Well, I’m a twit now. It seems that twitter is taking over blog feeds and blog comments. So, I’m now @MJonMoney on twitter. I take pride in my ability to be clear and concise, but the 140-character limit is a challenge. Here’s hoping that this leads to more useful interaction with my readers. Feel free to tell me what I’m doing wrong on twitter as I muddle through. My goal is to make my ideas conveniently accessible to people who want to read them without too much shameless self-promotion. Have a great New Year’s Eve party. Saving tip: to spend less on pills tomorrow, drink less tonight.

Just in case you need a reason to save more of your hard-earned money instead of buying yet another electronic gadget or pair of shoes, here’s a good one: the TFSA and RRSP contribution room you didn’t use in past years has been shrinking. Perhaps when you decided you didn’t have enough money to save any in a tax shelter last year you felt safe knowing that you’d be able to use the room in the future. Some magical time will come when you can save enough money to use up past room. But the trouble is that your available room has a leak. Dollars this year are worth less than dollars last year, and those dollars are worth less than they were the year before. So, let’s stop talking about dollars and start talking about loaves of bread (as a proxy for the cost of living). Suppose that your $5000 TFSA allotment from 2009 amounted to 2500 loaves of bread. The Consumer Price Index (CPI) in Canada has gone from 113 to 123 since the start of 2009. If you haven’t used this 2009 TFSA ro...

During Christmas week I wrote only one post, but I enjoyed writing it: Which Takes a Bigger Bite from Your TFSA: Income Taxes or Mutual Fund Fees? There weren’t too many financial posts this week, but here are a couple for some weekend reading: The Blunt Bean Counter explains how being named an estate executor can leave you handling two estates at once. My Own Advisor did a 2013 retrospective of his favourite posts each month.

Getting into the Grinchy side of the Christmas spirit, I thought I’d take a look at how both income taxes and mutual fund fees affect TFSA savings. The effects of these costs will vary considerably from one person to another, so we’ll just look at one particular case. From stage left, our saver Sally enters. She saves $5000 in her TFSA every year (rising with inflation) starting from age 25 until she retires at age 65. We’ll assume that she makes a return of 4% above inflation each year (before fees). From age 65 to 85, she draws $15,000 per year to live on (in today’s dollars). For Sally’s tax bite, we’ll look at how much income she had to earn to make the $5000 TFSA contribution. Let’s assume that Sally lives in Ontario and earns between $87,907 and $136,270 so that her marginal tax rate is 43.41%. This means she has to earn $8835 to get $5000 after income taxes. This makes the tax bite on her TFSA contribution $3835 per year. For the bite of mutual fund fees, let’s assu...

Solving the technical issues with my blog seems to have re-energized me for writing new posts. I have 3 this week: Do Stocks Become More or Less Risky Over Time? The Third Rail How Mutual Fund Fees Delay Retirement Here are my short takes and some weekend reading: Preet Banerjee explains his decision to rent instead of buying a home. Canadian Couch Potato explains how the slim chance of outperforming the market gets in the way of investors embracing index investing. Potato asks why do pensions exist if the future is discounted? A good question. I offered possible answers in the comment section. Boomer and Echo explain the CPP child-rearing dropout provision you may be able to use to increase your CPP benefits. I didn’t know that this dropout could be used by either parent. Big Cajun Man says you should scan your bills instead of keeping a bunch of paper around. Fortunately, I’m getting a lot of my bills electronically now. But most of my receipts that are r...

In my never-ending quest to clearly explain the devastating effect of investment fees on your savings, I’ve found another way to look at it. Instead of looking at how much of your money gets consumed by mutual fund fees, let’s look at how they affect your retirement age. Suppose that Katie is 30 years old and is just starting out saving in her RRSP. She has set up automatic contributions of $1000 per month. She plans to increase this amount each year to keep pace with inflation. Katie wants to know, “if I plan to draw $3000 per month (in today’s dollars) in retirement until I’m 95, when can I retire?” The answer depends on how her RRSP investments perform. For illustration purposes, let’s assume that her investments beat inflation by 4% per year, before investing fees . Of course, she can’t count on this, and returns vary considerably from one year to the next. But the goal here is to see how fees affect retirement, so we’ll do calculations based on a steady 4% real return. ...

