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Personal FinanceTax Planning

How to Invest the SAME Money in Two Different Places at the Same Time

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“You don’t buy life insurance because you are going to die, but because those you love are going to live.” — Unknown author

In my new book, Tax-Efficient Wealth, I discuss tax-exempt life insurance as one of the tax-efficient tools for building and accelerating your wealth.

Of the four tax-free options that the Canadian tax law permits, the use of tax-exempt life insurance is one of the least known tax strategies. You’re likely familiar with the other three options — Principal Residence; Tax-Free Savings Account (TFSA); and Lottery Winnings.

Under section 143(3) of the Canadian federal income Tax Act, assets accumulate within a tax-exempt life insurance contract free of annual accrual taxation.

When you pass away, any proceeds of the policy are distributed to your beneficiaries on a tax-free basis outside the scope of your estate, bypassing its associated costs.

Insurance is a no-brainer tool that allows for:

  • Tax-deferred growth, similar to the registered pool of capital in an RRSP (Registered Retirement Savings Plan)
  • Potential for tax-free income during retirement
  • Tax-free distribution upon your death

“Fun is like life insurance; the older you get, the more it costs.” — Frank Mckinney

Below is a quote from the PIVOT Magazine published by the Chartered Professional Accountants of Canada:

“Life insurance is still an excellent investment tool…one of the few investments that allow for the tax-sheltered accumulation of funds and at the same time covers the risk of death. The pretax compounding effect and the tax-free access to this accumulating fund are two of the attractions of life insurance. The tax-free maturity on death is the ultimate plus.”

Let me draw your attention to the bolded text (bolded texts are all mine) because I think this is one of the most understood and understated benefits of tax-exempt life insurance.

Tax-exempt life insurance is the only product that allows you to double-dip your investments.

In other words, by investing in a tax-exempt life insurance policy, you have the opportunity to earn a guaranteed rate of return that compounds year after year.

At the same time, you can withdraw up to 100% of the invested funds and invest the proceeds in another investment vehicle to earn additional returns without any impact on the original guaranteed returns from the insurance policy.

Essentially, you could invest the SAME money in two different places at the same time!

So why is the use of tax-exempt life insurance not as common given the tremendous tax advantages it provides and the fact that you can double-dip?

There are potentially many reasons for this, but here are my top 5 reasons:

1. Lack of Knowledge

This is probably one of the biggest reasons why people don’t consider life insurance as a tax planning tool or even as a tool to protect the financial welfare of their loved ones.

There is so much misinformation about insurance and in the midst of this kind of information, it’s challenging for most to see the real benefits of having insurance as a great financial and tax planning tool.

“I detest life insurance agents: they always argue that I shall someday die, which is not so.” — Stephen Butler Leacock


2. Insurance is expensive

Truth be told, insurance is expensive, particularly the kind of life insurance (whole life and universal life) that is suitable for tax planning purposes.

With the ever-growing costs of keeping up and managing family budgets to pay for things like food, clothing, housing, daycare, car payments, kids’ education, etc., insurance is just outside of those “necessities” when money is tight.


3. Insurance provided through your job

Many people are offered life insurance as part of their employee benefits package and often, decide not to get additional insurance.

They forget that coverage provided by this kind of employer-provided insurance is often not sufficient. In addition, if you leave the job, it’s typically the type of insurance that doesn’t “move on” with you.


4. It is intangible

For those like me, that prefer to buy things that are real, paying for insurance that we don’t see will seem like a waste of your hard-earned money.

All you get from buying an insurance policy is pages and pages of contract that you don’t understand and will likely never read.

A mindset shift is required here to see insurance as an investment, as protection for rainy days, and as a hedge for risk.


5. Life insurance — it’s on my list…eventually

There’s no deadline on life insurance, no mandate from the government on purchasing it.

Your parents may have never talked to you about its importance, and it’s certainly not the most invigorating topic for conversation. As a result, most never get to it.

“If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance.” — Suze Orman


Conclusion

Consider the benefits of insurance, particularly as it relates to wealth planning and tax optimization. Start by educating yourself. Review your existing policies, if applicable, and engage a knowledgeable professional that can guide you and provide a plan that will match your unique situation.


