# "... a science of uncertainty and an art of probability!"



## DrMatt (Dec 11, 2011)

This is the grand plan (for now)... A few hours of reading on this forum has helped it congeal! I don't think I'm going to do the real estate thing anymore (unless there's a major correction and it becomes too attractive to avoid - like equities did in early 2009!)

Few points to start: We're two professionals, pushing forty (actually my wife is a few years younger than me). Our rough gross household income in 2011: $440,000. Three kids and a live-in nanny. $550k home. $230 left to pay it off. Two cars: one new (the obligatory 8-seater) worth ~$35000, one old (probably needs replacing soon ~2years) worth ~$3000. $60k in equities split between two maxed TFSAs and one RRSP (not maxed). One of us also has a defined benefit government pension that is currently worth ~$350,000 or, deferred, non-indexed, ~$3000/month at the age of 65. Currently we are not saving other than debt reduction going forward into the near future.

The Grand Plan:

Goal: To achieve after-tax passive Cashflow from investments of 10K / month by the year 2029. 

Short-term: continue paying down debt at a rate of ~$10K/month until all debt is gone. Then amass six months gross pay (in an emergency fund) in a GIC ladder. We expect the debt to be gone in two years (hopefully less)... Then, due to the wonders of incorporation, expect the emergency fund to be capitalized within another year.

At that point, it will be 2015 and we'll be ready to start the retirement fund.

A conservative estimate of saving ability (retained in the corp) is ~$10K / month (possibly twice that on a busy month). The intention is to have a portion of this in fixed income and a portion in a basket of ten strong dividend paying securities. Hopefully I pick securities that will be around into 2029 and that I can repeatedly sell calls and puts on. (I'm already in RY, BNS, ENB, FTS, REI-UN, SC, and MFC... Considering POT, TRP, CNR, TCK.B, CNQ, ABX, SU, IMO, ???). I also intend to keep a smaller portion set aside for play money (riskier equities, short-term trades). The fixed income portion will vary. I'm thinking 25% of total savings in the first five years, 50% in the middle five, and 75% in the final five. Will probably use GICs for this... Unless I can figure out a cheap way to put together my own bond ladder with government bonds and corporate bonds mixed together?!?

The mechanics of the equity positions will probably vary also... but I have a vague notion that I'll be able to sell cash-secured puts on the desired securities, at a strike price that is attractive, that when exercised leads to a purchase of ~10K worth of the underlying security... Then repeat monthly. Which stock is chosen in any given month will depend on which seems most attractive that month, and which has the most attractive put valuations... I might wait a few months and put more funds into one play...

Might buy fixed income early in the year, or later... Lots of variables that haven't been worked out. This is the part that I might just get someone else to do for me??! Depending on how much time is consumed by it... will at least seek out some additional council... 

How does that sound?
Any suggestions?
Anyone have ten better stocks to suggest?
Should I add some international equities?
Should I do the etf couch potato thing instead?


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## steve41 (Apr 18, 2009)

Need to see what is already in savings (reg,txfree,nonreg) as well as spousal breakdown. (Salary breakdown as well) Unless I didn't read carefully enough.


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## Four Pillars (Apr 5, 2009)

Is the $10k/month of income in 2029 in today's dollars?

Offhand, I don't know how you are going to have time to manage individual stocks plus the options trading.

I would suggest starting with a couch potato and then just add the extra-curricular activities later on if time permits.

You might also want to look at Steve's numbers as well as consider a fee-only financial advisor to look at your situation.

If anything, I would be more concerned about saving too much, rather than not enough.


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## DrMatt (Dec 11, 2011)

I'm starting to think "saving too much" could be a real concern (like my wife has been trying to tell me!) but intergenerational wealth is also important for us... So tax efficient means of passing things on is an important consideration to get right as well.