Canada’s pension system is in trouble and we need to do something about it. This is the main message of the book The Third Rail , written by Jim Leech, CEO of the Ontario Teachers’ Pension Plan, and Jacquie McNish, senior writer with the Globe and Mail. The book is a fairly easy read and is worth a look. The authors take a detailed look at pension crises in New Brunswick, Rhode Island, and The Netherlands, and describe how the problems were solved. A common theme is that the pension plans were changed to make benefit levels conditional on the returns on pension assets. On one hand this makes a lot of sense. We can’t expect pension backers (taxpayers or companies) to grow benefits faster than they can grow the savings set aside to pay those benefits. On the other hand, if we make cost-of-living increases conditional on pension asset returns, this automatically takes the pressure off pension administrators to manage the funds well. They can award themselves excessive fees or all...

A very thoughtful post over at How to Invest Online looked at the opinions of various investment theory heavyweights on the question of whether owning an index of stocks becomes more or less risky the longer you hold them. I want to address the argument that because “the spread of possible ending dollar values get wider, not narrower, with time,” stocks keep getting more risky over time. At its core, this argument is playing a semantic game with the word “risk”. To explain what I mean, imagine you have the chance to invest in the following hypothetical investment: 1or2 investment : Each month you toss a fair coin. If it comes up tails, you get a return of inflation+1%. If it comes up heads, the return is inflation+2%. This looks like a fantastic investment. After one year, you’ll beat inflation by between 12.7% and 26.8%. Even the worst-case scenario gives a better return than most of us could possibly hope for. The 1or2 investment is risk-free in the every-day sense of ...

In addition to my appeal for help to keep my blog alive, this week I wrote about group RRSPs which generated quite a bit of discussion in the comments section: Employer Matching in Group RRSPs Here are my short takes and some weekend reading: Potato finds problems with an online calculator designed to help you decide whether you’re better off renting or buying a home. Retire Happy Blog reports that Service Canada’s online CPP calculator sometimes produces wildly inaccurate estimates of your future CPP benefits. Where Does All My Money Go? is offering a nearly half-off deal on pre-orders of Preet’s new book Stop Over-Thinking Your Money! Big Cajun Man describes a devious tactic used by furnace salespeople that worked on him. Canadian Couch Potato explains when it’s better to hold a U.S.-listed ETF and when it’s better to hold its Canadian equivalent. My Own Advisor finds out what’s in the Big Cajun Man’s personal investment portfolio. Million Dollar Journey desc...

My employer didn’t get much uptake when it first brought in an insurance company to offer a group RRSP because there was no employer matching. However, this has just changed. The question is how valuable is the employer match balanced against the high MERs on the pooled funds offered in the plan. My new group RRSP plan is fairly generous: they match half of my contribution up to a maximum of 5% of my base pay. So, if I contribute 10% of my base pay, my employer will kick in another 5%. That’s the good part. The bad part is that when I poked around in the investment options, the cheapest fees were on an index fund of Canadian stocks. The fees were listed as 1.401% per year (very high for an index fund). However, fee reporting on pooled funds is not the same as with mutual funds. As it happens, this percentage includes both the fund’s fees and the insurance company’s cut, but does not include HST or trading costs. I have no data on trading costs for this fund, but presumably ...

With some help from my readers, I managed to renew my domain registration. Not to bore you with the details, but there is an amusing bit: the solution involved resetting the password for an account I didn’t know existed from a year-old password reset email I received after first getting my domain. I always feel bad whenever I blog about blogging. In this case, I was rewarded with several suggestions from readers that added up to a solution. Thanks to the Big Cajun Man , Bet Crooks , Kevin Chmilar, Glenn Cooke , and Neil Jensen for suggestions and offers of help. Thanks also to Tom Bradley , Greg, Tara C, Be*en, Returns Reaper, Trish M., and an anonymous reader for assuring me that I’d be missed. Sorry if I forgot anyone. Some actual financial content: If I take the number of hours I spent solving this problem, and work out how much I would have been paid for this time at my day job, the resulting sum is the equivalent of 16 months of my blog’s income!

Update: With the help of some readers, the problem appears to be solved.  Thanks to all! Writing this blog has been a great journey for me that I’d like to continue. However, I’m caught in the strange situation of being unable to renew my domain registration. It’s only $10 or so, but after sinking about 15 hours of my time over the past month into trying to get Google to take my money, I’ve made no progress. I’ll describe the gory technical details at the end of this post. It’s not that my blog will disappear entirely, but I would have to go back to the old Blogspot address or try to register some new domain name. Either way I’d be facing losing my current PageRank which would lead to big loss in readership. I’m not sure yet if I’ll want to continue writing with this kind of setback. Other bloggers have tried hard to get me to leave Google’s Blogger and use WordPress. I have little doubt that WordPress is usually easy to use and has powerful features. However, when I a...

