Green Spot: Bike Verus Car Wars

Ah, Toronto the city of so many problems now has another one.  The car is losing the war to the humble bike  (see here if you aren’t familiar with the background).  Basically the plan is to reduce a five lane street down to make room for dedicated bike lanes.

I have to admit, I understand the car drivers fustration.  They have had years of development focused solely on cars.  For example, almost every big box store complex is based at you driving between stores and lots of parking in between.  So now to find their interests on the back burner would be a sort of shocking experience.

The reality is I understand the need for change.  People won’t do things unless you make it easy.  So by trying to make taking a bike to work easier than a car is a useful exercise if you want to reduce the number of cars on the road.  Reduce pollution, ease traffic by shifting people to bikes and get healthier people all in one shot.  No wonder they are doing this.

The issue for the drivers is change is hard.  It isn’t easy getting second place when you been on top for so long.  If you don’t believe me, ask GM.  They went from first to a walking government controlled zombie in record time.

So do you agree with the idea of making biking easier in big cities or not?

The New CPP: Can You Still Retire Early?

Perhaps you already came across CC’s post on the proposed changes to Canada Pension Plan (CPP), if so great you have a bit of background.  If not, I’ll do a very brief summary of the proposed changes and if they are good or bad for early retirement.

  1. You won’t have to quit working for two months prior to collect CPP early.  Basically they decided this rule is unfair and so it’s going away.  This is good for those that plan to do some work in early retirement.  You will no longer have to quit around 60 for a few months just to start collecting.
  2. Drop out rate is going up from 15% to 17%.  Again this a good for early retirement as you can have a few more lower income years and still collect a decant pension.  You could now retire at 52 and have 8 zero income years without much of a drop in you pension.
  3. If you work between 60 and 65 you will have to contribute to CPP.  This used to be optional, but now it is going to be required.  If your over 65 it is still optional.  This initially appears to be bad, but if you contribute during that time you pension will go up even if you are collecting a pension.  So overall this one appears to be fairly neutral to early retirement.
  4. Early pension penalties have increased and so have late pension bonuses.  If you take your pension before 65 you are now going to have a 0.6% reduction/month (current rate is 0.5%).  If you take the pension later you will get an extra 0.7% (from the current rate of 0.5%).  So at the extreme if you leave at 60 you will have 35% less pension or if you take it at 70 you will have 42% more pension (rather than usual 30% either way).  Now this is a huge bad thing for early retirees, the playing field is basically encouraging people to hold off on collecting CPP.  So what if you planned to collect at 60 under the old rules?  Hold off for ten months and you will end up with a similar pension you would have got under the old rules (actually likely slightly better because of point #2 above).  Easy and hardly enough to wreck most early retirement plans.

So in conclusion overall the changes may make you want to delay taking your CPP pension a bit, but only by 10 months or so.  It’s not a huge change, so don’t change your retirement dream by more than a year.  So what’s your thoughts on the CPP changes?  Good, bad or just ugly?

Killing the Mortgage

So after getting a new mortgage I’ve been flirting with the idea of paying it off completely over the next five years.  That way I would be completely debt free by 36 and it would also mean I only had a mortgage for a total of ten years.

On the positive side of the debate:

  • Debt free has a nice ring to it, but it is also practical in the regards the freedom to change jobs since our spending drops off to under $2000 a month with no mortgage payment.
  • After it is paid off I end up with a huge cash flow to invest or even spend a part of it on ourselves.
  • Technically I do have the prepayment privileges to actually do this and have no penalties.

On the downside of the debate:

  • I’m putting most of my cash flow to one goal.  Paying off the mortgage would consume almost all of our cash extra cash flow over the next five years.  Basically I would only be investing in my pension and $200 a month to RRSP’s and then all the rest to the mortgage.
  • My net worth is even more tied to my house than it already is.  As pointed out at various times on this blog and others that limits my options.

Then there is the other thought running around in my head.  I could always do a Smith Manuveour to try and reduce those downsides.  I still haven’t decided anything yet as I have to discuss the idea with my wife a bit more.  So what else would you add to these lists?  What would you do in my place?