Dr. Garth

Did you catch news of the mob in Kingston the other days, clamoring for medical attention? No, not the city in Jamaica. Ontario. They lined up before dawn. They stayed there all day. They were still there as evening fell – people trying to get on a list for a family doc.

The Kingston area contains 172,000 souls. Over 30,000 of them have no primary care. So when a new clinic was announced, the place was besieged.

Source: CBC

In a first-world country with an expensive public health care system this is unacceptable. So, thank Dog for this blog clinic where abusive treatment is swiftly delivered. Just ask. Nurse Jiggles will always find a way to squeeeze you. In, that is

Yo, Vanessa. Come on down. We hear you work for a big bank. What else?

“I’m divorced (in a relationship), my partner and I have our finances separated (and will remain that way).  We own our own properties (separately) living in between the two for now.  Don’t plan on buying one together unless we find a huge deal if the housing market tumbles completely and then i (maybe move into his & I’ll rent mine out, we buy one jointly, or if we do this then its half all the way down the middle, and or I move into his then I will sign a disclosure document and any investment I make into his home will be documented to come back to me with % earned up to the rate of inflation at that time depending so I don’t lose purchasing power) that will mean my place remains I refi and have rental income but that’s not the questions at this time”

Enough! How is that even a relationship? Just get to the damn question.

“My total portfolio is about $225,000, (mainly invested in bank shares). I have a mortgage of $160,000, my rate is 2.24% coming due Oct 2024. I make $75,000, and am 45 at the moment and would like to retire at 55. My question – does saving less towards my retirement goals and paying more down on my mortgage (so) to be mortgage free in 7 years make sense? My condo currently is valued at $750,000’ish.  I paid high $400k in 2018, I get this is paper wealth not real wealth. If you were me, would you keep saving the same amount towards retirement or focus on paying off the mortgage as quickly as I can to be mortgage free by age 52?”

First, you ain’t retiring in ten years with a current portfolio of $225,000. The only way is if you sell the condo, invest the $550,000 in equity and turn the boy-toy into something more useful. If you put together a proper B&D portfolio you might have about $1.4 million in a decade, which would roughly replace your salary while retaining the capital value. A few years later CPP, then OAS, would click in. Not so bad. But keeping the condo would mean financial struggles.

So, keep saving. Sell the condo by October when the cheap money runs out. Tell him to man up and take care of you.

Now, let’s turn to Dan. And his folks.

“My parents are in their 70s and have very little savings & almost no pensions,” he says. “They had difficult life circumstances and it’s mostly not their fault, they are wonderful people, although they are not great money managers.”

“I am very fortunate with combined income >350k, and we will take care of them – my base case is just to provide them with whatever cash flow they need (but I am not a fan of giving them lump sums because I don’t know that they understand how to invest & manage it). Question is, as compared to just giving my after-tax cash, is there any way to structure this more tax efficiently? Instead of further saving inside my own unregistered account (where we are being taxed in the highest possible brackets), I could open an unregistered account in their names and contribute there & manage myself.  Or Dad could loan me his modest 150k, upon which I would agree to pay him a high rate of interest (7%, 8%?), which would effectively create a generous annuity.  I could then invest & manage the money, and write off the loan interest?”

Fuhgeddaboudit, Dan. More trouble, complexity and CRA hassles than you need. The first idea might have been okay until Ottawa brought in the new bare trust regs. Just read Sinan’s blog here of a few days ago – arrangements like this must now be documented routinely and subject to federal tax scrutiny. As for the family investment loan, the CRA has a prescribed rate of interest (currently 4%). Your father would have to receive that level of return. Doubling it (then writing it off your income) would invite trouble.

The best solution is paying their living expenses with after-tax income. Just like they did for you.

Next!

“Thanks for the great info on your blog,” cries Gustavo in Victoria, “it helps a lot.”

“I’m 38, happily married, with a newborn and before I ever heard of your blog, I gave 5% down payment on a 460k condo in 2020. Now that same unit is worth somewhere near 600 but getting too small. Debt is still 420ish. Because of the little one, we are planning to upgrade into a SFH but seems like prices are moving north again. I was wondering, maybe selling our place and take the money after realtor mafia payments and invest or getting that money plus the 50k I currently have invested and give a 20% down?

“The wife is on mat leave but her income is around 90k and mine 140k. And we’d love to have a bunch of storage and backyard for our children to play. So I’m divided between, renting out my place, or sell it, then renting a place or purchase a 700ish one. What would you recommend?”

Seriously? You have only fifty thousand, a wife on mat leave, $420,000 in debt, no RRSP and a family to support. If you sell and use the proceeds (plus your current liquidity) to buy a place costing over $700,000 the debt will still be close to $500,000.

Think about it. Half a million in debt. No savings. No investments. One job loss, layoff, illness or second pregnancy from disaster. You’re delusional. Rent a storage locker somewhere and take your kid to the park. Sheesh.

About the picture: “This is Skye,” writes Allen. “She was so abused before we got her that we never saw her tail for the first 5 months we had her. So, we got her a puppy. This is her now. a happy-go-lucky playful almost normal dog who loves to play with “her baby”. He has grown to be a HUGE play toy. “MSU”  My wife and I have now been following your blog since your parliamentary days. Only your good advice has kept us on the straight and narrow for this long. We enjoy our retirement with the fruits of our investments and will not panic with the minor ups and downs of the markets. Thank you.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.