As one of Canada's youngest retirees at the age of 32, and after becoming mortgage-free at 29, Kornel interviews the top financial experts in Canada to help you optimize your investments, reduce your taxes, and help you accelerate your journey towards financial independence and early retirement. He also shares his own experiences and lessons learned in investing and as an early retiree and member of the FIRE (Financial Independence, Retire Early) movement to help you optimize your finances, specifically here in Canada.
Optimizing Investing Through Your Work - Employer Match, Defined Benefit, and Defined Contribution Pensions in Canada - Featuring Robb Engen from BoomerAndEcho.com
One question that I’ve been getting asked a lot, both from listeners of the podcast, as well as those in my investing course, is how to deal with and optimize any sort of investments through your work.
Typically, in Canada, when you work for a mid-size or large organization, you’ll either be part of a defined contribution pension plan, or a defined benefit pension plan.
We’re going to cover both types of pensions in this interview, and specifically, some of the things we’ll cover are:
How should a pension factor into how you view your finances/investments? (And again, this is all going to be for both types of pensions, no matter which one you have).
What should your portfolio look like with a pension (i.e. more equity than bonds?), especially depending on the type of pension that you have.
How to factor a pension into an early retirement.
The tax implications of potentially taking a buyout for early retirement (if that's an option) We cover all that, and much more in the interview (scroll down for the full list of questions).
Our Expert Guest: To help me with this, I have Robb Engen on the show, who is one of the most reputable fee-for-service financial planners that I know of in Canada.
He also runs one of the largest and most reputable personal finance blogs in Canada called boomerandecho.com.
He’s regularly quoted or featured in financial media such as the Globe & Mail, MoneySense, the Financial Post, CBC, and Global News. He used to actually work for a university here in Canada, where he had one of those nice gold-plated pensions, but ended up transitioning from that to becoming self-employed, so he had to go through this pension analysis himself first-hand on what to do when you have a pension, and then no longer wish to stay with that employer.
Because of his background, first-hand experience with pensions, and fantastic reputation in this space here in Canada, I thought he’d be a great fit for this episode, as he’s gone through these options and this analysis himself, so it’s not just some theory that we’re going to be talking about here.
Resources Mentioned: Robb's Site:
Robb's Fee-for-Service Financial Planning Page:
You can get your free Passiv account here:
My guide on how to redeem your free premium account upgrade in Passiv is here:
You can view the stock/equity side of my portfolio (what I invest in and how much of each ETF type I buy) here:
The account that I use for the safe part of my portfolio is here (I use the high-interest savings account, but they also do GICs if you are willing to lock in the money for a bit to get a higher rate):
Questions Covered: To start things off, can you take us through what the main pension types are for Canadians, and what are the key differences between them?
How should the 2 different pension types factor into how you view your finances and investments?
What should your investment portfolio look like, depending on the type of pension that you have?
(ie. more equity than bonds if you have a defined benefit pension?)
How do you factor in a pension into an early retirement? (for both pension types)
What are the tax implications of potentially taking a pension buyout for early retirement? (if that's an option)
Robb, you had a defined benefit pension when you worked at the university before becoming self-employed as a fee-for-service financial planner. Can you take us through how you decided between keeping the pension vs receiving the buyout?
What are the pros and cons of each approach?
When you have a defined benefit pension plan, your RRSP contribution room gets reduced. This begs the question of whether employees with good defined benefit pension plans should even bother with RRSPs.
Let’s also tackle this question fo
Hybrid Investing: An Improvement on Passive Investing?
Long-time listeners of the show know that I am always on the hunt for personal finance and investing tools that actually work for us Canadians. Too often we hear about some great tool or resource and then it turns out that it’s only for those in the US.
With that said, I wanted to bring on two CEOs today. The first is from a tool that I’ve been using and been hooked on for years now, which essentially automates any rebalancing that I have to do in my portfolio (so I don’t have to do the tedious data entry into a spreadsheet anymore to calculate how much of each ETF I have to buy every time that I have some money to invest).
