All posts by Jonathan Chevreau

Weekly Wrap: Census; Estate planning; Trump’s succession plan; Mutual Funds embrace ETFs

Based on the widespread media coverage of the 2016 Canadian census this week, Canada’s baby boomers are going to be just as much of a demographic force as ever once they enter their golden years. For the first time, our seniors now outnumber our kids, the CBC reported.

Not all seniors are baby boomers, of course, but sadly the reverse will soon be true: most if not all baby boomers will be seniors. For this generation retirement (or semi-retirement) is a huge looming event, as a quick browse of this site will establish. Hey, just this week I got a package from Service Canada advising me that I will be able to draw Old Age Security (OAS) when I turn 65 next April. And I intend to take it then too, as I wrote in MoneySense last August: Why I’m taking OAS right at 65.

Boomers need to face up to their own mortality

All of which suggests it’s time for Canadian boomers to start looking more seriously at their own mortality and the admittedly dreary topic of estate planning. I covered this Thursday in my latest MoneySense Retired Money column: Retirees need to start thinking ahead.

In my Financial Post article that ran on Wednesday, I looked at estate planning from a different perspective: how the original “Wealthy Boomer” —  Donald Trump —  is tapping his family members for senior roles in his administration and possibly for his business succession planning. Click on Donald Trump is upping the ante in the Wealth Transfer game.

Ian Campbell

One of the sources for the FP piece was business transition and valuation expert Ian Campbell, pictured. (He himself admits to his strong resemblance to investing legend Warren Buffett!). By coincidence I reached out to Ian about the Trump piece just as he had published a blog on that very topic. It ran on the Hub Wednesday under the headline Generational Business Transaction: The Apprentice. Check the links to his site for his free newsletter.

The Truth about Working in Retirement

Our best-selling (G&M, Amazon among others) book, Victory Lap Retirement, continues to get some positive reviews. Earlier this week Ellen Roseman of Toronto Star fame wrote the following review on Golden Girl Finance: The Truth about Working in Retirement. As Ellen recounts, she herself has retired from her full-time newspaper gig but continues to be fairly busy in the semi-retirement described in our book.

Mutual fund companies Excel Funds, Franklin Templeton enter ETF business

Finally, some big news in the asset management industry, where it was announced that two Canadian mutual fund companies — Excel Funds Management and Franklin Templeton Investments — are entering the ETF business. The Globe & Mail’s Clare O’Hara reported this on May 2nd. Click on Franklin Templeton, Excel Funds to enter Canadian ETF market.

Continue Reading…

Retired Money: The “Glide Path” to semi- retirement

My latest MoneySense Retired Money column looks at a concept called “The Glidepath” approach to semi-retirement. Click on the highlighted text for the full version, which is headlined How to Transition Into Retirement.

The “Glide Path” is a term used by veteran and now semi-retired financial advisor Warren Baldwin. At 66, Baldwin still works part-time as a senior vice president T.E. Wealth, working out of Oakville, Ont.

When used in the context of airplanes and flight, glide path is a familiar image that Baldwin’s clients easily understand. His own “glide path” to semi-retirement began three and a half years ago. “Maybe it takes five years because it takes two years to plan and get your mind around it. For me, it was coming up three years ago, when I was 63. The timing was right.”

The “Work Optional” stage of life

Another way to describe this is the “Work Optional” stage of life, a term popularized by Emeritus Retirement Solutions’ Doug Dahmer, who is a frequent contributor to the Hub’s “Decumulation” pages. See for example, this post.

Continue Reading…

With 2 weeks to go, two in five have yet to file their taxes for 2016

While the tax-filing deadline has already passed in the United States (it was yesterday, April 18th this year), Canadians still have roughly two weeks left to go before the May 1st tax-filing deadline for the calendar year 2016.

Today, a survey from H&R Block Canada found two in five Canadians still haven’t filed their taxes this year. I had to shake my head because the survey arrived in my inbox shortly after I received emails from the Canada Revenue Agency advising me that returns for my wife and I had been processed, with (small) refunds deposited into our bank account.

Actually, those expecting refunds don’t get hurt too much by procrastination, although the time value of money tells you the sooner you file and get your refund, the sooner it can be properly invested, or be applied to eliminate high-interest debt.

But I worry about the 40% who still haven’t filed, especially about the subset of that group who expects to have to pay the CRA. (30% of H&R Block clients have to pay, versus 70% who get refunds).  It’s bad enough owing money and you don’t want to compound matters by having penalties and interest get tacked on on top of the outstanding balance.

