Canada or USA: Where is it easier to FIRE

[lostamonkey]

Pros of Canada:
-Public Healthcare
-Cheaper universities
-Less restrictions on tax advantaged accounts

Pros of USA
-Lower taxes
-Cheaper housing
-Longer-term mortgages available
-Easier access to low cost investments
-More opportunities for geography hacking (ie: earn income in a HCOL city and FIRE in a LCOL city with no state income tax)

I am unsure which country makes it easier to FIRE. Thoughts?

[Cathy]

Alberta has lower taxes than anywhere in the USA, even the states with no income tax, especially if you are single and have no dependents. Moreover, in states like California or New York, the tax rate is not even competitive with Canada, it's just far higher. Move to Alberta if you want low taxes.

However, I think your bullet points are missing the biggest reason to move to the USA -- namely, it's much easier to earn higher incomes in the USA. High income is one of the most important things to reaching early retirement in a timely manner. If you spend, say, $25,000 per year, you can save a lot more with an income of $250,000 than you can with an income of $50,000. Certainly you can earn a lot of money in Canada as well, but it's easier in the US.

[ChrisCraft2015]

Alberta has lower taxes than anywhere in the USA, even the states with no income tax, especially if you are single and have no dependents. Moreover, in states like California or New York, the tax rate is not even competitive with Canada, it's just far higher. Move to Alberta if you want low taxes.

However, I think your bullet points are missing the biggest reason to move to the USA -- namely, it's much easier to earn higher incomes in the USA. High income is one of the most important things to reaching early retirement in a timely manner. If you spend, say, $25,000 per year, you can save a lot more with an income of $250,000 than you can with an income of $50,000. Certainly you can earn a lot of money in Canada as well, but it's easier in the US.

Cathy I'm not sure where you are getting your information from but Alberta one of the highest levels of family income in North America and its higher than any US state (if we are not converting currencies).

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil108a-eng.htm
http://calgaryherald.com/business/local-business/alberta-has-highest-family-median-income-in-canada
http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

[nereo]

Pros of Canada:
-Public Healthcare
-Cheaper universities
-Less restrictions on tax advantaged accounts

Pros of USA
-Lower taxes
-Cheaper housing
-Longer-term mortgages available
-Easier access to low cost investments
-More opportunities for geography hacking (ie: earn income in a HCOL city and FIRE in a LCOL city with no state income tax)

I am unsure which country makes it easier to FIRE. Thoughts?

... are you trying to start another US vs Canada thread that rapidly deteriorates into nationalistic mumbo-jumbo?  Most things that you listed as "Pros" for both countries are debatable.

[TheAnonOne]

AMERICA BECAUSE STEAK, SUVS AND FREEDOM

Ha, but seriously, America.

[canadian bacon]

Since I was able to get a job in the USA after graduating from university and I could not find one in Canada...  I vote the USA.  No income makes saving tough.

True, unemployment is almost like FIRE in that you don't work.

[Cathy]

Alberta has lower taxes than anywhere in the USA, even the states with no income tax, especially if you are single and have no dependents. Moreover, in states like California or New York, the tax rate is not even competitive with Canada, it's just far higher. Move to Alberta if you want low taxes.

However, I think your bullet points are missing the biggest reason to move to the USA -- namely, it's much easier to earn higher incomes in the USA. High income is one of the most important things to reaching early retirement in a timely manner. If you spend, say, $25,000 per year, you can save a lot more with an income of $250,000 than you can with an income of $50,000. Certainly you can earn a lot of money in Canada as well, but it's easier in the US.

Cathy I'm not sure where you are getting your information from but Alberta one of the highest levels of family income in North America and its higher than any US state (if we are not converting currencies).

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil108a-eng.htm
http://calgaryherald.com/business/local-business/alberta-has-highest-family-median-income-in-canada
http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

It took me a little while to parse your statement but you appear to be saying that Alberta has a higher median income than any US state. That may be true, but it's also irrelevant to what I said.

The real question is: where is it easiest to earn an income that is high in absolute terms? Let's say you want to earn at least $300,000 per year. Where is that going to be easiest? I claim it's going to be a lot easier in the US than in Canada, simply because the US has a larger and more diversified economy, leading to more competition for labour at the highest end of the skill spectrum, especially in certain industries like tech.

Pretty much every time I comment on income on this forum, somebody responds by drawing my attention to median income levels. As a Mustachian, median income levels should not concern you because you are not average. The average savings rate in Alberta is probably negative, but that doesn't mean that a Mustachian living in Alberta is going to have a negative savings rate.