One thing that I recently noticed is that I almost never log into my Questrade account anymore, because I would much rather just buy the investments right within one tool for all our accounts, whether it’s my account, my wife’s account, or our kids’ RESP, instead of having to log in and out of each account and doing the trades and calculations manually.
Our Guests: The tool and company that I’m talking about is Passiv. The CEO and our 1st guest today is Brendan Lee Young, and you can actually use Passiv for free, over at BuildWealthCanada.ca/free. They integrate with different Canadian Brokerages out there like Wealthsimple Trade for example, but if you’re a Questrade user like me, you actually get their Premium account for free, so that you can do the trades right within the tool and make your portfolio more tax efficient right from within Passiv.
Our second guest CEO is Alex from Global Predications which is a tool that I just recently heard about that is now available in Canada. I’m in the process of trying it out now. Some of its main functionality is that it can help find risks and problem areas within your investment portfolio, give suggestions on how to improve your portfolio, and let you visualize your net worth using all your assets (instead of just your investment portfolio). And, if you want to check them out, their Canadian page where you can get a free account is here.
I thought we could have an interview to discuss some of the tools available to us Canadians, and as a bonus, what’s really neat is that Passiv actually has a way for you to share what investments you’re holding with others, so in this episode, I also provide a link to my portfolio in Passiv so you can see exactly which ETFs I buy, and what my asset allocation is in terms of bonds vs stocks, and in terms of geography (so how much I have in Canada vs US vs International).
I hope you enjoy the discussion!
Resources Mentioned: You can learn more about Passiv and get a free account here.
You can also see my asset allocation and what ETFs I buy using Passiv here.
Here is the Global Predictions page where you can get free access, specifically for Canadians. FYI, this page is specifically for Canadians so you'll find it more relevant than just going to globalpredictions.com (which is the US version).
Thank You To Our Sponsor: Shopify A big thanks to Shopify for sponsoring this episode. You can get a free 14-day trial of Shopify here.
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Are You Holding the Right Bonds in Your Investment Portfolio?
When learning how to invest, we are consistently told to conduct our “due diligence” on the investments that we’re considering buying. Yet, almost all of us haven’t actually been trained on how to analyze the investments that we’re considering, so that we choose the ones that are right for our particular situation.
To help remedy this, I thought it would be good to give listeners a bit of a training on how to actually interpret the figures and terminology that we see used here in Canada, when we’re considering purchasing an investment.
Now this is obviously a very large topic as there are many types of investments, so I thought we could start with learning how to understand bonds (especially bond ETFs).
We’ve definitely seen some drops in the market recently and I suspect many investors are wondering about holding bonds, if they are holding the right types of bonds, and how to actually interpret the data that you see when you’re looking up information about a bond ETF.
Guest Bio: To help me with this, I have Danielle Neziol back on the show. Danielle and her team actually created and continue to manage the largest bond ETF in Canada (and in case you’re curious, that ETF is ZAG from BMO ETFs which now has over $5.8 billion in net assets).
Danielle is the Vice President over at BMO ETFs, and I thought it would be great for us to actually get some training from her on how to interpret the facts sheets that we all see when we look up any type of bond ETF, no matter who the provider is.
My goal is that this interview gives you the knowledge to be more confident in your investing, and hopefully helps relieve any anxiety that you may feel when it comes to choosing your own investments, or helping ensure that you are in the types of investments that are the best fit for you.
Resources Mentioned: Danielle and her team host free weekly webinars where you can learn more about ETFs, as well as ask them your ETF questions. I've been a guest there several times and it really is a great resource for Canadian DIY investors.
You can view past replays and sign up to attend the upcoming webinars for free here: etfmarketinsights.com
Also, be sure to subscribe to the ETF Market Insights YouTube Channel where you can also see past recordings.
Questions Covered: Investors place a lot of time deciding how much of their portfolio should go into bonds vs stocks. Yet, when it comes to bonds, there are several different types and they can each behave differently. Can you speak to the different types of bond ETFs out there, and what differences can we expect from them? Especially when it comes to changing interest rates and different economic climates?
