Friday, June 20, 2014

Wired and a Talk With My Money Guy

Yesterday was the day to go down and get wired for my 24 hour heart monitor. They attached five sticky pads and electrodes to my chest and plugged them into a small pager size device that hangs on my belt. I was instructed to carry on as usual and return the device at 3:00 today (Friday).

Well, how do you "carry on as usual" with a bunch of wires hanging off your chest. Sleep was very difficult as every time I turned I had to deal with the wires and device. After about four hours sleep I was awake and reading news sites on the computer. I napped a bit more before finally getting up and making breakfast at 8:30. Now I am "acting normal", whatever that is.

Wednesday I went down for my semi annual chat with my money manager. He proudly showed me he was averaging 5.8% for me on my investments which is actually pretty good in today's financial climate. He also pointed out that I would be turning 71 in 2016 which is the year I will have to start taking minimum payments out of my tax deferred savings (called RRSP's in Canada). These payments will of course become taxable income in the year they are taken out. This money is what I have been calling my "Rainy Day Fund" and we have dipped into it a few times. $30K to buy the first motorhome, $40K when Norma had her dental implants and much smaller amounts several other times to cover unexpected or unusual expenses. The balance of this fund has not come down too much over the years because the fund has done fairly well as an investment. The problem with these deferred tax plans is that you can't defer them forever and eventually you have to pay tax on the principal as well as the amount they have gained within the fund. The hope is that your tax rate will be lower when you sell them than it was when you bought them and in theory this works but tax still has to be paid and that is always a pain. If I had to do it all over again I might seek out a better way, if there is one. Adding these payments to my pensions means I am bringing in more now than I ever did when I worked so in my individual case the theory does not work as well. Who knew? The only thing that saves me a little is "Income Splitting" between spouses in cases where one spouse earns more than the other. This little gift from the Canadian Government could be taken away at any time but if they did, they would have millions of old people waving pitchforks, canes and walkers at their gates.

I can take the money out monthly or annually, my choice. I guess I will take out the full annual amount in March and use about 30% of it to pay the increased income taxes in April. I don't know what I will do with the balance. Spend it foolishly, I guess.

12 comments:

  1. Put the rest in a TFSA for now. You can put in up to $5500.00 annually and if you have extra, put some in for Norma. Live off the RRSP's which will become RIFF's at 71 and then in the end use the TFSA's ( tax free savings account ). That way when the day comes that you are both gone, Brooks and LindaLee will inherit what's in the bank without the estate having to pay taxes. I'm sure you know all of that anyway. 5.8% is good for now but the last 2 years should have been 10 -15% depending on what you were invested in. We got zip as we had the wrong money guy.

    Glad you got those wires sorted out. Next thing you will hear is that you are better than 100%

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    1. I have not had the detailed talk about the RIFF with him yet but what you say makes sense. The 5.8 was over an extended time and included the losses I suffered in my gold shares so I am not complaining (too loud). We have TFSA's going now.

      Aside from what Don and Kevin say below, I hate paying taxes but that is the "Catch 22" with the RRSP/RIFF thing.

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    2. I think we were all mislead way back when, when the RRSP's were introduced. It seemed like a great thing at the time but now we have to pay the piper.

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    3. We are not rich (very far from it) but we do control our expenses (Kevin will disagree) and we make out quite well on our six pension deposits each month. It is only every once in a while we need to tap into the Rainy Day Fund and we really do not need or even want extra taxable income. But then I do not want to croak with a pile of cash in the vault either. It is a dilemma.

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    4. Sadly either way, the taxes will have to be paid, either by you or the estate. By the way, RRSP's can be made to automatically roll over to RIFF's and then the powers that be ( the banks ) decided how much you HAVE to take out each year. As you get older the amount gets larger. You can Google and get a chart of it all. You can take money out of your RIFF until you die so you just may use it all up yourself.

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  2. A liberal guy like you should want to pay as much in taxes as you can Croft. ;)

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    1. I must have some Conservative blood in there somewhere Don, I don't mind paying my fair share of taxes but they should give pensioners a break.

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    2. The enemy is so much easier to identify in your USA, Don. Here, it is more confusing. In British Columbia, the Liberals are the far right party.

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  3. I would venture to say that your financial situation is a good problem to have; considering the flip side it could be. If you are paying taxes, you are earning money!!! Like you though, I hate paying taxes, knowing full well that the dollars are so often misspent ie: The Senate

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