[lostamonkey]

I live in Alberta. Alberta is only the lowest tax province if you make a really high income because we have a flat non-progressive tax system. This system will be eliminated if the PCs or the NDPs win the election next month. I would pay lower income taxes in BC.

I did not intend this thread to become nationalistic. I wanted to discuss where it easier to achieve FIRE, not which place is better.

[Guses]

Alberta has lower taxes than anywhere in the USA, even the states with no income tax, especially if you are single and have no dependents. Moreover, in states like California or New York, the tax rate is not even competitive with Canada, it's just far higher. Move to Alberta if you want low taxes.

However, I think your bullet points are missing the biggest reason to move to the USA -- namely, it's much easier to earn higher incomes in the USA. High income is one of the most important things to reaching early retirement in a timely manner. If you spend, say, $25,000 per year, you can save a lot more with an income of $250,000 than you can with an income of $50,000. Certainly you can earn a lot of money in Canada as well, but it's easier in the US.

Cathy I'm not sure where you are getting your information from but Alberta one of the highest levels of family income in North America and its higher than any US state (if we are not converting currencies).

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil108a-eng.htm
http://calgaryherald.com/business/local-business/alberta-has-highest-family-median-income-in-canada
http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

The real question is: where is it easiest to earn an income that is high in absolute terms? Let's say you want to earn at least $300,000 per year. Where is that going to be easiest? I claim it's going to be a lot easier in the US than in Canada, simply because the US has a larger and more diversified economy, leading to more competition for labour at the highest end of the skill spectrum, especially in certain industries like tech.

By that token, highest salary is also irrelevant. It's not how much you make, it's how much you spend/save. I would posit that expense is much more important than income in reaching FI.

Each unit reduction in expenses results in an exponential decline in time to FI.

Also, it is not necessary to earn 300,000$ to FIRE.

 

[OldPro]

The easiest place to FIRE is the where you find it.  What I mean is that it will vary by individual.  For example, your profession may be more in demand in one place than another, it may pay more and you might find that perfect job that pays you more and is located in the lowest housing cost place on the planet.  Who knows, but there is no simple is it easier in the US or Canada answer.

It's a simple question but there is no simple answer which makes the simple question pretty pointless.

[nereo]

By that token, highest salary is also irrelevant. It's not how much you make, it's how much you spend/save. I would posit that expense is much more important than income in reaching FI.

Each unit reduction in expenses results in an exponential decline in time to FI.
 

I'll disagree here.  From my perspective, absolute savings is what matters most.  Sure, halving your expected expenses in ER will cut your FI number in half, but there's a very real floor there (presumably $0) and most people cannot live on less than ~$15-20k when housing is included, and most unplanned emergencies come with an absolute dollar attached, regardless of how much you spend or have saved.
OTOH, high earners can invest $50-100k+/year, and there's a much greater ability for someone who spends more to cut back.

Understand I'm viewing this as someone who's gross income is under $40k/year, and we've come to realize that no matter what we do on the expenses side, we will never be able to reach FI in under 16 years.  Thankfully, we've been on the mustachian path for a while, but if we were starting at $0 (or worse, in debt) we couldn't be FI before we were in our 50s without an increase in earnings & subsequent increase in savings.

I will agree that a $300k salary is not required to FI/RE.  In fact, you don't even need to earn the median ~$52k to be FI/RE as long as you are wise with money and start in your 20s.

[Cathy]

Sure, halving your expected expenses in ER will cut your FI number in half, but there's a very real floor there (presumably $0) ...

Exactly. We often hear on this forum about how lowering expenses is so much more powerful than increasing income, but it's just not true. If your income is $50,000 net per year, then no matter how much you lower your expenses, you can never save more than $50,000 per year. However, if you raise your income to $300,000 net per year, you can now save up to $300,000 per year, or six times as much. Lowering expenses has a very real floor, but raising income does not.

If you want to reach retirement as soon as possible, lowering expenses can only take you so far. You are also going to need a high income. My personal perspective here is that I am a single person with no assistance from a partner and I plan to retire before age 30, and my retirement may involve significant cash outlays such as additional education, public interest spending, starting businesses, and so forth. I will be busy changing the world. There's no way I can achieve that before 30 if I earned a median income, no matter how much I cut back (not that there's a whole lot of room to cut back, given that my non-housing-spending is less than $500 per month).

