Recently, I applied for a new credit card.  Among the questions I had to answer was ‘What is your income?’  Before retirement that was an easy question; I’d just tell them my salary.  But now that I’m retired, I’m not sure how to answer it. I have no salary.  I have no workplace pension.  I’m not drawing from CPP or OAS yet.  There’s nothing I can point to that is the rough equivalent of a salary. I chose to answer the question with my previous year’s taxable income.  However, that number has little relationship to what I can afford to spend.  A big chunk of my spending comes from non-registered accounts that contain savings that have already been taxed. I do draw from my RRSPs, but this is only for lifetime tax efficiency.  Late in the year I withdraw the right amount to manage my income up to the top of a particular tax bracket.  I could just as easily have an income near zero and collect the HST rebate. So, my taxable income for the y...

I frequently see people whose financial plans rest on a steady income. I’m not just talking about those living hand-to-mouth, never saving a dime. There are also the “spreadsheet planners” who have their financial lives all mapped out. They borrow large sums for a house or to invest, and rely on a steady income to keep up with the interest payments. As long as everything proceeds exactly as they planned, they’ll be multi-millionaires by the time they get close to retirement age. I’d like to introduce these people to Heather Von St. James. Heather had a great life going but was hit with mesothelioma, a cancer caused by asbestos. Her story about the personal and financial costs she faced is definitely worth a read. ( Disclaimer: I have no financial connection to Heather; I just found her story compelling. ) One takeaway from her story is that your income is not fully secure no matter how safe it seems. Heather’s story is a very specific case, but there are many different pro...

Economic inequality around the world has been increasing in recent decades. It’s tricky to find the right balance between sharing the wealth and reducing the incentive to work and innovate. This is an important debate, but it is filled with nonsense arguments using made-up data. For some reason, people are impressed by arguments that include some sort of numerical evidence, even if the numbers make no sense. In a discussion of government spending and public debt, I once heard someone say that every dollar the government spends gets re-spent seven more times in the economy. The implication is that government spending provides a free multiplier effect, but just a little thought shatters this dream. If the government were to borrow and spent a few trillion dollars, it wouldn’t somehow grow and make us all rich. But this made up statistic seemed to win the argument at the time. A widely-cited web site is the Global Rich List (that has disappeared from the internet since this arti...

The dream of many people as they approach retirement age is to derive a safe and steady monthly income from their savings. One fund that seems to fit the bill is the popular BMO Monthly Income Fund that holds nearly $5 billion. However, investors may be in for a nasty surprise. Let’s start with the positives. This fund has a very nice looking performance chart. Apart from the blip around the end of 2008, it has been on a steady uphill climb. Another great thing is that it has paid a steady monthly distribution of 6 cents per unit per month since the beginning of 2002. So, what’s not to like? Many people would be surprised to learn that the unit price for this fund has dropped from $9.63 in January 2002 to $7.65 on 2012 March 8. How is this possible? What happened to the nice chart that mostly went up? Well, charts like this assume that distributions are reinvested. If you spend the monthly income, your remaining money does not follow this nice chart. I wonder how many i...

We often hear statistics about how men and women doing the same jobs aren’t paid the same. I’ve heard that women make anywhere from 60% to 90% of what men make. I don't trust these figures because the people who quote them often have axes to grind, but I do believe that a gap exists. I don’t think this gap is likely to close completely any time soon. The reason for this gap is usually attributed to sexism. I don’t know how much of a problem this is today but it definitely was a problem in the past. See a job posting from one of my father’s job searches back in the 1964 . However, I think there is another reason why women doing the same job as men get paid less, on average. I could have been paid much more in my career if I had devoted more energy to it. If I had worked more and spent less time with my wife and sons, my income would have been higher. I consistently made choices favouring a balanced life rather than devoting myself completely to my work. More than once I...