One way you can see some possible outcomes of your retirement plan is to use a retirement simulator similar to one available from Vanguard . These simulators use Monte Carlo methods to run several thousand possible patterns of investment returns to see how your portfolio holds up through retirement. Behind the impressive scientific-looking tools are some problems. Here I show the problems in pictures. To understand these problems, we need to look at the fairly simple way these simulators work. To generate a possible outcome for your portfolio, many of these simulators begin with some actual historical investment returns from a range of years. They build your simulated results one year at a time by choosing one of the historical years randomly and applying that year’s returns to your portfolio. Before getting into why this method has some issues, let’s go to a couple of charts. I grabbed some annual TSX investment returns for the past 47 years. Then I made a chart of portfoli...

Here are my posts for the past two weeks: Sharing Vacation Costs Money Skills and Spouses Here are some short takes and some weekend reading: Canadian Mortgage Trends reports that “Mortgage Professionals Canada has asked the Department of Finance for a moratorium on mortgage rule changes until the effects of the current changes are known.” They have 5 specific recommendations. My recommendations are different. I call on the Department of Finance to do what is necessary to protect taxpayers from the possibility of having to backstop losses if we have a significant real estate downturn. Further, I call on them to pay little heed to any organization whose primary concern is transaction volume and has minimal skin-in-the-game. John Bogle comments on the likely rollback of the fiduciary rule in the U.S. Tom Bradley at Steadyhand offers some interesting questions to ask your financial advisor about fees and services. Financial Advisor Tim Paziuk says CRM2 did not go far...

Even in marriages where work is split 50/50, it’s common for just one spouse to take care of any individual job. This applies to money as well. A reader, D.L., wrote (with light editing): My wife and I are in our 60's, retired, and financially pretty secure. I'm a self-directed investor. My spouse takes virtually no part in our financial life. Beside feeling that her math skills are weak, money problems were the cause of a lot of family stress when she was young. So, I do everything from paying bills to investing. I don't resent this. She has tried to get more involved, but loses interest. This is probably less about financial illiteracy, and more about anxiety and avoidance. I would like to hear your thoughts. As it happens, I’m currently helping an elderly family member sort out her finances after her husband passed. It’s been difficult. She wasn’t even sure which banks held her accounts. Her husband had taken care of everything money-related. Fortunate...

I like to vacation with friends, but working out how to split the costs can get tricky. When it’s just two couples, we often use the you-paid-last-time-so-I’ll-pay-this-time method. But we both have a tendency to try to pay a little too often. Nobody wants to look like a cheapskate. When more people are involved, it gets trickier. I recall going out to lunch with co-workers when I was in my 20s. Pre-split bills were less common back then, and we’d each figure out what we owed and toss money into the pot. It almost always came up short. I never knew whether people were bad at adding taxes and tips or if someone was deliberately cheating. In later years, though, we had a different problem; we’d end up with too much money in the pot. This is better than coming up short, but it’s still a problem to be solved. With more than two couples traveling together, there is a tendency for more than one person to try to pay for each expense. To try to pay my fair share, I’ve even resort...

Here are my posts for the past two weeks: Is it Really Necessary to Check Your Credit Score? My Investment Return for 2016 CEO of Everything Here are some short takes and some weekend reading: Steadyhand uses an infographic to show the costs that eat into investment returns, including an often-missed factor: investor behaviour. Robb Engen gives a strong defense of the Latte factor. It’s not about denying yourself the occasional indulgence. It’s about cutting down on habitual mindless spending. Investment News reports that an advisor “allegedly cost clients $1.3 million by placing trades through a master brokerage account and then allocating profitable trades to himself while placing unprofitable ones into client accounts.” Most retail stock pickers prefer to think about just their profitable trades, but this is a way to truly make bad trades not count. Canadian Couch Potato interviews the great Charles Ellis in his latest podcast. “We’re now very close to 99% of...