After getting a rare haircut that was bad enough for me to notice, I was reflecting on the transition from barbers many years ago to hair salons today.  It used to be that barbers cut hair in about 5 minutes, it was inexpensive, and they did it mostly their way. You got to say how short you wanted it but not much more.  This state of affairs suited me.  Now that gender-based price discrimination in haircuts is gone, hair cutters feel the need to take 20 minutes clipping my hair a millimeter at a time to justify the high price.  Maybe we could go to a “fast cut” and “slow cut” pricing system so that I could get a simple cut quickly.  There are some women this would work for as well.  It used to be that women who wanted a simple cut were unfairly discriminated against when they had to pay the higher “women’s price.”  I would even pay today’s high price if I could just sit in the 5-minute cut chair with no waiting. Here are my posts for the past two weeks...

The great thing about managing other people’s money is that you can dip into it to pay yourself.  This might sound unethical or illegal, but it’s perfectly legal if the owners of the money agree to it.  I use the word “agree” in a technical sense here; you really just have to get people to sign a document that points to other documents that bury the details of how you pay yourself from their investments.  You might think that once people notice some of their money is missing, they would become wise to your scheme, but most people don’t notice.  You might think that once such schemes are exposed in the media, people will see that they’ve been had, but most people who read essays like this one just don’t believe it applies to them.  The sad truth is that millions of Canadians allow others to take their money this way. Average Canadians invest much of their savings in mutual funds, segregated funds, and pooled funds offered by banks, insurance companies, and indepe...

Back in the 1920s, George S. Clason wrote a set of pamphlets about financial success using stories set in ancient Babylon.  The book The Richest Man in Babylon gathers these pamphlets together and has sold millions of copies.  People learn better from stories than from simple facts.  This book’s interesting stories are a compelling way to internalize the basics of personal finance. The version I read had an introduction by Suze Orman.  In addition to commenting on the book’s enduring lessons, she observed that “every character in the book is a man.”  “That’s not a reason to dismiss the heart of the book.”  “If you find the gender bias annoying, just recast all the characters in a way that enables you to read and absorb the wisdom.”  In my case, I found the repeated references to slaves more jarring than the gender bias, but I agree about the financial wisdom. I won’t try to summarize any of the stories, but tales of kings, camels, captures and escapes...

Those of us not lucky enough to have employer defined-benefit pensions have to save up for a decent retirement.  You’d think the challenge would be over when you’re done working and saving, but deciding how to manage your investments and how much you can spend is a new challenge.  Fortunately, former chief actuary at Morneau Shepell, Frederick Vettese’s book Retirement Income for Life: Getting More Without Saving More (second edition) shows us how to proceed with “decumulation.”  He even provides free online tools you can use anonymously.  I reviewed the first edition , and now Vettese has added new material and made significant updates to this excellent book. Typical decumulation advice based on the 4% rule can fail.  Vettese goes through five enhancements to this typical advice to greatly improve the odds of having your money last your lifetime, without the need for any more savings. “Many industry experts and professional associations already endorse the enh...

Some people have heard that when a spouse dies, the surviving spouse gets a survivor’s pension equal to 60% of the deceased spouse’s CPP pension.  Unfortunately, the actual calculation involves many more steps, and the final amount of the survivor’s pension is often much less.  Here I pull together information from 3 sources to piece together how to calculate the amount of a CPP survivor’s pension. My main source of information is Doug Runchey’s Understanding the CPP Survivor’s Pension .  I used Frederick Vettese’s book Retirement Income for Life (second edition) to corroborate Runchey’s calculations (although they didn’t completely agree), and Kea Koiv’s Shedding Light on the CPP Survivor Benefit added extra detail for young surviving spouses.  In the end there are still some subtleties I’m unsure about.  I have not tried to determine how these calculations change when either spouse is receiving a CPP disability pension.  Expert feedback is welcome. To b...

For those of us retiring without employer pensions, it’s a challenge to find the best way to spend the savings in our various accounts, a process called decumulation.  Most of us have RRSPs/RRIFs (or other tax-deferred accounts) and TFSAs.  Some of us also have taxable (non-registered) accounts.  Even after we decide how much we can safely spend each year, it’s not obvious which accounts we should spend from first.  Here I describe how I spend from my accounts.  It may or may not work well for people whose financial circumstances differ from mine. While working, our spending is usually closely linked to the income we declare on our taxes.  If we start with declared income and subtract taxes and savings, the rest is what we spent.  In retirement, it often doesn’t work this way.  If we spend from TFSAs or from taxable accounts, our spending can exceed the income we declare on our taxes.  This gives us some control over our reported income even ...