Ideally we'll be able to create the equivalent of 10K in future buying power... But that might be too much to ask?? And... given that today's 10K will likely be more than enough to live on, even then (am I wrong in thinking this?)... its a good round figure to aim for... we'll be pushing hard for that, as fast as possible, and then slowing it down and letting it accrue further on its own... (That's, hopefully, when you'll find us somewhere in the third world teaching young docs and treating obscure diseases...)


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## Spudd (Oct 11, 2011)

If her pension is 3k then do you only need 7k/mo from your investments? That should be easier to reach.


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## DrMatt (Dec 11, 2011)

I really appreciate you taking the time to do that for me... Unfortunately those calculations are next to useless... It says nothing about Cashflow... Which is my primary goal. And it doesn't reflect the reality of our financial position... I.e. as soon as we incorporate, our personal income won't be anything like the figures we currently make... And the corp will be able to amass funds much much more quickly than we will (significantly smaller tax rate). 

Wish there was an easy way to figure out these things... Future Cashflow from equity and bond positions, growth of retained earnings, etc... It looks like my projections will remain speculation until its officially history.

I'll try to keep you updated on how things go...

Thanks again. And happy holidays!


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## steve41 (Apr 18, 2009)

DrMatt.... Did you get my response/plan? I find that PM-ing on CMF to be a real pain. I sent it several hours ago.


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## DrMatt (Dec 11, 2011)

Steve, 
Yes I did, thank you. (The message above was meant for you... It sounds harsher than I meant it to... I really do thank you for your time... It's just not that helpful.)


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## Four Pillars (Apr 5, 2009)

DrMatt said:


> Steve,
> Yes I did, thank you. (The message above was meant for you... It sounds harsher than I meant it to... I really do thank you for your time... It's just not that helpful.)


I've looked at some of Steve's plans - I would have thought they were exactly what you were looking for? 

Maybe you are not looking for what I thought you were looking for.


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## DrMatt (Dec 11, 2011)

FP,

It's not helpful because its not at all representative of how our finances will look. My paper "income" will probably be closer to $60k for most, if not all, of the 15years... Because that's what i'll be paying myself out of my corporation (enough to support our lifestyle - whatever we figure out we need)... The corp will own all of our investments.

It is reassuring to see that there's going to be a lot of money available (but I knew that already).

I do have to admit though that it is definitely quite thorough and was put together really quickly for all the information it contains... Quite impressive!

I'm just a little picky. Wish there was an easy way to calculate things the way I see them playing out...


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## MoneyGal (Apr 24, 2009)

DM: you can get the kind of analysis you are looking for, but not for free. There are lots of financial planning, investment management and accounting firms - some of them really excellent - that specialize in doing this kind of analysis for professionals (medical, dental, etc.)


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## steve41 (Apr 18, 2009)

I would have thought that $136,000 income (after tax) in today's dollars would have sufficed going the POT (plain old taxpayer) route. (retiring at 60) 136K is a lot of caviar and champagne, IMHO.


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## DrMatt (Dec 11, 2011)

Yes... Quite impressive. And very reassuring. Thank you. (this means it almost doesn't matter how terribly I mess up the equities portion if our portfolio... As long as we put enough into the fixed income to keep pace with this baseline analysis... So, admittedly, not "useless"...)


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## steve41 (Apr 18, 2009)

I used a 4% rate of growth (nominal) and 2% inflation. Since I am not an 'investophile', I am not aware how conservative (or not) this makes the plan. Also, I taxed the nonreg as all interest, without an equity or dividend component.


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## Four Pillars (Apr 5, 2009)

DrMatt said:


> FP,
> 
> It's not helpful because its not at all representative of how our finances will look. My paper "income" will probably be closer to $60k for most, if not all, of the 15years... Because that's what i'll be paying myself out of my corporation (enough to support our lifestyle - whatever we figure out we need)... The corp will own all of our investments.
> 
> ...


The problem with this kind of forecasting is that you don't know how things will play out.

What is exact amount you will be saving each year?
What rate of return will the various investments get?
What will inflation be?

