“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

Canada Pension Plan (CPP) Is Expanding! And That’s Going To Make Retirement Easier

Canada Pension Plan (CPP) Is Expanding! And That’s Going To Make Retirement Easier

The Canada Pension Plan is expanding this year and that’s going to make retirement easier in the future. This expansion is part of a multi year effort to increase the size of CPP payouts in the future. The increased CPP benefits will make retirement easier for many people. It will mean less personal savings are needed for retirement and if you continue to save at the same rate as today you might actually be saving too much!

CPP is one of the best pension funds in the world. Actuaries have stated that CPP is solvent for 75+ years. That means anyone contributing to CPP now has very little to worry about when it comes to future CPP payments.

Despite Canada Pension Plan being one of the best pension in the world I still come across comments from people who are negative about CPP and OAS. They prefer not to count these retirement pensions in their financial plans. Instead they prefer to save more for retirement.

While I understand the desire to be prudent, this line of thinking makes things more difficult than they need to be. Retirement pensions like CPP and OAS provide an enormous amount of retirement income and ignoring them just means you have to save more.

Ignoring CPP and OAS is like running in a windstorm with a parachute tied to your back!

Why add that extra resistance when it’s already hard enough to save for retirement?!?

The good news for many people is that CPP enhancement will now fund even more of their retirement. Future CPP payments will make up an even higher % of retirement income. Before CPP reform the original goal for CPP was to cover 25% of earnings (up to the max) but with CPP enhancement the goal is to increase this to cover 33% of earnings (with a higher max too!). The result is that CPP payments will be up to 50% higher in the future!

This expansion will happen in two phases and the impact on your financial future will depend on how much you’re earning today and how long you’ll contribute under the new rules.

Unfortunately, if you’re retiring this year you won’t see much of an increase. But if you’re retiring in the next 5, 10, 20+ years you’ll likely see your CPP payments increase anywhere from $1.44/month up to $500+/month depending on timing and contributions! That’s an extra $6,000+ per year at age 65 or $8,500+ per year if delayed to age 70! And double that for couples!

The new Canada Pension Plan expansion won’t impact everyone equally, some people will gain more than others. Let’s look at the two phases of the expansion and how it will impact us.

read more
What Does It Take To Become A Millionaire? About 11.1 Percent

What Does It Take To Become A Millionaire? About 11.1 Percent

What does it take to become a millionaire? Surprisingly, not much, as long as you follow certain principles…

There’s something alluring about being a millionaire. Becoming a millionaire is not a traditional financial planning goal. There’s absolutely no reason to aim for a round $1,000,000. In fact, $1,000,000 might be too much! But there’s something appealing about it, alluring even. It could be the simplicity. It could be the many references to millionaires in movies, tv, music and social media. I have to admit, there’s just something interesting about having a 7-figure net worth.

Becoming a millionaire isn’t too difficult, if you start early enough and follow some basic principles. It’s a formula that’s been proven to work time and again.

So, what does it take to become a millionaire household in Canada? About 11.1%.

By using the right accounts, you can invest your way to $1,000,000 pretty easily, all it takes is time and discipline. The average household income in Canada is around $94,833 per year based on research by Statistics Canada and adjusted for inflation. That means to become a millionaire household by the time you hit retirement at age 65 you need to save about 11.1% per year. That’s it.

If you can save 11.1% of your gross household income from age 25 to age 65 you have a good chance of becoming a millionaire. And this is a million in today’s dollars. With inflation, you’ll actually have over $1.6M in future dollars.

This might be a bit lower during the beginning of your career when your income is lower, and it might be a bit higher later on when your income is higher. But by saving 11.1% of your income per year you should have a reasonably good chance of becoming a millionaire!

The key is to start early, be consistent, avoid unnecessary fees, and avoid the many mistakes investors tend to make.

read more
The Effect Investment Fees Have On Retirement Planning

The Effect Investment Fees Have On Retirement Planning

Everyone is talking about investment fees these days. There are ads on the radio, television, and online… there are podcasts, websites, blogs dedicated to low-fee investing… there are also books, magazines and research studies… all focused on one thing… how much the average investor pays in fees while saving for retirement.