I wrote about TFSAs this week: Forgone Consumption More Confusion Comparing TFSAs to RRSPs Tax-Free Savings Accounts – How TFSAs Can Make Your Rich Here are my short takes and some weekend reading: Carl Richards wrote a piece for the New York Times explaining that data exists to help us make good decisions in sports and investing, but coaches and investors make guesses instead. Rob Carrick reports that more mutual fund companies are creating Series D funds that have some costs stripped out. This is a step in the right direction, but the MERs are still generally above 1% of your assets every year. Because I pay less than 0.2%, I find this still very high. Canadian Couch Potato has the most thorough guide I’ve seen yet for saving money on currency conversions using the Norbert gambit. It includes instructions for RBC Direct Investing, BMO InvestorLine, TD Direct Investing, CIBC Investor’s Edge, and Scotia iTrade. Retire Happy Blog explains why mutual fund distribut...

The book Tax-Fee Savings Accounts – How TFSAs Can Make You Rich , by Gordon Pape, is a very useful guide to TFSAs. Broadly-speaking, the book contains two types of content: 1) easy-to-understand descriptions of the various TFSA rules and 2) advice for how to use a TFSA. The descriptions of the rules are excellent. The advice contains both good and bad parts. This book is useful for financial novices as well as experts. I won’t discuss the material aimed at novices any further in this review. Instead I’ll discuss parts that I found interesting and parts where I disagreed. Some Important Fine Points of TFSA Rules “Never contribute a money-losing security directly to a TFSA. Sell it first, thereby creating a deductible capital loss, and then put the cash from the sale into the plan.” When you deposit stocks directly into a TFSA, the stocks are deemed to have been sold. You would have to pay capital gains taxes on any gains, but capital losses are not allowed. You can’t “re...

When comparing TFSAs to RRSPs, it’s important to consider only the after-tax portion of your RRSP balance or you’ll be led astray. The concept of forgone consumption is helpful. Here I look at how to compare TFSAs and RRSPs when it comes time to draw from them in retirement. In the third edition of his book Tax-Free Savings Accounts – How TFSAs Can Make You Rich , Gordon Pape includes a section on questions he has received from readers. Unfortunately, the answer he gives to one of the question leaves much to be desired. Here is a paraphrase of the question: Q: I expect to run out of non-tax-sheltered investments in about 5 years. When this happens, should I start drawing from my RRSP or TFSA? Here is Pape’s answer: A: “Let’s suppose you have a $5000 investment in each plan earning 7 percent annually. Five years from now, that investment will be worth $7012.76. Now you are faced with a withdrawal decision. If you take the money from the RRSP, using a marginal tax rate of...

People tie themselves up in knots trying to compare RRSPs to TFSAs. Even well-known author and newsletter publisher Gordon Pape has some difficulty. The idea of forgone consumption helps to simplify things. It’s important to understand how much you’re really saving when you put money in registered accounts. With TFSAs, the situation is simple. If you deposit $3000, then you’ve saved $3000. RRSPs are more complex. If you’re in a 40% tax bracket and deposit $5000 in an RRSP, you’ll get $2000 back in taxes. Your forgone consumption is only $3000. RRSPs are easier to understand if you think in terms of only having saved $3000. Think of the other $2000 as belonging to CRA. Suppose that over 30 years your money grows by a factor of 10. Your TFSA now holds $30,000. In the RRSP, your part has grown to $30,000 and CRA’s part has grown to $20,000. If you withdraw $10,000 from your RRSP and your tax rate is still 40%, you’ll get to keep $6000 from your part and CRA will get $4000...