It seems like you don't think Steve's analysis is very useful because (I'm guessing) it probably doesn't account for the corporation. However, I think that you are likely over-estimating the tax benefits of the corporation. 

Given the uncertainties I've listed, Steve's analysis is more than good enough, even if it doesn't fit your situation exactly and has a lot of assumptions built in.


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## DrMatt (Dec 11, 2011)

FP, That makes my point for me. Am I underestimating or overestimating the tax benefits of the corporation? This analysis ignores it.

But I agree that it is "good enough"! (and quite possibly the best I'll find! ... Any other guesstimating will probably have to be done manually.)

Steve... I think 4% (return) and 2% (inflation) are reasonably conservative figures... More useful than the pie-in-the-sky 8% default on most calculators!


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## Four Pillars (Apr 5, 2009)

DrMatt said:


> FP, That makes my point for me. Am I underestimating or overestimating the tax benefits of the corporation? This analysis ignores it.


I'll guess that you are over-estimating. There are others in here who know far more than I about the tax benefits of incorporation, but this article shows how the benefits are minimal (for investment income at least):

http://www.thebluntbeancounter.com/2011/12/should-your-investment-income-be-earned.html


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## Sampson (Apr 3, 2009)

Leaving the validity of the analysis aside (people have discussed this in the past),

it seems that all you need to do is run two corresponding analyses at the same time, one for your personal finances (given tax-optimized income) and one for the corp.

You can use Steve's analysis to see how much will be saved in your personal accounts, and how much withdrawn from the corp. This is not unlike the analyses he does for couples, only one of the partners is your corp.


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## DrMatt (Dec 11, 2011)

FP, 
Good article... Here's the thing though... Of course the corporation has to pay tax on investment gains. It's unfortunate that its not at the corporate tax rate, but that's not where you get your tax benefit from... (and remember that most of the funds i'll be saving will be over and above the RRSP Max anyway)... What does occur though, is the corporation essentially becomes another non-registered account, but one that you get to deposit a large portion of the money that would have been going to the crown. And later on, you get to choose when and how the money comes out or gets passed down to your kids...


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## heyjude (May 16, 2009)

DrMatt said:


> FP,
> Good article... Here's the thing though... Of course the corporation has to pay tax on investment gains. It's unfortunate that its not at the corporate tax rate, but that's not where you get your tax benefit from... (and remember that most of the funds i'll be saving will be over and above the RRSP Max anyway)... What does occur though, is the corporation essentially becomes another non-registered account, but one that you get to deposit a large portion of the money that would have been going to the crown. And later on, you get to choose when and how the money comes out or gets passed down to your kids...


Exactly. The beauty of the Corporation is that it is a separate legal entity with its own tax deductions. Retained earnings can be sheltered from personal tax until you are in need of them (and are in a low tax bracket). And unlike an RRSP, there are no mandatory minimum withdrawals. So in retirement, you will not be forced to take out more money than you need and end up in a higher tax bracket. The Corp does not protect you against liability, but after retirement you can convert it to a holding company.


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## steve41 (Apr 18, 2009)

> And later on, you get to choose when and how the money comes out or gets passed down to your kids...


 Yabbut. There is no restriction on how monies can come in or out of the nonreg pot anyway. Unlike the RRSP/RRIF pot.


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## DrMatt (Dec 11, 2011)

Exactly. So why would you invest in a non-reg account with after-personal-income-tax-dollars, when your corp can invest non-registered funds with after-"corporate"-tax dollars?! That article misses the point completely. The key difference is between investing 53 cents on the dollar (after 47% personal tax), and investing 85 cents on the dollar (after 15% corporate tax). Thats huge! Who cares if the interest is taxed the same way when there is that much more interest to be taxed?


