This week, we have spent the week in Ottawa visiting family but also enjoying our nation’s capital as tourists.  As a result, I did not post anything this week but Sarah and Scott have some great articles to share.

This Week I Wrote:

• On Monday Sarah showed you how to go about Setting Financial Priorities.
• On Wednesday Scott shared his Financial Lessons Over the Past 20 Years.

Other Great Reads:

• This week The Globe and Mail posted a video on Why Speculators Are Betting Against the Loonie.
• The Financial Post revealed that Sustained Low Rates Raise Risks for Canada’s Banks: OSFI’s Dickson.
• CBC News shared a very interesting, and interactive, article on What Kind of Home Can $380,588 Buy?
• It’s travel season and that’s why Boomer and Echo want to make sure you’re aware of The Many Hidden Costs of Travel.
• This week the Canadian Couch Potato talked more about Equity Index Funds for the Socially Responsible.do and dont do
• The Canadian Personal Finance blog discussed the just-released news about Inflation at 0.4% for April in Canada.
• Rob Carrick this week compared Mutual Funds vs. ETFs: Know the Nuances in the Fees You Pay.
• This week the Canadian Finance blog went in-depth for those wanting The Universal Child Care Benefit (UCCB) Explained.
• Give Me Back My Five Bucks conducted a study to discover Target Canada or Target USA: Which is Cheaper?
• Andrew Hallam has an interesting question for his readers this week, Malaysia: World’s Best Retirement Destination?

Best of Blogs – accomplishments appeared first on Retire Happy.

Pay Yourself First

I would say that if you paid yourself first you won’t be able to stop yourself from reaching your goals. Put money into your RRSP, TFSA, Savings Plans, Health and Life Insurance, pay your mortgage bi weekly and you will be shocked in 20 years how little you owe and how much you own.  Everyone knows the 10% rule; pay yourself 10% of your earned income. Most people don’t but if you followed that simple rule you would be wildly successful.

Related article:  Pay yourself first to save money

There Are No Shortcuts. It Is Hard Work.

There is no easy way to save for your future and there is no easy way to get rich. If there was we all would be doing it. It is hard work, sacrifice and patience that lead someone to their financial goals. Over the past 20 years the people that I have come across that would be considered successful all have these same traits:

1. They are focused.
2. They have a plan.
3. They have patience.
4. They are informed.
5. They know that there are no shortcuts.
6. They carry as little bad debt as possible.

Related article:  Take control of your money

Use Professional Help and Keep Yourself Informed.

Many of the products that Advisors sell can be purchased on your own. At some point the consumer needs to ask someone questions. It may come down to the help of a professional to get good advice. If you are looking for a good advisor, ask your good friends and neighbours who they recommend. Many people sit down with an Advisor to help direct them in the future. There is also no reason for not keeping yourself informed. The internet, newspapers and magazines are always loaded with information on financial planning. Not all of it is accurate but you can take that information to your advisor and ask their opinion.

Related article:  What to look for in a financial advisor

Review.

People who review their portfolios regularly are rarely caught off guard with market changes or life changes. Whether it is once per year or 4 times per year you must review what you have so you know where you are, where you are going and how you are going to get there. By reviewing on a regular basis you will also stay up to date on products in the market place that may be of importance to you. At least you will have the information.

Related article:  How to review your investment portfolio

Retirement Can Be Fun But Can Be Stressful.

Retirement can be both an amazing time of life and stressful. At some point in the future there will be no more paycheques coming in from work and only money going out from RRIFS and other investments. That can be stressful for some but with regular reviews and knowing where the money is coming from and how long it will last, the stress can be elevated greatly.

Related article:  3 Steps to a retirement plan 

These are just some of financial lessons I have learned and observed over the past 20 years. It goes by very fast. Enjoy it.

Financial Lessons over the past 20 years. appeared first on Retire Happy.

Life is a question of balance but finding and maintaining that balance can be a challenge. The thing with life is that it’s unpredictable and what keeps you in perfect alignment one day may tip you off balance the next. Just like a performer walking the high wire though, if you can maintain a strong core and a steady step, keeping your balance (and recovering quickly from the ‘wobbles’) becomes much easier.  Maybe it all starts with establishing your financial priorities.

