Kevin Purkiss, vice president, Fraud Management, RBC
Special to Financial Independence Hub
While we don’t always want to think about the risk of fraud, it’s never been more important to stay vigilant. During the pandemic we saw a sharp rise in fraud attempts, but it may be about to get worse if we end up in a recession later this year.
Not only have we seen a strong correlation between increased fraud and economic slowdowns in the past, but many Canadians believe a recession will make fraud even more risky, according to new RBC research.
The poll found that 78% of Canadians believe a recession will increase everyone’s fraud risk and 42% think it will be harder to spot scams during a recession than in the pandemic. Three quarters (75%) also believe that it’s easier to fall victim to a scam when you’re struggling financially and 36% are simply too worried about other issues to be concerned about fraud.
While it’s understandable that Canadians have a lot on their minds and don’t want to think about fraud, scams are getting harder to spot and fraudsters are becoming more sophisticated. This is why we all need to continue to stay aware and take steps to protect ourselves.
Missing the signs of fraud is costing us money
Our research also found that 32% of respondents are concerned they are already starting to miss the signs of potential fraud and 71% are worried it will be harder to spot the signs of fraud as they get older.
Almost a quarter (23%) have been a victim of fraud or fallen for a scam, with 14% saying they lost money because of a scam. While the average lost was $400, 6% of respondents say they lost more than $10,000.
Apathy about fraud risk among Canadians 18-34
More than half (53%) of adult Canadians under the age of 35 say they share more information online than they should and 44% say they are quick to share personal data to get access to an offer, website, app or service. Thirty-five per cent of this age group also perceive fraud as something that happens to others, but not to them, and 33% have never been worried about falling victim to a scam. Continue Reading…
The FHSA and reasons why younger Canadians should really opt in to opening this account with any intention to buy their first home over time …
By Mark Seed, myownadvisorSpecial to Financial Independence Hub
The New Tax-Free First Home Savings Account (FHSA) Facts:
Think of the FHSA as a hybrid of the Registered Retirement Savings Plan (RRSP) / Home Buyers’ Plan and Tax-Free Savings Account (TFSA): FHSA contributions are tax-deductible like the RRSP and qualifying withdrawals out of the account are not taxed just like the TFSA.
To be eligible to open and contribute to your FHSA you must be:
A Canadian resident + 18 years or older + *a first-time home buyer. (Meaning, existing homeowners AND folks that owned a home in the *last four preceding years of trying to open the FHSA won’t qualify to open this account).
*An individual is considered to be a first-time home buyer if at any time in the part of the calendar year before the account is opened or at any time in the preceding four years they did not live in a qualifying home (or what would be a qualifying home if located in Canada) that either (i) they owned or (ii) their spouse or common-law partner owned (if they have a spouse or common-law partner at the time the account is opened).
The FHSA can hold stocks and bonds and ETFs just like the TFSA and RRSP.
FHSA Contributions and Tax Deductions:
Individuals would be able to claim an income tax deduction for FHSA contributions made in a particular taxation year; contributions currently capped at $8,000 per year up to a $40,000 lifetime contribution limit. So, a solid 5-years of striving to max-out the account for tax-free withdrawals.
Like the TFSA, your unused FHSA contribution room can be carried forward to the following year but only up to a maximum of $8,000.
FHSA Holding Period and Withdrawals:
The account can stay open for 15 years OR until the end of the year you turn 71 (not very likely???) OR until the end of the year following the year in which you make a qualifying withdrawal from an FHSA for the first home purchase, whichever comes first.
FHSA worst-case? What if you open an account and you don’t purchase a home??
Any savings not used to purchase a qualifying home could be transferred to an RRSP or RRIF (Registered Retirement Income Fund) on a non-taxable transfer basis, subject to applicable rules. Of course, funds transferred to an RRSP or RRIF will be taxed upon withdrawal.
Overall, pretty great stuff with the FHSA and a major opportunity for younger investors who are really trying to find ways to sock away more money for their very first home.
By Winnie Jiang, Vice President, Portfolio Manager, BMO ETFs
(Sponsor Content)
Little about the current economic cycle has conformed to historical norms. With divergence in employment data and leading economic indicators, recent data released sent mixed signals that left investors perplexed about the near-term economic outlook.
On one hand, the job market remains overwhelmingly strong, with ISM (Institute for Supply Management) Services bouncing back from extreme lows in December and retail sales also rebounding. The re-opening of the Chinese economy will likely provide a breather on global supply chain issues while boosting demand. Consumer credit remains well retained as default rates stay low with no warning signs of near-term upticks.
On the other hand, yield curve inversions, a precedent of most recessions, continue to worsen. 3-month U.S. Treasury yields are pushed above 10-year yields by the widest margin since the early 1980s. ISM Manufacturing PMI (purchasing managers’ index) and housing data also point to a gloomy outlook. Corporate sentiment and capital expenditure showed little signs of recovery, and housing permits have rolled back to pre-pandemic levels after surging strongly during Covid.
Source: Bloomberg, January 31st, 2023
The Outlook
While robust job markets and consumer data keep inflation well above the Fed’s long-term target, recent CPI (Consumer Price Index) announcements indicate things are steadily, albeit slowly, moving towards the right direction. The inversion of the yield curve caps the magnitude of further rate increases that could be absorbed by the economy before it slips into a recession.