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## Four Pillars (Apr 5, 2009)

DrMatt said:


> Exactly. So why would you invest in a non-reg account with after-personal-income-tax-dollars, when your corp can invest non-registered funds with after-"corporate"-tax dollars?! That article misses the point completely. The key difference is between investing 53 cents on the dollar (after 47% personal tax), and investing 85 cents on the dollar (after 15% corporate tax). Thats huge! Who cares if the interest is taxed the same way when there is that much more interest to be taxed?


I'm going to let Mr. Steve handle this one. 

Back to the original topic - I would suggest using Steve's analysis (or something like it). You can factor in a "corporation" benefit if you want. Perhaps add 5% or whatever to the future net income.

As I mentioned, with all the other uncertainties - that's good enough.


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## steve41 (Apr 18, 2009)

I ran the same plan three times.... 

-nonreg taxed as full interest
-nonreg taxed as dividends
-nonreg untaxed

In the 1st, the ATI came in at 139K,
2nd came in at 146K,
and the 3rd came in at 153K

So, I guess your tax avoidance strategy will deliver you the exotic imported caviar instead of the domestic. Bon appetite.


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## DrMatt (Dec 11, 2011)

But none of those three scenarios equates to the reality of my situation.

And please don't get me started on tax avoidance... This is probably not the place for a rant... But... Please do not get me wrong; I love this country, I am an extremely proud Canadian, and I particularly love the socialist bent to our health care funding, makes my job particularly easier knowing that I don't have to be concerned about what things cost: I just order the tests and procedures that are required... But... Writing $50,000 quarterly cheques to CRA gives a certain clarity of focus to any hint of waste in government... let's just say an era of smaller, more-efficient governments would not be unwelcome... And if I can save a little more for my kids through a government sanctioned tax avoidance strategy, then I will not hesitate to do that... In fact, I'd be crazy not to!


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## Dmoney (Apr 28, 2011)

DrMatt said:


> But none of those three scenarios equates to the reality of my situation.
> 
> And please don't get me started on tax avoidance... This is probably not the place for a rant... But... Please do not get me wrong; I love this country, I am an extremely proud Canadian, and I particularly love the socialist bent to our health care funding, makes my job particularly easier knowing that I don't have to be concerned about what things cost: I just order the tests and procedures that are required... But... Writing $50,000 quarterly cheques to CRA gives a certain clarity of focus to any hint of waste in government... let's just say an era of smaller, more-efficient governments would not be unwelcome... And if I can save a little more for my kids through a government sanctioned tax avoidance strategy, then I will not hesitate to do that... In fact, I'd be crazy not to!


Said the government worker... Man I hate giving the government back a portion of the money they gave me... .

The problem when you talk about government waste is that a number of people would consider your pay government waste. 

The system we've got is the system we've got and I'm all for working within that system to maximize one's own utility, but if we begin cutting government services, we'd all do well to take a step back and really consider what we're cutting. 

My house has never caught fire, but I hope that there are firefighters around the one time it does. Never needed and ambulance or paramedics, but if I have a heart attack I don't want to have to pay them before they save me. The list goes on... 

Granted, there are obvious examples of government waste that we can all agree on (private jet rides, private helicopter rides, fancy gazebos etc..., this list also goes on). 

The challenge is reaching a balance between the hippies and the pure capitalists.


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## DrMatt (Dec 11, 2011)

Well said.

I don't ever want to sound entitled or ungrateful. I love what I do. I love everything about this country that has afforded me the opportunity to do it... And I'm excedingly grateful and fortunate to be paid well for doing what I love. 

I'm just here as a neophyte with a sudden excess of capital who wants to try to learn a bit about how I might do a little better for my family in the long run. It would be too easy to ignore these issues and pay someone else to manage our money for us... And maybe that is what I'll end up doing in the end... but for now I'm here... 

And, by the way, I think the Canadian electorate does an excellent job reaching that balance! We've had a long run of overspending, so this era of slash and cut was overdue... But it won't last too long, and we'll start the pendulum swinging the other way soon enough.