Here are my posts for the week: Rule of 72 in Reverse for Mutual Funds Crazy Arguments in Support of Leverage Now is the Time to Consider Lowering Your Portfolio Risk (Rob Carrick mentioned this post on his Carrick on Money Globe and Mail blog -- thanks, Rob) Here are my short takes and some weekend reading: Jeremy Siegel gave a very interesting hour-long lecture that includes the great quote “a bubble is an asset class that is going up in price that you don’t own.” Siegel takes a very long-term view of various asset classes and argues that Robert Shiller’s Cyclically Adjusted Price Earnings (CAPE) ratio is thrown way off by recent accounting changes that dramatically lower earnings in the last decade compared to decades past. Big Cajun Man has a nice chart showing that the percentage of Canada’s debt owed to foreigners is lower than the percentage for other nations. However, in just 2 years, Canada’s percentage jumped from 15% to 25% owed to foreigners. The Blunt Be...

During the 2008/2009 stock market crash, it wasn’t too hard to find people telling you to re-evaluate your asset allocation and tolerance for risk . However, that was a terrible time to lower you portfolio risk; now is a much better time to consider this question. It’s natural for your emotions to tell you to sell stocks after they’ve dropped and to buy more after stock prices rise. To a certain extent it is these emotions that drive stock market swings. However, it’s not too hard to see that this behaviour amounts to selling low and buying high, which is exactly the opposite of what most investors want. Re-evaluating your asset allocation isn’t necessarily a bad idea, but there are wrong times to do it. The stock market lows of March 2009 were the wrong time to consider selling stocks. Even if you were right in deciding that your stock allocation was too high for your risk tolerance, making a change back then would have caused a permanent loss of capital. Now would be a gre...

I was reading an article called Why borrowing to invest (leveraging) is a good idea (on a site called FinanceWorks that has since disappeared).  I’ve read many reasonable articles that point out the positive side of leverage and expected more of the same here. However, I didn’t get more of the same. The interesting part of the article begins when the authors take aim at critics of leveraging: “Critics argue that leveraging increases investment risk and that a rate of return higher than the loan’s interest rate is needed to generate a profit. But neither claim is accurate.” Okay, this is going to be good. Apparently, leverage doesn’t increase risk and you can profit even if you pay more to borrow than you make on your investments! Let’s start with risk: “Risk, as far as it pertains to investing, is the odds that you will lose money. By this definition, we have to question how borrowing money can impact risk. After all, whether you invest your own money or that of the bank...

Most people have heard of the Rule of 72 . It’s a way to estimate how long it takes for your money to double at a given rate of return. Less well known is that this rule can be used to estimate how long it will take for investment fees to consume half your portfolio. The Rule of 72 says that if your rate of return times the number of years you earn that return is 72, you’ll roughly double your money. So, if you earn 6% each year, it takes about 72/6=12 years to double your money. When it comes to fees, the same rule works for finding the number of years it takes for fees to consume half of your money. For example, if you invest in Investors Canadian Growth Fund, the total fund costs each year are 3.02% of invested assets. So, it would take about 72/3.02=23.8 years for half your money to be consumed in costs. This rule just gives an estimate, but it’s pretty close. The actual time is just under 23 years. Update 2018 Nov. 27:  This fund's total expenses are now 2.72% per...

I gave a warning about misusing TFSAs this week: Two Common Misconceptions about TFSAs Here are my short takes and some weekend reading: Tom Bradley at Steadyhand makes a strong case that the mutual fund industry has lost its chance to create practices that are friendly to investors. He says that regulators need to cause a transition in the industry that is “jolting, expensive and soul searching.” Million Dollar Journey compares the top Canadian brokerages that offer U.S. Dollar RRSPs. He compares them on fees and on how well they handle currency exchanges between Canadian and U.S. dollars. The Globe and Mail has also come out with its 2013 ranking of online brokerages . Larry MacDonald explains why tax-loss selling is not as valuable as it appears to be. Retire Happy Blog does a good job of interpreting the latest SPIVA scorecard comparing active versus passive investing. The 5-year results look quite dismal for active investors. Canadian Couch Potato explains t...

The name Tax-Free Savings Account does a good job of making it clear that these accounts produce gains that are tax-free. However, the “savings account” part of the name leads to confusion for some Canadians. Here are two common misconceptions about TFSAs. Misconception #1: TFSAs are just for holding cash like regular savings accounts. TFSAs can hold a wide range of investments, including stocks, bonds, and cash just like RRSP accounts. It’s common for banks to offer TFSAs that can only hold cash and GICs, but this is the banks’ restriction, not a TFSA restriction. Most banks offer other TFSAs that do permit holding stocks and other investments. Almost all discount brokerages also offer TFSAs that allow the full range of investments. Misconception #2: TFSAs can be treated like regular savings accounts with many deposits and withdrawals. Most people are aware that there are limits on the total amount you can contribute to a TFSA. For those who turned 18 in 2009 or earlier,...

