Author Fred Schwed gave us his cynical take-down of Wall Street back in 1940 with the hilariously written, Where Are the Customers’ Yachts?. The book amazingly still holds up today in a world where investment advisors get rich while their customers, well, not so much.

“The title refers to a story about a visitor to New York who admired the yachts of the bankers and brokers. Naively, he asked where all the customers’ yachts were? Of course, none of the customers could afford yachts, even though they dutifully followed the advice of their bankers and brokers.”

I’m an advice-only financial planner who doesn’t manage money or get paid to tell you what to invest in. My goal is to help you navigate the financial minefield and use your resources over time to maximize your life enjoyment.

While my customers may not own any yachts (hey, neither do I!), I do get immense satisfaction helping clients achieve their rich life goals. One client suggested I start collecting postcards from my retired clients’ bucket list trips. Great idea!

It’s true that many retirees have a difficult time spending. I’d argue that the vast majority of my retired clients are capable of spending much more than they are right now.

For instance, if your net worth is projected to increase every single year throughout retirement, that’s a pretty good clue that you can spend more money.

Occasionally I have a breakthrough and can convince a retiree to open up the spending taps a bit. This might be a bucket list trip, a home renovation, a new car, or an early financial gift to their kids or grandkids. I love it!

In the above example, let’s assume the client planned to spend about $38,000 per year after-taxes. Financial projections suggest they can spend up to $58,000 per year without running out of money (and without touching their home equity).

The client has an epiphany. Why live a smaller life than I need to in retirement, only to leave more than $1.3M in my estate for two children who are already established in their careers and have encouraged me to spend my money?

Don’t get me wrong – they don’t suddenly become a spendthrift after decades of frugal living. But they decide it’s not necessary to contribute to their TFSAs annually throughout retirement “just because” and so they re-direct that $7,000 contribution back into their annual spending amount – increasing from $38,000 to $45,000.

This amount is still well below their maximum sustainable spending number, but gives them more breathing room for travel (an annual cruise, perhaps?) and to hire a personal trainer.

They’re also still not touching the $100,000 they currently have invested in their TFSA. That amount will grow to nearly $300,000 by age 85, leaving a healthy and tax-free margin of safety for unplanned spending shocks.

This new spending plan also reduces their total savings and investments to about $500,000 at age 85 (versus $1M in the previous scenario). Still a very comfortable nest egg to fall back on if needed.

It’s a modest example, but these are my customers’ yachts. A realization that you have the ability to live the retirement of your dreams without worrying about running out of money.

This may allow you to snowbird in the US or Mexico for four months of the year, or buy a property in Florida to golf year-round and escape winter. You could take a bucket list trip to see the World Juniors in Sweden, or take that African safari adventure, or climb Machu Picchu in Peru.

Your “yacht” might literally be to buy a boat and sail around the world for a year, or buy a motorhome and visit all of the national parks in North America.

Perhaps your dreams are more philanthropic and you want to give money away to your kids, or to set up an endowment with your favourite charity. Maybe you just want to fund your grandkids’ RESPs, or take the entire family on a hot holiday once a year.

Whatever your version of a yacht is, don’t forget to send me a postcard!

Weekend Reading:

I recently moved my LIRA from TD Direct to Wealthsimple Trade and updated my post on how I invest my own money.

My “controversial” takes on bitcoin, CPP, and dividends from the last Weekend Reading update.

Finally, my latest post for MoneySense shows you how to start saving for retirement at age 45.

Promo of the Week:

Speaking of Wealthsimple Trade, the commission-free self-directed trading platform has slowly started adding more account types such as RRIFs, LIRAs, and LIFs. Supposedly RESPs and RDSPs are on the way soon.

As Wealthsimple Trade continues to add new account types, and several big bank brokerages (BMO, Scotia) offer commission-free ETF trades, I’m struggling to see how Questrade makes any sense for DIY investors

— Boomer and Echo (@BoomerandEcho) March 9, 2024

For simple index investors following my one-fund solution using a risk appropriate asset allocation ETF, Wealthsimple Trade is looking better and better.

Get $25 when you fund any Wealthsimple account with my referral code: FWWPDW

Plus you’ll get your reward boosted to $250 if you become a Premium client ($100k) within 30 days and $1,000 if you reach Generation status ($500k).

https://www.wealthsimple.com/invite

Weekend Reading:

New on CBC Marketplace this week, hidden cameras capture bank employees misleading customers and pushing products that help sales targets.

Something I’m keenly watching as my mortgage term expires next month. Variable or short-term fixed mortgage? Where experts see the ‘sweet spot’.