I don't really understand why some people on this forum seem to pride themselves on not trying to earn a higher income. There seems to be an assumption here that earning more money means spending more, but that is consumer sucker thinking.

So to be clear, my advice to any prospective early retirees (not the person I quoted) is first to stop wasting money. Personally, I've never wasted money so that wasn't something I had to devote effort to. Then after you've stopped wasting money, you can focus on earning more money without spending more. That will make you reach retirement faster.

[Guses]

Sure, halving your expected expenses in ER will cut your FI number in half, but there's a very real floor there (presumably $0) ...

Exactly. We often hear on this forum about how lowering expenses is so much more powerful than increasing income, but it's just not true. If your income is $50,000 net per year, then no matter how much you lower your expenses, you can never save more than $50,000 per year. However, if you raise your income to $300,000 net per year, you can now save up to $300,000 per year, or six times as much. Lowering expenses has a very real floor, but raising income does not.

If you want to reach retirement as soon as possible, lowering expenses can only take you so far. You are also going to need a high income. My personal perspective here is that I am a single person with no assistance from a partner and I plan to retire before age 30, and my retirement may involve significant cash outlays such as additional education, public interest spending, starting businesses, and so forth. I will be busy changing the world. There's no way I can achieve that before 30 if I earned a median income, no matter how much I cut back (not that there's a whole lot of room to cut back, given that my non-housing-spending is less than $500 per month).

Sure, let me just dial my income-o-meter to 300,000$. Because it's that easy.

Similarly, if your expense was 0$ you would be already retired. Way easier than earning all that extra cash for years.

I am of the opinion that aiming at both increasing income and reducing expenses is the way to go.

Suggesting that attaining an annual income of 300,000$ is realistic for a significant strata of the population is extremely naive at best if not downright stupid.

[TheAnonOne]

Sure, halving your expected expenses in ER will cut your FI number in half, but there's a very real floor there (presumably $0) ...

Exactly. We often hear on this forum about how lowering expenses is so much more powerful than increasing income, but it's just not true. If your income is $50,000 net per year, then no matter how much you lower your expenses, you can never save more than $50,000 per year. However, if you raise your income to $300,000 net per year, you can now save up to $300,000 per year, or six times as much. Lowering expenses has a very real floor, but raising income does not.

If you want to reach retirement as soon as possible, lowering expenses can only take you so far. You are also going to need a high income. My personal perspective here is that I am a single person with no assistance from a partner and I plan to retire before age 30, and my retirement may involve significant cash outlays such as additional education, public interest spending, starting businesses, and so forth. I will be busy changing the world. There's no way I can achieve that before 30 if I earned a median income, no matter how much I cut back (not that there's a whole lot of room to cut back, given that my non-housing-spending is less than $500 per month).

Sure, let me just dial my income-o-meter to 300,000$. Because it's that easy.

Similarly, if your expense was 0$ you would be already retired. Way easier than earning all that extra cash for years.

I am of the opinion that aiming at both increasing income and reducing expenses is the way to go.

Suggesting that attaining an annual income of 300,000$ is realistic for a significant strata of the population is extremely naive at best if not downright stupid.

$300k was just a number that was thrown out, and might be out of reach in many fields but earning 50k and stopping there is a bit foolish in the ER world.

Earning 80k to 130k is when FIRE starts really coming quick (80-130 individually), and those levels are obtainable by most people with a bit of effort. Earning 160->200+k in a two person family is similarly obtainable in a two person household of motivated individuals.

[sleepyguy]

Another interesting area is,

Social Security vs GIS/OAS/CPP

Any feedback on this?

[RetiredAt63]

Just that CPP means you have to have paid in (it truly is a pension plan), and OAS has residency requirements.  So someone could make their money in the US and retire in Canada, but they would not be getting CPP.  OAS? That would depend on how long they were in Canada before they hit 65.

Another interesting area is,

Social Security vs GIS/OAS/CPP

Any feedback on this?

[nereo]

Sure, let me just dial my income-o-meter to 300,000$. Because it's that easy.

Similarly, if your expense was 0$ you would be already retired. Way easier than earning all that extra cash for years.

[confused].... you were the one that brought up the $300k figure (n'rmind - misread earlier thread), and you were the one said:

I would posit that expense is much more important than income in reaching FI.

I was merely saying that expenses can only be cut so far, and from my perspective absolute dollars saved is more important than expense(s). This is especially true for people with smaller incomes.

I am of the opinion that aiming at both increasing income and reducing expenses is the way to go.

