Time to Retire the Idea of Retirement

[Slava]

Originally Posted by fotze

I save some money and stuff. That should be enough information for you to go on. Is that enough?

Well you're probably fine. To be sure what you should do is wait until about age 53-54 and then at that point try to see if you can retire at 55 or have to work until 60-65. The question "how much of an income can I get from my portfolio of $35,000?" is pretty easy to calculate!

[Igster]

Originally Posted by 1stLand

The difference between people in their 20s/30s/40s today compared to that age bracket 30 years ago: half of us are getting divorced and on top of spousal support and getting cleaned by lawyers / ex wives we also have to pay child support. That will kill your retirement plan very quickly.
I know many people that are in their 40s that live pay cheque to paycheque with little or no equity in their home - some don't even own a home.

Yup...pay to pay for the wife and I. Both of us previously divorced. I got taken to the cleaners. We rent. In our mid 40's and really not much of anything saved. She has about 15k, which we will have to take half of when she turns 50 just to pay off some debts incurred. Good times.

[AMG_G]

Hi Slava, I have my house paid awhile ago and I need some ideas on how I can leverage some of the equity to make some money? On one hand, I have two young kids so I don't want to be betting the farm but it seems silly to have that much equity just sitting there. Can I deduct the interest for investing? Can I top up my our TFSA and still deduct the interest?

[Slava]

Originally Posted by AMG_G

Hi Slava, I have my house paid awhile ago and I need some ideas on how I can leverage some of the equity to make some money? On one hand, I have two young kids so I don't want to be betting the farm but it seems silly to have that much equity just sitting there. Can I deduct the interest for investing? Can I top up my our TFSA and still deduct the interest?

Well if you invest in a non-registered account and its something that is capable of producing dividends or income then you can write off the interest. If you invest in a TFSA though you can't write-off the interest.

Leveraging is something that you should be very careful with though; clearly investing with borrowed money is riskier than investing with money that you have saved up. Its definitely not for everyone!

[darklord700]

Originally Posted by fotze

Are there no-risk dividend ...things you could put it in? Like bonds? Even if its a percent or two?

I guess you have to pay to borrow the money, so skip that dumb idea.

Pref share dividends are treated like dividends. They are riskier than bonds but give a slightly higher return.

[Slava]

Originally Posted by fotze

Are there no-risk dividend ...things you could put it in? Like bonds? Even if its a percent or two?

I guess you have to pay to borrow the money, so skip that dumb idea.

Ya you could do that, but like you say there is a sort of "hurdle rate" there because you borrow the money. You can definitely put it in things that are not insanely risky and be fine though. You would be foolish to take a bunch of equity from your house, and make selections from a lot of the stock thread on here though....at least in my opinion! There are plenty of medium risk and low-to-medium risk options that you could consider and actually be able to sleep at night.

[Calgary14]

Originally Posted by AMG_G

Hi Slava, I have my house paid awhile ago and I need some ideas on how I can leverage some of the equity to make some money? On one hand, I have two young kids so I don't want to be betting the farm but it seems silly to have that much equity just sitting there. Can I deduct the interest for investing? Can I top up my our TFSA and still deduct the interest?

You could invest in some dividend paying equities, take out a HELLC to buya rental property (interest deductible) or a combination of both. Interest is deductible generally when the income is taxable. Interest on a loan to contribute to a TFSA isn't deductible.

[Slava]

Originally Posted by Calgary14

You could invest in some dividend paying equities, take out a HELLC to buya rental property (interest deductible) or a combination of both. Interest is deductible generally when the income is taxable. Interest on a loan to contribute to a TFSA isn't deductible.

Are you sure about buying real estate and deducting the interest? My understanding was that it had to be an investment at least capable of producing dividends or income.

[GP_Matt]

I write off the interest on my rental property every year and my taxes are done by a CA so I assume he is doing it correctly.

[AMG_G]

Originally Posted by Calgary14

You could invest in some dividend paying equities, take out a HELLC to buya rental property (interest deductible) or a combination of both. Interest is deductible generally when the income is taxable. Interest on a loan to contribute to a TFSA isn't deductible.

I already deduct the rental interest because I declare my all my rental income. I want to diversify a little.

[Calgary14]

Originally Posted by Slava

Are you sure about buying real estate and deducting the interest? My understanding was that it had to be an investment at least capable of producing dividends or income.

I'm 100% positive. As others have mentioned below the money does have to be used as an investment which would include a rental property. You would recognize the rental income and deduct the interest each year.

FYI - using a HELOC to buy a rental and then deduct the interest essentially makes the interest on your own mortgage tax deductible. Its called the Smith Manoeuvre, its very popular and common among real estate investors

[Slava]

Originally Posted by Calgary14

I'm 100% positive. As others have mentioned below the money does have to be used as an investment which would include a rental property. You would recognize the rental income and deduct the interest each year.