More stories are starting to come out about people in positions to influence vaccine rollout abusing their power to vaccinate themselves and their family and friends.  I assume that for every administrator who gets caught, a great many did the same thing but didn’t get caught.  This abuse is reprehensible, but predictable.  Fortunately, unless someone is actually reselling vaccine doses, each abuser’s incentive to break the rules goes away after the first offense.  Hopefully, we’re mostly through the loss of doses to corruption and we can move on with vaccinating health care workers and older people followed by the rest of us. Here are my posts for the past two weeks: Early Retirement Extreme Stock Tapering: Adjusting Your Asset Allocation Based on Market Price-Earnings Ratio Broke Millennial Talks Money Declining Spending as We Age Here are some short takes and some weekend reading: Josh Brown has one of the better discussions of the clash between Robinhood traders...

As we age in retirement, our inflation-adjusted spending declines.  This fact has been established in numerous academic studies.  The question is how we should incorporate this information into our retirement planning.  Former chief actuary at Morneau Shepell, Frederick Vettese has an answer to this question in the second edition of his excellent book, Retirement Income for Life .  Here I lay out the consequences of this answer in concrete terms. In Vettese’s earlier book The Essential Retirement Guide: A Contrarian’s Perspective , he wrote that our tendency to spend less as we age means we can assume that retirement spending “does not have to be indexed to inflation.”  I argued that this isn’t reasonable because some of the spending decline measured in academic studies comes from some retirees who spend too much early on and dwindling savings forces them to spend less later . In the first edition of Retirement Income for Life , Vettese changed his assumption to...

Money is an uncomfortable subject in many contexts.  In her book Broke Millennial Talks Money , Erin Lowry explains why it’s important to discuss money and how to proceed in sensitive or awkward situations.  The book covers financial discussions at work and with friends, family, and spouses.  Lowry even includes dozens of scripts to use to kick off a healthy financial discussion.  The book is aimed mainly at American Millennial women. Even if you agree that talking about money makes sense in a given context, it’s often hard to find the right words to begin.  This book contains over a hundred short scripts to get started in a discussion.  There are also suggestions for overcoming the natural resistance people have to talking about money. The first part of the book is about financial discussions at work.  To find out if you’re underpaid and to gather information before negotiating pay, it’s often necessary to talk to coworkers about how much they get pai...

Current stock market prices are high compared to corporate earnings.  What should investors do with this fact?  Index investors are told to ignore the possibility of a stock market bubble and stick to their plans.  Is it possible for investors to adjust their asset allocations to take into account market “priceyness” in a mechanical strategy that doesn’t involve gut-based decisions?  Here I examine one possible approach I call Stock Tapering. One popular measure of stock market levels is Robert Shiller’s Cyclically Adjusted Price-Earnings Ratio (CAPE Ratio) .  As I write this, the CAPE stands at 34.86, a level only seen once before during the late 90s tech boom when it peaked at about 45. As an index investor, I’m not interested in making active decisions like market timers who may decide to sell all their stocks because their trick knees tell them stocks are going to crash.  I’m also not interested in mechanical strategies that make hard switches such as s...

When I first picked up Jacob Lund Fisker’s book Early Retirement Extreme , I expected it to be similar to other early retirement books I’ve read, but it isn’t.  This is a thoughtful philosophy book that lives up to its subtitle A philosophical and practical guide to financial independence .  If I had read it decades ago, I likely would have retired even sooner. The book begins with the claim that modern life is like the movie The Matrix .  We can’t see the crazy way we live our lives as wage slaves.  We give up our most productive hours to a job that leaves us with too little energy to do much other than waste money on stuff we don’t have the time to enjoy.  If your instinct is to disagree, consider reading the book; Fisker makes an excellent case. “Ignore most of the personal finance books out there.  They only explain how to play the game by the rules.  Instead, use the rules to play a different game” outside the Matrix. It’s easy to pick out parts o...