But very few people are talking about the effect investment fees have on retirement itself. Mostly they talk about how fees impact you as you save for retirement, but very few mentions what happens if you continue to pay high fees as you enter retirement.

Fees definitely have an enormous impact on how much you can save for retirement. The average mutual fund fee is 2.35% in Canada, and that’s the average, there are lots of situations where the fee is even higher. The effect of this fee on a lifetime of savings and investments is enormous!

But what if you’re close to retirement? What is the impact then? Arguably the effect of investment fees on retirement planning is even greater than any other period.

Why?

Fees have an enormous effect on retirement planning because by the time we’ve reached retirement we’ve already saved up a huge nest egg. Unlike the accumulation phase, where you have limited assets in the beginning, when it comes to retirement, you’re starting with a huge amount of investment assets. This makes the impact of fees enormous, especially in early retirement.

The problem for retirees is that investment fees are hard to spot, hard to find, they’re almost hidden by investment providers, whether that is intentional or not. I’ve seen this on countless investment statements I receive from clients. Based on the statement alone you would NEVER know how much they’re paying in investment fees each year.

This isn’t an isolated issue, it’s a problem that many, many retirees face. Low-fee investing is a relatively new option in Canada. If you were investing 10-20+ years ago there just weren’t as many options to reduce your investment fees.

Many retirees who have high-priced investments are shocked (and somewhat saddened) to learn exactly how much they’re paying each year. It’s not their fault, this information is hard to find and not readily available to investors.

To figure out how much an investor is paying each year usually requires some digging. Mutual fund codes vary by fund and fund class. Sometimes fees can vary by 1% or more for the same mutual fund depending on the class.

But once you know how much you’re truly paying you can start to see the impact it will have on your retirement plans. There are two main effects that high fees can have on retirement, and the impact can be substantial.

read more
Page 2 of 3812345...

Owen Winkelmolen

Fee-for-service financial planner and founder of PlanEasy.ca

“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

Canada Pension Plan (CPP) Is Expanding! And That’s Going To Make Retirement Easier

Canada Pension Plan (CPP) Is Expanding! And That’s Going To Make Retirement Easier

The Canada Pension Plan is expanding this year and that’s going to make retirement easier in the future. This expansion is part of a multi year effort to increase the size of CPP payouts in the future. The increased CPP benefits will make retirement easier for many people. It will mean less personal savings are needed for retirement and if you continue to save at the same rate as today you might actually be saving too much!

CPP is one of the best pension funds in the world. Actuaries have stated that CPP is solvent for 75+ years. That means anyone contributing to CPP now has very little to worry about when it comes to future CPP payments.

Despite Canada Pension Plan being one of the best pension in the world I still come across comments from people who are negative about CPP and OAS. They prefer not to count these retirement pensions in their financial plans. Instead they prefer to save more for retirement.

While I understand the desire to be prudent, this line of thinking makes things more difficult than they need to be. Retirement pensions like CPP and OAS provide an enormous amount of retirement income and ignoring them just means you have to save more.

Ignoring CPP and OAS is like running in a windstorm with a parachute tied to your back!

Why add that extra resistance when it’s already hard enough to save for retirement?!?

The good news for many people is that CPP enhancement will now fund even more of their retirement. Future CPP payments will make up an even higher % of retirement income. Before CPP reform the original goal for CPP was to cover 25% of earnings (up to the max) but with CPP enhancement the goal is to increase this to cover 33% of earnings (with a higher max too!). The result is that CPP payments will be up to 50% higher in the future!

This expansion will happen in two phases and the impact on your financial future will depend on how much you’re earning today and how long you’ll contribute under the new rules.

Unfortunately, if you’re retiring this year you won’t see much of an increase. But if you’re retiring in the next 5, 10, 20+ years you’ll likely see your CPP payments increase anywhere from $1.44/month up to $500+/month depending on timing and contributions! That’s an extra $6,000+ per year at age 65 or $8,500+ per year if delayed to age 70! And double that for couples!

