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Discussion Starter · #241 ·
On 1., this is a good point. I am working on some side business ideas. If they develop into something sustainable, I will look into such DI prior to leaving my current employment.
You might even want to apply and lock in non-cancellable DI before you go too far down that route. The reason is that (as I understand insurance) there is an obligation to disclose material information to the insurer. If you were on the brink of quitting your job any moment, I think it might be dishonest to get DI at that point - or you should at least disclose the intention.

On the other hand, getting DI well in advance, back when you are still in the 'regular employee mode' seems perfectly honest. Again make sure it's non-cancellable and beware of the categories like 'any occupation' vs 'own occupation'.

The other downside is that you have less 'pension' income due to lack of CPP contributions. That gives you more sequence of return and rate of return risk. You seem to be quite a saver, so maybe not a problem, but something to consider.
You're absolutely right, and if I remain on this track, I will end up with less CPP than most Canadians. I'm glad you reminded me. Missing out on CPP is a pretty unfortunate consequence of reducing or stopping my employment income.

Do you think it's possible the government may let Canadians buy into the CPP, contributing extra? On my current track, I might not get anywhere close to 100% CPP, unless I go back to a regular office job for a few more years.
 

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Discussion Starter · #243 ·
You can pay yourself a salary from your holding company, instead of dividends, to contribute to CPP. Of course, you should dividend any Canadian dividends you receive.
This is an interesting idea. I don't have a corporation right now, but if my business picks up over time, this would be a good option.

Another idea might be to buy an annuity, but it seems to me that the CPP is a better deal than an annuity. Are they even in the same ballpark?
 

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I raised the same question as well as I stopped contributing to CPP in my 40s. Everyone says....who cares, it’s your your own money that you’re getting back from CPP.

do we know how much the average Canadian contributes to CPP during their lifetime and what the average Canadian earns form CPP? Would love to see some numbers And now the savings/investment return looks.
 

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Discussion Starter · #245 ·
I raised the same question as well as I stopped contributing to CPP in my 40s. Everyone says....who cares, it’s your your own money that you’re getting back from CPP.

do we know how much the average Canadian contributes to CPP during their lifetime and what the average Canadian earns form CPP? Would love to see some numbers And now the savings/investment return looks.
It's true that you're getting your own money back, and it's true that you can (in theory) get the same effect by investing your own money. So one could argue that you and I are not "missing out" on the CPP in monetary terms.

But I still wish I could buy into the CPP and convert my $ into a pension.

I think there's a big advantage to having a federal pension which holds some of your money. You can mismanage your finances, fail to save, or even have disasters in life (beyond your control). No matter what, the $ that goes into the CPP stays in there until you're 60 years old.

The CPP is government backed and firewalled. Your CPP is unaffected by personal bankruptcy. It's unaffected by relatives who are begging for money, perhaps pleading with you (or maybe harassing you) to hand over money. My ex girlfriend had a good income as a professional, but was constantly sharing her income with all her family members, who needed help for various reasons. She will work for 30 years and maybe have nothing left for herself.

My aunt is another person who has been unable to save money. She's made terrible investments on her own, and just not managed her finances well. But she did work, and pay into the CPP. Thank goodness!

Overall I really like what the CPP does. Yes you absolutely can save money yourself, to replicate the future cash payout. But we can't replicate the protection and firewalling.

The annuity is the only alternative I can think of, that has some of these nice characteristics.
 

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Another idea might be to buy an annuity, but it seems to me that the CPP is a better deal than an annuity. Are they even in the same ballpark?
One important difference between annuities and CPP is that the latter is indexed to inflation, which in the long run is very important. Another difference, as you have mentioned, is the implicit guarantee by the federal government for the CPP, which does not exist for an annuity.
 

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Discussion Starter · #247 ·
Things are "getting real" now... so it's a bit exciting and also a bit frightening.

I've moved to BC and, setting up my new household, there are a variety of new expenses. I expected this, but it's still a big spike in expenses. Monitoring my 'trailing 12 months' of spending will be even more important in the coming months.

At the same time, my low level of self-employment income continues. Managing my cashflow will be important for the rest of this year. I also expect to partially live off my investments (withdrawal mode).
 

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Discussion Starter · #249 ·
Welcome to Vancouver.
Thanks! And happy Canada Day!

The only thing that makes me nervous is the possibility of another shutdown / shortages due to COVID. There are still a lot of essentials I don't have and I'm going to need to get a bunch of stuff from Ikea, Home Depot, Best Buy (for business) and many other places.

Question for BC people: how likely do you think it is that retail stores will shut down again? The province may not consider Canadian Tire, Ikea, or electronics stores to be "essential services", but as a guy sitting in a mostly empty apartment who's still setting up my home & office, these things are essential for me.

I'm trying to prioritize the most essential things (work desk and vital computer equipment) but I have a long way to go. I normally don't like rushing my shopping, but I wonder if I should hurry before more closures come in Sept/Oct?
 

