All posts by Financial Independence Hub

Impact of the Trump administration’s Potential Tax Reform

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Summary of potential tax cut across Indexes

By Jeremy Schwartz, Director of Research, WisdomTree Investments and

Josh Russell, Quantitative Equity Strategist, WisdomTree Investments
Special to the Financial Independence Hub

 

Corporate tax cuts were a focal point of Donald Trump’s campaign — and Trump says lowering corporate taxes will be a priority in his first 100 days as president.

Based on the initial market response to Trump’s victory, lowering tax rates looks to us like the most important factor driving the market.

Equity markets, of course, like it when taxes are cut. It naturally means more after-tax earnings that can be reinvested or distributed to shareholders — and, importantly, an improvement in valuation ratios that many think look extended under present circumstances.

We published an initial sensitivity analysis to look at how various assumptions on tax rates might impact the earnings growth and ultimate market valuations across a market cap-weighted index set of the S&P 500, S&P 400 and S&P 600 — and across the sectors in those indexes. We have updated our original analysis to also include domestic WisdomTree Indexes; we also have updated our initial model for estimating the potential tax benefit that shows new results for the cap-weighted index family.1

Lower Tax Rates = Big Earnings Growth and Market Moves in Small Caps 

To summarize the results, a simple model shows the following: the more earnings (and taxes paid) that come from the U.S., the greater the earnings growth would be from a tax cut, because by and large, the companies with revenue across the world already have lower effective tax rates. Continue Reading…

Better Retirement choices: An elegantly simple solution

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By Doug Dahmer

Special to the Financial Independence Hub

“Life,” philosopher Albert Camus contended, “is the sum of all your choices.”

Do you think otherwise?

Good or bad. Easy or hard. Right or wrong. Every choice you make will impact your life to some degree.

Choices with little impact are often made without much thought and the trouble is this casual approach to decision making tends to be deployed on bigger and more impactful choices.

In my profession, as a retirement income specialist, I see poorly made choices all the time. They, unfortunately, tend to be life altering, irreversible and totally avoidable. Like a doctor passing along a gloomy prognosis, I am heartbroken to see the look on peoples’ faces when I tell them how a choice they made will put them at a disadvantage for the rest of their lives.

And, as I said, many of these damaging financial choices are often avoidable.

 The Retirement Risk Zone Years (TRRZY)

The years leading up to, and the early years of retirement are packed with important choices that can create turning points in your life. We call this period of your life ‘The Retirement Risk Zone Years’ (TRRZY).

TRRZY has aptly earned this acronym because this phase of life contains the highest concentration of high-impact choices that can lead to turning events, both good and bad, in people’s lives.

It is important to recognize that the number and frequency of tough and important choices increases during this time. In addition, the implications of choosing poorly intensify as both time and flexibility have turned from friend to foe. Successfully creating your best possible retirement years is directly linked to how well you navigate the challenging choices of TRRZY.

Over this nearly two-decade period we must adapt our thinking to a new reality. Strategies that served us well during our savings years can turn on their heads and start to work to our disadvantage as our flow of funds reverses from saving to spending. Those who fail to recognize and adapt to this new thinking have a high propensity for making poor choices, many of which they will regret in future years.

Turning Points during “TRRZY”

Continue Reading…

RRSPs — Getting past the contribution inertia

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By Aman Raina,  SageInvestors.ca

Special to the Financial Independence Hub

In the early part of the New Year we see, hear, and read a lot of messages regarding Registered Retirement Savings Plans (RRSPs). From every indication, they are important to have as a saving tool as we get older.

RRSP and Containers

Before getting to why it is important, a quick overview of the RRSP concept. The best way I can explain the concept of a Registered Retirement Savings Plan or RRSP, is that it is essentially a container. It can be a jar, a glass, a bathtub, anything that can hold something.

In terms of RRSP containers, I’ll keep this simple. You have several types to choose from:

Asset Specific RRSPs –can only hold a specific type of asset like a GIC or a mutual fund. You can hold multiple containers of Asset Specific RRSPs

Self-Directed RRSPs –can hold a variety of securities including individual stocks, bonds, ETFs, mutual funds, cash, GICs, Treasury Bills. They are much more flexible in terms of your options of what you want to put in your container. The banks and brokerages usually charge an annual fee for the privilege of using their containers, however if you have enough assets to put into the container or throw a lot of business there way, you can get it waived.

Continue Reading…

Steps for saving Money in 2017

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By Barney Whistance

Special to the Financial Independence Hub

With a new year come new resolutions and new hopes. You hope to have a better life by maintaining good health, having emotional stability and making yourself stronger financially. All these tasks are achievable, provided that you have proper guidance and will power.

To end up with a lot of savings at the end of the year is no easy feat. Anyone faced with loans, taxes, and insurance payments would want to save some money at the end of the year. There are a few steps that can be taken to maximize your savings and lead you to a better retirement plan than now.

Car Insurance

If you have purchased a new car, it is worth having insurance against theft and accidents. But if your car has been in your possession for more than a 7-year period, it is better that you let go of that insurance. As the price of your car has already declined precipitously, it is no use insuring something that costs so much less. Your insurance will only add to the unwanted expenses since you could have most parts of it repaired for a lot less.

Food

Food is the basic necessity of every human. Studies have found that people in America spend at least an average of $151 on food in a week. Eating at home is far more economical and healthier than eating out. To contain your food budget, allot yourself a fixed amount for every week and see if you can manage within the budget. If you are still left with enough money, indulge yourself in eating out. Moreover, to save on your grocery purchases, you can buy in bulk from a supermarket, which can save you money. Be sure to buy only those items that you use excessively and have a long shelf life. Plan your shopping on the days the store is known to give discounts.

Energy Bills

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Snowbird season is also tax season

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By Kristin Zacharchuk, Master Tax Professional, H&R Block Canada

Special to the Financial Independence Hub

Each year, more than half a million Canadians escape the cold and travel to the U.S. sun-belt to wait out the winter, while the rest of us suffer. Must be nice!

One thing they need to remember while soaking up the sun and sipping on daiquiris, is that snowbird season is also tax season and escaping our Canadian weather, unfortunately does not allow you to forget about taxes.

The reality is, snowbirds are under a lot of pressure to understand their tax obligations, as initiatives are built between Canada and the U.S. to better track movement, assets and residency. Failing to do so could result in much worse than a sunburn including stiff penalties, lost benefits or even resident obligations that bring higher tax payments. Need I go on?

So, if you are planning to migrate south this winter, please keep these tips in mind:

Entry/exit initiative

It’s important that you keep a record of your trips to the U.S. since the Entry/exit initiative border tracking system allows Canada and the U.S. to monitor who crosses the border, when they do, and the length of their stay. Track and record this information in case you are asked to report it. If you don’t, you run the risk of being required to file a return as a U.S. resident or even losing certain benefits like provincial healthcare.

Resident alien status

The IRS looks at how much time you spend in the U.S. in order to figure out if you are a resident alien. Since, resident aliens are supposed to file a U.S. tax return, it’s important you find out if you meet their U.S. residency standards.

Closer connection declaration

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