Now that Joe Biden has been elected president, there’s going to be a lot of unhappy people who want to leave this country. The capital gains tax rate might go up. The step up basis might go away. And the top marginal income tax rate might go up too! Therefore, may I present the best life hack for Americans: taking advantage of Canada!
I’m always looking for arbitrage opportunities to help readers make more money and live better lives. Taking advantage of Canada may seriously be the best American life hack of them all.
My favorite money-making arbitrage opportunity for the next couple of decades is investing in non-coastal city real estate due to lower valuations and higher net rental yields. Technology is accelerating the flow of capital and people towards attractive real estate opportunities.
However, taking advantage of Canada could be an even greater multi-decade arbitrage opportunity, especially if you have children. Despite the frigid weather for four months a year, Canadians have a lot going for them.
Their GDP per capita is a respectable $45,000. Few people go through medical bankruptcies because healthcare is heavily subsidized. Meanwhile, the average annual tuition for Canadian universities is only about $6,571 for the 2019/2021 academic year. Even compared to public university tuition in America, $6,571 a year is cheap.
Let me share how one Canadian friend is taking advantage of America and how we, in turn, can take advantage of Canada.
How Canadians Take Advantage Of America
A 25-year-old friend in my SF softball league is from Vancouver, Canada. He went to the University of British Columbia, a top five university where annual tuition is only $5,399 in the computer science department.
When he graduated, he decided not to find a job in Canada, but come down to San Francisco where the computer engineering jobs pay much more. He works for an online real estate company.
“Sam, I make twice as much in San Francisco as I would if I got a similar job in Vancouver,” my softball friend told me.
“But don’t you want to give back to your country? I thought brain drain is a big thing in Canada?” I responded.
“Yes, but let me make my money first. After five years in San Francisco making double the money, I’ll then move to Seattle with my girlfriend where my firm is headquartered. Seattle pay is similar to San Francisco pay, despite the cost of living being 30% cheaper. Further, Vancouver is only a 3.1- hour drive away.“
“Sounds like a good plan!” I responded.
“Once I’m in my 30s and ready to start a family, then I’ll move back to Canada and live a less hectic lifestyle. With a stronger government safety net, I feel more comfortable raising a family back home,” he explained.
Although I feel a little bad for Canada for not getting the benefit of his productivity after providing him with 22 years of education, I can’t fault his logic.
If Canadians wish to participate legally in our labor market and also buy and sell U.S. stocks and property, why not take advantage of the opportunity? After all, America is the greatest country in the world.
How Americans Can Take Advantage Of Canada
Following my softball friend’s logic, Americans should take advantage of Canada’s government safety net and immigrate to Canada after we’ve amassed our fortunes as well. This is the best life hack to make life easier.
One of the biggest problems we face in America is the runaway cost of healthcare. Medical-related expenses are our nation’s #1 cause for bankruptcy. It would, therefore, seem logical that those who decide to retire early and are ineligible for Medicare should migrate to Canada and get their healthcare paid for.
For example, my family of four will pay about $28,000 a year for healthcare premiums plus co-pays and co-insurance in 2021. Does this sound reasonable to you for a healthy family who never sees the physician?
To generate $28,000 in retirement income at a 4% rate of return requires me to first amass $700,000 in capital. But I will need to have closer to $850,000 in capital due to taxes. Unfortunately, interest rates have plummeted in the new decade, which means retirees should lower their safe withdrawal rates.
If my family moved to Canada, we’d be eliminating most of our present healthcare costs and could use the savings towards living a better lifestyle. We wouldn’t have to purposefully reduce our income to get healthcare subsidies either. What a shame to stop writing on Financial Samurai, something I love to do, just for the sake of affordable healthcare.
Further, given the average college tuition is only $6,571 a year, we would no longer have to contribute $30,000 a year in our son’s 529 college savings plan. We could easily afford to pay the $26,284 for four years in Canadian university tuition from the money sitting in our online savings account.
It is truly mind boggling that four years of Canadian university tuition costs $9,000 less than one year of private kindergarten in San Francisco.
Massive Savings If We Move To Canada
Saving $51,000 a year in healthcare and college expenses just by moving to Canada sounds like a home run. That’s $1,275,000 less in capital I need to amass at a 4% rate of return.
