Letters and Tweets - October 2015

CPA Magazine readers respond to the August 2015 issue via mail and Twitter.

HOW MANY ACCOUNTANTS DOES IT TAKE?

In an August letter to the editor, I. David Gould appears to be as incorrect as the article (“The Theory of Everything Debt,” May) he was commenting on. Gould states it would not take 16 years to pay off the credit card balance as stated but it would take “48-plus years to pay off” a $3,000 credit card debt, with monthly minimum payments of $10 (interest rate of 18%).

The problem with both assertions is that the debt would never be paid off if only $10 a month was being paid.
Based on an 18% annual interest rate, the monthly interest rate would approximate 1.4%, being $42 in interest on a $3,000 debt in the first month. Clearly, a $10 minimum payment will never pay the monthly interest let alone the principal.

Reviewing the article and the Survey of Financial Security, 2012 Statistics Canada, the source for an illustration in the article, I noted the following:
1. The quoted source of the illustration does not have the two sections that are headed “16 years” and “$2,798.88.”
2. The median value of student loans is shown as $10,000 where in fact the figure represents the median value of student loans for a “family unit,” which could be comprised of one or more individuals with student loans.

Yes, there is a problem with credit card company disclosure, but let the accountants get it right first.

Ronald T. Smith, Toronto

DEBT AS A RETIREMENT STRATEGY


I enjoyed the column on “Seniors and Debt” (On the Money, August), but there are many seniors who are increasing debt as a retirement strategy. As an entrepreneur, my net worth is in property and RRSPs. When you withdraw money from your RRSP, it is taxable along with your CPP and OAS. Therefore, with $1 million in equity in my home, it makes sense to borrow a small amount each year to avoid moving into higher tax brackets, thereby reducing the amount of tax on RRSP withdrawals.

Bob Garnett, Richmond, BC

RAISING EYEBROWS OVER THE OILPATCH


I was surprised to read “The Viscous Circle” (August). Take the sidebar “Types of Oil Production.” It states that pump jacks are used to drill vertical wells. Pump jacks have never been used to drill a well. They are used for production of oil from a well drilled by an oil rig.

Other things mentioned raise eyebrows or are incorrect. Clearly the writer does not have knowledge of the oilpatch, which is confusing as to why she would list “facts” as she did.

Ryan Norton, Edmonton
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Highlights

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It’s probable that someone you know is deep in debt. If you are observant, you might see one of these seven signs.