P.S. I am on a mission to arm you with financial education. That’s one reason I started writing on medium and that’s why I wrote Tax-Efficient Wealth. This book will help you accelerate your wealth in a tax-efficient way. Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal Finance

How Good Are Your Buckets?

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In this article, I explored the meaning of financial independence.

According to Wikipedia, financial independence is the status of having enough income to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.

In order to accumulate sufficient funds to take care of your living expenses for the rest of your life, you have to generate income today by working or by running a business.

You then take those funds, and save and invest in “buckets” that will compound the growth to build up sufficient funds that will allow you to achieve financial independence.

So, what are these buckets?

These buckets are the different tools and vehicles we use to save and invest for retirement. These vehicles, if used correctly, will allow for the compounding and growth of your hard-earned resources so you can achieve your dream of financial independence in the future.

Many people work so hard for several years. They follow the advice of their employers and their financial advisors. And they think they have been saving and investing in retirement buckets that look like this:

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Unfortunately, this is, in fact, not the case.

The majority of Canadians have been saving for retirement using Registered Retirement Savings Plan (RRSP), Company-sponsored Registered Pension Plans (RPP), Tax-Free Savings Account (TFSA). Those in the U.S. have been saving for retirement using 401k, IRA, 403b. These vehicles mostly invest in mutual funds, index funds, stocks, bonds, and other money market instruments.

Unknowingly to most of these working-class professionals is that these retirement buckets they have been saving and investing in, actually look and behave a lot more like this bucket:

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How much of your retirement money do you suspect has already “leaked” out of your buckets over the years?

Do you have any idea how much money is leaking out of your retirement bucket right now?

Do you know what/who is responsible for the holes in your bucket?

Do you know what steps you can take to plug the holes in your existing bucket, or how you can upgrade to a better bucket?

These are important questions that must be answered if you really want to secure your financial freedom.

We’ve all heard stories of retirees who worked so hard for 20, 30, 40 years dedicating their talents and life to a particular corporation only to retire half a million dollars short, $400,000 short, or $300,000 short, because of these holes in their buckets.

Painfully, these retirees will now have to work longer — another 3, 4, 5 years or more, often at jobs that don’t fulfill them in order to make up for the shortfall.

These holes in your retirement buckets represent:

  1. Disclosed and hidden fees on your investments, including the high mutual funds’ fees
  2. Avoidable taxes paid on your investment earnings
  3. Losses from market volatility
  4. Inefficient use of these vehicles due to improper planning that is not tax-efficient
  5. Lack of financial knowledge on the part of the individual investor

Without question, the number one concern among people in retirement, and those approaching retirement, is the fear of running out of money. So, it is, therefore, critical to ensure that you eliminate the holes in your bucket.

And this is why…

Every dollar that leaks out of your bucket is one less dollar you can spend today, or one less dollar growing for a future use.

We often focus on making more money so we can add more money to our retirement bucket. However, we fail to understand that making new money often involves taking some element of risk. Instead, if you take steps to keep more of the money you already have, you can achieve a great outcome 100% of the time when you take the right action.

It’s Not How Much You Make That Counts, It’s How Much You Keep

So, how do you plug some or all of these holes?

Here are a few quick suggestions:

  • Invest in your financial education so you can ask intelligent questions of your financial advisors and be a part of your investment management team.
  • Review your statements, call your investment advisors and your banks to find out exactly how much fees you’re paying. Then look for alternative investments with lower fees to invest in.
  • Consider managing a portion or all of your investments to avoid or minimize investment management fees.
  • Consider better vehicles that provide tax advantages, such as real estate, business, and tax-exempt life insurance.

Final Thoughts

Your journey to financial freedom or a life of great retirement doesn’t have to be complicated or confusing. But you wonder why investing and planning for retirement can be so hard to understand.

It’s because the odds are stacked against you.

The multitrillion-dollar financial institutions and mutual funds industries that profit from “helping” you save for retirement have unfortunately made this seem more complex so you can remain dependent on them and their advisors.