I wholeheartedly agree with you here.  The best approach involves both more income and lower expenses.  Whenever possible people should do this.

EDIT: misread earlier threads and corrected this one to match.

[Guses]

Snip

I was responding to Cathy's post. She brought forth the 300,000$ figure.

[Cathy]

OAS? That would depend on how long they were in Canada before they hit 65.

Under Article VIII(3) of the Agreement Between the Government of Canada and the Government of the United States of America with Respect to Social Security, periods of paying into US Social Security count as periods of residence in Canada for the purpose of determining eligibility for Canadian Old Age Security ("OAS"). However, such periods of US residency do not count for the purpose of determining the amount of OAS, and thus somebody who does not meet the normal residency requirements (but does meet the more generous eligibility requirement in the treaty) will only be entitled to a pro-rated OAS amount. This is still something I've thought about in planning my retirement though.

[MMMdude]

I would say it's easier in Canada.

1) As others mentioned - healthcare.  Anything major here is free.  I couldn't imagine having to pay for treatment on something like cancer or whatever.  It's absurd a modern country does not provide health care to it's citizens.  Canada has it pretty good - not as good as UK though
2) Living in Alberta there is further benefits for seniors such as subsidized drugs after age of 65 + you can defer a portion of your property taxes until you die/move out of your main residence
3)OAS and GIS.  OAS is paid to everyone.  Sure it's a measly $7K per year but if you are a couple it would be $14K.  if that is all the income you have, then GIS kicks in such that if you had nothing at all you would probably be bringing in $20K per year in retirement from the gov't.  I believe Social Security and CPP are a wash in that you get what you put in.

Offsetting that would be higher home prices in Canada.  I bought my house in 2002 and it's doubled + some.  Not sure how people are affording homes in Toronto/Vancouver now on average salaries.  Way better off to rent at the moment if you are in that spot.

[nereo]

I would say it's easier in Canada.

1) As others mentioned - healthcare.  Anything major here is free.  I couldn't imagine having to pay for treatment on something like cancer or whatever.  It's absurd a modern country does not provide health care to it's citizens.  Canada has it pretty good - not as good as UK though
2) Living in Alberta there is further benefits for seniors such as subsidized drugs after age of 65 + you can defer a portion of your property taxes until you die/move out of your main residence
3)OAS and GIS.  OAS is paid to everyone.  Sure it's a measly $7K per year but if you are a couple it would be $14K.  if that is all the income you have, then GIS kicks in such that if you had nothing at all you would probably be bringing in $20K per year in retirement from the gov't.  I believe Social Security and CPP are a wash in that you get what you put in.

Offsetting that would be higher home prices in Canada.  I bought my house in 2002 and it's doubled + some.  Not sure how people are affording homes in Toronto/Vancouver now on average salaries.  Way better off to rent at the moment if you are in that spot.

1) you realize our health care in Canada is not "free", right?  And that it's province (not federally) based? And that people have health coverage in the US too?
2)your understanding of SS is not correct.  There is no guarantee that you will "get what you put in".  A worker gets an amount based on their average salary over their highest working years and the year that they started taking disbursements (e.g. it will be higher at age 70.5 than at age 62).  In general, if that person lives substantially longer than his/her life expectancy, he/she will get more than he/she put in.  If he/she dies a year after taking disbursements (or die before they take any) then he/she will obviously get far less. 
3) home prices are extremely region specific.  I don't think it's fair to say home prices are "higher" in one country than another.  Toronto, NYC, Vancouver, SF are all extremely high.  Cleveland OH and Halifax NS are examples of 'cheaper' cities to buy a home.  You can find cheap housing in both countries.

[Meggslynn]

Off topic.

Wow! I never realized there was so many Albertans here!! We should start our own Albertan thread for MMM topics and issues somewhat specific to us :)

[RetiredAt63]

Re 1) I went over my TurboTax return and realized that for Ontario not only am I paying for OHIP in general revenue, I forked out another $600 just for health care.  And my corner of the province is not well served.  I redid my taxes as if I had already moved to BC, and there was $900 more coming back to me.  We pay.  It has to be paid for somehow, right?  It is just that we pay out of general provincial tax revenue instead of all of it coming out of our own pockets or private insurance. 

and for 2) the same can be said for the CPP - like any pension it stops when you do.  Yes there are some spousal benefits, but that is usually true of private pensions.  The trick is to live a long time.

