When people suggest topics for me to write about, more often than not I can point to an article I’ve already written, which is handy for me.  I doubt I’ll ever run out of thoughts on new topics, but it’s good to have a body of work to refer to. Here are my posts for the past two weeks: Car Companies Complaining about Interest Rates RRSP Confusion Searching for a Safe Withdrawal Rate: the Effect of Sampling Block Size Here are some short takes and some weekend reading: Ben Carlson lists some things in the markets that surprised him this year.  The first thing is that stocks and bonds both went down double-digits.  Apparently, that’s never happened before.  I guess if you just look at the history of stock and bond returns, this outcome looks surprising.  However, when you look at the conditions we’ve come through, this was one among a handful of likely outcomes.  Bond markets were being artificially propped up, and the dam had to burst sometime.  As for...

How much can we spend from a portfolio each year in retirement?  An early answer to this question came from William Bengen and became known as the 4% rule .  Recently, Ben Felix reported on research showing that it’s more sensible to use a 2.7% rule .  Here, I examine how a seemingly minor detail, the size of the sampling blocks of stock and bond returns, affects the final conclusion of the safe withdrawal percentage.  It turns out to make a significant difference.  In my usual style, I will try to make my explanations understandable to non-specialists. The research Bengen’s original 4% rule was based on U.S. stock and bond returns for Americans retiring between 1926 and 1976.  He determined that if these hypothetical retirees invested 50-75% in stocks and the rest in bonds, they could spend 4% of their portfolios in their first year of retirement and increase this dollar amount with inflation each year, and they wouldn’t run out of money within 30 years. R...

Recently, I was helping a young person with his first ever RRSP contribution, and this made me think it’s a good time to explain a confusing part of the RRSP rules: contributions in January and February.  Reader Chris Reed understands this topic well, and he suggested that an explanation would be useful for the upcoming RRSP season. Contributions and deductions are separate steps We tend to think of RRSP contributions and deductions as parts of the same set of steps, but they don’t have to be.  For example, if you have RRSP room, you can make a contribution now and take the corresponding tax deduction off your income in some future year. An important note from Brin in the comment section below: “you have to *report* the contribution when filing your taxes even if you’ve decided not to use the deduction until later. It’s not like charitable donations, where if you’re saving a donation credit for next year you don’t say anything about it this year.” Most of the time, people t...

I don’t often have much to say about macroeconomic issues, but an article “sounding the alarm” about how interest rate increases are affecting car companies drew a reaction. “Aggressively raising interest rates has helped create an untenable situation in car financing.” Good.  Financing a car is usually a mistake for the consumer.  When consumers’ credit is so bad that they can’t even get a car loan, it’s even clearer that they shouldn’t buy the car. “The auto sector is one of the victims of the aggressive interest rate hikes.” Ridiculously low interest rates have allowed car companies to inflate prices and sell ever more cars to people who can’t really afford them.  The fact that the party is ending doesn’t make car companies victims.  Conditions are just slowly getting back to normal. “Rising interest rates will make consumers reevaluate their decisions before quickly jumping into a car loan.” Good.  It’s sad when people bury their financial future by buying ...

There’s a whole world of retired people who play sports that I didn’t know existed until the last few years.  As I aged and was trying to compete with much younger athletes, I often wondered how much longer I could keep going.  A common mindset among older players is that they’ll have to give it up sometime, probably soon.  However, when I play sports with people my age and older, I see that I can keep going as long as I can stay healthy enough. Rather than focusing on how much physical ability I’ve lost, I can focus on finding people who play at roughly the same level I do.  This has increased my motivation to do targeted exercise to keep my body healthy enough to play sports.  You’d think that staying healthy and strong would be motivation enough, but I find the deadline of completing rehab before an upcoming sports season much more motivating. Here are some short takes and some weekend reading: Justin Bender compares U.S. stock ETFs domiciled in Canada (e.g....

It’s no secret that bonds got crushed this year as interest rates rose.  Rob Carrick went so far as to say “Given how absurdly low rates were in 2020 and 2021, your adviser should have seen the events of 2022 [the bond crash] coming.”  I agree in the sense that the bond crash was predictable, but its exact timing was not.  I explained the problem with long-term bonds back when there was still time to avoid the losses . It’s important to be clear that I was not making a bond market prediction.  What was certain was that long-term bonds purchased in 2020 were going to perform very poorly over their lifetimes.  The exact timing of bond losses was not knowable with any certainty.  The tight coupling between interest rates and bond returns is what made it possible to see the brewing problems; this isn’t possible with stocks. I’ve seen a few attempts by financial advisors to justify their failure to act for their clients by talking about how if you blend poor lon...