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## Dmoney (Apr 28, 2011)

DrMatt said:


> Well said.
> 
> I don't ever want to sound entitled or ungrateful. I love what I do. I love everything about this country that has afforded me the opportunity to do it... And I'm excedingly grateful and fortunate to be paid well for doing what I love.


Wasn't an attack at all, don't worry. My mom feels the same way about her job, and apparently before McGuinty made changes to MD comp she was doing the exact same work for 1/3 the pay. She now gets paid for a load of things she did for free before, and while she feels like she's overpaid now, she's not complaining. 

The tricky part of MD compensation is that doctors can go south of the border and make a ton of cash, so we need incentives to keep them here. Have we overcompensated in the last few years here in Ontario? Maybe. I think GPs in Ontario are making a lot more than in the States, but down south patients generally go straight to the specialist which ends up costing them more overall. 

I think most Canadians want to see waste eliminated, and when we see government workers spending $1,400 a night on a hotel room we get a little pissed off at our tax bill.


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## DrMatt (Dec 11, 2011)

But comparing her pay from those two periods is a little unfair. The one-payer system keeps costs artificially low and not reflecting the 'true value' of anything... (like the politburo trying to tell people that bread costs a penny - what happened there is the black marketeers bought up all the penny bread and sold it for $50 / loaf)...

E.g. When universal health insurance came to Canada you could buy an office complex for about $2000. A doctor at that point was paid ~$4 per visit, and he/she was easily considered "upper class". Fast forward 40 years later, that same office complex: $2,000,000... That same office visit: ... Wait for it ... $16 ... And that doctor sat comfortably in the middle class. So the recent increase was welcomed by many both in and outside of the profession. (but you'll never hear doctors complaining about their pay because, 1. We don't do it for the money; and, 2. We get paid well enough either way.)


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## kcowan (Jul 1, 2010)

I appreciate every penny the government spends on health. I know that Canadian doctors are underpaid, and I am glad they are choosing the Canadian way. I don't mind waiting for non-life-threatening procedures. The price is right.


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## Four Pillars (Apr 5, 2009)

DrMatt said:


> But none of those three scenarios equates to the reality of my situation.


If you want an exact analysis - you need to hire the appropriate person and pay some money (as MG suggested). This might not be a bad idea.

In the meantime, if you assume that your scenario (using the advantages of the corporation etc) will be better tax-wise than Steve's scenario, then you can use his numbers as a minimum income level approximation.


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## steve41 (Apr 18, 2009)

Four Pillars said:


> If you want an exact analysis - you need to hire the appropriate person and pay some money (as MG suggested). This might not be a bad idea.
> 
> In the meantime, if you assume that your scenario (using the advantages of the corporation etc) will be better tax-wise than Steve's scenario, then you can use his numbers as a minimum income level approximation.


The 153K result means, that (except for tax on salary and RRSP withdrawals, CPP, etc) all investment income associated with monies outside your RRSP (i.e. your nonreg capital) will be untaxed. I can't see how managing this money in a holding company could improve that.


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## DrMatt (Dec 11, 2011)

Hard to believe over two years have passed since I made that first post..... been lurking a lot.... and learning a lot.... so thank you all.... Feel a little strange about posting some of this but I have been referring back to my first post occasionally so I figured I'd update a few things for posterity...... It's been a good couple of years for our family finances.... our mortgage is gone.... our student debt is gone... but our slightly premature backyard renovation debt (new pool and stone and hot tub) is not quite gone... But our kids are awesome swimmers and we've thrown some great parties...... AND we just found out we've over-paid taxes in 2013.... so we'll be getting a nice little tax return next month which should put us within a month or two of being completely debt free...... which feels amazing.... hence the update!