Mortgage broker David Larock says the longer the Bank of Canada takes to cut rates, the lower our variable rate mortgages will go.

Pay off your mortgage early or invest? Morningstar’s Christine Benz takes on this age-old question.

Of Dollars and Data blogger Nick Maggiulli has a clever take on bitcoin as a momentum trade – more people buy, number go up.

Michael Batnick with some smart thoughts on the fear of missing out:

“I have no problem with speculative behavior, but like walking into a casino, you have to know your limits, set them, and then don’t go back to the ATM once you hit that number. Have fun, but be careful out there.”

A Life Income Fund (LIF) is the annoying cousin of the Retirement Income Fund (RRIF), with both minimum AND maximum required withdrawal limits. Adam Chapman shares a neat trick to completely unlock your LIF in just a short period of time.

Speaking of RRIFs and LIFs, Jason Heath explains everything you need to know about these plans and their withdrawal rates.

Here’s a really good piece by Jason Evans about the pros and cons of buying back pensionable service.

A Wealth of Common Sense blogger Ben Carlson shares 20 lessons from 20 years of managing money.

Finally, retirement expert Fred Vettese explains how delaying retirement can boost income for singles (subs).

Have a great weekend, everyone!

The price of bitcoin is surging again and recently surpassed all-time highs. That has brought all of the ‘crypto bros’ out of hibernation to gloat about bitcoin taking over the financial system (or whatever they think happens next).

Shares of NVIDIA Corp are also soaring to new heights. The semi-conductor company recently surpassed $2 trillion in market capitalization to become the third most valuable company in the world (behind Apple and Microsoft).

Surprisingly, shares in NVIDIA have performed even better than bitcoin over the past five-and-10-year periods. In fact, you would have had to own bitcoin in the very early days (2009-12) to have seen better performance than holding shares of NVIDIA stock.

But when I say this on social media, the crypto bros come out in full force telling me all the reasons why bitcoin is superior and investors should get in now before it’s too late.

Hey, at least NVIDIA actually makes and sells something useful.

I’m not one for speculating on assets with lottery-like properties. Usually by the time we hear about how great the investment is, most if not all of the upside has already been captured.

Unfortunately, we can’t go back in time and capture past returns from any stock, coin, real estate market, or any other asset class. 

I say this to caution readers not to get caught up in the next speculative bubble, whether that’s AI or cryptocurrency or the next big thing.

CPP as an investment

Few topics are as divisive in Canada as the Canada Pension Plan. Business owners and self-employed individuals hate it for having to fork over both the employer and employee contributions. People who die early also don’t like CPP and accuse the whole program of theft.

Proponents of CPP say it helps the social safety net and acts as longevity insurance for those who live to a normal to above average life expectancy thanks to its guaranteed, paid-for-life, and indexed-to-inflation properties.

Ben Felix is a huge proponent and argues that CPP is one of the best retirement assets money can buy, despite what the skeptics say.

“The CPP benefit is an inflation-indexed annuity – the only true risk-free asset for a long-term investor.

This is an asset that hedges three of the most important risks that retirees face: longevity risk, inflation risk and sequence-of-returns risk. Inflation-indexed annuities are not available for sale privately in Canada.”

Felix also says a less appreciated aspect of CPP is that it allows investors to take more risk with their other financial assets, increasing their expected returns without increasing their chances of financial ruin.

But, oh the comments! What if I die at 65? Why can’t I opt-out and invest on my own? Business owners get screwed?

The reality:

“We should be happy to have an asset like CPP. Planning to get the most out of it is far more productive than griping about its existence.”

Dividends aren’t free

If you ever get tired of debating bitcoin bros and CPP cranks, there’s always the dividend delusionists.

For the record, I have no problem with dividends. They’re an important part of the stock market’s overall returns. I receive regular dividends from the 13,500+ stocks I own through the globally diversified VEQT (about half the companies pay a dividend).

But dividends are not magic. They’re not free. They get paid out from a company’s earnings, and that payment to shareholders reduces the value of the company by the exact amount of the dividend. 

For some reason this is a concept that many dividend investors fail to understand. One such investor told me:

“Dividends come from earnings or free cash flow. Share price increases only come from someone being willing to pay more today for the same company than they did yesterday.”

I think this is a serious misunderstanding of how the stock market works, especially if you believe that word ‘free’ actually means free.

Investors pay higher prices because they expect higher future returns. Why would you invest in a company that you don’t believe will increase its value in the future?

Promo of the Week:

We enjoyed a week away in Cancun and took advantage of some of our American Express travel benefits on the way there and back.

