Keep posting ole j
I learn something new everytime you do!!

I did learn by watching the Suze Orman show never to co-sign for anything (in case someone wants me to)I think that's a good show for any age to watch. I think she is on MSNBC on Sat nights.

There's more relative to the six blocks of 5-year periods that I mentioned about, covering the time from my age 70 till 100.

I need money to live on each year as I go, as I have through the years of my life since I became independent.

I get two gov't. pensions (partly indexed) and a private pesion covering about half of my working years (also partly indexed).

As for any more money that I need for expenses, there's something that I need to remember.

Of those six blocks of five years of time, as of that date, all six were earning income (whether current or deferred) that was available for me to use.

Suppose, however, that I choose to eat up all of one of those six blocks of funds in the first five yers.

Then - there are only five blocks of money left to earn money, so they'll earn quite a lot less in the next five year period.

But my costs of living may well increase over that time, for medical services usually cost a lot in our last year or so of life (maybe longer).

And if I need to go to a retirement home, or a nursing home, the fees there are high, much more than it costs me now to live in my own home.

Which meant, as I told the financial advisor on the radio, that I did not want to eat up all of one of those six blocks of asset during the next five years of my life, as the amount that it could contribute to fund my ongoing retirement during the remaining five-year periods would be zero. So I did not want to eat up more than half of that block during that first five-year period ... preferably even less than half. I wanted to preserve a good part of it to go on earning to fund my later costs (without causing me to chew my finger nails).

Or hit up my kids for a subsidy.

The advisor agreed.

I prefer to run out of life before I run out of dollars, rather than the other way around, thanks very much.

And now, 1-1/2 of those periods later, I consider myself fortunate to have more assets than I did back 7-1/2 years ago when I was doing that talking.

I hope that you're enjoying the physical, mental, spiritual and social aspects of your life, and doing some things to help others. Plus doing things to enhance all of those aspects of your life, as you go.

Use it - or lose it.

ole joyful

How do you manage your taxes on all your investments?

jane ny,

So far, my annual tax bill has been low.

Partly because I don't have a large number of investmetns, and partly because I seldom sell any so have not had to answer to the Canada Revenue Agency on the increase in value ...

... and won't, until I either sell them - or die - neither of which I intend to do, this week or next.

However, there's another possibility, detailed below, which triggers a capital gain - but not at a time of my choice.

With regard to distributions from my equity-based mutual funds (which most of mine are) they are re-invested, and I pay tax on those amounts annually - but at varying rates.

I goofed - I should have kept track of the annual amounts over the years, which is over 20 years for some of them, for I need those amounts to add to the amounts originally invested in order to calculate my adjusted cost base, which I need when I sell them (or die, at which time is is deemed that I sold all of that kind of stuff the day before, so become tax-liable on the whole of it in that year ... which my executor has to figure out). I deduct that amount from the value at the time, in order to calculate the amount of my capital gain - taxable, but at a reduced rate.

And if I give the certificates to a charity, there is no tax on the capital gain on that portion of my asset.

As for foreign-based stocks, on some of them I am taxed in the originating country, and usually there is a tax treaty with Canada and I get a credit here with regard to that amount; if they are U.S.-based companies, I must declare full amount here and can claim credit with regard to that amount withheld and paid to the foreign country - I used to find that for $3.00 paid to I.R.S., I'd get about a $2.00 credit from the Canada Revenue Agency.

When I own Canadian stocks that pay annual dividends, I pay a much reduced rate on those dividends, at that time.

For some of them, they have a Dividend Reinvestment Plan (which I have not used, but should have). In that case, I need to keep track of annual payments which were used to buy more shares, to calculate my adjusted cost base when I sell them.

When I sell a stock, I need to deduct the amount that I paid (adjusted cost base), in order to calculate the capital gain, then I pay tax at regular rate on half of that amount.

I've been wondering whether I should sell some, then buy them back (or of a similar company) in order to crystallize the capital gains now, and be taxed now, but at a lower rate, as I'll be taxed at top rate on a substantial portion of that year's income, on death.