Even though the average home price in Vancouver is an absurdly high $1.4 million, it’s still about $200,000 less than the median home price in San Francisco.
Moving to Vancouver, Canada might just be the best geoarbitrage move for us. For Americans living in lower cost of living areas, there are plenty of lower cost of living areas in Canada as well.
Our Children Can Take Advantage Of Canada Too
In addition to recommending all adult Americans seeking financial independence to migrate to Canada, there’s also a way for our children to take advantage of Canada too. The best life hack is when you can help your children as well.
One of the reasons why I’m a high school tennis coach is because I want to learn how to interact with teenage boys before my own boy becomes a teenager in 2031. It may sound crazy to prepare so far in advance to be a better father, but I figure why not try? Planning is free to do.
During practice one day, I had a nice conversation with one of my favorite players, a senior who will be attending Occidental College in Southern California.
Occidental College is a good school, but I thought he was going to attend a top-10 ranked school instead. He was super smart, very wealthy, and frequently late to practice due to after school tutoring.
McGill University, The Harvard Of Canada
He mentioned a classmate was attending McGill University in Canada and I was immediately impressed. I remember having a financial analyst classmate at Goldman Sachs who had also attended McGill University.
She was extremely kind and smart. Further, she was the only one in my 1999 financial analyst class who survived the post dotbomb layoffs and made Managing Director 10 years later. MD at 33!
“McGill is the Harvard of Canada!” I exalted in a somewhat joking way. “I wonder what their acceptance rate is?“
My student responded, “Really? The Harvard of Canada? How can that be if their acceptance rate is 50%?“
“There’s no way Mcgill has a 50% acceptance rate! I’ll happily bet you 20 pushups that it’s 45% or less! You’ve got to accept the bet since I’m giving you a 5% buffer.” I retorted.
Secretly, I was thinking McGill’s acceptance rate was closer to 20%. By comparison, the best universities in America have single digit acceptance rates.
“You’re on!” My student immediately looked up McGill’s acceptance rate on Google and started to dance.
McGill University Acceptance Rate
He showed me his phone and Google had the acceptance rate at 46.3%. “Time to do some push-ups coach!“
Never one to surrender so easily, I looked at the data closely and the 46.3% acceptance rate was from 2016. As someone who is proficient with the search engines, I knew Google often had old data in its featured snippets.
Once I clicked on McGill’s website, it showed they made 15,385 offers to 37,505 applications for a 41.7% acceptance rate for the 2018 school year.
“Bahaha, never challenge the coach! 20 pushups right now!” I boomed.
A 41.7% acceptance rate for arguably the best university in Canada is comical by US standards for the top school. Does everybody get a participation trophy in Canada too? The high acceptance rate shows that Canadians really are much more accepting of everybody than we in America.
Thankfully, we didn’t make the bet in late 2020. If we did, I would have lost! The latest stats for Fall 2020 admission show an even higher acceptance rate at McGill. The university made 17,385 offers out of 35,505 applicants for an astounding 49% acceptance rate!
Conversely, the Harvard of Harvard has an acceptance rate of about 5%. If your kids are academically mediocre, then it is much wiser to at least apply to a university like McGill. The career paths of many university graduates tend to end up at the same place.
Acceptance Rates From Other Top Canadian Universities
Let’s say you disagree that McGill is the best university in Canada. Here are the acceptance rates for the other top universities in Canada.
- University of British Columbia: 52.4% acceptance rate
- Queen’s University: 42% acceptance rate
- University of Toronto: 40% acceptance rate
- McMaster University: 58.7% acceptance rate
- University of Waterloo: 52% acceptance rate
- University of Montreal: 57% acceptance rate
In other words, the best universities in Canada have an acceptance rate of 40% – 58.7%!
And one reader even mentioned that Concordia University is supposedly one of the best universities. If so, that’s great because Concordia University has about a 73% acceptance rate!
Acceptance Rates At The Top U.S. Universities
Now let’s take a look at the acceptance rates of some of the top U.S. universities.
Good luck getting into a top 10 school in America. It is nearly impossible. And if your kids are Asian, like mine are, then they’ve really got a Mt. Everest to climb. Is there no wonder why so many Asian families run small businesses? They know their odds are stacked against them, so they do what they can to take care of their own.
