many people doubt that we will get to full autonomy, but they're mistaken. We want to believe that our judgement will always be better than that of a machine, but once cars have been fully autonomous for several years, few people will think this way any more (about driving).Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-422683584161046902016-05-06T09:47:42.868-04:002016-05-06T09:47:42.868-04:00http://www.cbc.ca/news/technology/sex-distracted-d...http://www.cbc.ca/news/technology/sex-distracted-driving-1.3562029<br /><br />Selling point? ;)SSTnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-80825852647671828312016-05-06T09:42:02.584-04:002016-05-06T09:42:02.584-04:00@Alan: I saw a 60 Minutes piece on self-driving ca...@Alan: I saw a 60 Minutes piece on self-driving cars. The interviewer said he was nervous at the start, but that after 10 minutes he was fine with the self-driving. As with other revolutionary technologies, people will adapt rapidly.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-11910139670110487122016-05-06T09:40:19.475-04:002016-05-06T09:40:19.475-04:00@SST: Actually, they are projecting a 4% real ret...@SST: Actually, they are projecting a 4% real return on investments. But this doesn't translate into a 4% real return for us. CPP is a defined-benefit plan. So, based on the current rules, the 2.1% return for those born after 1971 is locked in. One could argue that better or worse returns may lead to a change of rules, but that's another matter.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-51488528112313297502016-05-06T09:38:25.547-04:002016-05-06T09:38:25.547-04:00Whether these self-driving cars get adopted or not...Whether these self-driving cars get adopted or not is another point of contention, but I would have no problem using one (once they are proven), especially over long distances. Thanks for the inclusion this week, and enjoy the lovely weekend ahead.Big Cajun Man (aw)http://www.canajunfinances.comnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-21433992530341591002016-05-06T09:35:11.801-04:002016-05-06T09:35:11.801-04:00re: CPP -- the CPPIB does a really good job, imo, ...re: CPP -- the CPPIB does a really good job, imo, with our money. It's a bit of a stand-out from the rest of the government entities. The only issue I have with them is that their expenses to operate the fund are massive, even when compared to high-fee funds. If they ever decide to run the fund more efficiently (it is government, so don't bet on it), that 2% return would increase. SSTnoreply@blogger.com