By Bill Tufts, Fair Pensions for All

Special to the Financial Independence Hub

The Harper government introduced the Tax Free Savings Account (TFSA) in 2009. At the time Finance Minster Jim Flaherty wanted Canadians to bolster saving, mainly for retirement. The growth of RRSPs had started to slow and many Canadians are going to be in for a big surprise on their first day of retirement and be greeted with even bigger surprises a decade or two into retirement.

The first year of the TFSA proved a big success when Canadians opened an estimated 3.6 million accounts and deposited $12.4 billion in just the first six months of the plan being opened.

After this initial success and the resulting growth of assets that Canadians could use for retirement, the government decided to build on this success. The plan had expanded once, raising the annual limit from $5,000 and was boosted by $500 as an inflation adjustment for calendar 2013 to $ 5,500. TFSAs were also designed to be cumulative and savers could backfill the TFSA using previously unused accumulated room.

In 2015 the federal budget hiked the annual contribution allowance to $10,000 annually. Canadians around the country applauded this move.

TFSA opponents have no problem with “tax cost” of public-sector pensions

The increased room announced in the budget for the TFSA and the fact that it would accumulate tax free alarmed some groups. The Broadbent Institute was the first out with a report, concerned about the ability of government to continue funding ever expanding and increasing government programs. Broadbent was opposed to the TFSA and any expansion of the program because it was leaving too much money in Canadians’ bank accounts and not coming to government as tax. Continue Reading…

SensibleInvesting.tv recently released a free documentary that’s a behind-the-scenes look at the multi- billion dollar investment industry.

How to Win the Loser’s Game includes interviews with Vanguard founder John Bogle, Nobel Prize-winning economists Eugene Fama and William Sharpe, author and wealth manager Larry Swedroe, among many others. (To view Part 1, which runs for six minutes, click the red link above, which takes you to YouTube.com). You can also find it and future instalments housed here at Findependence.TV.

While the publisher is UK-based, most of the concepts are widely applicable to most of the fund management industry, both in Canada and the U.S.

The series clearly communicates the challenges that investors face and gradually covers the benefits of a low-cost, long-term, low-maintenance, diversified investment strategy.  This is valuable information for consumer-investors, although many in the investment fund industry would probably prefer that it not be widely distributed.

After watching the video if you want to learn more, download the free guide, 12 Essential Ideas For Building Wealth.

“If you are serious about investing and building wealth the video documentary series ‘How To Win the Loser’s Game’ is a must-see. It’s excellent.” — Paul Philip, Financial Wealth Builders Securities

By Matthew Ardrey

Special to the Financial Independence Hub

In my previous two blogs in this series, I took a look at the pure mathematical decision as to when you should take your CPP (hyperlink to CPP blog) and OAS (hyperlink to OAS blog) to maximize their payout.

In my final entry on government pensions, let’s examine a couple of cases to get a sense of how personal circumstances can affect the decision.

If I stop working is it still better to defer?

Jim is planning to retire next year at age 55 and not work thereafter. He is single and his assets and future income are such that his decision to take the CPP at 60 or 65 will not affect his OAS clawback. Jim has a Statement of CPP Contributions that shows for the first five years he made 50% of the maximum contributions and then 75% of the maximum for the following three years. After this point he has contributed the maximum every year. Should Jim defer his pension to age 65 or take it at age 60? Continue Reading…

By Matthew Ardrey

Special to the Financial Independence Hub

The rules surrounding Old Age Security (OAS) changed as of July 1, 2013 with full implementation of these changes by January 2029.

The recent election of the Liberal government, promises to change the age of eligibility back to 65. Thus, we will assume that everyone is eligible to receive OAS at age 65. Continuing with the theme of government pensions, this is the second in a three-part series where we will examine how the remaining changes to the OAS rules will affect your pension payment in retirement.

What is the best age to take OAS?

As of July 1, 2013 you are able to defer your OAS pension for a maximum of 60 months in exchange for a higher pension amount. For every month you delay receipt of your OAS pension, your payment will be increased by 0.6%, to a maximum of 36% at age 70. Deferring GIS will not cause an increase in those benefits.

Looking at the math behind the breakeven calculation and ignoring the personal retirement circumstances that may influence this decision, the following are the breakeven points for taking OAS under the new rules.

Using the current maximum OAS payment and ignoring inflation, the total OAS pension received is greater just before the pensioner reaches the age of 84 if you defer the pension from age 65 to age 70. If 2% inflation is factored in over the time period, then the breakeven age drops to just after age 82. Comparatively, these ages are much later than the deferral breakeven for CPP as seen in part one.

At what age can I start receiving my OAS?

Continue Reading…

By Matthew Ardrey, T. E. Wealth

Special to the Financial Independence Hub

The rules on how CPP works changed as of January 1, 2012 with full integration of the changes to be implemented by this coming January (2016).

As this is a part of almost every Canadian’s retirement, it is important for everyone to have a good understanding of how to maximize this government benefit.

What is the best age to take CPP?

This is a common question from many people approaching retirement. How will these changes affect when you should take the pension to maximize the benefits payable to you?

First, a brief look at the changes implemented. Previously, if you chose to take your CPP early or defer past age 65 the reduction or increase in your pension was 6% per year, or 0.5% per month, to a maximum of 30%. Upon full implementation, the reduction for taking CPP early will be 7.2% per year, or 0.6% per month, to a maximum of 36%. The increase in pension from deferring, which is already fully implemented, is 8.4% per year, or 0.7% per month, to a maximum of 42%.

From a purely mathematical perspective, the following are the breakeven points for taking CPP under the new rules. We will touch on how your personal retirement circumstances may effect this decision in a later blog.

If the effects of inflation are ignored, by the time the pensioner reaches age 73, the total CPP received is greater by taking it at 65 instead of 60. Similarly, by deferring CPP to age 70, the total CPP received is greater when the pensioner reaches age 81 than if taken at 65. If inflation of 2% is factored into the calculation then the breakeven ages drop to just before 72 and just after 79 respectively.

What happens if I keep working after taking CPP?

Continue Reading…