Unless you’re a really rich legacy student or cured malaria while fighting against gun violence, you have little chance of getting into a top American university.
Remember, even some rich celebrity kids couldn’t get in on their own merit. Therefore, what makes you think your kids can get in? If you don’t have $500,000 in bribe money lying around, then forget about it.
What is the point of trying to grind so hard in middle school and high school to try and get into a top American university with a 10% or lower acceptance rate? Instead, you can be an average student and still get into a top-five Canadian university!
The reputations of the top Canadian universities are higher than their respective acceptance rates indicate. And many consider the top Canadian universities to have a similar amount of prestige to the top American universities.
The best life hack helps get your kids into a great school and ultimately get better jobs.
The Pressure For U.S. High Schoolers Is Immense
Over the past three years, I’ve seen and overheard my students talk incessantly about their studies. They discuss how they need to go to expensive SAT tutoring after practice. They complain about having to take more practice AP exams and so forth.
Several even showed up late to important matches because they required extra time on their exams. They then wanted to talk to their teachers after. I could feel the pressure they were under to try and do it all.
Maybe the pressure cooker environment has always been there in high school. But is it really a necessary rite of passage given college is becoming less necessary thanks to the free internet?
Instead of spending $48,000 in annual tuition going to Harvard only to end up with the same type of job as everyone else, why not spend 1/9th the annual tuition at University of British Columbia and work at a US-based firm for more money instead? You might have to live in Canada for a year or two to be able to pay Canadian tuition, but it’ll be worth it!
Even if you cannot get any tuition exemption, international tuition is still about $10,000 cheaper than a comparable top rated private university in America.
Not only might you land a $120,000 computer engineering job at Zillow, but you might also even make more than $1,000,000 a year as an MD at Goldman Sachs by your early 30s!
Best Life Hack: Time To Move To Canada
The best life hack is to take advantage of Canada. I encourage all American high school students to apply to Canadian universities to get a great education and save on cost. Then once you’ve accumulated enough capital in America to retire, you can then return to Canada to live off the government’s good graces.
Having a Canadian university education should make it easier to be accepted by the Canadians. You don’t even need a job thanks to Canada’s Express Entry program. All that’s required is at least one year of work experience, proficiency in English or French, and $1,500 – $2,000.
If you intend to be self-employed when you move to Canada, you’ll need to show you have at least two years’ relevant experience in the field in which you intend to self-employ.
But once you get to Canada, there’s no law that states you need to start a successful business. You can just be a hobbyist to keep yourself engaged.
At the end of the day, Canada is great for early retirees, people seeking financial independence, entrepreneurs, and children. Canadians are more laid back as its citizens are more focused on work-life balance.
When it’s time for my family to choose between relocating to Hawaii or Canada, it may be a harder choice than I had initially imagined. But then again, with Joe Biden as President, perhaps he’ll turn the United States more into Canada and we won’t have to leave. Therefore, my preference is still for Hawaii.
Taking advantage of Canada truly is the best life hack for Americans. Who’s with me? Go Canada!
Best Wealth Hack
Now that you know the best life hack, know about the best wealth hack. Stay on top of your overall finances by signing up with Personal Capital. PC is a free online tool I’ve used since 2012 to help build wealth. Before Personal Capital, I had to log into eight different systems to track 35 different accounts.
Now I can just log into Personal Capital to see how my stock accounts are doing. I can easily track my net worth and spending as well.
Personal Capital’s 401(k) Fee Analyzer tool is saving me over $1,700 a year in fees. Finally, there is a fantastic Retirement Planning Calculator to help you manage your financial future.
Best Investment Hack
Real estate is a core asset class that has proven to build long-term wealth for Americans. Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
If the U.S. housing market ever gets as hot as the Canadian housing market, I expect U.S. real estate prices to go up another 30% – 75%.
Take a look at my two favorite real estate crowdfunding platforms.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eREITs. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most investors, buying a diversified eREIT is likely the best way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot of capital, you can build your own select real estate fund with CrowdStreet.
Both platforms are free to sign up and explore. I’ve personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America.
The Best Life Hack For Americans is a Financial Samurai original post.