Saturday, February 23, 2013

When and where to contribute and how much.

2251 days to retirement, or thereabouts....

The chickens come home to roost at Christmas time.  That's when the annual performance bonus arrives and you either panic over how small it is, or over how big the bills are.

In either case, you may ahve to make adjustments. 

I've just had to suspend my additional voluntary contribution to the emoployee share program to make sure that the bills get paid.

Tax time is coming up and it's also time to pick up the tx prep package that I use: TurboTax (no connection other than being a satisfied customer)
The usual suggestions always apply ... get all your forms in hand before you start, ensuring that you've collected them during the year.

Medical expenses, charitable donations, retirement savings (RRSP, TFSA, etc.).

Best thing is to contribute regularly and to challenge yourself that you have the knowledge to understand what you're investing in.

Wednesday, August 17, 2011

Handling the annual bonus or whatever the boss calls it.

At work, we have two ways of taking this: either take the payout as cash (pay about 40-50% taxes up front), or put it into a RRSP account. Downside is that the RRSP is a short list (not the greatest ROI -- return on investment).

However, ALL (emphasis) of the funds do go into the RRSP rather than trying to claim some of the deducted funds back at tax time.

Since I need to ratchet up my savings, putting all of the bonus into the RRSP is worthwhile as I can always withdraw some later and pay less taxes too!

Right now, I'm putting away $205.76 a pay into employee share ownership (don't panic because the stock market is twitchy), so an additional $12.50 a pay into this RRSP  makes a total of almost $5700 a year in savings, or a net savings rate of 8%.

I'll have to update my spreadsheet when the plan is set up and see how this moves me to the point of having my retirement being fully funded.  Not much but every little bit helps.

Also found an interesting article on retiring your debts before you retire

Friday, July 29, 2011

Fighting the ticket and winning (sort of)

This is Ontario-centric, but probably applies almost anywhere in throry.

Ontario has soemthing called the "Provincial Offenses Act" under which most municipalitiies issue parking, driving and by-law infractions, plus the OPP uses for their tickets. Essentially, it means that local governments don't have to set up their own collection agency to go after dead-beat ticket holders, and there's a common set of rules governing how to pay them or protest.

You have three options:
1)Plead guilty and pay the fine in whole by sending in a cheque to the given address on the back.
2) Go down to the local court house and see a Justice of the Peace, pleading guilty with an explanation in the hopes of getting a reduced fine.
3) File for a court date and go to trial. (What Ticket-Busters and other companies do for you....)

Short story: I got nailed for dog-off-leash and was issued a $250 ticket (plus victim surcharge of $50).

I did some research and found that the by-law under which I was being charged does not have a schedule of fines for various offenses, but simply a cap of $5000 (not sure if that's per incident or per charge, probably the latter.) Some more research gave me a number of towns or cities where they posted the dog-off-leash fines (major cities are more than small towns) but mine was right up there at the top of the pile.  I decided to do option B and see what happened.

Most JofP sessions are time-limited. Mine was a one-hour session Monday through Friday, with no guarantee that everyone would get in and plead their case. 

ME? I got to the court at 8AM for a 9AM-10AM window. First in line to see His Honour.  At 9:20, he opened the door and called my name. I went in to his office.  Everything is tape-recorded. I was repeatedl;y asked during the session that I knew that I was pleading guitly to the offense. I was also asked for my explanation and was told the short-comings of my evidence (I didn't print anything) as well as what I should be doing if I felt that the fine was too much (essentially proposing to the town that the by-law needed to be revised). I told what I did and why, plus the sequence of events (making sure that no one else was around, early hours, etc.)

After twenty minutes of sweating over everything, His Honour pulls out another ticket form and starts to fill it in.  "I think that you did everything you could to control the situation and that the fine didn't take that into account. I'm reducing it to $50 plus surcharge and fees."

I walked out of the court $65 lighter in the bank account not the $300 that I thought that I'd be paying. Well, theat $235 that I won't be spending on the ticket.

If I have to do this again, I know what to do and will be a lot more prepared.

Things to remember if you're going to do this.....
1) Do your research so that you can prove your case. If you think that the fine is way beyond what it should be, prove it through research on what comparable fines are.  PRINT OUT THE RESULTS OF YOUR RESEARCH TO SHOW THE JofP. This includes aerial shots from Google or MapQuest to show what happened where.
2) Print out the law or by-law under which the charge is being made, showing the fines area.
3) Get there bright and early and try to be in the first few people queueing up.

Wednesday, April 20, 2011

Getting the Christmas Bonus

Days to Retirement: 2933 (May 1, 2019)

Current Status:

Shortfall for added income/month$212,521.73
Planned Additional Savings
ESOP Contributions w/AVC 4%251.7626$52,366.08
ESOP Dividends$15,893.23
Group RRSP (bonuses)12.526$2,600.00
Tax Refunds and Bonuses50001$40,000.00
Mortgage paid off (three years, but using one payment per month)80014$44,210.53
Shortfall Remaining$57,451.89
Annual addition required$7,181.49
Monthly addition required$598.46

I've been taking what's called at work "the Christmas Bonus" (just because of the timing) as cash to help pay for Christmas as well as other bill. We've decided to close the "Bank of Nana and Grandpa" and to put the bonus money into my RRSPs, as well as my tax refund (hopefully). Putting the cash-payout of the bonus still results in less money (cash plus tax refund) than if I had the entire pre-tax bonus put into a RRSP.

