The darling buds of May

I was watching an old movie called The Mating Game, staring Tony Randell on TCM a while back, the storyline reminded me of the British TV show, The Darling Buds of May, which was shown between 1991 and 1993. I liked that show, which is the title of H. E. Bates' story of idyllic country life, written in 1958.

I then started thinking about the phrase "The Darling Buds of May" and wondered where it came from. I did some research (I love the Internet) and found that the phrase came from Shakespeare who coined it in his celebrated Sonnet 18. So on the first day of May enjoy the Sonnet.


Shall I compare thee to a summer's day?
Thou art more lovely and more temperate:
Rough winds do shake the darling buds of May,
And summer's lease hath all too short a date:
Sometime too hot the eye of heaven shines,
And often is his gold complexion dimmed,
And every fair from fair sometime declines,
By chance, or nature's changing course untrimmed:
But thy eternal summer shall not fade,
Nor lose possession of that fair thou ow'st,
Nor shall death brag thou wander'st in his shade,
When in eternal lines to time thou grow'st,
So long as men can breathe, or eyes can see,
So long lives this, and this gives life to thee.

Taxes filed feeling blue

So Income Tax has just been paid or you are thinking you will have to pay it by the end of the day. I found the following interesting and a sad commentary about the spread between the rich and the rest of us in Canada.


If Romney were filing Canadian taxes, we estimate he would have paid even less, even though Canada’s tax rates are generally considered to be substantially higher than the U.S. Running the U.S. numbers on a Canadian return, assuming no foreign currency adjustment and assuming his dividends would be Canadian dividends had he lived in Canada, Romney would have paid $2,973,021 of Canadian federal tax in 2011 on his $20.9-million of income, which translates to an effective federal tax rate of only 14.2%, more than a percentage off the 15.4% he is forecast to pay.


Romney and other rich Americans and Canadians are able to pay a lower tax rate because of how investment income is taxed as well as the value of the charitable donation tax credit.


In Canada, dividend income is eligible for a dividend tax credit while capital gains are only half taxable. In other words, for a top income earner, Canadian dividends are taxed a top federal rate of only 17.72% (2011) while capital gains for a high income earner would be taxed at half the top marginal tax rate or 14.5% (i.e. 50% X 29%). Charitable donations above $200 are eligible for a 29% federal donation tax credit.


When we consider that Romney’s 2011 income was made up of US$3.1-million in dividends and $10.7-million worth of capital gains, combined with $4-million of charitable gifts, it’s possible to see how Romney or, for that matter, anyone who earns the bulk of their income from investments, ends up paying very little tax.


The Romney story also serves as an important reminder of the difference between your marginal tax rate, which is the amount of tax you pay on each additional (“marginal”) dollar of income above a certain level and your effective tax rate, calculated by dividing your tax liability by your income.

For most Canadians, your average tax rate is significantly lower than your marginal tax rate, especially if the bulk of your income comes from tax-preferred investments. (My thoughts, most Canadians I know, do not have the bulk of their income coming from tax-referred investments so I suspect that the marginal and the effecting tax rate is not as low as the rich in Canada.)


But the last word goes to Romney himself. As he said in Monday’s debate on the eve of releasing his tax returns, “I pay all the taxes that are legally required and not a dollar more … Will there be discussion? Sure. Will it be an article? Yeah. But is it entirely legal and fair? Absolutely.”

(Sorry, but I  have to disagree, yes it is legal, but this system is very far away from being fair. Perhaps the bankers and others, think this system is fair, but they are wrong as the system penalizes the poor because they cannot use the taxloopholes the rich uses and makes a mockery out of the idea of a progressive tax system.)

Jamie Golombek, CA, CPA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto Source:  Financial Post

Pension debate; do Canadians care?

One of the positions put forward by the government is that Canadians don't care enough about their retirement to plan for it.  This interesting perspective is about laying blame rather than dealing with the issues surrounding retirement. A number of supporters of the idea of changing the way we pay out Old Age Security offer similar arguments. These arguments can be classified as follows: First, that if you did not plan properly for your retirement that is your own problem. Supporters of the government will say something like  If your retirement plan is compromised by a missing $13,000 that you knew years in advance you wouldn’t be getting, it wasn’t a serious plan in the first place.

Or supporters will say that many Canadians now collecting OAS also are still in the labour force, by choice  so it’s not as if 65 is the pivotal age it once was.

The second argument is that with all of the opportunities given to us by the government there is no excuse for not putting money aside for retirement. Of course, I agree that there are opportunities such as the Tax Free Savings, Pension Splitting, Changes to the Canada Pension to reward those who take it later, the ability to sell your personal residence with no taxes and the low rate of Capital Gains tax, and finally the abundance of private sector plans and the ability to maximize contribution's to your RRSP.

The problem is these are only available to those with extra money and this is not most of us. Its not that we cannot be bothered it is because we have other more pressing expenses such as raising children, or paying the mortgage, or buying food or paying rent, or buying gas to run our car, or or or.  The crux of  this argument is that  people do not want to be held responsible for lifestyle choices.Those who hold this argument believe that most of us Boomers included, are spenders and into self-gratification and they want the government to bail them out for bad choices they are making today so they can continue to live the good life when they retire.

