All posts by Jonathan Chevreau

Retired Money: Taking RetireMint for a test spin

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My latest MoneySense Retired Money column has just been published: you can find the full column by clicking on the highlighted headline here: What is RetireMint? The Canadian online platform shows retirement planning isn’t just about finances.

We provided a sneak preview of RetireMint late in August, which you can read here: Retirement needs a new definition. That was provided by RetireMint founder Ryan Donovan.

The MoneySense column goes into more depth, passing on my initial experiences using the program, as well as highlighting a few social media comments on the product and some user experiences provided by RetireMint.

RetireMint (with a capital M, followed by a small-case letter I rather than an e) is a Canadian retirement tool that just might affect how you plan for Retirement. There’s not a lot of risk as you can try it for free. One thing I liked once I gave it a spin is that it isn’t just another retirement app that tells you how much money you need to retire. It spends as much or more time on the softer aspects of Retirement in Canada: what you’re going to do with all that leisure time, travelling, part-time work, keeping your social networks intact and so on.

In that respect, the ‘beyond financial’ aspects of RetireMint remind me of a book I once co-authored with ex corporate banker Mike Drak: Victory Lap Retirement, or indeed my own financial novel Findependence Day. As I often used to explain, once you have enough money and reach your Financial Independence Day (Findependence), everything that happens thereafter can be characterized as your Victory Lap.

As Donovan puts it, this wider definition must “break free from the tethered association of solely financial planning.”

Donovan says roughly 8,000 Canadians will reach retirement every single week over the next 15 years. And yet more than 60% of them do not know their retirement date one year in advance, and more than a third will delay their retirement because they don’t have a plan in place.

Retirement not calendar date or amount in your bank account

Donovan says  “Retirement has become so synonymous with financial planning, and so associated with ‘old age,’ that they’re practically inseparable. Yet, in reality, retirement is a stage of life, not a date on the calendar, an amount in your bank account, and is certainly not a death sentence.” He doesn’t argue that financial planning is the keystone of retirement preparation, as “you won’t even be able to flirt with the idea of retiring without it.” But it’s much broader in scope than that. As he puts it, this wider definition must “break free from the tethered association of solely financial planning.” Continue Reading…

Vanguard unveils new Ultra-Short Canadian Government Bond ETF

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In what it says is its first new ETF announcement in four years, Vanguard Investments Canada Inc. today announced a new Fixed-Income ETF designed to met investors’ short-term savings needs. Here is the full release on Canada News Wire.

Trading on the TSX under the ticker VVSG, Vanguard Canada says the Vanguard Canadian Ultra-Short Government Bond Index ETF offers AAA-rated high-quality government bonds and treasury bills with a low management fee of 0.10%. It seeks to track the Bloomberg Canadian Short Treasury 1-12 month Float Adjusted Index. The release says the ETF will invest primarily in public, investment-grade government fixed-income securities with maturities of less than 365 days issued in Canada.

Vanguard Canada’s first new ETF in 4 years

In an email to me, Vanguard Canada spokesman Matthew Gierasimczuk confirmed “It’s our first ETF launch in four years.” It brings the total number of Vanguard ETFs in Canada to 38, with $80 billion (CAD) in Canadian ETF assets under management. You can find the full list on its website here. Continue Reading…

Retired Money: Should retirees consider a Reverse Mortgage?

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My latest MoneySense Retired Money column looks at the question of whether seniors or those near Retirement should consider  taking out a reverse mortgage. Click on the highlighted headline for the full column: Why a reverse mortgage should be a last resort for most Canadian retirees.

At first glance, reverse mortgages sound appealing, especially for those whose wealth mostly resides in their home equity. If you have little other sources of future retirement income, and especially if you have no heirs who will be annoyed at having a reduced inheritance, then the prospect of living in your home in old age and generating tax-optimized retirement income to boot does sound appealing.

Have your Home and your Money too?

As P.J. Wade wrote in her 1999 book, Have Your Home and Money Too,  reverse mortgages can be “your best friend or your worst enemy … your choice!”

However,  there’s not a lot of Reverse Mortgages available in Canada. The two main ones of which I’m aware are Equitable Bank and HomeEquity Bank (aka CHIP). According to Rates.ca “Reverse mortgages always cost more than conventional mortgages because the lender’s funding costs are higher.”

The full column includes input from occasional MoneySense contributor Allan Small, who is a senior investment advisor with IA Private Wealth Inc. as well as a podcaster. He says reverse mortgages “have not played a part in any of the retirement plans and retirement planning that I have done so far in my career. I think the reverse mortgage idea or concept for whatever reason has not caught on.” Also, “those individual investors I see usually have money to invest, or they have already invested. Most downsize their residence and take the equity out that way versus pulling money out of the property while still living in it.”

