Last month I wrestled with my pension decision and opted to take the lump sum (commuted value) rather than a deferred pension at age 65. That decision meant forgoing a ~$15,000 per year pension in retirement. Instead, I would receive a $290,000 lump sum – $134,000 in a locked-in retirement account and the remaining $156,000 paid in cash.
I received the lump sum cash payment on Friday. It’s strange to see more than an entire year’s salary ($110,500 after taxes) deposited into your chequing account. Fortunately, I’m a disciplined budgeter and have already mapped out a spending plan for the rest of the year.
First, I sent $30,000 over to my Wealthsimple Trade account to fully max out my available TFSA room (finally!). Next, I sent another $3,700 over to Wealthsimple Trade to max out this year’s available RRSP contribution room. I’ll use the funds to add to my holdings of VEQT in both my RRSP and TFSA.
The funds for my LIRA have not arrived at TD Direct Investing yet, but when they do I’ll also purchase VEQT in that account and hold it there until retirement.
The other major change for our finances this year is that we’ll no longer have to withdraw from our small business account to meet our spending needs. We had planned to pay ourselves dividends, but instead any income earned this year will remain inside the business account where it is taxed at a lower rate.
Speaking of business income, it’s been surprisingly steady this year despite the disruption caused by COVID-19. While web traffic and advertising have slowed by 30 percent or more, I’ve been busier than ever with freelance writing and my fee only financial planning service. It’s good to have multiple income streams.
Finally, we’re resigned to the fact that we’re likely not going away this summer and so we want to make the most of the time we spend at home. We’ve purchased some new patio furniture and spent the weekend cleaning up our backyard. We’d also like to buy a hot tub and so we’re exploring our options there.
Don’t think we’re splurging just because there’s a large lump sum in our chequing account. Instead, I think of it as using our travel refunds to invest in our stay-at-home experience this year and beyond.
This Week’s Recap:
I managed just one post here this week when I looked at changing investment strategies after a market crash.
This post remained incredibly popular – the top ETFs and model portfolios for Canadian investors.
Over on Young & Thrifty I wrote about how to invest in oil through stocks and ETFs.
I also looked at borrowing to invest when the market is down.
Promo of the Week:
I’ve been catching up with some the recent changes at Willful Wills – the online platform where you can create a will for as little as $99. I initially reviewed Willful Wills two years ago.
They still have the same the pricing plans – $99 Essentials (just a will); $149 Premium (will an 2 Power of Attorney documents); $249 Couples (will + POAs for two people).
Willful is now available in seven provinces (Ontario, BC, Alberta, Sask, MB, NS, NB).
They’ve added the ability to account for pets (assign a pet guardian + leave money for their care), and added a charitable giving feature (ability to leave a $ amount to a charity, and ability to leave a % of your residual estate to charity).
Willful has created more than 20,000 documents since launching in 2017. They’ve also given out over 1,300 plans to frontline healthcare workers during COVID (healthcare workers can apply here), and are currently offering a free printing/shipping offer.
While the law still doesn’t allow for digital signing, witnessing, or online storage of wills or POAs, Ontario’s new emergency order does allow for virtual witnessing – and Willful has launched a partnership with Notary Pro to help Willful customers get their wills virtually witnessed (and we’re watching legislation in other provinces hoping they follow suit).
Whether you’re creating your first will, or need an update, be sure check out what Willful has to offer.
Weekend Reading:
Michael Batnick answers the question, why aren’t stocks down more? I’ve been hearing that a lot lately.
Even a common sense investor like Ben Carlson has a stock picking side. Here are some crisis investing lessons learned from his fun portfolio.
Here’s Millionaire Teacher Andrew Hallam on financial experts trying to time the market:
“If you sold some of your investments because you think stocks will fall, you are thinking like a hedge fund manager. If you have suspended your regular investment contributions while you wait for the markets to stabilize, then you are thinking like a hedge fund manager. If you have money to invest but you want to wait for stocks to fall even further, you are thinking like a hedge fund manager.”
How are your investments protected? This MoneySense article explains the role of the CDIC and CIPF, and breaks down the different kinds of protection each offers.
Here are two conflicting views regarding when to take CPP. (I recommend deferring CPP to age 70):
- Jonathan Chevreau reconsidered when to take CPP benefits amid COVID-19 risk and elected to take it at 66.
- Rob Carrick argues that the pandemic makes it even more sensible to delay the start of CPP retirement benefits.
The Alberta Investment Management Corp (AIMCo) made a $3 billion blunder with a volatility trading strategy (options and derivatives):
“It’s not very hard to lose $3 billion selling volatility,” said one quantitative hedge fund manager who frequently trades with the likes of AIMCo. “You’re doing stuff that has a minus-infinity potential outcome.”
Check out this podcast interview with Millionaire Teacher Andrew Hallam on whether you should try to time the stock market.
In his latest Common Sense Investing video, PWL Capital’s Ben Felix explains why the stock market is not the economy, and the economy is not the stock market:
Worried about your RRSPs tanking? Michael James on Money says, so is the Canada Revenue Agency.
An incredibly brave post from Kind Wealth founder David O’Leary, who shares how he filed for bankruptcy at age 25.
Finally, this powerful piece in the New York Times is worth a read: My restaurant was my life for 20 years. Does the world need it anymore?
Have a great week, everyone!