The more complex and confusing managing your money is, or at least as it appears to be, the more likely you are to hire a “trained professional” to manage your money for you.

The more complicated or confusing something is, the less likely you are to understand what is actually going on. As a result, you limit your ability to ask the important tough questions regarding what’s being done with your money.

Therefore, it has never been more urgent to arm yourself with the financial knowledge you require to challenge this massive financial industry and protect yourself from these leaks that are making your journey to financial freedom harder than it should be.


P.S. I am on a mission to arm you with financial education. That’s one reason I started writing on medium and that’s why I wrote Tax-Efficient Wealth. This book will help you accelerate your wealth in a tax-efficient way. Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal FinanceTax Planning

Why You Should Care About the Type of Income You Earn

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“Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” — F.J. Raymond

When it comes to taxes, the term “income” isn’t quite as straightforward as you might think.

In Canada, there are four main distinct groups of income you may have as an individual with a variety of different tax implications. In some cases, you may have sources of income with zero tax!

So, understanding this and arranging your affairs accordingly will enable you to enjoy tax breaks that most people don’t know about. This is why I love this quote by Martin Sullivan.

“There may be liberty and justice for all, but there are tax breaks only for some.” — Martin Sullivan

Below are the four main groups of income in Canada:

1. General income

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This includes income from employment, self-employment, sales commissions, tips and gratuities, pensions and other social benefits, interest, etc.

General income sources are taxed the most heavily in Canada.

2. Dividend income

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This is dividends paid to company shareholders. Dividend income receives a special deduction that can reduce the rate of taxation. However, the effect of the deduction varies.

3. Capital gains income

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This is the income you make by selling shares or other property, which are taxes on only half the profit made on the sale (except your home, which is exempt from tax when it is your principal residence).

4. Tax-free income

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Yes, there is such a thing as tax-free income.

This includes income from insurance, income from sale of your principal residence, gaming and gifts, which are generally tax-free (except gifts from your employer, and some gifts of capital, such as company shares — if the gift produces income, then the income is usually taxed).

In Conclusion

Note that general income sources are taxed the most heavily in Canada.

Dividend income and Capital gains income attract lower taxes compared to General income.

The best part is that there are certain income sources that are tax-free. In addition to the income sources included in this tax-free income group listed in #4 above, proceeds from loans such as equity from your home or loan from your tax-exempt insurance policies can also be included in this income group.

This 4th group of income represents a great source of tax-free income that can be used to significantly accelerate your wealth.

Depending on the type of income you earn, you may end up keeping less or more of your income. So, it is key to understand this and plan accordingly to structure your income to keep more of your money.

“The best things in life are free, but sooner or later the government will find a way to tax them.” — Anonymous

Note that every dollar saved in taxes will help accelerate your wealth.


P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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BusinessPersonal FinanceTax Planning

Are You Thinking of Selling an Asset? Think Again

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This pandemic has forced a lot of people to make significant financial decisions.

Some have sold assets to generate income to fund basic living expenses.

Some have sold assets to address immediate health issues.

Some have sold assets to pay off debt.

Others have sold assets due to fear and uncertainty of the future.

And some have sold their assets in exchange for cash stored in their homes.

While there is nothing wrong with selling assets, you should consider certain criteria before selling. The last thing you want to do is to derail your financial journey by liquidating assets without careful planning.

Here are a few considerations you may want to review when thinking about selling your assets:


Productive assets vs. Unproductive assets

Productive assets are assets that generate income or cash flow. An example of a productive asset is a business you own or a rental real estate. Other productive assets are dividend stocks as these generate dividend income.

A vehicle you use for Uber is a productive asset as you generate income with it.

On the other hand, unproductive assets do not generate income. An example is a car you use for personal purposes, your 60-inch flat-screen TV, a piece of land that you own lying idle.

If you’re considering selling an asset, it’s best to first sell non-productive assets. And then use the proceeds to buy productive assets if you don’t have other immediate use for the cash.


Pay off debt vs. Invest

Should you sell an asset to pay off debt or should you sell your asset to invest in a new opportunity?

