Monthly Archives: August 2017

If an enhanced CPP takes you off GIS rolls, count your blessings!

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Let’s HOPE this advisor’s financial plan means this senior couple won’t qualify for the GIS!

Here’s my latest MoneySense column, which looks at the headline-grabbing “news” that an  Enhanced Canada Pension Plan (CPP) would mean roughly 243,000 low-income seniors might not be eligible for the Guaranteed Income Supplement (GIS) once the full-bore enhanced CPP system is in place in the year 2060.

Click on the highlighted headline for the full piece: Retirees should be happy not to qualify for GIS.

None of the five financial experts whose input appears in the piece disagreed with this article’s premise: that far from being a bad thing to make so much from CPP (or any other source of retirement income) that you exceed GIS minimum income thresholds, it’s actually a good thing. Yes, you have to work at a job to earn CPP benefits, whether “enhanced” or not, and yes, this entails payroll contributions taken off the top. That’s no different than anyone with a good employer pension or who saves in RRSPs or any other vehicles.

That’s what saving is all about: providing for future needs by taking a little out of current income. It’s all about living within your means, being responsible for your own future and all the other themes that the Financial Independence Hub espouses every day.

The Hub and MoneySense recently looked in-depth at OAS and the GIS, which you can find here.  And earlier today we looked at Survivor benefits for CPP, OAS, GIS and other sources of retirement income.

One of the sources for the GIS article was TriDelta Financial’s wealth advisor, Matthew Ardrey. Time and space limitations meant we could include only a snippet of Matthew’s analysis in the MoneySense column itself but he has given us permission to run his whole opinion below:

TriDelta Financial’s Matthew Ardrey

The government plans to enhance CPP through two measures. One, increasing the contribution amount from 25% to 33% and two by increasing the income limit on which contributions are made to $82,700. Combined these two measures will take the maximum pension of $13,370 today to about $20,000 in the future.

There will be some measures to offset these contributions for the employee including an enhanced Working Income Tax Benefit (WTIB) to help offset the cost for lower income workers and making the enhanced contributions a tax deduction instead of a tax credit. Though that helps out today it does nothing for the low-income earner in retirement.
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Retired Money: Pension Survivor Benefits

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Pension Survivor Benefits are one of those morbid topics every couple needs to investigate. No matter how happy a marriage may be, at some point the phrase “till Death do us part” sadly comes into play.

My latest MoneySense Retired Money column looks at the somewhat morbid topic of survivor benefits on employer pensions, savings and especially the triad of the three major Government retirement benefits we’ve looked at in recent Retired Money columns: the Canada Pension Plan (CPP), Old Age Security (OAS) and for some, the Guaranteed Income Supplement (GIS).

You can access the full MoneySense column by clicking on the highlighted headline here: Survivor Benefits: A Guide to CPP, OAS, GIS and more.

The piece begins with a look at the more or less straightforward survivor benefits of employer-sponsored pensions. It notes that pension law requires that you and your spouse be offered a joint-and-survivor pension that makes payouts until both partners die. While pension administrators will likely encourage the pensioner to provide for the spouse, some may offer a spouse the option to waive their pension rights.

Depending on the paperwork signed when you elected to start receiving a corporate pension, your spouse may be entitled to a good percentage of what the lead pensioner is promised: it can range from 50% to two thirds to 75% and may even be 100%.

Things are relatively simply on RRSPs and RRIFs. Ideally you and your spouse have named each other the beneficiary on your RRSPs and eventually RRIFs. If so, the rules are relatively simple: the money in the one spouse’s plan rolls over tax-free to the survivor. It’s only when the second spouse dies that there will be a large tax liability to the government.

Tax-free Savings Accounts (TFSAs), introduced in 2009, have a special wrinkle and here we will refer you to a past Retired Money column. The main thing is to ensure you and your partner do the paperwork and name each other a Successor Holder for your respective TFSAs.

Given the preceding, readers may be surprised to find that survivor benefits for CPP, OAS and GIS are quite a bit more complex, and may be less generous than you may have supposed.

No real OAS Survivor Benefit after 65

For starters, there really is no OAS Survivor benefit after 65, since Ottawa assumes the survivor will have their own OAS benefits. There is an income-tested transitional benefit called the Allowance for the Survivor but it’s only for those aged 60 to 64 and subject to various conditions.  Service Canada says once these beneficiaries reach age 65, their benefit is converted to an OA pension and “possibly the Guaranteed Income Supplement.”

Similarly, Survivor Benefits for CPP may be less than couples may have been hoping for, particularly if both had been receiving the maximum.  A survivor who is 65 or older and not already receiving CPP benefits qualifies for a survivor benefit of 60% of the deceased spouse’s CPP pension, assuming benefits beginning at 65.