Assets: 
$550,000 House (that's about what we've put in, including the reno's.... might be marketable for more, but whatever!) 
$30,000 8-seater
$5,000 commuter sedan
$97,000 discount broker corporate investment account (mostly Cdn Dividend Payers with a portion also in a HISA at 1.25%)
$33,000 combined TFSAs (haven't added to these since 2011)
$28000 in RRSP (haven't been adding to this and not sure if we will.... the corporate account might suffice)
$16000 in an RESP (also haven't been adding to this.... the corporate account might suffice)
$800,000 DB Pension (TV)(or a deferred annuity of $60,000 annually payable in 2033.... I know Harold it's gold-plated! But please don't hate the player, hate the game.) 

Liabilities:
$0 Mortgage
$19000 LOC debt at bank prime should be gone by July (possibly sooner)
$0 owed to anyone or anything else....

So when I write it all down this way... and do the math... it appears that we're officially millionaires... ~1.5M actually...... and it's conceivable that we've been millionaires for some time..... kinda had a feeling that was the case but hadn't added the pension value until just now.... Truthfully it doesn't change anything...... our cash-flow generating assets are certainly not there yet.... our focus is not on 'net worth' anyway because it really doesn't matter, does it.... What matters is that our investments (TFSAs and Corporate Savings) generated ~$3000 in dividends, interest, and option premium in 2013 and they're currently on track to generate slightly more than $7000 in 2014........ That's the number I'm tracking with vigour.... growth in cash-flow is our only real concern now.... Hopefully it will be positive.... and hopefully I'll keep this updated with our progress..... we'll see how this post is received first.... I may not post much more but I'm reading a lot and I appreciate all your input.... 

"The purpose of life is to discover your gift. The meaning of life is to give your gift away" 
Take care of yourselves CMF'rs.... you're doing good in the world....


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## peterk (May 16, 2010)

Awesome work! so a ~700k increase in 2.5 years? :encouragement:



DrMatt said:


> What matters is that our investments (TFSAs and Corporate Savings) generated ~$3000 in dividends, interest, and option premium in 2013 and they're currently on track to generate slightly more than $7000 in 2014........ That's the number I'm tracking with vigour.... growth in cash-flow is our only real concern now....


How come? Are you planning to retire in a year or two? I would think you'd be most interested in growing your total assets, cashflow/income be damned.


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## DrMatt (Dec 11, 2011)

"700k increase in 2.5yrs..."... When you put it that way it seems more herculean than it felt... the biggest increase was in the pension Transfer Value... and that was due to a promotion and buying back some previous service... 

Paying off the mortgage was a lot of fun too... Our accountant thinks we're crazy, but I think it's a better long-term financial decision than most of the 'money-people' tend to let on... more years where zero after-tax dollars are going to pay the bank interest seems better..... sure we'd have paid less tax over the past 2.5 years (by leaving the assets in the corp), and our investment account would be that much bigger..... but going forward from here we'll be able to save a lot more.....

And "How come?"... well that's a bigger question than I thought... it actually made me think (so thanks).... Truth is I probably won't stop working... maybe ever... I kinda love the work... but buying assets that produce income just seems like the right way to go..... then the option to retire, or even take a prolonged vacation will be on the table for the rest of our lives..... 

I'm certainly no expert though.
Just muddling through.
And maybe we should be buying other things now? I don't know..... 

I'm pretty pleased with myself for achieving an "MER" of 0.059% last year and actually offsetting all trading fees (which were very minimal) with option premium... so it feels like we paid nothing!!


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## peterk (May 16, 2010)

Also take a look at this thread by a fellow Dr. http://canadianmoneyforum.com/showthread.php/17339-Anti-dividend-investing

Especially for high income individuals, dividend payments are a guaranteed taxation event. You may want to look into investments which minimize income/dividends so that you can defer paying (capital gains) taxes as long as possible.

For example:

$100,000 invested over 40 years at 6% Nominal Return in the province of Alberta at the highest tax bracket...

With a 6% dividend, and 0% capital gain you get $662,990 after tax.

With a 3% dividend, 3% capital gain, and 10% churning rate (this means you will sell 10% of your portfolio each year and pay capital gains tax on that 10% position) you end up with $808,150 after tax.