Paying off debt is likely the safest investment you can make as there is zero risk of loss. However, safety does not always mean it is the best thing to do.

Also, if your goal is to be financially free by being debt-free, you must remember that debt freedom does not equal financial freedom. What gives you financial freedom is the ability to generate cash flow on demand to meet and exceed your financial needs.

When it comes to debt, start by classifying your debt into productive debt and unproductive debt.

Productive debt is debt incurred to acquire a productive asset. It is debt that provides you with the ability to deduct the interest for tax purposes. An unproductive debt is consumer debt.

If you’re considering selling an asset to pay off debt, it makes no sense to sell a productive asset to pay off an unproductive debt or a productive debt for that matter.

Rather than selling an asset to pay off debt, consider ways you can generate more cash flow from the asset to pay off the debt. Perhaps, you can sell a productive asset to buy another productive asset with more cash flow.

My bias is always to invest my resources. Then use the income from the investment to first pay off unproductive debt as this has no tax benefit. Then slowly pay off the productive debt using income from the asset.

When it comes to paying off unproductive debt, the best approach is to first invest in yourself by acquiring some high-income skills and use the cash from your side business hustle with your high-income skills to liquidate your unproductive debt.


Buying assets vs. Selling assets

As an investor, my bias is always to buy and never to sell.

So, when does it make sense to sell an asset?

My answer is simple.

The only time it makes sense to sell an asset is if you can use the proceeds to buy other assets generating MORE cashflow.

You can use this lens when you’re considering any asset or any group of assets for sale.

If you own a dividend stock and the company reduces or suspends its dividend, you can sell this stock and use the proceeds to buy a new dividend stock offering more cashflow.

If you own a rental property that is not generating sufficient cash flow or appreciating in value, you can sell it if you find a better opportunity in another asset class.

You could sell a number of rental properties you have if you find an opportunity to invest in a great business that has value and generates a lot more cash than your rental properties.

There are so many ways you can go about doing this. What’s important is to understand the principle. If you’re selling an asset, you’re doing so because you want to buy a replacement asset that has more value and generates more cash flow.


Final Thoughts

Now you have a framework for determining the logical process when you’re considering selling an asset:

  • Sell unproductive assets rather than productive assets.
  • Resist selling assets to pay off debt. If you have to sell, use the proceeds to buy another productive asset and pay off debt using cash flow from the asset.
  • The only time it makes sense to sell an asset is if you can use the proceeds to buy other assets generating MORE cashflow.

Consider listing every asset you own and the income generated by each asset. See if you can increase the income either by making changes to improve the operation of the asset or by swapping the asset with another asset.


P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Business

Why You Should Not Start a Business If You Don’t Have Another Source of Cash Flow

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If you are considering starting a business, one key lesson you may have learned from this pandemic is the importance of cash flow.

Many businesses had their cash flow completely eliminated due to the pandemic. As a result, most of these businesses had to shut down in as little as 3 months, some in less than 3 months.

These businesses went out of business because they had no cash.

  • They did not have the cash reserve to sustain operations for 3 months.
  • They could not wait for the government relief programs which took a little bit of time to kick in.
  • They could not obtain short-term financing to stay in business.

So, what’s the lesson for those considering starting a business?

Don’t start a business unless you have an additional source of cash flow to sustain your business for at least 6 to 12 months if your business is faced with hard times.

The famous multi-millionaire, Dan Lok in this video, introduces this concept of the wealth triangle. In the video he suggested a three-step method for generating wealth:

  1. Build a high-income skill that will generate over $120,000 in annual income;
  2. Operate a scalable business; and
  3. Invest in high-return investments that will earn at least 10% per annum.

He notes that starting a business is the hardest part. He cautions against starting a business before developing a high-income skill that can generate cash flow for you. As Dan notes in the video:

“A business takes a tremendous amount of effort to build. Don’t believe that you can start a business and make money within a few months. Be prepared to go a year, two years or three years before making a profit. The only way a business goes out of business is if it runs out of cash.”

I could not agree more with Dan.

Before you start a business, make sure you have a cash reserve that you can potentially use if needed to keep your doors open for business.