When examining all these different types, I can see it being overwhelming for some investors when they do a search and see dozens of different bond ETFs out there from all the different providers. One may begin to wonder whether they should pick and choose individual bond ETFs, or whether they should just hold one large aggregate bond ETF like ZAG which holds all these different types of bonds in a diversified manner. For those struggling with this question, what advice can you give?
Does a rising interest rate environment like we are in now change how we should be thinking about bonds?
Often when I see a model portfolio from a professional in the industry, the bond portion of the portfolio includes a bond ETF that contains only Canadian bonds. ZAG if I’m not mistaken also holds exclusively different types of Canadian bonds. Why is that, when with equities on the other hand, we want international diversification?
One of Canada’s largest bond ETFs (ZAG) is designed to replicate the FTSE Canada Universe Bond Index. Is this index a standard that many other bond ETF providers are using as well? And for us index investors, how can we make sure that the ETF we choose is trying to replicate the correct index?
When evaluating which bond ETF(s) to use for ou
Andrew Hallam: How to Invest and Spend for Happiness, Health, and Wealth
Today I’m extremely excited to have Canadian best-selling author, Andrew Hallam back on the show. His first book, Millionaire Teacher continues to be the #1 best seller in the Investment and Portfolio Management category on Amazon.
He is one of the world’s most prolific financial wellness speakers and over the past 16 years, he has given hundreds of talks in over 30 different countries espousing research on financial wellness, sound investing and life satisfaction.
He has been investing in the stock market for 32 years, having built a million-dollar portfolio on a schoolteacher's salary when he was in his late 30s.
In today’s interview with Andrew, we cover the subject of how to achieve balance, and how to maximize your happiness, health, and wealth.
We also cover what to expect and how to maintain balance after having hit your financial independence number. Lots of early retirees in the FIRE movement and traditional retirees continue to do some sort of productive paid work. Why is that, and is it realistic to never work again after you retire?
As you can imagine, generating some minor income after retirement, doing something you love, can drastically decrease how much money you actually need to retire from your day job, potentially letting you leave that job you may dislike or be bored with many years earlier.
Since Andrew is already financially independent, we dissect how Andrew has found that balance in his life between taking on meaningful and fulfilling work, and balancing that with leisure, health, and happiness.
1. When a lot of people, myself included start their financial independence journey, the goal is to never work again and that becomes a major motivator to accumulate all those savings to be able to retire.
Yet from my own experience and after interviewing many other early retirees, I've noticed a pattern where most if not all still end up doing some sort of productive work or something that could be classified as “work” even though they don't have to, since they've already reached their financial independence number.
Did you have the same experience as you moved from the accumulation stage to the financial independence and retirement stage, and from your experience what have you found to be a good balance in your own life?
2. You've spoken with many other early retirees who I assume had a similar experience in terms of that progression from initially never wanting to work again and live a life of leisure permanently, versus eventually realizing that there needs to be a balance to achieve sustainable happiness. Have you noticed any patterns from those you've talked to in terms of how they were able to find sustainable happiness and what that balance was for them in order to achieve it?
3. After reading your book, it becomes very clear that health and longevity is something that is a high priority for you, and should be for all of us since what’s the point of accumulating all this wealth and retiring if you don’t live long enough to enjoy it.
From the research that you’ve done, what have you found to be the best practices to maximize our health and longevity?
Nutrition? Types of exercise and frequency? Cancer prevention? Stress control? Energy maximization? 4. In terms of maximizing happiness in retirement, is there a routine that you follow during any part of your day that works well for you? Or do you take a more fluid, go-with-the-flow approach, where things are more spontaneous?
5. Do you find that goal setting and trying to achieve growth and improvement in retirement adds to your happiness and fulfilment? Or do you take the approach of trying to just be happy with where you are, living in the moment, as opposed to continuously striving for more?
