Pensions: why I have one and you don't

<DISCLAIMER: I work for a crown corporation (meaning the government of Ontario is the sole shareholder), and have a defined benefit pension plan. No, you (the taxpayer) don't pay my salary nor do you fund my pension. We produce and sell a product, and that's where we get our revenue from which my salary and benefits are paid.>

So, there's been a bit of talk lately about pensions. Well, truth be told there's always been talk about pensions. It usually revolves around people who don't have pensions bitching and complaining about those who do have pensions. Since a good chunk of people with pensions happen to be public servants (including teachers), it often degrades into a classic game of "blame the public servants with good pensions".

Now, let's look into this a bit more, shall we? Why don't YOU have a good pension/retirement savings?

Well, according to this CBC article (http://www.cbc.ca/news/business/cpp-reform-needed-to-head-off-poverty-charles-sousa-says-1.2467563) "Right now only half of Ontario workers have a private pension and only a third contribute regularly to an RRSP." I want you to keep this in mind while I explore several of the reasons why I have a good pension lined up and you don't.


Reason #1: I contribute to my pension plan every year

People with company pensions typically have no choice. It is a compulsory plan, and they pay into it whether they want to or not. This fact alone probably covers 50% of the reason why my retirement will suck less than yours. Remember, 2/3 of Ontario workers don't contribute regularly to their RRSP. Even in lean years, when I could really use that cash, my company deducts my pension contributions, while you go and spend what could have been your RRSP contribution on useless crap.

Stop spending, start saving, and you will be 50% closer to having a retirement on par with mine.


Reason #2: I contribute more than you do (if you contribute at all)

Each pension plan is different, but just to give you an example, I contribute 7% of my gross pay every paycheque. Teachers (whom most of the general population love to criticize) pay a whopping 14% into their pension plan. How much did you contribute last year?

Most workplaces will match a portion of your RRSP contributions. A typical scenario that I've often run into is a matching contribution up to 3% (meaning that your employer will contribute up to 3% of your gross salary into your RRSP as long as you also put in 3% ). So if you put in as much as I do, you'll have a total RRSP contribution of 10% (your 7% plus your employer's 3%).

Quick example for you who are mathematically challenged. If you earn an average of, say, $70k per year, and save 10% of your pay for 30 years , assuming a rate of return of 5% net of inflation (meaning in today's dollars), you'd have almost $500k.

Once again, stop spending, start saving, and you'll have covered 75% of the ground necessary to having a good retirement fund.


Reason #3: Your company doesn't offer a pension plan (or even matching RRSP contributions)

Well, you may at last think you've found a reason that isn't your fault. I mean, what can you do if your company does nothing for your retirement right?

But alas, you'd be wrong to think this. If your company doesn't offer any retirement plans at all, just switch to a company that does. Am I supposed to suffer simply because you chose to work for a company that doesn't offer a pension or RRSP contributions? That was entirely your decision, and the fault rests entirely with you.

Now, there are those few select individuals that really can't do anything about #3. Maybe life just dealt them a really bad hand. However, these folks are akin to the number of obese people for whom genetics are to blame (meaning, like, 1% of them). For the vast majority of you, hard work, dedication and more careful thought put into education/job training would lead you to a better job at a better company.


Reason #4: You have a pension but it isn't as good as mine

Ok, you got me. My pension plan is pretty good, not many people have anything like it. But, much like in Reason #3, if you want one like it, apply to a position where it is offered. You can't have your cake and eat it too. You'll find that a lot of the jobs that come with this type of pension aren't necessarily the most exciting, or lucrative. Sometimes, you have to choose between a fun, exciting and rewarding position, and one that comes with a pension. Pick your poison.


Conclusion

In conclusion, for most of you, 100% of the blame for not having a good retirement fund rests entirely on your shoulders. It really isn't my fault, nor should I have to suffer, because you have a bad job that pays little, doesn't provide retirement savings, and, especially, the fact that you SPEND ALL YOUR MONEY INSTEAD OF SAVING IT. I don't wear fancy clothes, don't really go on vacation, don't drive a fancy car. I chose to work for a company that I knew didn't pay large bonuses, paid a salary that was less than what I could make elsewhere, and had potentially less opportunities for career advancement/development - but had a good pension. And, in return, my retirement will likely be quite comfortable.