With a 0% dividend, 6% capital gain, and 10% churning, you get $984,120 after tax. (with a 25% churning rate you get 920k, with a 5% churning rate you get 1.01m)


It is quite apparent that if you are in the highest tax bracket with unregistered investments the prudent strategy is to buy stocks of the highest quality, with the lowest dividend payment, which you will not feel the urge to sell for as long a time period as possible.

If you have unregistered stocks that aren't Canadian, which a large unregistered portfolio probably should, dividends get even worse!


Just some food for though 

Edit: the above is assuming you are in Alberta (my province). Every other province is much worse for dividend tax at the highest bracket, and would make the differences even more profound.


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## peterk (May 16, 2010)

^ I just realized that your porfolio will be held in a corporation, not a personal account. I am not sure what the taxation rates are for this scenario... The math behind the comparison will always give favour towards the capital gain though.

Take your 100k, from which you want to generate 6% income annually. Assume tax rates are equal for both dividends and capital gains... 20%

A 6% dividend payment for the year will give you $6,000. You will pay $1,200 in tax, and be left with $4,800.

From your non dividend portfolio, you sell $6,000 worth of shares. These shares have been churned, including the 6%, by 10% for the year. So you had 100k to start. It gained 6%, you sold 10% (kept 6% and reinvested 4%). You tax bill will therefore be $6000 gain * 0.1 churning rate * 20% = $120. You would be left with $5,880 after tax.

Buffet explained this in one of his letters, as to why there is no dividend for Berkshire, and why that even if one is in retirement and needs regular income, it is better to sell shares and pay capital gains than collect dividends.


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## DrMatt (Dec 11, 2011)

Thanks Pete... I never really thought about it this way... Makes sense though... I'll have to stop focussing so much on the divi payers...


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## donald (Apr 18, 2011)

Often times though divi payers also turn out to be good investments via capital appreciation,I get the point of the discussion but it doesn't have to be either or.
You can find many divi companies that are also phenomenal investments(income aside)
Not saying you should or shouldn't do anything but there is plenty of evidence bearing this out.


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## peterk (May 16, 2010)

^ Certainly. Despite my long post above, the consideration of dividends; high, low or non existant, should be fairly low on your list of criteria for selecting a stock. Picking a stock with no dividend to save tax is only slightly less foolish than picking a stock with an 8% yield because you want "income"


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## DrMatt (Dec 11, 2011)

So... I met with my accountant today. Apparently eligible corporate dividends paid into our corporate account are received virtually tax free (something about our corp acting like a hold corp for the op corp that gave us the divi??? can anyone explain this better??)....

Plus, which I was not aware until today (scary because I'm essentially the CFO!), with respect to capital gains... 50% of the gain gets taxed at the corporate tax rate (15.5%), the other 50% goes into a 'corporate dividend account' which can be removed tax-free from the corporation.

Looks like the rich get richer.


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## DrMatt (Dec 11, 2011)

Wow. Have not been around here in a very, very long time. Reading that first post, and the update post, very interesting. Turns out I was being conservative in my estimates. Compound interest really is a wonder of the world. (I'm actually wincing at some of the crap I wrote here. Hope I never offended anyone.) Anyway...

Here introduced to ETFs, Vanguard, and MrMoneyMoustache. So thanks for that. Started lurking in the very beginning. Bore witness (as many of you did) to 'the million dollar journey' as it unfolded. I was 'paper trading' equities and getting out of high priced mutual funds at the time. Bought our first bank stocks in March of 2009, during that trench you can see there related to the '08 housing crisis. Couldn't have been better timed. 

Following advice found here was helpful. Lots of wise posts and blog suggestions. Thanks to steve, fourpillars, moneygal, spudd, humblepie, Toronto.gal, atrp2biz, Pluggingalong, James4beach, etc... Even DMoney had an influence... I'm pretty sure he/she pumped some Chinese stock that went to zero though. Wasn't happy about that at the time - greenstar ag or something - lost some money but also learned an early lesson in sticking to the plan. So not all bad.

