When most people think about finally cleaning out their desks (or toolboxes, or whatever the case may be) for the last time, the first exhileration of finally being “free” is quickly tempered with the not-quite-so-fun question about how they are going to support themselves. For people who do not have pensions, or whose pensions are not adequate to fund their retirement fully, savings for retirement are an absolute necessity. Broadly speaking, there are two models for funding your golden years: retirement nest egg, and retirement cashflow.
Historically, the more common model has been the nestegg. You try to make pile of money that is big enough that it will last longer than you do. I remember a great-aunt of mine who followed this model. She (somewhat morbidly, although always with good humour) used to say that she could only live until she was 92 because that was when her money was going to run out. The good news, if you can call it that, is that she timed things right, and passed away early in her 91st year. Still, I can’t help but think that even if she didn’t seem to feel too much stress at the thought of running out of money, I certainly would. (Then again, maybe she didn’t share all of her financial worries with a teen-aged grand-nephew.)
I admit that it’s a bit of a stretch to write about passwords on a financial blog, but to be fair, it’s part of estate planning these days. Also, I find that people who invest are generally the type of people who like to take care of business, as it were. This being the Internet, that’s enough of a tie-in for me to post this here.
Every once in a while, you hear an idea that is so good, and so obvious (in hindsight) that you wonder how you have been able to live so long without thinking of it yourself. If you’re like me, you (metaphorically!) kick yourself, make a mental note, and then, well, misplace the note a few days later. And so it was with this idea, until I was reminded of it again the other day. This, time, however, I’m writing it down so that I absolutely can’t forget to do it. …someday.
Introduced in February of 2008, Tax Free Savings Accounts (TFSA) represented the biggest change to Canadians’ personal finances in many years. Here, suddenly, was a vehicle that seems to be (and in my opinion really is) an investor’s dream: a way to invest money, and never be taxed on it; a vehicle that allows people to withdraw money at will, and then replace it again in future years (again, without tax consequences); a vehicle that is open to everybody over the age of 18, regardless of income; a vehicle whose contributions room increases every year, even when a person reports no earned income. These are all great feature of the TFSA, but their biggest advantage may be the low annual contribution limit. The low limit allows people to max out their contribution, and feel like they have control over this part of their lives. The idea that you’ve done all that you can do, that you’ve won the game you are playing, is highly motivating; it makes people want to play again and again.