Rocks, sand and coffee

There is a story about a university professor who presents his class with a glass jar, some large rocks, some small rocks, some sand and a mug of coffee and asks them to place all the items into the jar. The students try for a while with no success and then ask the professor for the solution. The professor takes the big rocks and puts them into the jar. Then he pours in the small rocks, shaking the jar a little so that they fall between the larger ones. Lastly he takes the sand and tips it into the jar, letting it settle in between the big and small rocks until the jar is full. He explains to the class that his approach to filling the jar is an analogy for achieving balance in life. The big rocks are the really important aspects of life; your health, your family and friends. The smaller rocks are the other things in your life that matter such as your job or your hobbies and the sand is all the other “small stuff” and your material possessions. If you put the sand in the jar first then there is no room for the rocks or the pebbles. The same can be applied to your lives; if you spend all your time and energy managing the ‘small stuff” you’ll never have time to devote to what’s truly important. The students absorb the message and then one raises her hand asking, “Professor, what about the coffee?” The professor smiles, takes the mug of coffee and pours it slowly into the jar where it soaks into the sand. He looks at the class and says, “this is to prove that there is always time for a coffee with friends.”

I’ve used the lessons in this story for a while as a guideline for keeping the balance in my day to day life but this week I thought about how they might relate to financial balance:

The Big Rocks

The big rocks are your commitments to saving and eliminating debt. Experts agree that “paying yourself first” is a critical component of financial success and being able to build wealth without carrying debt puts you in a strong position to achieve your financial goals. Simple strategies such as pre-authorized payments make it easier to ensure that those commitments are made with the minimum of conscious effort giving you more time to focus on everything else in your “jar”.

The Small Rocks

The small rocks are the “necessities” or fixed expenses that have to be paid each month. Bills relating to food, housing and transportation as well as insurance all fall into the category of “needs” because they relate to the items that provide us with food and shelter, allow us to work and protect us from the unexpected curveballs that life can throw.

Sand

The sand is the “wants”; the little indulgences and non-necessities that make life more enjoyable. We work hard for our money and it’s only fair that we should have opportunity to have fun with it. It’s a lot easier to enjoy these things guilt-free when you know that you’re paying for them with dollars that have been purposed for splurging and don’t have to be used for anything else.

Often, when things start to go off track financially it’s because we’re focusing on the sand rather than the rocks. Whether it’s an unexpected event or expense, sometimes just one thing can kick-start a domino effect that sends us into a whirlwind and takes our focus off the “big rocks” that keep us grounded. Keeping things in balance is often just a question of revisiting our priorities. Sometimes, life gets busy or things change and when the dust settles we forget to take a step back and make sure that our focus is where it needs to be.

There can be a lot of power both in having a plan and in working it; knowing that you’re on track to achieving your goals anchors you and gives you a sense of calm that allows you to weather the day to day shifts that threaten your balance. Making sure that plan allows time for coffee with a friend is also a good thing – anyone who’s ever over-indulged in a little retail therapy will attest that your emotional health can have an impact on your financial health! This week, why not take some time to figure out your financial priorities by differentiating between your big rocks, small rocks and sand and to make sure that you’re focusing on them in the right order. If you have tips for defining and keeping your financial priorities in line, I’d love to hear them.

Setting Financial Priorities appeared first on Retire Happy.

This Week I Wrote:

• On Monday I helped you answer the question, How Much Income Do You Need in Retirement?
• On Tuesday Sarah shared her Six Steps to Avoid Being a Money Moron.
• On Thursday Doug explained Voluntary Deferral of OAS.

Other Great Reads:

• This week the Canadian Personal Finance Dot Com blog shared their Effective Tips on Opening a Forex Trading Account.
• Give Me Back My Five Bucks discussed why Finding the Right Credit Card Can Be Confusing.
• In an interesting article, Brighter Life proposed Seven Ways Today’s Economy is Like the NHL Playoffs.
• The Canadian Dream Free at 45 tells you why you should make the decision to Give It Away, It Will Make You Happy.
• This week Boomer and Echo revealed their newest post: The Beginner’s Guide on How NOT to Start Investing.
• The Canadian Couch Potato continued their thoughts on socially responsible investing with their article: More on Socially Responsible Index Investing.
• When it comes to paying off debt, the Canadian Personal Finance Blog admits that Sometimes Never is Better than Late.
• This week the Canadian Finance Blog helped answer the question Do You DIY or Pay for Help?
• The Million Dollar Journey discussed the New Horizons for Seniors Program.
• Rob Carrick wrote a great post for the Globe and Mail about why you need to Stop Blaming Gen Y for Wrecking Your Retirement.

Best of Blogs – Off to Ottawa appeared first on Retire Happy.

1. The age of eligibility for OAS will gradually increase from age 65 to age 67.
2. You will be able to defer taking your OAS pension by up to five years in order to receive a higher monthly pension.
3. The government will start a proactive enrolment process that will eliminate the need for many people to apply for OAS and the GIS (Guaranteed Income Supplement).

