All posts by Financial Independence Hub

TFSA or RRSP? – The right answer for YOU

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By Ed Rempel

Special to the Financial Independence Hub

TFSA vs. RRSP is one of the most common questions I am asked. If you want to know for sure which is better for you, then you need a financial plan.

Many articles have been written on this topic that list pros and cons with general opinions.

The truth is that:

1.) Rather than just having an opinion, there is a precise right answer specifically for you. To the extent that you know your present and future marginal tax brackets, you can calculate a precise optimal contribution for RRSP and TFSA for each year, as well as the optimal amounts to withdraw each year after you retire.

2.) The decisive factor is your tax brackets now vs. after you retire. Most people just assume they will be in a lower tax bracket after they retire, because their income will be lower. In many cases, that is not true.

When you include the clawbacks of government income programs that affect everyone over 65, many seniors are in shockingly high tax brackets!

The clawbacks cost you actual money and are the same as a tax. The three main clawbacks are the 50% clawback on GIS for low incomes (under $20,000), 15% clawback on the age credit for middle incomes ($35,000-85,000), and the 15% clawback on OAS for higher incomes ($75,000-120,000).

The chart above shows the actual approximate tax brackets before and after age 65. Check out the tax brackets over 45% in red:

Understand the differences

You can own the same investments in your TFSA as your RRSP. The main difference is that RRSP contributions and withdrawals have tax consequences, while TFSA contributions and withdrawals don’t.

Therefore, the answer to TFSA vs. RRSP is primarily based on your marginal tax bracket today compared to when you withdraw after you retire: Continue Reading…

Opinion: Tax policy and the Liberals

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Trevor Parry

By Trevor Parry, M.A., LL.B,LL.M (Tax), TEP

Special to the Financial Independence Hub

I am always concerned when a Federal government starts thinking of the Province of Quebec as a policy innovator.  Certainly the left exalts their cheap daycare, made possible by an utterly punishing tax burden on business and individuals.  Well, it should be no great surprise that the Boy King and his fellow trust fund alumnus, LSE grad Bill Morneau have started to embrace “revenue measures” quite popular in La Belle Province.

Taxing private medical and benefit plans

The latest trial balloon is to make private medical and benefit plans a taxable benefit.  This would mean that most Canadians who have dental and pharmaceutical coverage provided as part of their employer compensation would start seeing these benefits taxed as income.

Of course, the middle class:  that amorphous group that the kumbaya chorus known as the federal Liberal Party claims to represent would feel the pinch most acutely.  If your group plan costs $6,000 per year you can now look forward to having the Little Prince confiscate just over $2,000 from you.  If you are unfortunately part of the class enemy known as the 1% then count on $3,000 or more being forked over.   One can assume that the bedrock of the Liberal Party, that is the civil service, would somehow be spared from this tax measure.

The rationale for this policy innovation is of course the grand and lofty goal of egalitarianism.  The homeless and downtrodden don’t have these plans so once again we must measure all policy according to the lowest common denominator.  The fact that these individuals, if they care to check into the medical system are completely covered is irrelevant in the Fabian Socialist society (a.k.a LPC).

Unfortunately too many Canadians, fed a steady diet of Liberal sycophancy from the Canadian media believe that Justin and the Liberals are champions of the little guy.  There has been no bolt of lightning that jars into accepting the reality that the LPC is the part of oligopolies, banks, insurance companies, Bombardier and the law and accounting firms that service them.    It is also lost upon them that the general health of the population should be given at least equal weight as mandated equality of results. Continue Reading…

The Canada Child Benefit – 4 key planning points to consider

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By Aaron Hector, Doherty & Bryant Financial Strategists Inc.

Special to the Financial Independence Hub

Budget 2016 introduced a new child benefit program called the Canada Child Benefit (CCB). This program replaced the UCCB, and despite their similar acronyms, they are very different from one another.

The U in UCCB stood for universal, and it was just that. Every Canadian resident family with a child under 18 received a benefit. For children aged 0-5, the amount was $160/month and for children aged 6-17 the amount was $60/month. This benefit was taxable as income to the lower income earning spouse (or single caregiving parent).

In contrast, CCB payments are tax-free. Eligibility for CCB payments are based on your family’s combined net income. The word “net” is important as it leads into other tax planning ideas that we will explore a little later on. In general terms, when compared with the UCCB the new program provides a higher benefit for lower and middle-income families at the expense of reduced benefits for high-income families. The specific calculation is as follows:

Step 1 – Calculate the maximum benefit

1. For each child aged 0-5 there is a maximum benefit of $6,400
2. For each child aged 6-17 there is a maximum benefit of $5,400 Continue Reading…

Billy & Akaisha’s 3 Lessons on how they reached their Victory Lap

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Almost 3 decades of retirement and we still have a great time on a boat ride across Lake Atitlan

By Billy and Akasha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

Retirement is a great achievement, but it’s not static. It’s not like once you arrive you can forget about it and put it on auto-pilot. It’s an interactive manner of living that continues to respond to our input, the new skills we learn and how our goals modify. Hopefully we continue to grow and change, making our retirement sustainable and sweeter to live.

Below you will find three of our most effective lessons on retirement that will enrich you and increase your enjoyment along your path in financial freedom.

Control housing costs and you can live anywhere

This is a well-kept secret of retirement. The cost of housing is one of the largest financial outlays in anyone’s household no matter what age you are, and if you modify the price you pay for your residence, you have the financial freedom to virtually afford living anywhere in the world.

In other words, if you could save tens of thousands of dollars a year on mortgage payments or rent, insurance, maintenance and repairs, how would that affect your life? What if you could live in Paris or on a Caribbean island for free? You can do that, if you house sit. Continue Reading…

3 tips for raising a family in a Condo

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Healthy demand is forecasted for Canada’s condo markets in 2017, and it’s not just young professionals and investors fueling the boom. As low-rise housing prices grow further out of reach, families are increasingly turning to condo life as an affordable housing option.

For many, condos offer the only affordably entry point into the market, especially in Vancouver and Toronto real estate. And while some buyers choose to “drive until they qualify,” suburb life isn’t desirable to everyone, prompting buyers to increasingly sacrifice space to live within city limits.

The Toronto Real Estate Board (TREB) reports demand for high-rise units surged more than any other housing type in 2016, with 20,860 units changing hands – a 19.9% increase. In comparison, detached homes – despite being extremely highly sought – saw a year-over-year change of over 3.10% in the 416 region as sales were limited by tight supply.

Condos still an affordable option

Continue Reading…