Combined CPP Survivor Benefit and Retirement Pension can’t exceed $1,114.17 a month

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5 small business ideas you can start for under $10,000

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By Emily Lil

Special to the Financial Independence Hub

Have you ever dreamed of opening up your own small business but wondered where you’d find the capital to do so? It turns out that there are scores of businesses that require no more than US$10,000 to start. With such a low start-up investment, there is no excuse to wait before launching your dream business.

1.) A Cleaning Business

All you need to start your own residential cleaning business is a mop, a vacuum, and some bulk cleaning supplies. Develop a game plan and begin by cleaning residential spaces. When you’re ready, commercial clients tend to pay greater hourly rates. Cleaning services make up a billion-dollar industry. Advertise in your local newspaper or register your business with Amazon Services to help customers discover you more quickly. When business is booming, consider embracing the high-paying niches in the cleaning market, such as bio hazard cleaning and commercial janitorial services. While these jobs require more complex equipment, they could lead you to earn a six-figure salary.

2.) Gardener

If you’re an avid and successful home gardener with a wide knowledge of plants and an artistic eye, garden consulting may be the perfect start-up for you. Garden consultants are typically paid by the hour to work with home gardeners, answering questions, and guiding decisions. You may also be asked to develop a cohesive plan including what types of plants, soils, and rocks to incorporate into a garden. If you’re planning on becoming a full-time garden consultant, work on developing a portfolio, advertise in local directories, and develop meaningful contacts. You’d be surprised at how many people desire to skip traditional landscaping services for a more in-depth informative service like garden consulting.

3.) Freelance Writer

If you’re a skilled writer, you can start a home-based business with little to no start-up investment. Continue Reading…

Old Age Security (OAS) explained

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Old Age Security (OAS) was originally intended to be a universal program to provide income support payments to Canadian seniors. It is one of the cornerstones of Canada’s retirement income system.

It is not a pension plan. You don’t make contributions. OAS is a government benefit program that is financed out of general revenue.

Related: Is our Old Age Security Program Sustainable?

Employment history is not a factor in determining eligibility. You can receive OAS benefits even if you have never worked, or are still working.

Residency requirements have to be met. The amount you receive is determined by how long you have lived in Canada after the age of 18.

Everyone who has been a resident of Canada for at least ten years (after age 18) is eligible to collect OAS starting at age sixty-five. Normally, you qualify for the full amount only if you have been a resident for at least forty years after turning 18.

You may still qualify for full or partial payments if you meet certain other requirements.

Up to September 2017, the maximum monthly benefit is $583.74. This rate is reviewed four times a year and may be adjusted based on the cost of living measured by the Consumer Price Index. OAS is taxable income.

OAS for low income seniors

Anyone who receives OAS and whose income falls below a certain level may be eligible to receive additional non-taxable monthly payments.

  • The Guaranteed Income Supplement provides a monthly benefit to low income OAS recipients. It is an income tested benefit. This means your total income from the previous year (combined income for couples) is used to determine your eligibility.
  • Allowance is available to 60-64-year-old spouses/common-law partners of OAS recipients who also receive GIS.
  • If you are sixty to sixty-four years old and are widowed, you may be eligible to receive the Allowance for the Survivor.

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Ask Tyler: Should I sell my stocks, given the North Korea situation?

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By Tyler Mordy, Forstrong Global

Special to the Financial Independence Hub

Diversifying Fire & Fury

What danger does the North Korea situation present for global investors? Clearly, Trump’s indulgence in nuclear brinksmanship carries risk. Pyongyang potentially firing missiles at US territory in the Western Pacific is also real. And there is a global existential threat should it ever escalate into intercontinental warfare.

Yet, rather than add to the volumes of prognostications about North Korea’s specific situation, consider the track record of major events and their impact on markets.

Most geopolitical events are false alarms

First, most geopolitical events are false alarms. As card-carrying members of the change-anticipation field, we understand the desire to divine the big events: to be first to spot the outlines of a looming disaster can be glorious (and career-enhancing).

But most warnings are false alarms simply because big turns are rare events. Remember Y2K, Saddam Hussein’s so-called “weapons of mass destruction” and, recently, Brexit? None of these widely-feared threats materialized or they delivered benign outcomes.

Second, more often than not, geopolitical events create opportunity. Rummaging through past post-crisis periods produces a long list of stellar returns after the initial event. For example, the Cuban Missile Crisis in October 1962 was a 13-day confrontation between the US and the Soviet Union, widely considered the closest the Cold War came to full-scale nuclear warfare.

However, after the crisis subsided, the Dow went on to gain more than 10% that year. Or take the Korean War, when the North invaded the South. This conflict lasted from June 1950 — July 1953. During that time, the Dow was up an annualized 13.6%. History is brimming with similar examples.

Such events often have binary outcomes

Finally, geopolitical events may have binary outcomes. By this we mean that a negative scenario would either produce an extremely large portfolio loss or gain. There is no knowing which ahead of time. As such, narrowly focusing on one type of risk is speculative at best.

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