Majority are between Procrastinators and Eager Beavers

H&R Block claims its survey has a bit of good news as it relates to attitudes towards filing: the majority consider themselves to fall under the In-Betweener category (55%), i.e.  those who file a few weeks before the deadline. Almost a quarter (23%) are Procrastinators who file at the very last second. Category 3 are  Eager Beavers (19%), who file well in advance of the deadline. (That would be me, although even Eager Beavers have to wait until the first week of April if they have non-registered investments: some of those T-3 slips don’t arrive until the end of March).

Eager is perhaps too strong a word. I hate filing taxes as much as anyone but I look at the annual ordeal as comparable to dentistry. If you have a toothache you want to address the pain head on, as soon as possible. And there’s nothing like the feeling of relief you get from hitting the Send button on a tax return, assuming you NetFile.

Most Canadians are anxious about tax filing, although H&R Block says one in four actually “get excited about filing and the prospect of receiving a hefty refund.” But the majority associate negative feelings with it:  Reasons range from finding tax preparation a complicated process (21%) to the inconvenience factor (19%) of filing a tax return or just the feeling of overall anxiety it evokes (11%).

The major excuses for not filing:

• They haven’t organized all of the necessary paperwork yet (34%) – with millennials being the most susceptible at 45% to state that as the main reason for not having filed

• They always file on the last week before the deadline (18%)

• They had not yet received all of the necessary paperwork (17%) to file

• They haven’t had time (11%) to file

Even so, 86% plan on filing their taxes before the May 1st deadline. Between now and April 27th, you can download the H&R Block Tax Software 100% free of charge (including all upgrades and support). See here for details.



How to earn $50,000 in dividend income tax-free (in most provinces)

The Financial Post has just published (in Thursday’s paper and online) my article headlined “You can earn $50K in tax-free dividends but there’s a catch: You can’t have a job.”

Can’t have a job, indeed, or a large pension or any other source of significant alternative income.

The article is based on a BMO Financial Group report (May 2016) entitled Eligible Dividend Income. It shows that at least eight provinces or territories make it possible to receive $51,474 a year in “tax-free” eligible dividend income, provided there are no other major sources of income, and notwithstanding any provincial health levies.

These include Alberta, British Columbia, New Brunswick, Ontario, Saskatchewan, the Northwest Territories, Nunavut and Yukon. It’s only $45,309 in Prince Edward Island, $35,835 in Quebec, $30,509 in Nova Scotia, $24,271 in Manitoba and just $18,679 in Newfoundland and Labrador.

BMO won’t update for 2017 until all 2017 provincial budgets are released. When it first began publishing the document for the 2012 tax year, the maximum amount of tax-free income on eligible dividends was $47,888 in Ontario and eight other provinces. The amount rose to $48,844 in 2013 and to $49,284 in 2014.

Dividend Tax Credit, Basic Personal Amount are keys

This low-tax phenomenon happens through a combination of the Basic Personal Amounts (which in 2016 makes the first $11,474 tax-free federally) and the 15.02% federal dividend tax credit on eligible Canadian dividends: Continue Reading…

Retired Money: How tax filing changes in Semi-Retirement

Here is my latest MoneySense Retired Money column: Tax filing advice for retirees.

It relates my personal experience of filing this year’s tax returns for the 2016 calendar year.

There is quite a difference between the key tax documents when you’re a full-time employee and the ones you receive when you’re fully retired. And in semi-retirement, it’s an interesting combination of both. Instead of T-4 slips from full-time employers, and RRSP receipts that help you minimize the high tax rates of employment, the semi-retiree now may be receiving T4A slips that tell you (and the Government) how much pension income you received in the prior calendar year and how much (if any) tax was withheld at source.

And the mirror image of the RRSP receipt in retirement or semi-retirement is the T4RSP slip, which tells you how much money you withdrew from your RRSP and how much (if any) tax was withheld at source.

The article also links to an earlier Retired Money column on “Topping up to Bracket,” which describes how you really want if at all possible to tap into the roughly $20,000 “Tax-free” zone made up of the Basic Personal Amount ($11,474 in 2016, which rises to $11,635 in 2017), another $2,000 for the Pension Credit and for those who are 65, the $7,125 Age Credit.

Age Credit escapes the axe … for now

As I noted in my Budget blog last night and this morning, despite fears that the Age Credit might be the victim of the Liberal zeal to jettison costly tax credits, evidently the fear of offending the 5.2 million seniors affected stayed the hand of Finance Minister Bill Morneau. While it is income-tested, for modest-income seniors I view the Age Credit as essentially making Old Age Security (OAS) benefits tax-free, assuming they are commenced also at the magical age 65. Continue Reading…