Money Smarts Blog

As you all know, anyone who works for a company has to pay EI – employment insurance premiums and CPP – Canada Pension Plan premiums on every paycheck. The maximum amount you can pay for CPP in 2007 is $1989.90 which is based on a salary of $42,100. The maximum EI contribution is $720 which is based on a salary of $40,000

[edit – Here are the 2011 Employment Insurance premium amounts and the 2011 CPP contribution amounts]

The problem is that the deduction rates are calculated so that the premiums are all deducted during the portion of your salary within the annual maximum. For example EI is calculated at $1.80 per $100 of earning up to $40k in earnings. That’s fine if you earn $40k per year and the deductions will be constant throughout the year. But what if you make say $65k per year? Then the EI contributions will only be deducted for the first 7.5 months or until the middle of August, when you’ll see a significant raise. In that case the CPP will be deducted until the end of August. The more you make, the higher the deductions are per paycheque and the earlier in the year you get your “raise”.

This drives me nuts because as much as I like to get a raise during the year, I find it difficult in January to go back to the “old” paycheque at a time when heating bills are higher. Why can’t the government mandate that the annual maximum contributions be prorated over the entire year so that there is no “raise” and “pay cut” because of this dumb policy?

This post isn’t directly related to finances however because of several developments I’ve come across in the last little while, my surfing productivity has increased greatly which allows me to cover more financial ground when I’m on the net.

First of all – until about a year ago I used to surf exclusively with Internet Explorer. Good application, does the job, however because I can read faster than most pages download (which isn’t that fast) I normally opened up multiple browsers with different pages loading in each, which is not that easy to do with IE. You can imagine my joy when I discovered the FireFox browser. It has a tab feature that allows you to open up multiple pages in the same browser. What really made things easy for me is FireFox’s ability to open up all the links in a bookmark group at the same time in different tabs. By grouping similar websites in a bookmark folder I can open them all up by selecting the “Open All in Tabs” option.

Great stuff, but when I finally figured out the whole RSS feed/Blog reader thing a few weeks ago I really hit the jackpot. By setting up a Google Reader account and linking to the feeds of all my favourite blogs I can keep up with all their latest posts and comments regardless of how frequently or infrequently they post. One complaint is that it sometimes takes a while for the posts/comments to show up on the reader but that’s not a big deal. Another complaint is that a lot of blogs don’t seem to have comment feeds. This seems to be exclusive to the blogspot type of blogs – do these not have comment feeds available?

Anyways, if anyone has any suggestions on how I can improve my surfing experience then I’d love to hear it!

I’ve been considering a bit of a funny idea for what to do with my retirement: go get a PhD.

Back when I did my Masters, I really enjoyed the day-to-day of being a grad student. Investigating an incredibly detailed area of study and getting to the point where only a handful of people in the world could knowledgeably discuss the issues I was investigating was definitely a fun, cool way to spend a couple of years.

If you want to read more about grad school from someone who has been through it all – check out the new site Ivory Tower Unlocked.

One area I didn’t like was having the profs treat us with contempt. Graduate students are like teenagers in a family, you want to be taken seriously, but your supervisor (parent) occasionally makes a comment that makes it QUITE clear they don’t.

One big benefit to grad school is that here in Canada you get enough funding to cover tuition and a modest lifestyle (some of my friends were able to afford to run cars while doing grad work). Currently grad funding would more then cover the “spread” between my passive income and my expenses (in fact I think I quite easily live off of my grad funding, and just let my passive investments compound for the 5-7 years I’d be working on my PhD).

The other considerations are if my desired lifestyle suddenly spiked during my studies I might be bummed out living like a starving student (I think this is unlikely).

Its definitely something to consider (finding a “fun” job, even if it doesn’t pay very well to start my “retirement”). This would help me test to make sure I can live off of what I’ve set aside. Additionally, it’d build up a buffer to deal with any unexpected emergencies (dividend cuts, rampant inflation or some such things).

One of the other big benefits during an “early retirement” is if you discover you’re falling short of what you need to live the life you want, you can always go back to work! (much harder at 70!).

Other “retirement jobs” I’m considering are some sort of technical liason with an overseas company (maybe China?), publishing (starting or writing for a magazine or self-publishing some books like John T. Reed), property management (develop my real estate skills on someone elses dime) and working for a non-profit (high pay and low stress, what’s not to love?).