Here are my posts for the week: Fight Back Investment Survey Troubles Expanded CPP and Debt Here are my short takes and some weekend reading: Anita Anand and John Chapman at the University of Toronto Faculty of Law explain in this short article why investment advisors should be fiduciaries. They say that current Canadian laws in this area are “a mess.” Thanks to Ken Kivenko for pointing me to this one. Where Does All My Money Go ? says you shouldn’t take up a bank’s offer to take a payment holiday. Canadian Couch Potato shreds claims made by a mutual fund company in their ad. Big Cajun Man lays out the reasons why some parents are pushed toward sending their kids to a private school. The Blunt Bean Counter brings us a detailed look at the ins and outs of tax-loss selling. My Own Advisor calls for clawing back Old Age Security at lower income levels. His reasoning is that it makes no sense for working-class Canadians to subsidize the lifestyles of upper-midd...

The push to expand CPP has been strong lately. The idea is that too many Canadians won’t save for their retirements and must be forced to save more money. Setting aside the argument over whether it is a good idea to force Canadians to save more money, I wonder if it is even possible because of debts. For various reasons, many Canadians simply won’t save for their retirements. Some have good reasons, but most don’t. If we expand CPP, we can force people to save more through increased payroll deductions. Those who already save for their retirements can afford to save a little less because they can expect higher CPP benefits. So, by expanding CPP, we’re mostly affecting those who don’t save now. But how can we stop people from simply building larger debts as they head into retirement? When Canadians carry debt into retirement, it’s as though they have pre-spent part of their CPP benefits. If CPP expands, they can borrow even more and pre-spend the increase in CPP benefits. ...

In Rob Carrick’s latest roundup of personal finance links on the web he asked his readers to take a short Qualtrics survey to “help build a better investor risk assessment tool.” Unfortunately, the survey has problems that will muddle its results. The main question on the survey asks which of 4 investments you’d be most comfortable with. Here is the exact wording: “Investments with higher potential returns typically involve greater risk. The following chart shows four hypothetical investments of $10,000, each with a different potential best and worst outcome at the end of one year. Which investment would you be most comfortable with?” You are presented with 4 bar graphs giving ranges of possible portfolio returns going from safest to riskiest. Here were the ranges I was presented. Portfolio A: 0 to $10,900 Portfolio B: -$9600 to $11,200 Portfolio C: -$8900 to $11,800 Portfolio D: -$8400 to $12,400 Just based on the numbers, it’s hard not to choose Portfolio A because ...

Over her years of using her Toronto Star column to help consumers fight back against unfair company practices, Ellen Roseman has built up wide-ranging consumer skills. Her book Fight Back teaches us what she has learned and goes further with many parts written by experts in different areas. Across 81 short, easy-to-read sections, Roseman covers how to deal with almost every conceivable consumer problem. The broad categories covered in this book are banks, finances, telecom suppliers, travel, retailers, cars and houses, and the courts. I’ve had troubles in most of these areas, and I find this book very valuable. However, Dave Chilton, who wrote the foreword, shows he is better at singing Roseman’s praises than I am when he starts with “I LOVE ELLEN ROSEMAN’S WRITING.” I agree. In the rest of this post I’ll discuss specific parts of the book that I found interesting. Mutual Fund Companies In the past “many [mutual fund] companies treated investment advisors as their custome...

This week I fed my interest in poker: World Series of Poker Main Event Losses Here are my short takes and some weekend reading: Canadian Couch Potato uses factor analysis to look for value in Canadian equity ETFs. Big Cajun Man talks from experience when he explains how to get tax credits for school fees for a disabled child. My Own Advisor gives a quick, easy-to-understand summary of the things you should know about RRSPs. The Blunt Bean Counter is giving away copies of Richard Peddie’s book Dream Job .

With the main event of the world series of poker wrapping up tonight, I thought I’d throw a wet blanket on the dreams of aspiring poker players by looking at the risk-adjusted payoff of entering this tournament. The results are worse than I expected. The entry fee to the main event is $10,000. However, the prize payouts average only $9400 per player. Without any risk adjustment the average player is losing $600 by entering the tournament. To an insurance company with billions in assets, this analysis makes sense. But to people of more modest means, a reasonable amount of risk aversion makes the loss much higher. A sensible level of risk-aversion involves treating gains and losses geometrically. This means that doubling your net worth from $100,000 to $200,000 is as good as it is bad to have it cut in half to $50,000. Based on this model of the utility of money, a person with a $100,000 net worth expects to lose $5918 playing in the main event if his tournament result is just...