Make a choice. Spend your way into poverty in your golden years or stop pissing away money and start saving a nest egg. But, most importantly, stop trying to blame people with pensions for your misery.

Don't have a pension/retirement savings? Guess what - IT'S ENTIRELY YOUR FAULT.

NOTE - There are some unfortunate individuals who have suffered through incredibly harsh times and events, and simply cannot do better than they currently are. They are clearly not targeted by this post.

More "green energy" news

So, as if the situation hadn't pissed me off enough already,  we now have the government saying they had no idea their Green Energy Act would be this costly.  Because it's not like everybody in the industry told them this would happen a decade ago. They simply chose not to listen and wasted our tax dollars instead.

Idiots.

http://www.thestar.com/news/queenspark/2013/12/10/ontario_tilts_against_wind_turbines_as_costs_spiral_cohn.html

Ontario Green Energy Act - the fiasco

So, by now some may have guessed how I feel about the so-called Green Energy Act (GEA). I think it's a steaming pile of crap. I try to put the reasons why into easy to understand posts and explanations, but sometimes this fails. Unless people work in the sector, or have specialized knowledge, they usually just don't get what's going on and why it's bad.

So, I'll be linking to external articles that help explain in ways that perhaps I can't.

Here's the first, from the Globe and Mail.

http://www.theglobeandmail.com/globe-debate/editorials/ontarios-low-voltage-electricity-policy/article15727240/

Investing 101 - Mutual funds? Individual stocks? Bonds?

So, you've saved up some money, and now you're wondering what to do with it. Buying a house currently isn't an option for you, because you're too poor. You could blow it on useless crap, which would be fun. But no, you've decided to be responsible and invest it. Good for you.

The question now is how to invest it? Well, I'll give you a few tips and some inside information. I'm no Warren Buffet, but I do have a degree in finance, and have worked as a performance analyst for an investment manager in the past. So you could say I have some passing knowledge of the subject.

This is going to be a very condensed, summary version. I'll be posting a bit more detailed stuff later on.

Stocks: Only if you have a lot of money to invest. If not, and you really want to try your hand at individual stocks anyway, only invest a small portion of your total savings. Otherwise don't try. People who are much smarter than you have tried, and failed.

Bonds: No. Bond values are only going to go down in the future. I'll explain why in a later post.

Mutual funds: Generally speaking, yes. But only if you pick the correct ones. I'll go into them in more detail in a later post.

Exchange-traded funds (ETFs): Yes, with a caveat similar to mutual funds.

So bottom line? Go for a well-balanced, diversified mix of low-cost mutual funds/ETFs. Stay away from bonds, and only dabble in stocks with a bit of your money (unless you're a wealthy, sophisticated investor).

Stay tuned for more in-depth posts on each asset class.

Buying a new cellphone, round 2

So, Rogers (and the other providers) has a new promo out for the Black Friday shopping bonanza. The most eye-catching part is the following:

Get a Samsung device (such as the Galaxy S4) for $0, and you can get the new Galaxy Gear watch for only $50 as a bonus.

The watch normally goes for $320, and the S4 $700 (according to their website). There is a catch, however. The minimum monthly plans start at $70 per month (I went into a store and asked a sales associate). This $70 plan is utter and total crap. It includes 250MB of data per month. I currently have a plan with 6GB of data that costs $50 per month. If you read my previous post, you know you can get a plan from Koodo/Fido that includes unlimited Canada-wide calling/texting and 2GB of data for $60 per month. The same plan costs $85 at Rogers.

The difference in cost over a 2-year period is $822. Gee, that figure looks awfully like the price you'd pay to buy the S4 and the Galaxy Gear watch outright, doesn't it? Except that you have a much cheaper plan with Koodo/Fido. Think about it: you could get the Koodo plan, go and buy $800 worth of new phones, and two years later, you'd be in the exact same position financially.

So, now you know why the phones are "free" at Rogers/Bell/Telus. They "give" you the phones for free (or cheap) and then utterly gouge you on the plans.

There's no such thing as "free" in life people, especially when it comes to private companies. Only a dumbass would assume those phones are really free, and that the company is giving you a good deal. It's quite the opposite: YOU'RE giving the company a good deal - a good deal of your money.