The new Canada Pension Plan expansion won’t impact everyone equally, some people will gain more than others. Let’s look at the two phases of the expansion and how it will impact us.

read more
What Does It Take To Become A Millionaire? About 11.1 Percent

What Does It Take To Become A Millionaire? About 11.1 Percent

What does it take to become a millionaire? Surprisingly, not much, as long as you follow certain principles…

There’s something alluring about being a millionaire. Becoming a millionaire is not a traditional financial planning goal. There’s absolutely no reason to aim for a round $1,000,000. In fact, $1,000,000 might be too much! But there’s something appealing about it, alluring even. It could be the simplicity. It could be the many references to millionaires in movies, tv, music and social media. I have to admit, there’s just something interesting about having a 7-figure net worth.

Becoming a millionaire isn’t too difficult, if you start early enough and follow some basic principles. It’s a formula that’s been proven to work time and again.

So, what does it take to become a millionaire household in Canada? About 11.1%.

By using the right accounts, you can invest your way to $1,000,000 pretty easily, all it takes is time and discipline. The average household income in Canada is around $94,833 per year based on research by Statistics Canada and adjusted for inflation. That means to become a millionaire household by the time you hit retirement at age 65 you need to save about 11.1% per year. That’s it.

If you can save 11.1% of your gross household income from age 25 to age 65 you have a good chance of becoming a millionaire. And this is a million in today’s dollars. With inflation, you’ll actually have over $1.6M in future dollars.

This might be a bit lower during the beginning of your career when your income is lower, and it might be a bit higher later on when your income is higher. But by saving 11.1% of your income per year you should have a reasonably good chance of becoming a millionaire!

The key is to start early, be consistent, avoid unnecessary fees, and avoid the many mistakes investors tend to make.

read more
The Effect Investment Fees Have On Retirement Planning

The Effect Investment Fees Have On Retirement Planning

Everyone is talking about investment fees these days. There are ads on the radio, television, and online… there are podcasts, websites, blogs dedicated to low-fee investing… there are also books, magazines and research studies… all focused on one thing… how much the average investor pays in fees while saving for retirement.

But very few people are talking about the effect investment fees have on retirement itself. Mostly they talk about how fees impact you as you save for retirement, but very few mentions what happens if you continue to pay high fees as you enter retirement.

Fees definitely have an enormous impact on how much you can save for retirement. The average mutual fund fee is 2.35% in Canada, and that’s the average, there are lots of situations where the fee is even higher. The effect of this fee on a lifetime of savings and investments is enormous!

But what if you’re close to retirement? What is the impact then? Arguably the effect of investment fees on retirement planning is even greater than any other period.

Why?

Fees have an enormous effect on retirement planning because by the time we’ve reached retirement we’ve already saved up a huge nest egg. Unlike the accumulation phase, where you have limited assets in the beginning, when it comes to retirement, you’re starting with a huge amount of investment assets. This makes the impact of fees enormous, especially in early retirement.

The problem for retirees is that investment fees are hard to spot, hard to find, they’re almost hidden by investment providers, whether that is intentional or not. I’ve seen this on countless investment statements I receive from clients. Based on the statement alone you would NEVER know how much they’re paying in investment fees each year.

This isn’t an isolated issue, it’s a problem that many, many retirees face. Low-fee investing is a relatively new option in Canada. If you were investing 10-20+ years ago there just weren’t as many options to reduce your investment fees.

Many retirees who have high-priced investments are shocked (and somewhat saddened) to learn exactly how much they’re paying each year. It’s not their fault, this information is hard to find and not readily available to investors.

To figure out how much an investor is paying each year usually requires some digging. Mutual fund codes vary by fund and fund class. Sometimes fees can vary by 1% or more for the same mutual fund depending on the class.

But once you know how much you’re truly paying you can start to see the impact it will have on your retirement plans. There are two main effects that high fees can have on retirement, and the impact can be substantial.

read more
Page 2 of 3812345...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

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