If you’re already in business, you will agree that cash is critical to keeping your doors open. As they often say,

Cash is King!

Several years ago when I started a business with my business partner, we faced a number of cash flow challenges as we did not pay close attention to these 5 key drivers of poor cash flow I discuss below.

“Never take your eyes off the cash flow because it’s the lifeblood of business.” — Sir Richard Branson

So, I want to share these 5 key insights I learned from my experience dealing with cash flow issues in my business very early on. I hope they will help you avoid running into cash flow issues as you run your business:


1. Low gross margin

Following a close analysis of our margins, we realized that the low margins on our sales were a critical contributor to a lack of sufficient cash flow in the business.

This was primarily due to the low fees we charged early on in the business. In our attempt to quickly acquire clients, we went low on fees and provided services similar to other providers. We essentially competed on price rather than on value.

We could not justify charging a higher fee due to the lack of differentiation in the market place. To address this concern, we now invest in ways to differentiate our services from the rest of the market. We are continually working on different ideas to change service delivery and add more value to our clients.

If you are able to offer more value to your clients, you can charge higher fees for the value you provide — value that clients cannot get from your competitors.

“Entrepreneurs believe that profit is what matters most in a new enterprise. But profit is secondary. Cash flow matters most.” — Peter Drucker


2. Slow-paying invoices

At some point in my business, this was a big concern as we had thousands of dollars in receivables that were 30 days, 60 days, and sometimes 90 days past due.

The impact on cash flow can be significant when invoices are not paid on time. For some understandable reasons, we were shy to ask our clients to pay.

Our clients are busy professionals and business owners, so most often they simply forget.

As business owners, it is our responsibility to remind clients to pay. To address this problem, we implemented a few things like:

  • Requiring upfront payment of a certain percentage of the total fees prior to commencing the engagement;
  • Invoicing more timely;
  • Following up more frequently on unpaid invoices;
  • Offering early payment discounts;
  • Implementing monthly or quarterly recurring pre-authorized payments; and
  • Automating the process to remind clients of unpaid invoices.
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3. High overhead expenses

Every business will have overhead expenses that must be managed closely. The overhead expenses impacted our cash flows and we found it challenging to cut in this area.

What we did was to look for cheaper ways to pay for the key things we needed. For example, we cut our radio advertisement which was expensive, and spent a fraction of that money on running events and online marketing.

“The more a business owner knows about their cash flow, the more empowered they become.” — Nick Chandi


4. Bad debt

If you’re in a business like ours, you will likely deal with bad debt. While the impact on our cash flows is less for this issue compared to the others, we have had our share of bad debts.

These are clients who just don’t pay part or the entire invoice. Requiring upfront payment has minimized this and implementing a more robust client engagement process is something we are refining to help substantially reduce the likelihood of bad debt.

“If I had to run a company on three measures, those measures would be customer satisfaction, employee satisfaction, and cash flow.” — Jack Welch

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5. Slow investment or capitalization of the business

A growing business requires capitalization to fuel that growth. You can capitalize one of two ways — reinvest your profits into the business or add debt to the business by borrowing.

In running our business, we’ve used both options but to a limited degree. Although our business has grown over the last couple of years, the growth has been slow, principally because we’ve not been aggressive in throwing more capital to fuel growth.

Growing a business is a double-edged sword. On the one hand, it can put significant pressure on your cash flow. On the other hand, if successfully implemented, it can add a lot of new cash flow streams to your business.

We’re now at a place in our business where we feel comfortable increasing the capitalization of the business a little bit more aggressively than we’ve done in the past.

We continue to minimize owners’ draw from the business so we can leave the capital to invest in growth.

“There is really only one way to address cash flow crunches, and it’s planning so you can prevent them in advance.” — Elaine Pofeldt

The key here is to have a long-term view of your business that will enable you to invest more in the capitalization of the business.

I hope you find a few points from this article to improve your business cash flow. In upcoming articles, I will look into other core areas of running your business.


In Conclusion

Cash is king!

If you don’t want to go through the experience that many businesses went through during this pandemic, then you have to keep a close eye on your cash flow and ensure you have sufficient reserves either in the form of cash saved or available financing if you run into hard times.