Related article:  Three changes to OAS

The increase in the eligibility age doesn’t start to take effect until April 2023, with full implementation by January 2029. The proactive enrolment for OAS is supposed to be implemented in a phased-in approach from 2013 to 2016, but I haven’t seen much detail on it yet. In any case, I see the impact of this initiative as minimal.

The voluntary deferral of OAS is effective as of July 2013 and the impact can be quite significant, so this change is the focus of my article today!

What is meant by voluntary deferral of OAS?

Voluntary deferral means delaying your receipt of OAS pension in order to receive a larger pension at a later date. The term “voluntary” is perhaps a bit of a misnomer, however, since the larger benefit will be payable whether the delay was intentional or just an oversight.

Who is affected by the voluntary deferral of OAS initiative?

Anyone under age 70 and not in receipt of OAS as of July 2013 is potentially affected by this initiative. You will be able to defer your OAS whether you’re eligible for the full OAS or just a partial OAS, although you cannot “double-dip” by waiting. (I’ll explain this in more detail later.) Voluntary deferral does not affect the income-tested benefits of GIS, the Allowance or the Allowance for the Survivor.

What is the impact of voluntary deferral of OAS?

For each month of “valid” deferral, your OAS pension will be increased by 0.6%. The maximum deferral is 5 years, which would increase your OAS pension by 36%. I used the qualifier of valid deferral, because there is no increase in your pension in the following situations:

• For any period of time before July 2013
• For any month after you turn 70 years of age
• For any month before you meet the residence requirements for a full OAS
• For any month before you reach any specific step in the 1/40ths eligibility for a partial OAS (This is what I referred to as double-dipping above, and which I’ll explain more fully in the third example below.)

Here is a chart that shows the dollar impact of deferral on a full OAS pension (using current May 2013 rates), as well as the breakeven age (the age at which you would begin to be ahead if you deferred the start of your OAS pension beyond age 65.)

The above chart demonstrates that the basic premise of voluntary deferral of OAS is fairly easy to understand and evaluate. However, due to the restriction of no deferral before July 2013, and no “double-dipping” on meeting the residence requirements for full or partial OAS, the actual implementation is slightly more complex.

Here are some examples that may help to demonstrate those complexities.

EXAMPLE 1

In this example, let’s say that Joe turns 71 in July 2015 and he finally decides to apply for his OAS. (He may have had his own reasons for not applying earlier, or he may just not have been aware of OAS until then.) Joe will be limited by both the July 2013 restriction and the age 70 restriction above, so his valid deferral is just 12 months or 7.2% overall. Luckily for Joe, however, OAS provides for a maximum of one year of retroactivity for a late application, so at least he is compensated in that way for his delay beyond age 70.

EXAMPLE 2

In this example, let’s say that Mary lived in Canada from birth to age 34 and then she left Canada for work reasons. She retired and returned to Canada at age 60 in June 2010. She inquires about OAS when she turns 65 and is told that in one year when she turns age 66, she will be eligible for a full OAS under the “three-for-one” rule. (She would also have other choices for an immediate partial OAS pension, but let’s ignore that for now.) When she turns age 66 in June 2016, she is eligible for a full OAS, but she doesn’t receive any increase for voluntary deferral, because she didn’t meet the residence rules for a full OAS until that date.

EXAMPLE 3

In this example, let’s use Mary again, but let’s have her return to Canada at age 65 in June 2015. At that time she is eligible for a partial OAS pension of 16/40ths immediately, or she can wait four more years until age 69 to qualify for a full OAS. She initially decides to wait for a full OAS, but she decides a year and a half later (for health or financial reasons) that she wants to start receiving her OAS immediately. At that point, she would have 17.5 years of residence in Canada after age 18, and she would have three choices as follows:

• A full year of retroactivity at 16/40ths partial OAS, plus a six-month deferral increase of 3.6%
• Six months of retroactivity at 17/40ths partial OAS with no deferral increase
• No retroactivity, but 17/40ths partial OAS with a six-month deferral increase of 3.6%

As mentioned above, this third example demonstrates that if you delay applying for your OAS, you can increase your partial pension by adding extra 40ths, or you can increase your pension by the voluntary deferral percentage, but you can’t “double-dip” and use the same period of time to count for both purposes.

Here are links to four Government of Canada web pages that provide more information about the voluntary deferral of OAS, as well as the other upcoming changes to OAS.

• Placing OAS on a sustainable path
• OAS voluntary deferral
• Q & A regarding OAS changes
• Proposed legislative changes

Voluntary deferral of OAS appeared first on Retire Happy.