Now,  just to make you feel really bad about the lousy deals us Canadians get,  check out this website used for comparing UK phone plans and deals.  It'll make you sick. FYI, the exchange rate is around 1.75, so whatever the price in £ is,  multiply it by 1.75 to get the Canadian equivalent.

http://phonestore.techradar.com/phones

Do you want an iPhone?

Do you love your iPhone? Does it make you feel special to own such a nice, polished, over-priced piece of hardware?

Well, you're probably not alone. A ton of people buy the iPhone not because it's the best phone out there (it isn't), not because it's the best value (it isn't), not because it's the cheapest (it REALLY isn't), but simply because it's the iPhone. It has this aura around it, this intangible thing that makes people want it. Much like other status symbols (driving a very rare and expensive car, wearing designer clothes), many people think that owning an iPhone makes you cool, hip, unique, different...the list goes on.

But does it really? What is the definition of cool, unique? You would think that only by possessing an item that few other people have would you qualify as cool and unique, right? Yet if you own an iPhone, you own a piece of hardware that is EXACTLY THE SAME as, what, several hundred million other people? Not only the hardware, but even the software is EXACTLY THE SAME. You use the same mail client, the same messaging app, your icons look exactly the same.

So no, owning an iPhone doesn't make you cool, hip or unique. Not anymore. Not when everybody else around you owns the same phone, and uses the exact same apps with the exact same look. Heck, you're even all typing on the exact same keyboard.

Boring.

Now, buy an Android phone, install a custom ROM, swap out the stock messaging and email apps, download a new theme for it, change your keyboard, install custom icons...NOW you have a unique phone that nobody else has.

Don't get me wrong, the iPhone is a good piece of hardware/software. It functions well. And if you buy it for <insert valid reason here> then that's fine. Just don't go pretending to do it because it's the best phone, or the best value, or because it's cool and unique (owning something everybody else owns is the very antithesis of unique and cool). Because none of those are true.

Now, some may say "well the iPhone just works". This implies other phones don't, which is silly. In the early days of Android and Windows Phone, they had a few hiccups. But these days, top devices from all manufacturers all "just work". They're all polished and smooth.

Some food for thought:

https://www.youtube.com/watch?v=DaxU0ut5tUw&list=FLE73CfEmx_sy8OrSiqmT5Ug&index=33

https://www.youtube.com/watch?v=kS5sal5wN1c&list=FLE73CfEmx_sy8OrSiqmT5Ug&index=31

This is what you folks are like. I'm not joking.

Wind power - the great money pit

Wind power in Ontario has been a major component of the Liberal's agenda, especially under Dalton McGuinty. Tree-huggers claim it's the best thing since sliced bread, manufacturers of wind-power related equipment claim additional environmental benefits. Basically, everybody thinks wind power is just super.

Is it?

Short anwer: no.

Long answer: it depends on how it is managed and integrated into the system. There are some green benefits, of that there is no doubt. Once built, wind generators don't consume anything meaningful other than wind. This means virtually zero input costs, and little to no emissions. Wow, great huh?

However, these benefits have been more than lost in Ontario due to the stupidly generous contracts handed out to the wind generation companies. Did you know, for example, that if a wind generator is producing electricty, this power is guaranteed to be purchased, regardless of whether or not it is needed? Did you also know that the rates being paid for this power are about FIVE times what hydro power gets in this province?

Even better: did you know that often times, we are spilling water at our hydro plants (meaning that instead of using the water flowing down the river and through the power plant, we're just spilling it around/over the plant, essentially wasting that water) in order to be able to accomodate this (very expensive) wind power? So in a nutshell, we are not generating hydro power (even worse, spilling water), which would have cost around $0.03 per kWh, in order to run wind power, which costs an estimated $0.15 per kWh. Man, what a bargain. What a great deal McGuinty got us.

Now, to be fair, this doesn't always happen. There are times when we are running as much hydro power as we can (not spilling water) while also running all the wind power that is being produced. But the majority of the time, wind power is generated overnight (when we least need it), which is, coincidentally, the time when power on the open market is generally cheapest. So, at the time of day when power should normally be cheapest, we are not only not running cheap hydro power, we're spilling water, all to accomodate very expensive wind power (that we don't need).