P.S. I am on a mission to arm you with financial education. That’s one reason I started writing on medium and that’s why I wrote Tax-Efficient Wealth. This book will help you accelerate your wealth in a tax-efficient way. Grab a FREE eBook version of my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal FinanceTax Planning

The Differences Between Canada Pension Plan (CPP) and Old Age Security (OAS)

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Clarifying the differences between CPP and OAS for Canadians nearing retirement

For many Canadians nearing retirement age and those considering their options for the best time to take retirement benefits, they don’t understand the difference between the CPP and OAS. In this article, I will clear the confusion and clarify the differences between these two popular benefits for Canadian Pensioners.


Overview and Definitions

The Canada Pension Plan (CPP) retirement pension is a monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life. To qualify you must:

  • be at least 60 years old
  • have made at least one valid contribution to the CPP

Valid contributions can be either from work you did in Canada or as the result of receiving credits from a former spouse or former common-law partner at the end of the relationship.

CPP payments are not automatic. You must apply in advance of when you want the pension to start in order to receive payment.

One important point to note is that the CPP is not a government benefit and it is not funded by the government. CPP is a defined benefit pension plan, funded by employees and their employers.

The funds are managed by the CPP Investment Board. The CPP Investment Board was established by an Act of Parliament in December 1997. The board is accountable to Parliament and to federal and provincial ministers who serve as the CPP stewards. However, the board is governed and managed independently from the CPP itself and operates at arm’s length from governments.

The Old Age Security (OAS) program is the Government of Canada’s largest pension program. It is funded out of the general tax revenues of the Government of Canada. This means that you do not pay into it directly.

The OAS pension is a monthly payment available to seniors aged 65 and older who meet the Canadian legal status and residence requirements. You may need to apply to receive it.


Pension amount

CPP

The amount you receive each month is based on your average earnings throughout your working life, your contributions to the CPP, and the age you decide to start your CPP retirement pension. Your contributions to the CPP are based on your earnings.

The standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.

If you start receiving your pension earlier, the monthly amount you’ll receive will be smaller. If you decide to start later, you’ll receive a larger monthly amount. There’s no benefit to wait after age 70 to start receiving the pension. The maximum monthly amount you can receive is reached when you turn 70.

For 2019, the maximum monthly amount you could receive as a new recipient starting the pension at age 65 is $1,154.58. The average monthly amount is $679.16. Your situation will determine how much you’ll receive up to the maximum.

OAS

The amount of your Old Age Security (OAS) pension will be determined by how long you have lived in Canada after the age of 18. If you were a resident of Canada for 40 years between the age of 18 and 65, you will get the maximum OAS amount.

OAS benefits are adjusted quarterly (in January, April, July, and October) if there are increases in the cost of living as measured by the Consumer Price Index.

The maximum OAS benefit in 2020 is $613.53 per month.


Age of eligibility

As discussed earlier, the standard age to start the pension is 65. However, you can start receiving it as early as age 60 or as late as age 70.

OAS is a benefit available at age 65. You cannot collect OAS any early and new rules now allow for the voluntary deferral of OAS to as late as age 70.

Note that your employment history is not a factor in determining eligibility for OAS: you can receive the Old Age Security (OAS) pension even if you have never worked or are still working.

If you are living in Canada, you must:

  • be 65 years old or older
  • be a Canadian citizen or a legal resident at the time we approve your OAS pension application, and
  • have resided in Canada for at least 10 years since the age of 18

Clawback

With the CPP, there is no clawback. Clawback only applies to OAS.

The OAS clawback means that if you earn more than the maximum annual income allowed for a given year, you will have to repay part of or their entire OAS pension. The income threshold for 2019 is $77,580.


Survivorship

When a pensioner dies, the CPP will make the pension benefit payment to the surviving spouse. The surviving spouse must apply (it is not automatic) and the maximum combined CPP pension (personal CPP plus CPP survivor) cannot exceed the annual maximum benefit.

There are no provisions for OAS to continue to any after death. OAS ends when the pensioner dies.