And the residue of my tax-deferred retirement accounts (I had to begin to liquidate them, beginning at age 70, at a specified minimum amount annually, which precentage increases annually till age 90) will all be added into income in the year of death.

However - there'd be brokerage fees to sell, then when I re-buy. And the amount paid in tax would no longer be available to invest.

However ... in this year, one investment that I'd wondered about selling, as I'd owned it for a number of years, was involved in a reorganization, such that it would be deemed a sale, so I'll be taxable on that capital gain this year.

Another company was sold, so my shares are (forcibly) luiquidated.

And a third company, whose shares I bought earlier this year, was involved in two reorganizationas (one related to the first one that I mentioned) so there'll be capital gain involved with that one, as well.

All in one year.

Drat!!!

So - I guess that I'd better start finding money, looking toward writing a cheque of substantial size to the Canada Revenue Agency at the end of next April.

Wish me luck!

One advantage, though, of buying stocks whose value rises and not selling them for a sustantial period, is that I don't become tax-liable on the increase until I sell (or get sold involuntarily) (or die) so I achieve tax deferral, which achieves one of the major purposes of a tax-deferred investment account, but without the restrictions.

ole joyful

Hope this helps.

About three years ago I was paying just over 10% of my income as income tax, last year, though I enjoyed a slight (temporary) increase in income, I paid about 8.75% of it in tax, largely due to a substantial increase in charitable gifts.

Or - so I thought.

I just received a message from the Income Tax people, which stated that a reassessment of my last year's income produced an extra refund of around $250. - which will reduce that percentage of total income that I paid in income tax even further.

I like them apples!

Have a lovely weekend, everyone.

ole joyful

Perhaps you recall the current price of the bank stock that I referred to in the original post on this thread as having bought 40 years ago for less than $4.25 per share. In case you didn't, it was around $80.00, last fall.

The price has risen substantially in recent months: it passed $100.00 per share, a few weeks ago.

That means that it has doubled about 4-2/3 times during that 40-year period.

Are you familiar with the Rule of 72?

It says that if you divide the rate of interest/growth that you obtain into 72, the result shows how many years that it will require for your money to double.

Double $4.20 to 8.40, 16.80, 33.60, 67.20 and 134.80, means that at $100. currently, it has doubled just over 4.5 times.

Dividing 40 years by 4.5 doubles shows that it took about 8.88 years average per double.

Then dividing 72 by the 8.88, the number of years required per double, shows that the rate of growth of capital was about 8.1%.

That is a number that pleases me, and when I know that when I sell, the tax rate on the growth in capital is low, that pleases me even more.

But - there's more.

During those years, the stock has paid a dividend of about 3%, sometimes at a higher rate, sometimes lower.

Plus - I paid tax at a much lower than usual rate on such dividends, and that rate just dropped even further.

Not only that - I have not been required to report to the income tax people about that increase in value of my asset, and won't until I sell. That gives me the equivalent to a major advantage of the folks who invest in tax-deferred retirement investments. But when they withdraw those funds, every dollar is taxable, and at regular rates ... as the invested dollars were deducted when invested.

No complaints, here.

Some of my holdings have not grown that well, and some pay a lower rate of dividend - or none, for newly-started ones.

Some have lost money - in an investment group that I've attended monthly for several years, we call that the tuition fees for learning how money works.

Good wishes for having an enjoyable time through the rest of winter (summer, if you're in Australia).

ole joyful

I showed earlier that the rate of growth of that bank stock was about 8.1%, over 40 years.

In addition, they've paid about 3% dividend rate, over those years, which brings my rate of gain to just over 11% annual rate, compounded.

I'm not complaining.

To be fair, I've owned stocks that didn't grow that well. Some didn't grow at all.

Some paid a decent dividend rate, some paid less and some, especially young companies that need to reinvest their profits to grow, paid no dividend at all.

The trouble is to know how to choose which small, growing company may grow, and which among dozens/hundreds may languish and die.

Good wishes for a fascinating week, everyone.

ole joyful