From first-hand experience, I can tell you that dealing with the Canada Revenue Agency (CRA) can be bewildering. I would have to say that just about all the CRA people I have spoken to seem motivated to help me, but they all seem to disagree with each other. In his book Tackling the Taxman , Alex Doulis gives a host of examples where CRA employees don’t seem as willing to be helpful as I’ve found them to be. This book may actually be mistitled because most of the CRA people I’ve spoken to are women. However, given the tone of this book, my guess is that these women don’t mind being left out of the accusations. It’s clear that Doulis knows a great deal about income taxes and the dispute process between CRA and taxpayers. The parts of the book that explain these matters are very useful. However, the bulk of the book is a collection of stories of serious misdeeds by CRA employees. These stories are entertaining, but they don’t have quite enough detail for the reader to figure ou...

A reader, Andi, is concerned about the value CPP gives for the money contributed. Andi sent a detailed analysis comparing RRSPs to CPP that can be summarized as follows: If I could take all the CPP payments I’ve made and will make and instead invest them in my RRSP, the investment returns in the RRSP would make me far more money than I’ll ever get from CPP benefits. Assuming Andi is one of the few who has the discipline to stick with a reasonable portfolio through thick and thin, the conclusion that the RRSP approach would beat CPP is very likely true. The problem for government is that the majority of investors will make an anaemic return on their money due to paying huge fees on mutual funds, failed market timing attempts, and so on. Even worse, many people would simply dip into their RRSPs either out of true need or simply a desire for more consumption. Eliminating CPP would leave governments with a big problem. We can’t have huge numbers of older citizens no longer able to w...

Update: Annuity payment rates for one insurer are at the end of this post. The Canada Pension Plan (CPP) is essentially a CPI-indexed life annuity. Your CPP benefits are determined based on your contributions during your working life, and once payments start they rise with the consumer price index (CPI) each year. CPP payments may not be large, but their purchasing power remains constant for the rest of your life. This brings considerable peace of mind. For people who have built their own savings over the years without the benefit of an employer defined-benefit pension plan, it’s natural to consider turning a large lump sum of savings into a CPP-like CPI-indexed life annuity. This would eliminate having to worry about investing and would eliminate concerns about outliving your money or losing ground to inflation. I wouldn’t want to tie up all my savings in an annuity, but I can see the appeal of allocating a portion to an annuity so that the combination of CPP and annuity pay...

1. Jason Zweig at the Wall Street Journal reports on research into why it feels good to follow the crowd . Unfortunately, following the investing crowd is a formula for losing money. 2. Preet explains that the cost of the fake lake is barely a drop in the bucket of the total cost of the G8 and G20 summits .    3. With the earthquake in the nation’s capital, Big Cajun Man takes a look at earthquake insurance .

I’m getting used to the periodic phone calls from the Royal Bank to discuss the products I have with them. However, their latest contact by snail mail adds a new twist. The RBC phone calls I get seem aimed at getting me to use more RBC products and always end with a pitch for a credit card. These calls are awkward because I don’t want to say too much until I’m sure that I’m really talking to a Royal Bank representative, and the person at the other end is trying to pretend to be interested in helping me save money, but is really interested in selling more products. The calls end when I’m sure that there was no important reason for the call. My latest contact from RBC is a letter with the following printed in large bold letters at the top: “Meet with your RBC Advisor before August 10, 2010 to review your ___ . Please book your appointment today.” The body of the letter repeats the deadline and adds even more of a sense of urgency. I wouldn’t blame people for reading this let...

It's possible to make a reasonable argument that the average investor would be better off investing in GICs than stocks and bonds. Unfortunately, David Trahair fails to make this argument well in his book Enough Bull: How to Retire Well Without the Stock Market, Mutual Funds, or Even an Investment Advisor . So, I'll try to make it for him. The main argument in favour of investing in stocks is their higher expected returns (called the risk premium) than guaranteed investments like GICs. However, the typical Canadian investor working with a financial advisor is invested in balanced mutual funds (half stocks and half bonds) and pays yearly fees in the 2%-3% range. To these fees we can sometimes add front-end loads and deferred sales charges. On top of that we can add the losses that come from panicking and selling at the wrong times. Taken together, these costs eat up the risk premium. This type of investor very likely is better off with bank GICs as long as they are he...

The Ontario Energy Board is seeking a $495,000 penalty against Summitt Energy for unfair practices in their business of trying to sign people up for 5-year fixed price contracts for gas and electricity. Ellen Roseman reported on this and a link to the full details can be found in the comment section below. Here is my favourite allegation: “AB attended at the residence of T.V. in Pickering, Ontario. He did not identify himself as being a sales agent from Summitt but rather stated he was a representative of Veridian, the local utility in Pickering. AB told T.V. that he had just changed the meter outside her home and she needed to sign a document to prove that he had attended at the residence. He did not explain that the document was for a five year fixed price contract with Summitt for the supply of natural gas and electricity.” I don’t think most of us are prepared for brazen lying of the type alleged here. I expect people to shade the truth a little, but just don’t expect some...