Adequacy of pension funding

According to the CPP Investment Board, the CPP appears to be well funded.

Every three years, the Office of the Chief Actuary of Canada conducts an independent review of the sustainability of the CPP over the next 75 years.

In December 2019, the Office of the Chief Actuary reaffirmed through its latest triennial review that each part of the CPP remains sustainable at the legislated contribution rates throughout the 75-year period of her report (i.e., until 2095), based on actuarially accepted assumptions.

As of March 31, 2020, the Fund’s 10-year net nominal annualized return of 9.9% (or 8.1% on a net real return basis) is comfortably above the Chief Actuary’s assumption over this period.

OAS is funded by tax dollars. According to government reports, OAS is costing the government $36.5 billion dollars. The government predicts that the cost to fund Old Age Security will triple to $108 billion by 2030. OAS may be subject to changes in the future as this is not independently governed like the CPP.


Final Thoughts

Now you know the difference between these two benefits.

If you’re considering retiring, ensure you do some planning to maximize your benefits from these programs.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal DevelopmentSelf Growth

20 Quotes to Inspire You to Invest in Yourself

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The best investment you can ever make is an investment in yourself

I believe that the best investment you can ever make is an investment in yourself.

If you realize that you’re the #1 asset in anything you do, then you will begin to prioritize investment in yourself.

And this is why.

If you’re employed, you were for a reason — for the special skill you possess. So you must keep investing in yourself to stay on top of your game if you want to keep getting promoted and keep getting higher bonuses.

If you own a business, you are the business. You make all the critical decisions. You hire the best people. You are the top sales and marketing guru in your business. So, if you want to keep generating higher and higher income, you have to stay on top of your business by investing in yourself.

If you don’t invest in yourself, no one will.

You invest in yourself by:

Learning and growing in your knowledge in critical areas.

Learning how to learn.

Hiring coaches and mentors to collapse time and avoid costly mistakes.

Growing in your spirituality.

Mastering the mindset of successful people.

Mastering how to effectively build relationships and how to work with people.

Learning how to build communities and how to build a movement.

It is suggested that you invest at least 10% of your gross earnings in yourself. Often times, if done correctly, this investment will yield rewards that are multiple times what you invested.

That is the power of investing in yourself.

Here are 20 quotes to inspire you to invest in yourself:


Quote # 1

“Be patient with yourself. Self-growth is tender; it’s holy ground. There’s no greater investment.” ―Stephen Covey

Quote # 2

“Income seldom exceeds personal development.” — Jim Rohn

Quote # 3

“Every moment of one’s existence, one is growing into more or retreating into less.” — Norman Mailer

Quote # 4

“Dream big, start small, but most of all, start.” — Simon Sinek

Quote # 5

“You cannot dream yourself into a character; you must hammer and forge yourself one.” — Henry David Thoreau

Quote # 6

“The only person you are destined to become is the person you decide to be.” — Ralph Waldo Emerson

Quote # 7

“Life is growth. If we stop growing, technically and spiritually, we are as good as dead.” — Morihei Ueshiba

Quote # 8

“Change equals self-improvement. Push yourself to places you haven’t been before.” — Pat Summitt

Quote # 9

“Personal development is a major time-saver. The better you become, the less time it takes you to achieve your goals.” — Brian Tracy

Quote # 10

“Personal development is the belief that you are worth the effort, time and energy needed to develop yourself.” ―Denis Waitley

Quote # 11

“There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.” — Ernest Hemingway

Quote # 12

“Personal confidence comes from making progress toward goals that are far bigger than your present capabilities.” — Dan Sullivan

Quote # 13

“Growth is the great separator between those who succeed and those who do not. When I see a person beginning to separate themselves from the pack, it’s almost always due to personal growth.” — John C. Maxwell

Quote # 14

“In this world you’re either growing or you’re dying, so get in motion and grow.” — Lou Holtz

Quote # 15

“One can choose to go back toward safety or forward toward growth. Growth must be chosen again and again; fear must be overcome again and again.” — Abraham Maslow

