tag:blogger.com,1999:blog-5465015914589377788.post451495218180043405..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: The Ages of the InvestorMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5465015914589377788.post-51321488144130011162019-01-23T14:22:14.214-05:002019-01-23T14:22:14.214-05:00No free lunch. The results only go out to age 80 ...No free lunch. The results only go out to age 80 so it's impossible to know how they expect spending to change after that. In my parents' case, spending went way down at first when minor health issues started to occur but then jumped when they needed help.<br /><br />The more research I do on government nursing homes in Ontario, the more confident I am that they will be able to find a quality affordable option after the 3-4 years waiting time that exists for the homes with the best reputation. The key is to have financial resources to manage this wait well. <br /><br />And when they are finally settled, extra monies can be directed to providing additional support in the home that makes their situation more comfortable. <br /><br />Thanks again.<br /><br />Larry C.https://www.blogger.com/profile/17718393493123680154noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-17985076439813612382019-01-22T21:22:47.060-05:002019-01-22T21:22:47.060-05:00@Larry C.: I suspect the difference comes from un...@Larry C.: I suspect the difference comes from underlying assumptions. Frederick Vettese has written multiple times that he believes we will naturally want to spend less as we age. I don't believe this. It's true that many studies show people do spend less as they age, but this comes from averaging in data from people who overspend early and are forced to spend less later. The Morneau Shepell calculator is likely based on Vettese's assumptions.<br /><br />Bernstein observes that incomes actually grow slightly faster than inflation (because society gets wealthier over time), and that our spending desires will actually grow with time. So, there is about a 2-3% per year gap between the pace of increased spending assumed by Vettese vs. Bernstein. Over decades, this gap makes a huge difference.<br /><br />My own assumptions are between the two, but closer to Bernstein than Vettese.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-5429897661054433062019-01-22T18:26:43.028-05:002019-01-22T18:26:43.028-05:00Michael,
Do you have an opinion on the results ge...Michael,<br /><br />Do you have an opinion on the results generated from this online calculator provided by morneau shepell re: safe spending rates in retirement. When I run the numbers for both my family and my parents, they show significantly higher spending available vs. the 2% safe, 3% probably safe, 4% taking chances. If the math makes senses (as best as can be determined with actually seeing their algorithms), could it be a US vs. Canada thing? Thanks. <br /><br />https://enhancement4.morneaushepell.comLarry C.https://www.blogger.com/profile/17718393493123680154noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-6930127570185875182019-01-13T14:17:36.903-05:002019-01-13T14:17:36.903-05:00@Larry C.: It seems unavoidable that we have to tr...@Larry C.: It seems unavoidable that we have to trust someone else when we're no longer able to protect our assets ourselves. <br /><br />Another of my family members has a concentrated portfolio. I've been selling off a little each year to contribute to a TFSA. It helps that income is low enough that these sales don't trigger any income taxes.<br /><br />Glad you enjoy my blog.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-62183368887109022242019-01-13T12:55:37.499-05:002019-01-13T12:55:37.499-05:00I've mentioned to several people how easy it w...I've mentioned to several people how easy it would be for me to make off with large sums of money undetected. That leads me to believe it's probably a common occurrence. The other dilemma is the asset mix - 90% common stock concentrated in 6 names. The dividends are great but they would have to pay huge capital gains taxes if they were sold off and replaced with stock and bond index funds. I sold off their TFSA stocks and moved that money to GICs but I'm hesitant to lose 10% of the portfolio to taxes. <br /><br />I also have nothing but good things to say about our local LHIN. They have provided much support to my parents, but there are limits to what can be provided. <br /><br />It's a challenge but what in life isn't? Thank you for your writing.Larry C.https://www.blogger.com/profile/17718393493123680154noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-53745823656540939272019-01-13T09:13:50.712-05:002019-01-13T09:13:50.712-05:00@Larry C.: I recently went through this helping my...@Larry C.: I recently went through this helping my aunt. At first she needed only a couple of hours of help each day, which was covered by a provincial program in Ontario (LHIN). As her needs escalated, LHIN limits forced me to find a for-pay service that my aunt couldn't afford (she had much less money than your parents). Eventually, she needed the for-pay service 12 hours a day ($160k/year). As I was considering hiring someone live-in for less money and setting up a reverse mortgage on her house, she ended up in hospital and never left. The whole experience was very difficult, despite the best efforts of the LHIN people. My aunt's lack of assets complicated matters greatly and I ended up spending 5 figures of my own money.<br /><br />A generation earlier, elderly members of my family ended up living with their adult children. This has some financial advantages, but it can be a crushing burden to deal with an old person with dementia in diapers.<br /><br />I don't have any good answers for you, but money definitely helps, as long as an honest family member is watching the money to make sure the elderly people aren't getting fleeced somehow.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-43530313032326285412019-01-13T08:43:53.606-05:002019-01-13T08:43:53.606-05:00To provide a real life example of this challenges ...To provide a real life example of this challenges of planning for old age. My parents saved $1.5 million for retirement (very small work pension) and own their own condo in Markham. They were quite comfortable until health issued began in their mid 70s. In order to avoid moving to a government nursing home (forget about private nursing care - $120,000-$150,000/ year depending of level of care needed), they are spending $85000/year of home care. Add to this the cost of food, condo fees, etc, and their yearly expenditures are close to $110,000/year or 7.3% of their savings. Thank goodness for CPP and OAS which lowers their spending rate to 5.7% which is still above your recommendation. But what's the alternative? Government nursing home?Larry C.https://www.blogger.com/profile/17718393493123680154noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-13291791755531730042019-01-12T11:31:46.248-05:002019-01-12T11:31:46.248-05:00@Grant: It wouldn't look like a traditional bo...@Grant: It wouldn't look like a traditional bond ladder, so maybe that's not the best term to describe it. You could split your money among RRBs maturing every 5 years far out into the future. The idea is that each investment provides spending money for 5 years. So, when RRBs mature, instead of reinvesting, you'd just spend the money for 5 years. If RRBs don't have long enough durations for your full retirement, you might have to reinvest part of the longest-duration RRB when it matures. I'm not advocating this approach, but it's the best I can think of to follow Bernstein's advice.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-88065961337496028572019-01-12T11:24:02.368-05:002019-01-12T11:24:02.368-05:00Apart from the longevity risk issue with a ladder ...Apart from the longevity risk issue with a ladder of inflation protected bonds, it is even possible in Canada to build such a ladder? I have read that even in the US, some years TIPS were not issued. I think I prefer the traditional 3-4% portfolio withdrawals.Grantnoreply@blogger.com