FYI - using a HELOC to buy a rental and then deduct the interest essentially makes the interest on your own mortgage tax deductible. Its called the Smith Manoeuvre, its very popular and common among real estate investors

I am very familiar with the idea, but for some reason I thought that buying property wasn't eligible. The Smith Manoeuvre works because the investment is often stocks/mutual funds that pay dividends/interest. That isn't what you get directly from the investment property. Regardless, I'm not saying I'm right....which is why I asked!

[MoneyGuy]

Of course rental property is eligible. You declare your income and deduct all eligible expenses.

[bizaro86]

Originally Posted by Slava

I am very familiar with the idea, but for some reason I thought that buying property wasn't eligible. The Smith Manoeuvre works because the investment is often stocks/mutual funds that pay dividends/interest. That isn't what you get directly from the investment property. Regardless, I'm not saying I'm right....which is why I asked!

It has to be a rental property that produces income. House you're renting out - deduct the interest. Piece of scrub land you're holding outside the city in hopes of eventually selling to a developer for $$$- you capitalize the interest every year, and use it to adjust your cost base for when you sell.

[missdpuck]

Do Canadians have to worry about long-term care insurance, or is that already covered for you?

I was going to bolt as soon as I'm eligible. If I stay another 2 years, that means almost 200 bucks more a month--for life.

Some people say it's not worth staying for, but the "for life" part is what hooks me.

[Mr.Coffee]

I remember playing around on Sunlife's little retirement planner. I filled in some of the metrics and then got a depressing but hilarious ass kick back indicating how woefully inadequate I am. How sadly unprepared I'll be.

It is insane how much money I think I am going to need to properly retire. They may have to make suicide legal in the future for when our generation stops working and can live to 150 but run out of money when we're 80-90. #### me.

Then it told me how much I need to save and I'm looking at the average life in Calgary and wondering why I'm not making half a mill per year yet so I can actually retire.

Yes I'm exaggerating bit. Yes it's still depressing kinda. Hope my kid can pay for their education haha!

[Calgary14]

Originally Posted by Mr.Coffee

I remember playing around on Sunlife's little retirement planner. I filled in some of the metrics and then got a depressing but hilarious ass kick back indicating how woefully inadequate I am. How sadly unprepared I'll be.

It is insane how much money I think I am going to need to properly retire. They may have to make suicide legal in the future for when our generation stops working and can live to 150 but run out of money when we're 80-90. #### me.

Then it told me how much I need to save and I'm looking at the average life in Calgary and wondering why I'm not making half a mill per year yet so I can actually retire.

Yes I'm exaggerating bit. Yes it's still depressing kinda. Hope my kid can pay for their education haha!

It is depressing but what most people don't realize is how far expenses decrease upon retirement. Lower taxes, income splitting, no daily coffee, no transit costs, parking, meals out, work clothes etc. it's a lot bigger than people think. Oh and the big one for most people is no mortgage and no monthly retirement savings payments. So yes it's necessary to save but it's achievable for most people and may not be as far off as you think

[chemgear]

Originally Posted by Calgary14

It is depressing but what most people don't realize is how far expenses decrease upon retirement. Lower taxes, income splitting, no daily coffee, no transit costs, parking, meals out, work clothes etc. it's a lot bigger than people think. Oh and the big one for most people is no mortgage and no monthly retirement savings payments. So yes it's necessary to save but it's achievable for most people and may not be as far off as you think

Most? Not sure that is the case though.

http://ca.finance.yahoo.com/blogs/pa...145752087.html

According to a new CIBC poll, 59 per cent of retired Canadians say they’re carrying debt. And 19 per cent of those say that their debt level has increased over the past year, while 36 per cent report their debt level has stayed the same.

Among those retired Canadians with debt, the Harris/Decima poll found:

• 37 per cent are juggling two or more debt payments a month
• 39 per cent are carrying credit-card debt
• 30 per cent have debt on their line of credit
• 16 per cent are carrying debt on their mortgage, and
• 14 per cent have loan debt

http://business.financialpost.com/20...bt-retirement/

A survey released Tuesday from Manulife Bank found that 49% are confident they’ll still have some debt in retirement, including mortgages, compared with 51% who say they anticipate being debt-free at that stage.

[Calgary14]

I've read the stats and although it's not pretty it definitely is possible to retire with no debt. I think the main point is that if you feel like you can't control your investment returns, pay down debt for a guaranteed return

[WilsonFourTwo]

^^This is the 'free wisdom' that I like to give to people who are just starting to get their finances in order.

If anything else paying down debt frees up cash flow allowing you to either start a debt snowball or free up money to try other things, and usually helps build a level of interest/confidence in managing personal finances. Gaining confidence and a basic financial literacy is s a huge first step!