This week I found a problem with a trading account statement and added a new twist to my retirement income strategy: InvestorLine Computers Charge Me Interest A Retirement Income Strategy Revisited Here are my short takes and some weekend reading: The Blunt Bean Counter looks at the tax side of Bitcoins. Glenn Cooke gives a thoughtful review of Potato’s Short Guide to DIY Investing . Glenn makes an interesting pitch for keeping your stock investments in Canadian stocks, but then admits that this is likely just emotional and that including foreign stocks is probably best. Despite his assertion that we need to get emotions out of investing, he illustrates why this can be hard to do. Where Does All My Money Go? interviews Rich Cooper who explains some of the ins and outs of a DIY approach to settling your debts for less than you owe when you’re in serious financial trouble. Financial Crooks reviews Ellen Roseman’s book Fight Back . My Own Advisor has made some great...

Last week I made my first stab at designing a retirement income strategy that adapts to portfolio performance . By allowing monthly income to vary we can overcome serious problems with the “4% rule” and rules of thumb about the percentage of bonds in your portfolio. Unfortunately, the monthly changes in income were too erratic. I now have a fix for this problem. I won’t repeat too much from the original post . I did experiments based on a 60-year old retiring at the start of the year 2000 with $1 million in today’s dollars. I designed a spending plan based on keeping 5 years’ worth of monthly spending in a high-interest savings account (HISA). I used a target life expectancy of 95 and assumed that all savings not in the HISA would be invested in the Canadian stock ETF XIU. (I don’t recommend such a concentration in Canadian stocks for a real portfolio.) Stocks were extremely volatile from 2000 to 2013 and the goal of this experiment was to design a retirement spending plan t...

“INT @21%” Hmm. That strange line appeared in my InvestorLine RRSP statement. It seemed to be related to my latest Norbert Gambit , which is a way to save money with currency exchanges. All have gone reasonably smoothly until recently when I was hit with a mystery interest charge. To exchange Canadian dollars for U.S. dollars, I have bought the exchange-traded fund DLR that trades in Canadian dollars and then sold the equivalent ETF DLR.U that trades in U.S. dollars. The idea is simple enough, but a mistake with some accounting generated an interest charge that shouldn’t be there. To make everything balance out, InvestorLine adds some extra transactions to the Norbert Gambit trades. I did the trades on a Monday. This means that the trades settled three days later on Thursday. So my account statement showed a buy of DLR units and a sell of DLR.U units. To balance things out, InvestorLine added a transfer out of DLR units and a transfer in of DLR.U units. Unfortunately, th...

I had a couple of popular posts this week judging by the number of comments: A New Market for Education A Retirement Income Strategy Here are my short takes and some weekend reading: Freakonomics reports on research into why women earn less than men. The finding that women seem less willing to compete for higher pay is consistent with my experience. Among the most competitive business people I know who have questionable morals and are willing to devote far more than 40 hours per week to their careers, the vast majority are men. The Blunt Bean Counter looks into investing in NFL football player Arian Foster. I suspect that fans will consistently overpay for shares of professional athletes. Owning a slice of a player might feel good but I doubt that it is likely to be a good investment. Big Cajun Man asks when you got your first credit card and discusses how attitudes toward credit cards have changed over generations. Where Does All My Money Go? interviews a legal e...

I find most rule-of-thumb strategies for drawing retirement income from savings very unsatisfying. We have things like the “4% rule” and using your age as a percentage for your bond allocation, but such one-size-fits-all rules can’t possibly fit everyone. Here I introduce my own candidate strategy for generating retirement income. Troubles with the 4% Rule The 4% rule says that when you start retirement you can calculate 4% of your initial savings and spend this much each year rising with inflation. So, if you have $1 million saved, you spend $40,000 in the first year and increase this amount by inflation every year. Of course, the main problem with this rule is the possibility of running out of money. If your investments perform poorly in the first few years, you just keep spending based on your initial savings even though your savings will start to dwindle quickly. A second problem is that everyone uses the same percentage regardless of how they invest their money. Supp...