blog28jan2007

Hot Off the Web

In the NYT article entitled “A contrarian view:  save less, retire with enough” Damon Darlin tables the debate on assets required to be saved for retirement. This is a debate between calculations of financial institutions (who at times are accused of trying to beef up assets under management) and some economists who beg to differ. While some will jump at the lower suggested numbers to cut back on their saving, others will realize the real message is that personalized solutions are better than canned ones. Specifically, getting a real handle on how much you’ll need in your first year of retirement has more to do with a good understanding of the components of your pre-retirement expenses and changes resulting from starting retirement, than simply a percentage of final earnings. By the way, you can read more about this in the Transition link in the Planning section of this website.

“Splitting up is hard to do”from the Ottawa Citizen shows that those that wish to take advantage of reduced tax levels resulting from the proposed pension splitting legislation, may have to wait until 2008 to get their tax refund (or at least until the legislation is passed) rather than being able to spend their tax savings during 2007. (Although a friend of mine indicated that all may be required is an Order in Council for the new law to take effect. Perhaps the government is holding off with that until the related income trust debate simmers down somewhat). And talking about income trusts, Diane Francis in the National Post continues her campaign to support those trying to push back or water down the proposed changes. She positions the debate as an integrity issue. Perhaps it is, but was it not John Keynes that said “When the facts change, I change my mind. What do you do?”

A couple of 401(k) related articles in the WSJ remind you to “Take a close look at retirement plan fees” (Do you know what you are paying? You’re your plan have revenue sharing agreements?) Also, “When changing jobs leave the money in the 401(k)” hardship cases aside, taking the money out when changing jobs will result in much more pain later (lower assets/income for retirement or much higher contributions while working to recover the spent assets). These issues are probably equally applicable to RRSPs.

Clements in the WSJ article “Why you should think twice about investing in real estate” reminds us that unless you are collecting rent on your property “you are not investing in real estate, you are consuming it”. So if you can afford to buy that larger house or that vacation home and you are going to get enjoyment out of it, then go ahead and buy it, but who are you kidding when you call it an investment? (Those with second homes can no doubt resonate with this, given the rapidly increasing taxes, maintenance and utility costs, repairs associated with seasonally occupied homes. Clearly, this is not an investment, but a luxury that you have to pay for).

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