I don't know about you, but I'm extremely excited and pleased about this. Who wouldn't want to pay five times the going rate for electricity? Especially when you replace cheap green power with expensive wind power, the deal seems just THAT much better. Really folks, why would you pay $0.03 for green hydro power when, thanks to the Liberals and McGuinty, you get to pay $0.15 for green wind power?

Have you ever looked at your power bill and wondered what the "global adjustment" charge is? It's basically what you pay the wind generators to make up for the difference between what their generation actually costs and what the market rate of power is (as well as other fees that need to be collected). For example, there are times when wind is generating and the current hourly price of electricity in Ontario is hovering around $0. Yes, that's right, while you're paying $0.07 + charges for power at 2am, the market price is $0.00. Well, during this time, wind is producing power and getting $0.00 from the market for it. But they've gotten a contract from the government that guarantees them $0.15, so the diffrence has to come from somewhere and someone. That someone is you, and that somewhere is the "global adjustment" charge on your bill. Are you pleased yet?

You'll often hear wind proponents state things like "last year, wind power in Ontario generated X amount of power". True, but what they don't tell you is this power was useless and not needed. They don't tell you that in order to generate that power, hydro power (that would otherwise have been generated) was scaled back. In other words, instead of generating power with hydro, we're using wind. Wind power was supposed to replace coal generation, according to the McGuinty Liberals. What's ACTUALLY happened is that wind power has replaced hydro power and nuclear power. Are we any greener? Not really. Poorer? You bet.

So the next time you see McGuinty, or any Liberal for that matter, be sure to thank them. Thanks to them, our power bills are amongst the highest in North America, we've spent billions of dollars in subsidies and guaranteed contracts, and all we've really managed to do is replace green, cheap hydro with green, expensive wind.

Like I said, a great deal!

The economics of buying a cell phone

Most people I know tend to buy their cell phones on a contract, and therefore pay a subsidized price for their shiny new toy. They think it’s a good deal, because their new phone “only” cost them $129. What they don’t realize is that these days, the major cell phone carriers have come up with a stratified pricing scheme. In other words, if you go in and sign up for a contract with a hot new phone (the Samsung Galaxy S4, the newest iPhone 5s, for example) you’ll only be eligible for a certain selection of plans, which will cost a minimum of, say, $65. If, on the other hand, you purchase a less expensive model (maybe last year’s Galaxy S3 or iPhone 5), you’ll be able to get a better/cheaper plan. In addition to this, the older phone also costs less. You’ll often find them offered at $0. So not only do you get a better/cheaper plan, your phone costs you less too. It’s a double-whammy. It gets even better if you shop around a bit at the “discount” carriers (Fido, Koodo, Virgin).

 Let’s take Bell, for example. A 16GB iPhone 5s will cost you $230 on a 2 year contract. You can get an $85 plan that includes unlimited Canada-wide talk + text and 2GB of data. The exact same plan at Koodo is currently on promotion for $60. You could get the new Nexus 5 for $200, and that will only add an extra $5 to your monthly bill. So, for $200 at Koodo, you get the Nexus 5 and the plan for $65. At Bell, for $230, you get the iPhone 5s and the plan for $85. Your total cost over the next two years at Bell (after tax) will be $2,565. At Koodo, it will be $1,989. That’s a $576 difference, just so you can get your stupid iPhone 5s, which is not any “better” than the Nexus 5.

Now, let’s think even further outside the box. What if, instead of buying a phone on contract, you went to Koodo and bought the new Moto G from Motorola outright, with no 24-month contract. This will set you back $200 + tax. That’s right: you can buy a brand-new phone for $200. And this isn’t one of those cheap, discount phones: the Moto G is just as good, if not better, than phones like the Galaxy S3. Additionally, if you bring your own phone (or buy one outright), most carriers, including Koodo, will give you a 10% discount on your monthly bill. So, in the case of the Moto G, your total two-year cost will be $1,833 – that’s $732 less than buying the iPhone 5s with Bell for the same plan and a phone that, while not quite as powerful and top-notch as the iPhone, is still very good.

So ask yourself this – is getting that shiny new iPhone 5s worth spending an extra $732 (in addition to being tied to a two-year contract)?