The real conicidence is that there was a corporate e-mail yesterday that announced how our bonus will be calcualted in the future.  Bad news is that the only RRSP plans that I can put the money into is a group PPSP plan.  Oooookaaaay....  Looks like I have to hook in to the group RRSP provider and set up an account and then direct at least $12.50 a pay into the plan plus the start-up amount.

Does pull down my numbers, but the tracking will really the impacts as the bonuses are paid out over the years. Lower tax refunds but more money into savings.

Friday, April 15, 2011

Comparing apples and oranges when doing math

Days to Retirement: 2938 (May 1, 2019)

If you compare today's chart to yesterday's, you see that there's a whacking difference.

Causes are:
Ratcheted up ESOP contributions by another percent of my gross salary, and recalculated dividends and contributions over the next eight years
Moved some items around that should be in this section
Realized that I had calculated my mortgage payments as after-tax dollars without using the calculation for making them pre-tax dollars. BIG IMPACT! Reduced amounts needed signicantly.

Good news is I'm actually in pretty good shape. Phew!

If you're going to do caculations of what you're going to need in savings, make sure that you have two columns -- one for pre-tax numbers and another where you're doing things like payments/mortgages. These feed into the pre-tax column as a formula using your tax rate.

Another way of not making mistakes is to hand this to your spouse (or someone that you trust) to make sure that the numbers are correctly organized and kept separate (pre/post-tax amounts)  My mistake was using the one column for both data types.

Thursday, April 14, 2011

Employee Share Ownership and other forced savings plans

Days to Retirement: 2939


Savings Shortfall$191,824.00
Added Savings
ESOP Dividends (est)$18,000.00
ESOP Appitional5026$10,400.00
Shortfall Remaining$163,424.00
Annual addition$20,428.00
Monthly addition$1,702.33

One of the fun parts of working for a corporation is that they support employee share ownership.  It comes in various flavours of comapny participation: discounted prices, matching funds, that sort of thing.  For me, the company partially matches my contributions and administers the RRSP.  The immediate impact for me is that its payroll deduction (before taxes are calculated) and there are no management fees to worry about.

When I did my initial calculations, I didn't include potential dividends. Last night, I pulled up my spreadsheet and added a new tab. The calculations that I used had a lower dividend rate than is currently being paid and assumed a steady share price of the current maximum price over the last year -- think of a pessimistic viewpoint. I also didn't try to include the 2 odd payments that would be made by me during the year (getting paid bi-weekly.

Ran the calculation out over the next eight years and surprised myself. I know that past performance doesn't predict future performance, but the company's been rock steady since I've been here and the real old-timers have said the same thing about their history.

Since I can adjust my contributions on-line, I'm going to ratchet up my contributions by about $50 per pay. The impact on my actual paycheck will be less since the $50 represents pre-tax dollars while my paystub will show a lesser amount.  If Ottawa doesn't mind getting less taxes for me saving for retirement, who am I to refuse?

So the impact is about 28 grand, which pulls down my number a bit.

I'm a big fan of schemes like this as the money disappears before you see your pay stub and aren't tempted to spend the money and "replace it someday".  My household savings fund operates in the same manner.

Wednesday, April 13, 2011

HOw much do I need to retire? YIKES!

Days to retirment: 2940

I did a quick spreadsheet that allowed me to work out what I should need in the way of savings.  I know that the financial planners have these massive spreadshets that allow you to do what-if analysis with compounded interest and other fancy featurs, but I just did it with straight calculations.  Interest and dividends are just icing on the cake for this basic analysis.

My salary (using my take-home pay) is about 60 grand. To have the same income for 20 years after I retire, I'd need something like 1.2 million. Gotta win a lottery to have that much put aside....

Fortunately, I've got a company pension plus the Canadian Pension Plan and Old Age Security (big assumption is that they will still be around in the future).   That covers about 32 thousand a year, leaving me to fund the shortfall with my savings.  Crunching the numbers for 20 years, this results in 550 thousand.

OK, sounds of screeching tires .....  Of course, I'll have no mortgage by that time (20 grand a year at current rates), so that pulls down the numbers a lot more, leaving a shortfall of 7 grand and a need for having $140 grand in savings.

Obtainable but really a plain vanilla life. Assuming that one mortgage payment a month gets used for other activities and emergency savings, this adds an additional 10 grand to my shortfall, needing a total savings of 330 grand.

What have I actually saved?  Based on current savings plus continuing putting month into my Employee Share Ownership Plan at the current rate, and not factoring in dividends, stock splits or the vagaries of the market (remember 2009 and 2010?), I'll have a total saving around 140 grand, enough to finance the vanilla retirement.

So, the differenece between the vanilla and upgraded retirement means that I have to find another 190 grand in savings somewhere. Works out to about 2 grand a month.

Immediate Goals:
increase RRSP contributions on pre-tax dollars if possible
funnel all bonuses and tax refunds into RRSP

This is the starting point -- I know what I need to put away (sticker shock city).