If you're still reading. Thanks.

I would say it worked out well, so far. 

Family is happy and healthy. Been in practice for well over a decade. Still married to the love of my life. Four beautiful healthy children. Eldest in grad school, youngest in grade school. Thanks to MMM's 'shockingly simple math' we've been saving well over 60% of our gross household income for at least a decade... We did it... #FIRE LIFE... It would be hard to spend our nest egg to zero; Unless, of course, we get back on the hedonic treadmill collecting dust in the corner. We've been decently frugal and have enjoyed the journey. Lucky to have the income to keep up with the upper middle class Jones'.

Purchase price value on our real estate (home, cottage, 2 rentals), and market value on our investments, puts our net worth around 7. We passed 5 in 2019. And using current bonkers real estate values it might be even higher. 

More importantly, we passed our "10K per month" target for the first time in June 2019, about 9 years ahead of my projection from 2011. Every month in 2021 projected at or above target (With a record of $13,678 in February!!). It appears, this will continue into the future like an unstoppable train. We continue to reinvest and haven't slowed down earning/saving. A large chunk has been in VAB and VXC (With some individual stocks that pay dividends: E.g. still own those RY shares purchased for $32 in 2009!) (I've recently sold a bunch of VXC and increase the proportion in VAB, just cuz it feels like the right thing to do and I'm trying to take on the perspective that once you've won the game, stop playing!)

COVID has been a shock to the system and I'm tired. Wish it was possible to slow down and take a break from clinical medicine, but it's hard, in these unprecedented times. Maybe soon, maybe soon... but I've got promises to keep, and miles to go before I sleep. 

Good luck out there.
Stay safe CMF'rs


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## milhouse (Nov 16, 2016)

Wow is right. Quite the journey over the decade! Any highlights or challenges you want to put a spotlight on?
Personally, the missus and I kind of regret not jumping on the Vancouver RE bandwagon in early 2000's with an investment property or doing the pre-sale thing. But it also kind of illustrates the challenges with housing in Canada today.


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## DrMatt (Dec 11, 2011)

Yep. We've all been lucky in RE, that's for sure. And we've been riding a massive bull market in equities at the same time. I can see how that feels unfair to future generations. We've been blessed.

I don't know? We worked hard. Stayed the course. Bought as much as we could through all the dips. Bought a bit more when things looked really dire. But I wouldn't say we 'timed the market'. I'm living proof that "Time-in" beats "Timing". Never used margin (except the leverage on the rentals I guess). Sold a bunch of "out of the money" puts along the way. Picked up a few extra shares that way; mostly just kept premiums though. Can't say enough about keeping it simple. Buy what you know. Don't take flyers. Stay the course. 

But most of all, just save as much of your earnings as you can. Let the 'assets' do the rest. (It's shockingly simple).

I did feel a little silly a few times: For example. A friend told me to buy a little company called "Tesla" when it was trading at about $28. I looked at it's earnings and laughed at him. (It was valued at more than Ford, GM, and Toyota combined at the time - Insane). Another friend told me to buy something called 'bitcoin' when it passed $1000! I told him he was nuts. I'd never buy some load of crap as that... Instead I bought more VXC each of those times... (Ironically, I got some tesla in there anyway didn't I?). No regrets.

I'd also recommend not forgetting to live life along the way: I recently made a couple of purchases (new wood shop equipment and a utility vehicle). Paid cash. At the end of the month I was surprised to see our total accounts balances were higher anyway. I guess that shouldn't have been a surprise. They go up and down 1-3% every day if you're paying attention. Spending less than 1% hardly makes a difference anymore. As long as you don't do it every month. Part of me wishes we bought them sooner. Would have made life easier. But that's not me. I tell my kids all the time: "Easy choices, hard life. Hard choices, easy life". (Now it's all about convincing them to make some hard choices.)


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