Last time, we showed that a working couple with two children and household earnings of $100,000 could maintain their lifestyle in retirement with income of just $51,000 a year (51%) from CPP, OAS and RRSPs. For the sake of simplicity, this calculation was performed on a pre-tax basis. In our latest analysis, presented below, we have reflected the impact of income tax and the results are even more startling. The target retirement income for this particular couple reduces from 51% to only 43%. (Later, we will see how this target income varies based on one’s circumstances.)
Figure 1 illustrates how retirement income equal to 43% of final pay can provide the same disposable income as before retirement. Not only do seniors finally escape a variety of pre-retirement expenditures, they also benefit from an income tax system that confers several advantages, including an age credit (starting at 65), a pension income credit, and the ability to split pension income or transfer credits between spouses.
Canadians have a reputation for modesty. Bragging is not supposed to be our national tendency — except when it comes to banking. Canadian politicians and bankers praise Canada’s banking system so relentlessly that it has created a virtual echo chamber of self-congratulation. This endless mantra extolling Canadian banking is a dangerous hubris in light of the prevalence of global financial turmoil in the neoliberal era. Who might have imagined even a few years prior to 2008 that American regulators and financial institutions could have gone so disastrously wrong? Who dreamt that so soon after the 2008 financial crisis European banks would be facing such ominous threats?
Editor's Note: Where the C.D. Howe Institute is considered to be a 'Right-Wing' think-tank, the CCPA is often viewed as their 'Left-Wing' counter part. Both have valid opinions and both offer investors insightful discussions. Good investors always try to keep an open mind.
An update on the Gold Sector - Supply and Demand, Gold vs. Equities and their top 'Buys' and 'Sells'.
Amid volatile trading and as an immense number of European headlines streamed across the globe, equity markets rallied for the week. Much of the activity was driven by hedge funds, with individual investors and large institutions standing on the sidelines ahead of the Greek election on June 17. Regardless of the election winner, and assuming a government can be formed within days, the market anticipates the Greek bailout will be renegotiated, and central bankers stand ready to act if necessary.
Many investors still approach the fixed income marketplace with a goal of capital preservation and income. But fixed income investments may also be utilized as an effective tool for managing overall portfolio volatility. The differences in fixed income market performance relative to equities create that opportunity.
Generally speaking, holding a greater percentage of fixed income may help you strike the right balance between risk and return.
An actuary will say we can retire when we have saved enough. That is true for an individual and, eventually, it will also be true for the country because we cannot pass the cost of our pension programs onto a future generation forever. By knowing how much Canadians are prepared to save and what level of retirement income they hope to attain, the actuary can calculate the age at which we can collectively afford to retire.
Equity markets rallied and safe-haven government bonds sold off for the week on numerous headlines about potential forthcoming actions to stabilize the European crisis. (Haven’t we seen this movie before?) Wednesday’s trading session set the tone. U.S. and European markets jumped more than 2% on news policymakers may be preparing to inject capital into Spain’s troubled banking system—one of the main distress areas of late.
This simply table summarizes the investment returns for various bond and stock market indices. The returns are displayed for the one month, quarter, year-to-date and full one year time periods. The table also contains the data for Canada's Consumer Price Index (CPI) and Morneau Shepell Benchmark Portfolios.