First, we used the free night certificate that comes with the Marriott Bonvoy Card to stay at the Calgary Marriott in-terminal hotel the night before our early morning flight. This saved us from driving up from Lethbridge super early the day of the flight and made for a stress-free travel day.

At the airport we took advantage of the free lounge access that comes with our American Express Platinum cards. The cost of entry is generally $49 USD per person. We visited the lounge in Calgary and in Cancun, which would have cost us $392 USD or $532 CAD

Finally, we boosted our rewards points earlier this year with the best offer I’ve seen in a while from the American Express Business Gold Rewards Card (<–scroll to the bottom and click “explore other cards”).

Earn a whopping 75,000 Membership Rewards points when you spend $5,000 within the first three months.

Transfer those points to Aeroplan where you can typically redeem them at 2 cents per mile. That’s $1,500 in value ($1,301 when you subtract the $199 annual fee). Not a bad return on $5,000 spending.

Do you need to have an incorporated business to qualify? No! Sole proprietors and side hustlers are welcome.

Sign-up for the American Express Business Gold Rewards Card here.

Weekend Reading:

The Globe & Mail’s Erica Alini says new tax rules have many Canadians in a bind. It’s hard to find an accountant and risky to DIY.

Tim Cestnick explains why spousal RRSPs still have a place in clever planning.

Why Canada’s former chief actuary says you should wait to take your CPP benefits (subs).

An age-old question for Canadians: Should you pay down your mortgage, or fund your RRSP?

Rob Carrick took a deep dive on the OAS clawback: How many people are affected, and how much does it cost them?

Ben Felix looks at home country bias and says it can reduce fees and taxes, it may hedge the cost of local consumption, and it reduces exposure to the potential mistreatment of foreign investors when times get tough:

Last month, for the first time, passively-managed funds controlled more assets than did their actively-managed competitors. Index funds have officially won.

Dare to compare your investment results with your colleagues and friends?

“When people talk about money, it’s like social media posts. They rarely share the bumps and bruises.”

These 15 funds managed to lose value for shareholders even during a generally bullish market.

Michael James on Money discusses private equity’s fantasy returns.

Finally, here’s Ben Carlson’s take on avoiding burnout and a mid-life crisis.

Have a great weekend, everyone!

We spent a few years building up a massive bank of travel points before our first trip to the U.K. in 2019. Indeed, we put nearly 1 million travel points to work booking flights and hotels for a 32-day trip to Scotland and Ireland. Then we went back to work replenishing travel points for our revenge travel year in 2020, which ended up getting postponed to 2022. We took it easy(ish) on travel in 2023, but have three trips booked this year that pretty much drained all of our points again.

I get it. Obsessing over travel points is not for everyone. My wife and I have collected rewards from more than a dozen credit cards, all in a well thought out goal to maximize our travel points, save money on flights and hotels, and upgrade our experience whenever possible.

We’ve also willingly paid – wait for it – more than $3,000 in annual fees! Crazy, right?

But I’ve done the math and figured that paying $3,000+ in fees was a good investment to earn more than 1 million travel points. I valued those points at about $20,000. How? Let me explain.

The main rewards program to drive all of this was the American Express Membership Rewards program. It’s the most lucrative in terms of number of cards available, the incredibly generous sign-up bonuses, and the ability to transfer Membership Rewards points to other programs such as Aeroplan and Marriott Bonvoy.

I typically transfer Membership Rewards to Aeroplan on a 1:1 basis. I value Aeroplan miles at 2 cents per mile. That means 1,000,000 Aeroplan miles x 2 cents per mile = $20,000 worth of travel rewards.

Marriott Bonvoy is not as lucrative – these points are only worth about 0.9 cents – so I limit the number of points I transfer to Bonvoy on an as-needed basis. Besides, we mostly rent Airbnbs when we travel as a family.

Amex Cobalt

I start with the Amex Cobalt card – the best card for everyday spending in Canada with 5x points for food & drink. Sign up and spend $750 per month on this card to get an extra 15,000 Membership Rewards points (plus the 45,000 points you’d earn if you spend $750 per month on a 5x spending category).

Then use your own referral link to refer your spouse or partner (called: activating Player 2), and have them do the same thing. This could be worth a total of 120,000 Membership Rewards points in a year, plus another 10,000 for the referral bonus.

Amex Platinum

Next, go big with a premium card like the American Express Platinum Card. This one is great for airport lounge access, plus preferred status at Marriott Hotels (automatic Gold Elite tier). Yes, it’s a steep annual fee of $799 but you get a $200 annual travel credit AND a $200 annual dining credit to offset $400 of that fee. Plus, in the first year you can earn up to 100,000 Membership Rewards points when you spend $10,000 within the first 3 months.