1) you realize our health care in Canada is not "free", right?  And that it's province (not federally) based? And that people have health coverage in the US too?
2)your understanding of SS is not correct.  There is no guarantee that you will "get what you put in".  A worker gets an amount based on their average salary over their highest working years and the year that they started taking disbursements (e.g. it will be higher at age 70.5 than at age 62).  In general, if that person lives substantially longer than his/her life expectancy, he/she will get more than he/she put in.  If he/she dies a year after taking disbursements (or die before they take any) then he/she will obviously get far less. 

[daverobev]

BC is certainly a good place to FIRE. Just gotta convince the wife!

Ontario... worries me. ORPP is nasty. Health Premium.. well, I don't mind it, really.

Honestly, it has to balance. I mean, my wife got a year of maternity EI, PLUS we get UCCB, whatever the other child benefit is. Someone has to pay for the roads, schools, hospitals.

Anyway, to the original question, I'd say you can retire on less in the US if you choose to. There are SO many opportunities for Americans to make easy side money (see Reddit's beermoney sub!), and with a $35k house you're golden.

Healthcare is the only thing going the other way.

Not that you have to be rich to retire in Canada, but the cost of certain things is higher - car insurance in Ontario, cell phones generally even on the most barebone offering, petrol, etc. Again in Ontario, your heating bill is not going to be cheap, where in the US you can choose your climate.

[RetiredAt63]

I had forgotten about ORPP.  I really don't see the point ...sigh.  Not that it affects me, but it will affect a lot of people for not a lot of benefit that I can see.

Health premium - I am OK with it, I do appreciate our health care.  I just wish Toronto didn't think everything outside of the GTA (and a few other big cities) is boonies.  Given American salaries and COL and choice of climate, I am not sure health care costs should be a big incentive to retire here, for anyone in the US with a decent income.

Re BC, I was surprised at the tax difference, since on paper it looks about the same.  And of course climate, at least along the coast, should make for a lower COL.  But I am sure other things will make up for it!  I will look at prices this July while I am out there (yes, trip is in the planning stages now, no more just talk).

BC is certainly a good place to FIRE. Just gotta convince the wife!

Ontario... worries me. ORPP is nasty. Health Premium.. well, I don't mind it, really.

Honestly, it has to balance. I mean, my wife got a year of maternity EI, PLUS we get UCCB, whatever the other child benefit is. Someone has to pay for the roads, schools, hospitals.

Anyway, to the original question, I'd say you can retire on less in the US if you choose to. There are SO many opportunities for Americans to make easy side money (see Reddit's beermoney sub!), and with a $35k house you're golden.

Healthcare is the only thing going the other way.

Not that you have to be rich to retire in Canada, but the cost of certain things is higher - car insurance in Ontario, cell phones generally even on the most barebone offering, petrol, etc. Again in Ontario, your heating bill is not going to be cheap, where in the US you can choose your climate.

[daverobev]

I had forgotten about ORPP.  I really don't see the point ...sigh.  Not that it affects me, but it will affect a lot of people for not a lot of benefit that I can see.

Health premium - I am OK with it, I do appreciate our health care.  I just wish Toronto didn't think everything outside of the GTA (and a few other big cities) is boonies.  Given American salaries and COL and choice of climate, I am not sure health care costs should be a big incentive to retire here, for anyone in the US with a decent income.

Re BC, I was surprised at the tax difference, since on paper it looks about the same.  And of course climate, at least along the coast, should make for a lower COL.  But I am sure other things will make up for it!  I will look at prices this July while I am out there (yes, trip is in the planning stages now, no more just talk).

BC is certainly a good place to FIRE. Just gotta convince the wife!

Ontario... worries me. ORPP is nasty. Health Premium.. well, I don't mind it, really.

Honestly, it has to balance. I mean, my wife got a year of maternity EI, PLUS we get UCCB, whatever the other child benefit is. Someone has to pay for the roads, schools, hospitals.

Anyway, to the original question, I'd say you can retire on less in the US if you choose to. There are SO many opportunities for Americans to make easy side money (see Reddit's beermoney sub!), and with a $35k house you're golden.

Healthcare is the only thing going the other way.

Not that you have to be rich to retire in Canada, but the cost of certain things is higher - car insurance in Ontario, cell phones generally even on the most barebone offering, petrol, etc. Again in Ontario, your heating bill is not going to be cheap, where in the US you can choose your climate.

Ya I saw your other thread. I might join you, haha.. we're thinking about thinking about heading out to the west to have a look around after I get back from a trip to France later this month.