Quote # 16

“Strive not to be a success, but rather to be of value.” — Albert Einstein

Quote # 17

“Investing in yourself is the best investment you will ever make. It will not only improve your life, it will improve the lives of all those around you.” — Robin Sharma

Quote # 18

“Don’t go through life, grow through life.” — Eric Butterworth

Quote # 19

“Stay afraid, but do it anyway. What’s important is the action. You don’t have to wait to be confident. Just do it and eventually the confidence will follow.” — Carrie Fisher

Quote # 20

“We can’t become what we need to be by remaining what we are.” — Oprah Winfrey


Final Thoughts

If you want success and if you want to use all of your potentials, you cannot neglect to invest in yourself.

Being at the top of your game and staying there will require enormous investment in yourself. It is hard work, it takes time but the reward is much better than the effort you put in.

So, what are you waiting for?

Start doubling, tripling, or quadrupling the investment in yourself now. Your future self will thank you for this.

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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Personal DevelopmentPersonal FinanceSelf Growth

Why Finding Job Satisfaction Is so Rare

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This is why so many people are stuck at jobs they hate

As a full-time employee, I worked for five different companies in the span of 17 years. This would seem like a lot of companies in a relatively short period of time. It certainly would be for the older generation but not for the millennials.

These days, it appears to be more trendy to move more frequently from one company to another in search of better pay, more prestigious job title position, more authority, and more power.

As I think back to my career in the corporate world, I don’t recall too many times when I really had job satisfaction. Something was always missing that made the job frustrating for me — terrible bosses, incompetent colleagues, poor compensation, lack of passion, lack of corporate integrity, etc.

I don’t recall one person in my 17 years career in the corporate world that loved his or her job or had anything amazing to say about the job. It was more common to hear colleagues complain about one thing or the other about their jobs.

So, why is it so rare for many to find job satisfaction in the corporate world?

In an article by Michael Hyatt, he writes that job satisfaction requires three components:

  1. Passion: This is where it begins. What do you care about? What moves you? What problems do you want to solve or issues you want to address? If your heart is not in your work, you have a job but not a calling.
  2. Proficiency: Passion alone is not enough. You have to be good at what you do. Being good enough will not give you the satisfaction you desire. You have to excel at your craft and be awesome. Mastery is the goal.
  3. Profitability. To enjoy a successful career, people must be willing to pay you for what you do. You don’t have to get rich, but there must be a market for your product or service. Otherwise, your career is not sustainable.

As Michael writes, if you have all three of these components, you can experience genuine career satisfaction which is at the intersection of all of these three components as illustrated in the figure below:

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Image Credit: https://michaelhyatt.com/

Anything short of these three components intersecting perfectly will lead to something other than true job satisfaction.

  • If you have passion and proficiency without profitability, you have a hobby. Many people that work in the Not-For-Profit sector will fall into this category. They have the heart to serve using the skills they’ve been blessed with but end up overworked, stressed, and unable to pay their bills.
  • If you have passion and profitability without proficiency, you have failure. You can fake it in the short-term but in the long-term, your lack of proficiency will be exposed. You will struggle to get hired, or simply be flushed in the next round of layoffs.
  • If you have proficiency and profitability without passion, you have boredom. This was my story in the latter part of my career where I had the proficiency and had decent pay but was bored as the job did not fulfill me intellectually or otherwise.

This explains why the majority never find job satisfaction because it is rare to find a job that has a perfect intersection of all of these three components.

To find job satisfaction, you will have to create your own job. If you’re in the corporate world, this means you must be in a position with a lot of authority.

If you’re an entrepreneur you have a better chance of finding job satisfaction in your business. However, note that most entrepreneurs don’t start out here. It takes years of tweaking the business to get to the point where you will have true job satisfaction even as an entrepreneur.

Final Thoughts

If you have job satisfaction, lucky you. It is rare.

If you don’t, ask yourself, “Which of these three components am I missing? What could I do to become more satisfied with my job?

P.S. Do you know I have a new book that can help you accelerate your wealth in a tax-efficient way? Check out my new book, Tax-Efficient Wealth, to learn how you can build wealth quickly using strategies that will save you a ton in taxes.

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