The first home savings account goes live on April 1, 2023. [It was confirmed in Tuesday’s 2023 federal budget.] The FHSA is a program to help first time home buyers save for a home, in tax-free fashion. The program can be used on top of the current Home Buyers Plan (HBP) that is part of the RRSP savings vehicle. We can also throw in the Tax Free Savings Account (TFSA) for ways that Canadians can save in tax-free or tax-deferred fashion. The first home savings plan is a wonderful addition to the Canadian saving and investing landscape.
And special thanks to financial planner Mark McGrath for his tweets and help. Mark is a Wealth Advisor at Wellington-Altus Private Wealth.
Be sure to follow Mark on Twitter. He often provides wonderful insights on financial planning basics, and is always happy to answer questions.
What is the first home savings account?
The First Home Savings Account is a type of registered savings plan for Canadians saving to buy their first home. Canadian residents aged 18 years or older can open an FHSA to save towards the purchase of a home in Canada.
There are limits to how much you can put in your FHSA:
$8,000 – yearly contribution limit
$40,000 – lifetime contribution limit
Contribution amounts are tax deductible, just like the RRSP program. They will reduce the amount of income taxes that you will pay. The annual contribution limit would apply to contributions made within a particular calendar year. Unlike RRSPs, contributions made within the first 60 days of a given calendar year can not be attributed to the previous tax year.
Contribution room carries forward to the next year if you don’t put in the full amount. Carry-forward amounts only start accumulating after you open an FHSA for the first time. The carry-forward room does not automatically start when you turn 18.
An individual would be allowed to carry forward unused portions of their annual contribution limit up to a maximum of $8,000. For example, an individual contributing $5,000 to an FHSA in 2023 would be allowed to contribute $11,000 in 2024 (i.e., $8,000 plus the remaining $3,000 from 2023).
Who can open a first home savings account?
To open an FHSA, an individual must be a resident of Canada and at least 18 years of age. In addition, an individual must be a first-time home buyer, meaning you cannot have lived in a home that you or a spouse/common-law partner owned in the current year or the previous 4 calendar years. And you can only use the FHSA once.
Combine FHSA with the RRSP home buyer’s plan
As you may know you can remove up to $35,000 from an RRSP account to be used for a first time home purchase. It’s called the Home Buyer’s Plan (HBP). You can use monies from both the HBP and the FHSA for that first home purchase. You can combine amounts.
There is no limit to how much you can use from your first home savings plan. Meaning, for your first home purchase.
What can you hold in an FHSA?
An FHSA can hold savings or investments. The same qualified investments that are allowed to be held in a TFSA can also be held in an FHSA. This could include ETFs, stocks, mutual funds, bonds, savings accounts and GICs.
What if you don’t use the FHSA funds for a home purchase?
Any savings not used to purchase a qualifying home could be transferred on a tax-free basis into an RRSP or Registered Retirement Income Fund (RRIF) or would otherwise have to be withdrawn on a taxable basis. Individuals that make a qualifying withdrawal could transfer any unwithdrawn savings on a tax-free basis to an RRSP or RRIF until December 31 of the year following the year of their first qualifying withdrawal.
Withdrawals that are not qualifying withdrawals would be included in the income of the individual making the withdrawal. Financial institutions would be required to collect and remit withholding tax on non-qualifying withdrawals, consistent with the treatment applicable to taxable RRSP withdrawals.
Transferring your FHSA to your RRSP or RRIF
Your FHSA must be closed by December 31st on the soonest of:
a) the 15th year after you open it
b) the year you turn 71
c) the year following the year of your qualified home purchase The balance can be taken as taxable cash or rolled over, tax-deferred, to your RRSP. Continue Reading…
It’s everyone’s nightmare: watching retirement assets vanish in a bear market, especially in or just before retirement.
Many of you will remember the severe market downturn of 2000-2002, the Dot Com Bubble, when the Standard & Poor’s 500 Index fell 37%.
We’d be lying to say that this declining market didn’t affect us. Our finances dropped about the same as most others on a percentage basis. As retirees, with no regular paycheck coming in on Friday, this event could have spelled disaster for our future plans of maintaining our financial independence.
Then there was the 2007-2009 “Great Recession,” where the market fell by almost 50% lasting 17 months, testing our courage.
The 2020 Covid scare shook the market’s foundation, earning the title of the “shortest bear market” in the S&P 500 history, lasting only 33 days.
And now here we are again in 2023, where the market is in the grip of a bear. How much longer will this last? How low will we go?
What should we do? How do we cope?
First, we’ve learned from past bear markets the importance of some cash flow. Having aged a bit and now receiving Social Security we have adjusted our portfolio to a more balanced one adding DVY, iShares Select Dividend ETF as a dividend-producing asset as well as increasing our cash holdings.
Then, there are regular chats about our finances and the state they are in, in hopes of averting a possible worst-case meltdown. We have discussed the fiscal facts and tried to extrapolate them out into the future.
One obvious problem: No one can predict the future.
Friend asks “Billy, why are you investing now? You know the market is crashing, right?” Same friend 10 years later: “Hey Billy I heard you retired early. How did you do that?”
Using history as a guide
Researching bear markets, we take heart from the knowledge that past downturns always ended.
Retiring is definitely easier when markets are rising as compared to when they are falling. But how do you know if you are in a rising or falling market? That depends on your starting point and there has been no 20-year rolling negative returns.
Another question to ask – is this is a good time to buy equities? For every buyer there is a seller and they both think they are right. Maybe the cure for cancer will be announced tomorrow or the global economy will collapse. We just don’t know.
Posted By 