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Dr Henry has said the plan is go slow in order to prevent the province from having to take a step back. So ideally, stores won't have to shut down going forward. In fact, I don't think normal retail stores were under any original health order to close down. The retail outlets just made the decision themselves to close up shop for a few weeks. I don't think online shopping and delivery/pick-up was impacted.
That said, if things really flare up again, I can see province re-enact restrictions that indirectly impact retail operations. I'm cautiously optimistic the province won't take a step back though.
 

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Discussion Starter · #251 ·
Spending update
Total spent in last 12 months: $29,089

I'm now getting back to normal spending patterns so this number will increase. My annual expense budget has been 38K since 2017 and I'm continuing to stick with this level.
 

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Discussion Starter · #252 · (Edited)
I'm still settling into Vancouver and it's too early to tell how my spending pattern will shape up. I've been buying all kinds of household items and furniture, but this is a bootstrapping phase.

Originally I thought I would be on sabbatical and not working, but as it turns out, my small business income has been OK. I think we might be entering an economic depression, and I think I would be unwise to turn down income under these circumstances especially since I am lucky enough to still work despite COVID. Any extra $ that I can get in the bank and into my investments can only help in the long term. Plus, self-employment lets me make CPP contributions.

My business cash flow (monthly revenue) is volatile, ranging from 1K to 15K a month. So I'm trying a new trick. I've got all the cash (business revenue + stock dividends) sloshing into a large account, which is also connected to my LoC for extra liquidity. I've set up a monthly recurring transfer for a constant amount, out of this large account, into my daily-use chequing account.

The money shows up like a regular paycheque. Then, I pay all my bills out of here. What I like about this approach is that it decouples my immediate self-employment earnings from my spending. I don't want to change my spending behaviour on a month-to-month basis due to that volatile income.
 

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Discussion Starter · #253 ·
My spending in the last few months has been much higher than I anticipated. I forgot how much money it costs to acquire new stuff to fill up a new home / apartment / home office.

That's also important to keep in mind for home insurance. You might look at your possessions and think they aren't worth much. But the real question is: how much would it cost you to replace everything you have?

The CPP issue is also now "solved" because, due to self-employment income, I will be paying into CPP.
 

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Discussion Starter · #255 ·
In some cases you could be thrifty & use kijiji / FB Marketplace..... there are savings with some used stuff....
True, and I've scored some used items already.

Next month I'll force myself to finally look at my numbers. October looks pretty good with about 3K spent (within budget) but previous months were much higher.
 

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Discussion Starter · #257 ·
Spending update
Total spent in last 12 months: $43,516
Total spent in last 6 months: $19,141


Definitely running higher than my 38K annual budget for the trailing 12 months, but close to my target for the trailing 6 months.

Some of the big costs are moving expenses, and high fees for dealing with American IRS and complex dual-country tax advice. Unfortunately I still need that expensive expert at the moment, and am thinking about how to phase it out in the coming years. Sadly I am not finished with the IRS for a few years.
 

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Discussion Starter · #258 ·
Spending update
Total spent in last 12 months: $46,573
Total spent in last 6 months: $21,197


Still running higher than my 38K annual budget. This is mostly attributable to special one time items (moving + professional help with IRS) so I'll just have to live with it for now. But I'm also seeing good news in my spending patterns. My core living expenses in 2021 so far (housing, food, travel, necessities, etc) are all within target.

So I think that my core living expenses are OK.
 

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Discussion Starter · #259 ·
A question for @milhouse @john.cray @andrewf @AltaRed and others...

My recent experience with these surprise or one-off expenses makes me wonder how one should estimate their living expenses in retirement. For example, I might say that "I can live on 40 k" which is mostly true, but once in a while you encounter some surprises that can easily add an extra 5 or 10k in expenses.

From the SWR standpoint, it's important to account for those surprises. How do you think one should do this? One way is to eyeball an average amount and increase the annual living expenses, but that doesn't seem like a great way to account for highly sporadic one-off spending. And I don't want to encourage any increase to my routine spending.
 

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A question for @milhouse @john.cray @andrewf @AltaRed and others...

My recent experience with these surprise or one-off expenses makes me wonder how one should estimate their living expenses in retirement. For example, I might say that "I can live on 40 k" which is mostly true, but once in a while you encounter some surprises that can easily add an extra 5 or 10k in expenses.

From the SWR standpoint, it's important to account for those surprises. How do you think one should do this? One way is to eyeball an average amount and increase the annual living expenses, but that doesn't seem like a great way to account for highly sporadic one-off spending. And I don't want to encourage any increase to my routine spending.
You didn’t ask me, but I’d make a best guess at my long-range plans are and budget accordingly. Will I need a new roof, car, furniture, dental etc. Plan for what you KNOW you will need, even if 10-15 years out. Then establish a safe emergency fund for the truly unexpected.
 
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