Saturday, March 5, 2016

Moving to Canada, A Guide for Americans

With the Trump ascendancy, we see increased interest from Americans in moving to Canada.  As a dual citizen who has lived and worked in both countries, here is my guide to moving to Canada, assuming Toronto Ontario is your desired location (nice place, terrible hockey team).


Top income tax rate for earned income: 54% on income over $220,000 Cdn (~$163,000 US)
Sales tax: 13%  - similar to US sales taxes, it is added at the cash register.  The heavy taxes pay for all the social programs and health care.

Health Care

Everyone gets hospital and medical care.  No copays or other payment required.  Acute care (accident, cancer..) is as good as the USA.  You will wait for anything which is not acute.  Current wait time for hip replacement in Toronto is 134 days (4 months).  They publish the wait times online.

You pay for your own prescriptions unless you have insurance through work.  Costs are generally lower than the USA, but newly introduced drugs or sole source drugs can be expensive.  If you do not earn enough, the government will help with medication costs.


It is expensive to buy alcohol due to government taxes and regulation.  It is about 2X to 3X the price in the USA.  Alcohol and wine are available at government liquor stores (LCBO).  Small quantities or beer (6 packs) and low quality wine can be purchased at grocery stores.  Large quantities of beer (more than 6 cans or bottles) must be purchased at a private monopoly store called the "Beer Store" (I kid you not).  It can be difficult to get beer, alcohol or wine on a Sunday due to LCBO and Beer Store hours.

It is easier to get MJ in many areas, although it is not legal yet as a recreational drug.  It should be legalized in a few years but that means that it will be taxed heavily like alcohol and probably sold by a government monopoly that is only open M-F 9-5pm.  This will allow drug dealers to flourish as they will offer 24/7 delivery tax free.


Guns are more heavily regulated than the USA.  You can buy a long gun (hunting rifle or shotgun) if you pass a short course and get a permit.  This is not too difficult if you are not a felon or terrorist.  You cannot buy an assault rifle with this permit.  If you want a handgun or assault rifle, you must get a restricted permit and pass a different course, this is more difficult but not impossible.

You cannot carry a handgun in public outside the home, concealed or openly.  You are generally restricted from carrying a long gun in urban or suburban areas.  They can be carried appropriately and used for target practise or hunting but openly carrying a rifle on a street will generally get you arrested and convicted.


Abortion is legal in Canada.  It is a free medical procedure.  That's about it.


Canada wants legal immigrants and has lots of programs to find them and get them to come to Canada.  You can search the Internet for a plethora of information.


Canadians like their governments and want them to do an efficient job of providing services.  Hence the municipal, provincial, and federal governments have banded together to offer one-stop face to face customer service in common locations.  The people in these service centers will be well paid and know their stuff. Your job as a Canadian will be to get as much as you can from the government in return for your high taxes.


All signs are in Kilometers or "Klicks".  Get used to multiplying kilometer or kph by .62 to get miles or mph.  Gas costs about 1.5 to 2X what it costs in the USA.  Therefore, people drive smaller more fuel efficient cars.

Due to the gun laws noted above, it is much safer to give a fellow motorist the finger or other insulting signal or horn honk.  He/she might get out of their car and hit yours with a hockey stick, but there is little chance of a shootout.


This is the top subject of conversation in Canada, closely followed by hockey, with the subject of "those crazy Americans" in third place.  There is nowhere in Canada that has great weather like Hawaii or San Diego.  You have your choice of lots of cold in Winter and a short hot Summer (most of Canada), wet (Vancouver), or wet and cold (maritimes).  


Canada's animals are quite different than animals in the southern USA.  In the south, the little animals are most deadly: rattlesnakes, scorpions, brown recluse spiders.  In Canada, the big animals are deadly: bears, mountain lions..  The animals stay out of urban areas, so not to worry.  You will find that Torontonians treat raccoons like American bald eagles.  No killing, no moving them away because they are a nuisance, no trapping, etc etc.  This cannot be rationally explained, ask a Torontonian after you immigrate, maybe they know.


That's all I can think of for now.  Practice up on your "eh".  A good start is to say "How about that weather, eh?" or "the Maple Leafs stink, eh?" when meeting a Canadian.

Oh, I forgot, we add a "u" to a lot of words like the originators of the English language intended: colour, humour, ..

Thursday, March 3, 2016

Is Monte Carlo Analysis For Retirement A Winner?

In my last post, I despaired over the latest Monte Carlo analysis of my retirement plan done by Vanguard.  They advised reducing expenses because their new Monte Carlo analysis uses 100 for the life expectancy of me and my spouse, and they made a few other adjustments.

But is Monte Carlo analysis really the best way to predict whether a retirement plan works?  I did some digging and found out that Monte Carlo analysis as performed by Vanguard may have a weakness.

The Vanguard model effectively assumes the probability of you and your spouse living to 100 is 100%, i.e. you will live to 100 and need a retirement plan that provides you with income until then.  This seems unrealistic to me.  My probability of living to 100 is about 11% according to some online mortality calculators.  In Vanguard's defense, they do not target 100% success for your retirement plan, (target is 80-85%) so they do take mortality into account in some fashion.

So to explore this further, let's consider a hypothetical Monte Carlo Analysis of my situation where we have retirement assets and small social security pensions:
  • The Monte Carlo model does 5000 scenarios and in 80% of the cases, there is enough money to for our retirement, meaning 1000 scenarios failed and 4000 succeeded.  I have an 80% chance of my plan succeeding.
  • In each of these 1000 failed scenarios, the money runs out in a particular year meaning a particular age for me and my spouse.
  • However, the probability that we are alive diminishes over time. If 100 scenarios fail in 2057 when I am 99 and my spouse is already deceased, that is much less "important" or "probable" than 100 scenarios failing in 2037 when I am 79 and my spouse is 89.
  • The figure below depicts the probability of running out of money (the Monte Carlo analysis) and the probability of not being alive as time progresses.  It is just a representation but it shows that your probability of being alive goes down over time, and your probability of running out of money goes up.  Makes sense, right?
  • So the question is: should a good financial planning model take into account that the probability of us being alive in a particular year decreases? 

Probabilities of Being Alive and Running Out of Money in Retirement (Representative Data, not based on actual results)

Unfortunately, I don't have the knowledge of probability and statistics to create a new modified Monte Carlo model, and besides that, I am a lazy SOB.  I described my idea to Vanguard, perhaps they will research it and see if it makes sense, and if yes, modify their model.

What do you think, does my idea make sense?