There are other explanations as to why we don't take advantage of all of our opportunities to plan for retirement and for these we can look to the field of Behaviour Financial modelling. This area of Economic offers models that hold there are a number of reasons why people don't put money into retirement plans, including:

People are easily influenced by decision framing, which means decisions are often made based on how the options are presented.  Madrian and Shea (2001) have shown that when workers are required to opt-into a pension plan as the default decision (or the non-decision) people will not opt in and the effect is that people save nothing; by dramatic contrast, if the default decision is an automatic enrollment plan started when they are hired or is put into play by a union contract, the default decision is that people will save whatever is the contracted agreement. What this means is that by merely changing the question the decision can be changed from not saving to saving.

People lack willpower. People try to save for retirement, but they too often prove to be limited in their capacity or desire to execute intentions. In a sense, saving for retirement requires behavior similar to those undertaken in other behavior modification programs such as exercising, dieting, quitting smoking, or following through on New Year’s resolutions. It would seem that while people intellectually “understand” the benefits of a specific behavior, and they even have some idea of how to get started, they have difficulty implementing their intentions. Too often, they struggle to take action, and when they do act, their behaviors are often half-hearted or ineffective.

Risk vs Rewards have different meanings. Weber suggests that retirement risks rate low along both dimensions: few people have a palpable fear of impending disaster or of great uncertainty in their retirement planning, as compared to other risks in their lives. In Weber’s framework, the self-control problem of retirement saving must join both cerebral and emotional decision-making simultaneously, if people are to be prompted to take effective action. For example, if one were to experience the risks of retirement in the present so as to stimulate the brain’s affective system, people might attempt a real-world experiment such as attempting to live on, say, two-thirds of their income for the next month.

Too many decisions results in confusion One tenet of contemporary economics is that more choice is good news, but choice, can produce "choice overload" so  the opposite may be true.  If we become overwhelmed with the complexity of the decision many will withdraw and  pension plan participation is reduced. Faced with complex investment choices, and given a myriad of choices, many of us take the default choice and do not choose anything.

Another position taken by supporters of the government is that we really cannot afford to continue to pay because there will not be enough workers to support the program.  The argument goes something like this,  there are now seven workers paying for every one person collecting Old Age Security, in 20 years there will be only 2 workers for everyone worker collecting Old Age Security.

What are the facts about this last statement. In 2031 there will be about 9,935,,000 Canadians over the age of 65 according to Stats Canada. (using the highest growth rate for Canada) while there will be about 24,355,000 Canadians between the ages of 20 and 65, many of whom will be working. Today there are about 21,714,000 million Canadians between the ages of 20 and 65, while there are about 4.981, 000 over 65.

Yes. the number of Canadians over 65 will increase, but so will the number of younger Canadians who are or could be working. Canadians who are working age will increase by about 3 million while the number of Canadians over 65 will increase by about 4 million. But there are many who, while over the age of 65 will continue to work, because they need to work. The argument that those collecting Old Age Security will outnumber the workers 2 to 1 does not make sense to me.

There are many reasons that Canadians do not prepare for retirement and need the Old Age Security, this is a complex issue, which begins with understanding human nature and financial decision making as well as looking at the facts.

The arguments being put forth by the government and its supporters are simplistic and are not based on facts. The government decision will be sold to the public as rational. However, The decision to cut the pension is an ideological decision not an Economic decision. I believe that the conservatives have never been a government that relies on facts and the truth to drive their decisions.

Note to self: Cancel credit cards prior to death!

My thanks to Jon for this:

Be sure and cancel your credit cards before you die!

This is so priceless and so easy to see happening - customer service, being what it is today!

A lady died this past January, and the Royal Bank billed her for February and

March for their annual service charges on her credit card, and they then added late fees and interest on the monthly charge. The balance had Been $0.00, now is somewhere around $60.00.

A family member placed a call to the Royal Bank:

Family Member:

'I am calling to tell you that she died in January.'

Royal Bank:'The account was never closed and the late fees and charges still apply.'

Family Member:

'Maybe, you should turn it over to collections.'

Royal Bank:

'Since it is two months past due, it already has been..'

Family Member:

So, what will they do when they find out she is dead?'

Royal Bank PAC:

'Either report her account to the frauds division or report her to The credit bureau, maybe both!'

Family Member:

'Do you think God will be mad at her?'

Royal Bank:

'Excuse me?'

Family Member:

'Did you just get what I was telling you . . . The part about her Being dead?'

Royal Bank:

'Sir, you'll have to speak to my supervisor.'

Supervisor gets on the phone:

Family Member:

'I'm calling to tell you, she died in January.'

Royal Bank:

'The account was never closed and the late fees and charges still apply.'

Family Member:

'You mean you want to collect from her estate?'

Royal Bank:

(Stammer) 'Are you her lawyer?'

Family Member:

'No, I'm her great nephew.'  (Lawyer info given)

Royal Bank:

'Could you fax us a certificate of death?'

Family Member:

'Sure.'  (fax number is given )

After they get the fax:

Royal Bank:

'Our system just isn't set up for death. I don't know what more I Can do to help.'

Family Member:

'Well, if you figure it out, great! If not, you could just keep billing Her. I don't think she will care.'

Royal Bank :

'Well, the late fees and charges do still apply.'

Family Member:

'Would you like her new billing address?'

Royal Bank:

'That might help.'

Family Member:

' Rookwood Memorial Cemetery , 1249 Centenary Rd, Sydney Plot Number

1049.'

Royal Bank:

'Sir, that's a cemetery!'

Family Member: 'Well, what the hell do you do with dead people on your planet?'.............