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The power of asking: why you should negotiate everything

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workers in the office

by Robb Engen, Boomer & Echo

Special to the Financial Independence Hub

Most of us are creatures of habit – we crave routine. We bank at the same place where we first opened an account. We renew our mortgage and insurance policies automatically without shopping around for better rates. Then when we see a promotional offer from a rival cable or internet provider, we complain how loyal customers get screwed.

When it comes to our finances, complacency is king. Yet many of us will drive across town just to save a few cents per litre on gas, or we’ll go to three or four different supermarkets to save a few bucks on groceries.

Sure, there’s nothing wrong with saving money on gas or groceries. But why are we willing to trade an hour or more of our time to save a few bucks when we can’t be bothered to spend 15 minutes to shop around and negotiate in the more critical areas of our finances?

Negotiating a deal can be intimidating. When the seller has more or better information than the buyer, it creates an imbalance of power. The more you know about the products and services you buy, the better the deal you’ll get.

Research the promotional offers and discounts currently available. Luckily, in this day and age, all that information is online and at your fingertips.

The best advice I can give is to shop around, or to simply ask for a better deal. Here are some other tips to help you negotiate:

1.) Check your bill often

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How RRSP meltdown strategies could jeopardize your retirement

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Patrick McKeough, TSInetwork.ca

By Patrick McKeough, TSInetwork.ca

Special to the Financial Independence Hub

Investment tip: “RRSP meltdown strategies promise to ease your tax burden on withdrawals, but these complicated manouvres are usually more lucrative for brokers than for investors.”

Investors sometimes ask us what we think of the so-called “RRSP meltdown.” This is a strategy that would let them make withdrawals from their RRSPs without paying income tax.

How the RRSP meltdown works

When you take money out of your RRSP, you have to pay tax on your withdrawal at the same rate as ordinary income in the year you make the withdrawal. However, under an RRSP meltdown strategy, you would offset the additional tax by taking out an investment loan and making the interest payments from funds you withdraw from your RRSP (the withdrawals must be equal to the interest payment).

Since the interest on the loan is tax deductible, the tax on the RRSP withdrawal is cancelled out. This, in theory, results in zero tax owing on your withdrawal.

You can then use the investment loan to buy dividend-paying stocks, which you would use to provide income during retirement. Dividend-paying stocks also have the advantage of being very tax efficient.

RRSP meltdown by the numbers

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Ontario Retirement Pension Plan to roll out from 2017 to 2020

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Minister Robb with Ontario Premier Kathleen Wynne, Northern Development and Mines Minister Michael Gravelle, HOM Tony Negus and Consul General/Senior Trade and Investment Commissioner Portia Maier.
Ontario premier Kathleen Wynne (Wikipedia)

The National Post today reports the Ontario Government has revealed more detail today about its oft-criticized Ontario Retirement Pension Plan or ORPP. As it reported in a later update, staff at the province’s bigger employers will have to start paying into the plan by 2017, with a full rollout by 2020.

Employers will be exempt only if they already offer a mandatory Registered Pension Plan that Ontario deems comparable to the ORPP.

In 2022, Ontario residents who are 65 or older can start drawing benefits from the ORPP. Full-time or part-time workers  can  start contributing at 18 and continue until they turn 70.

While Premier Wynne has not released cost estimates of the program, the Post reported the plan will collect 1.9% of a workers’ income up to $90,000 from both employers and employees to a total of 3.8%, or a combined total of $3,420 a year

Meanwhile, proponents and critics of the plan got a little more ammunition from two different retirement reports produced by the Fraser Institute and the Mowat Centre.

Released Tuesday, the Fraser Institute report is titled Lessons for Ontario and Canada from Forced Retirement Savings Mandates in Australia. It suggests that if Canada really needs more “forced” retirement savings, Ontario should look for global examples that could be alternatives to its current plans for the ORPP. For example, it should look at Australia’s “superannuation” program, a contribution-based scheme to which both employers and employees must contribute. Australia’s system of “individual accounts” provide more flexibility and choice than, for example, the Canada Pension Plan (CPP.)

Like the CPP, the ORPP is a “collective” pension plan that pay out defined benefits over a lifetime. The paper by the Mowat Centre (titled Lower Risk, Higher Reward: Renewing Canada’s Retirement Income System) says the Australian plan has had “mixed” success because as a Defined Contribution plan it doesn’t guarantee a set income for life, as does the CPP and DB pensions in general.

Middle-to-upper income earners may need more help

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“Stop Doing” #2: Stop Reacting to Market Noise

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Steve Lowrie

By Steve Lowrie, Lowrie Financial

Special to the Financial Independence Hub

In recently revisiting Jim Collins’ classic, bestselling business book “Good to Great,” I was reminded of this timeless tip:

Successful business owners make as much use of “stop doing” lists as they do of “to do” lists.

“Most of us lead busy but undisciplined lives,” says Collins. “We have ever-expanding ‘to do’ lists, trying to build momentum by doing, doing, doing – and doing more. And it rarely works.”  In his related piece, “Pulling the Plug,” He adds: “One key decision about what to stop doing might have as much impact as five new initiatives.”

Stop Reacting to Market Noise

Having a “stop doing” list seems like a fantastic idea – in business, in life and especially in your financial management. So often, I see investors who would probably be doing fine if they would just form a plan that reflects their personal goals, build a low-cost, globally diversified portfolio that complements those plans … then STOP reacting to near-term market noise that distracts them from their focus.

And Stop Reacting to Others Who React to Market Noise

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Investment Fees Are Costing You Way More Than You Think … Here’s Why

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Vita Nelson

 By Vita Nelson, Editor and Publisher of Moneypaper’s Guide to Direct Investment Plans

Special to the Financial Independence Hub

You may not give much thought to the investment fees you pay. That’s because they seem so small. Right?

According to an October, 2014 survey by investment management firm Rebalance IRA, many Americans incorrectly believe they pay no fees in their retirement accounts. Among baby boomers between ages 50 and 68, all with full-time jobs, “forty-six per cent believed they paid nothing, and 19 per cent were under the impression that their fees totaled less than 0.5 per cent.” (In fact, research reveals that actual expenses average 1.5 per cent of their assets per year every year.)

Chances are that fees are costing you much more than you realize! Why?

Because the fee itself isn’t the real culprit. The real killer is the opportunity cost of not investing the money you’re spending on fees. That’s why John Bogle, founder of Vanguard, calls investment fees the “tyranny of compounding costs” in a recent Forbes interview.

The real cost of investment fees is the value of the shares you never bought, and how much those shares would have increased your wealth over the long term. That is, you’ve lost the compounding effect of owning those shares: the dividends that would have been paid to you on the shares and the compounding effect on those dividends. Continue Reading…