6. Please tell us again where we can learn more from you and get your latest book.
Guaranteed Income For Life: How to Use Annuities in Your Investment Portfolio
When it comes to the safe portion of our portfolio, we’ve talked about GICs and high-interest savings accounts before, but one option that we haven’t talked about yet, is one that gives you guaranteed income for life, no matter what the markets are doing, and those are called annuities.
So, I thought it would be good for you and me to get some annuities 101 knowledge under our belts, so that we can better understand what’s out there, what are the pros and cons of annuities, and so that we can better determine if they are something that we should look into further, based on each of our particular situations.
To learn more about this, I thought it would be good to get our information from two different sources. The first, would be fee-for-service financial planners who don’t actually create or sell annuities, but are responsible for potentially using annuities as part of a total financial plan.
With that in mind, I’m definitely going to be asking financial planners that I interview in the future about annuities, so that we can get a holistic view and multiple perspectives on the subject.
The other source of information that I thought would be good to interview, is an actual creator of annuities. This way we’re getting the information right from the source about how they actually work, their intent, the pros and cons, and how they can potentially fit as part of a financial plan.
To help me with this, I have Selene Soo on the show. She is the Director of Product Strategy and Development in the area of Wealth Management over at RBC. She has been there for over 17 years, and has been in the industry itself for over 2 decades, so she definitely has a wealth of experience and knowledge when it comes to annuities.
I thought I’d pick her brain so that we can get a solid foundation on annuities, and one question that I’ve been extremely curious to ask someone like her that’s actually in the industry, is for those of us who don’t have a defined benefit pension through our work (for example, those of us that are not government works, teachers, police officers etc.), is there a way that we can get the type of guaranteed income for life in retirement that the government workers get, by using annuities?
We definitely get into that question, plus a lot more. Thanks for tuning in, enjoy the learning, and now let’s get into the interview.
Rising Interest Rates, Variable vs Fixed Mortgages, and How to Take Equity Out of Your Home
In this episode, we cover the rising interest rate environment that we're currently in here in Canada, and how it can impact you financially.
We also cover how to decide whether you should go fixed or variable on your mortgage in the current interest rate environment.
Next, we cover the subject of how you can take out some of the equity that you’ve built up in your home, so that you can either use it to invest, or deploy it elsewhere (without having to actually sell your home).
We also discuss the Smith Manoeuvre, which is a technique that you can use here in Canada to make your mortgage interest tax-deductible (and be able to invest a bit easier when you pay down your mortgage).
All this and more on this month's episode.
For the first time in over 3 years, the Bank of Canada has started raising interest rates. What should we be considering if we have a variable rate mortgage or have debt that’s tied to the prime rate (like a home equity line of credit)? For Canadians that have their mortgage coming up for renewal in the near future, or those looking for a new mortgage, based on the current environment, what is the mortgage rate outlook for the coming year and how can those Canadians best decide whether they should go fixed or variable? From what you’re seeing, what is the real estate market outlook for this coming spring and the rest of the year? Is it likely to be a buyer's market or a seller's market? What kind of buying/selling environment should people be ready for if they are thinking of moving, buying/selling a house? Home prices have grown substantially over the years making many Canadians who already own a house pretty wealthy on paper, but much of that money or equity is tied up in the house, and I’m sure many of us would like to be able to use some of those gains either for investing, or other things. We’ve probably all heard of using a home equity line of credit (HELOC) to take some of that money out, but what are the other options available to us, and what are the pros and cons of using a HELOC vs these other options? On the flip side, with the rising cost of living (we’re hearing about inflation a lot), cash flow is becoming a challenge for some Canadians, making it even more difficult to find extra cash to invest for their retirement, while also paying down their mortgage and other expenses. However, there are strategies to pay down your mortgage and invest at the same time. Can you explain this strategy to listeners that are in this situation? And what are the pros and cons?
Love Build Wealth Canada! I’ve listened to all of the episodes. Kornel is great!
Great Content !! Too much rambling!
Great podcast with good content and knowledgeable guests but a little too much rambling from the host. Good job overall but make your point and move on.