No doubt there are many financial advisors out there who do a good job of advising their clients on when to start their CPP benefits.  However, I frequently encounter advisors who declare that they always advise their clients to take CPP at 60.  Given the significant benefits of delaying the start of CPP benefits for those with sufficient assets or income to wait , why are some advisors so adamantly against it?  Here I offer some possible reasons. According to Owen Winkelmolen, in 2018, 38% of Canadians took CPP at 60, only 7% waited until after they were 65, and only 2% waited until they were 70 .  This certainly doesn’t suggest that many financial advisors advise their clients to delay CPP. So, here are some possible reasons why so many financial advisors recommend taking CPP early. Higher Assets Under Management (AUM) When clients take CPP early, they spend less from their savings, and this increases the advisor’s AUM.  This is true, but the effect isn’t big,...

A strategy some retirees use when it comes to the Canada Pension Plan (CPP) is to take it at age 60 and invest the money.  They hope to outperform the CPP increases they would get if they delayed starting their CPP benefits.  Here I take a close look at how well their investments would have to perform for this strategy to win.  I also repeat this analysis for the choice of whether to delay the start of Old Age Security (OAS). This analysis is only relevant for those who have enough other income or savings to live on if they delay CPP and OAS.  Others with no significant savings and insufficient other income have little choice but to take CPP and OAS as soon as possible after they retire. How CPP Benefits Change When You Delay Their Start You can start your CPP benefits anywhere from age 60 to 70, with 65 considered to be the normal starting age.  For each month that you start CPP benefits before you turn 65, your benefits are reduced 0.6%.  So, suppose you’...

The list of needed repairs around my house that are beyond my skill to do myself keeps getting longer.  However, I’ve been promised that a contractor will be coming to complete one of them next week, and I managed to do a very poor concrete repair myself that might hold for a year.  I’m still riding high on last fall’s pool repair that I waited 3 years for.  So, it’s not all bad.  I’ll be happier when talented tradespeople aren’t all pulled into the vortex of building new houses. Here are my posts for the past two weeks: Money Like You Mean It Trillions Rich Girl, Broke Girl Interest on a Car Lease Here are some short takes and some weekend reading: Christiaan Hetzner reports that Standard & Poor’s sustainability index now includes Exxonmobil and excludes Tesla.  I know Tesla’s price is sky-high and Elon Musk is a weird guy who sometimes writes dumb stuff on Twitter, but how is this relevant?  This is a huge black eye for sustainable investing.  T...

I’ve written before on how to calculate payments on a car lease .  However, when I began reading Jorge Diaz’s book Car Leasing Done Right , I saw that he believes the interest calculation is different from what I’ve seen everywhere else. Update 2022-05-19: Jorge Diaz confirmed that his interest calculation was wrong and that he intends to fix it in the next version of his book. Diaz gives the following example: MSRP $27,799 + PDI $1825 = Vehicle cost of $29,624 Term: 48 months Residual Value: $14,561 Interest Rate: 3.99% HST: 13% Diaz calculates the total interest paid over the 4-year lease to be $1217.01.  This figure is consistent with taking the difference between vehicle cost and the residual value and calculating interest on this as it declines to zero.  We can estimate this by starting with cost minus residual ($29,624 - $14,561 = $15,603).  The average balance owing will be about half of this.  Then we multiply by 4 years and 3.99% to get $1202.  Thi...

Kelley Keehn’s recent book Rich Girl, Broke Girl uses interesting fictional stories about women to teach personal financial lessons.  Keehn understands the circumstances, pressures, and emotions that drive women to make poor financial choices.  The advice in this book is packaged in a way that makes it an easier read for those who’d rather focus on life than money. Keehn uses the stories of ten women to illustrate different types of financial mistakes and how to fix them.  Each chapter begins with the history of a woman whose financial life isn’t going well.  It then moves on to what she did wrong, some financial lessons, and how she can fix her troubles.  The chapters end with an update on how the woman is doing now that she has made some positive changes.  The anticipation of getting back to the story made it much easier to read the ‘lesson’ part of each chapter. The most interesting lesson to me was about the woman who let a casual partner move in and s...

For fans of indexing and business stories, Robin Wigglesworth’s book Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever is a page-turner.  Although this book is well-researched, it’s not a dry academic work.  Wigglesworth delves into the personalities of the important players who grew index investing to what it is today. The stories begin with pioneers who sought to bring scientific rigour to investing rather than just rely on the instincts of investment managers.  These builders of index funds faced initial investor indifference as well as scorn from the traditional investment industry.  Index funds were even labeled as “un-American.” Throughout the birth and growth of indexing, fund managers became increasingly aware of the threat to their incomes.  In 1973, “one anonymous mutual fund manager griped to the Wall Street Journal ” that “a lot of $80,000-a-year portfolio managers and analysts will be replaced by $16...

The world has changed over the past 30 years or so, and the advice baby boomers give their adult children isn’t always relevant in today’s world.  Money reporter Erica Alini offers a millennial’s view in her book Money Like You Mean It: Personal Finance Tactics for the Real World .  She delivers on her promise to offer useful financial advice for the world that millennial’s live in, and her writing style makes the book easy to read. Millennial Challenges Alini devotes a significant chunk of the book to the challenges millennials and women face.  She covers the familiar themes of high housing prices and student debt.  She also covers an under-appreciated problem that millennials face more than boomers did: “easy access to credit” and aggressive marketing to get people to use that credit.  Borrowing for any aspect of your lifestyle has been normalized.  Thirty years ago, people who never ate out and had no car weren’t seen as freaks.  Marketing has rampe...

My wife pointed out that some readers of my post on the rout in long-term bonds may not know what “long-term bond” means.  Typically, bonds pay interest for some number of years after which you get the money you invested back.  So, a $10,000 30-year bond would pay interest on the $10,000 for 30 years, and then the investor would get the $10,000 back at “maturity”.  I think of any bond whose maturity is more than 10 years away as a long-term bond, but others may have different cut-offs. Here are my posts for the past two weeks: The Rule of 30 The Rout in Long-Term Bonds Here are some short takes and some weekend reading: Tom Bradley at Steadyhand has an intervention for stock market forecasters. Morgan Housel explains that every year, something big and unexpected happens.  Housel is always clever, but I find his essays rarely actionable, at least for an index investor like me.  This article, however, is actionable.  We need more ready cash and other saving...

The total return on Vanguard’s Canadian Long-Term Bond Index ETF (VLB) since 2020 October 27 is a painful loss of 24%.  Why did I choose that particular date to report this loss?  That’s when I wrote the article Owning Today’s Long-Term Bonds is Crazy . Did I know that the Canadian Long-Term bonds returns would be this bad over the past 18 months?   No, I didn’t.  But I did know that returns were likely to be poor over the full duration of the bonds.  Either interest rates were going to rise and long-term bonds would be clobbered (as they have been), or interest rates were going to stay low and give rock-bottom yields for many years.  Either way, starting from a year and a half ago, long-term bond returns were destined to be poor. Does this mean we should all pile into stocks? No.  If you own bonds to blunt the volatility of stocks, you can choose short-term bonds or even high-interest savings accounts.  This is what I did back when interest rates...