Amex Aeroplan Reserve

Wanna get crazy? Refer your spouse or partner to the American Express Aeroplan Reserve Card where they can earn up to 90,000 Aeroplan points (plus a sweet 30,000 point referral bonus for your partner).

This card comes with a whopping $599 annual fee but includes access to select Air Canada Maple Leaf Lounges, plus Priority Check-In, Priority Boarding, and Priority baggage handling with Air Canada. Not bad!

American Express Business Gold Card

The best sign-up bonus in Canada right now is for the American Express Business Gold Card, where you’ll get 75,000 Membership Rewards points when you spend $5,000 within the first 3 months. The annual fee is just $199, which is reasonable for a business card.

I *just* completed my $5,000 spend on this card (deposits for Airbnbs for this summer) and instantly received the 75,000 Membership Rewards welcome bonus. I transferred that to Aeroplan and it allowed us to upgrade our flights to business class to Edinburgh on October. Nice!

Again, refer your partner or spouse and do it all over again to earn another 75,000 Membership Rewards points.

Marriott Bonvoy Cards

Chalk this one up as an absolute no-brainer card to have in your wallet. The Marriott Bonvoy Card gives you 55,000 bonus (Bonvoy) points when you spend $3,000 within the first three months. Not only that, you get an annual free night certificate to stay at a category five hotel (easily worth $300+), making this a card a keeper from year-to-year. The annual fee is just $120.

We just used our free night to stay in the Calgary Marriott Airport in-terminal hotel the night prior to an early flight departure. Nothing beats walking out of the hotel lobby and right to your gate without stepping foot outside!

Again, refer your spouse or partner and do it all over again to earn another 55,000 Bonvoy points, plus 20,000 referral points, and another free night certificate.

Building your Travel Bank

By my count, that’s up to 530,000 Membership Rewards points and 130,000 Bonvoy points (plus two free nights, plus $400 in travel & dining credits) from eight cards, split between spouses so there’s only four cards each. Spread these out over the year so you can better align your regular spending with the minimum spend amounts required for each card.

This strategy is not for the faint of heart. You’d be paying more than $2,200 in annual fees for these cards. But the payoff could be worth $12,700 or more, depending on how you redeem your points. Plus, hotel status, airport lounge access, priority boarding, etc. 

The time to use this strategy is when you have multiple trips lined up for a year.

Guess what? Cancel the cards after almost a year so you don’t have to pay a second annual fee. I keep the Cobalt card as my everyday card, since it has a high earn rate, plus the Platinum Card for the hotel status and airport lounge access, and the Bonvoy Card for the free annual night certificate. The others have been rotated through over the years by either me or my wife to capture the bonuses.

Questions? Hit me up in the comments.

This Week’s Recap:

Kyle Prevost shared the details on his new DIY retirement planning course for Canadians. Worth checking out!

Also popular was the last Weekend Reading edition all about when to RRIF.

From the archives: A two-fund solution for investing in retirement.

Promo of the Week:

Author and friend of the blog Mike Drak has generously offered to send Boomer & Echo readers a free electronic copy of one of his three books, choosing from:

• Retirement Heaven or Hell
• Victory Lap Retirement (2nd Edition)
• Longevity Lifestyle by Design

If interested, please email Mike directly at michael dot drak at yahoo dot ca. He’d also love for you to write an Amazon review afterwards.

Weekend Reading:

Short and sweet this week. 

The always eloquent Morgan Housel shares a few thoughts on spending money.

Dr. Preet Banerjee asks if today’s young, diverse investors are making good choices with their money?

It’s a Ben Felix trifecta. First up, Ben explains the role of bonds in retirement portfolios, and suggests we move beyond common asset allocation advice.

Then, on YouTube, he says that popular personal financial advice suggests that portfolios should contain at least some bonds and that asset allocations should shift increasingly into bonds as investors move toward retirement, but new research suggests that this thinking is due for an update:

Finally, Ben takes a hard look at ESG investing and says it may be counterproductive:

“Hedging ESG risks and feeling good about your portfolio are valid reasons to consider the ESG characteristics of the companies that you own. When it comes to making the world a better place, I don’t have the solution, but ESG investing probably isn’t it.”

The Humble Dollar’s Jonathan Clements says our experiences – especially those during childhood and that involve family – tend to triumph, shaping our world view and potentially setting us up for costly financial mistakes.

Jason Heath shares some surprising retirement math you need to know, from how long you’ll live to deferring CPP.

Advice-only planner Anita Bruinsma compares active versus passive investing.

Finally, retirement expert Fred Vettese explains (and charts) why you should be able to save more money closer to retirement.

Have a great weekend, everyone!