Milevsky: It all depends on to what a financial strategy is compared

For me, the definitive word on Reverse Mortgages or any other financial instrument goes to noted Finance professor and author Moshe Milevsky. He told me in an email that when it comes to reverse mortgages – or any other financial strategy or product in the realm of decumulation – “I always ask this question before giving an opinion: Compared to what?” He worries about the associated interest rate risk, which is “difficult to control, manage or even comprehend at advanced ages with cognitive decline.”

What are the alternatives to a reverse mortgage? Is it selling the house and moving? Or, Milevsky asks, “Is the alternative reducing your standard of living? Is the alternative taking a loan from a local bookie? It’s the alternative that determines whether the reverse mortgage is a good idea or not … Generally I will not rule them out and I think they will continue to grow in popularity among retiring boomers, but I wouldn’t place them at the very top of the to-do list when you get to your golden years.”

Gen Z driving surge in mobile Debit spending

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Image courtesy Interac Corp.

An Interac survey being released today finds that more than two thirds (69%) of Canada’s Gen Z generation [defined as Canadians aged 18 to 27] have embraced the mobile wallet, while almost as many (63%) would rather leave their old-fashioned physical wallets at home for short trips. Gen Z’s Interac contactless mobile purchases also rose 27% in the first half of 2024, compared to the same period a year earlier.

Gen Z appears to be more enthusiastic than their counterparts in older cohorts: 60% of Millennials [aged 28-43]  embraced mobile wallets, compared to 44% of Gen Xers [aged 44-59] and just 27% of Baby Boomers [aged 60-78.] Only 10% of the older Silent Generation [age 79 or older] did so.

A whopping 63% of Gen Z mobile wallet users have loaded their Interac debit card on their smartphones, and 31% plan to set debit as their default method of payment. For 63% of them, the reason is perceived faster payment times compared to physical card payments.

 “Choosing your default payment method may feel like a small step, but it can play a big role in shaping Canadians’ ongoing spending habits,” said Glenn Wolff, Group Head and Chief Client Officer, Interac in a press release. “When consumers tap to pay with their phones, the decision to select a card from the digital wallet is easy to miss. Canadians could end up unintentionally using a default payment method that prompts them to take on more debt. This differs from traditional physical wallets where the consumer had to select the card they wanted to use each time.”

Majority want to be smarter with money

62% of Gen Z want to be “more mindful when spending” with 57% saying they want the option to use debit when paying in store or online; 79% of them say the cost of living is too expensive and 59% feel the need to be smarter with their money.

Interact says this generation’s desire to control overspending is heightened by back-to-school season: last year, family clothing stores saw almost twice as many Interac Debit mobile purchases in September and October compared to earlier that year in January and February. 54% of Gen Zs see the need to develop new habits to stay in control over their finances, while 56% are setting a timeline for this September to introduce new habits. Continue Reading…

Darren Coleman interviews Tax expert Kim Moody about Liberals floating tax on Home Equity

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Darren Coleman (left) and Kim Moody (right, with glasses).

The following is an edited transcript of an interview conducted by financial advisor Darren Coleman’s of the Two Way Traffic podcast with tax expert Kim Moody, of Moody Private Client. It appeared on August 8th: click here for full link.

Moody recently wrote an article in the Financial Post about the government flirting with the idea of a home equity tax, even on principal residences. Such a tax could result in an annual levy of about $10,000 for a home worth $1 million. He described that, along with the increase in the capital gains inclusion rate that has already passed into law, “really bad tax planning” based on ideology, not economics.

In the podcast Moody and Coleman also discussed …

  • The disparity between U.S. and Canadian tax rates, beginning with how the state of Florida compares with Ontario, a difference of 17%.
  • The tax model established in Estonia lets you reinvest in your company without paying corporate tax while personal income is taxed at a flat rate of 20%. They say such a system would work in Canada, and celebrate success and entrepreneurship.
  • What organizations like the Fraser Institute and mainstream economists think about Canada’s economic performance.

Below we publish an edited transcript of the start of the interview, focusing on the capital gains inclusion rate and trial balloon about taxing home equity.

Darren Coleman, Raymond James

Darren Coleman:  I’m Darren Coleman, Senior Portfolio Manager with Raymond James in Toronto.  I’m delighted to be joined by Kim Moody of Moody’s tax and Moody’s private client. You’re also a law firm based in Calgary, Alberta, and probably one of Canada’s best known tax and estate planning advisors. You may have heard our last conversation with Trevor Perry  about some of the issues we might be seeing in terms of taxation of the principal residence in Canada.

I think because governments have spent so much money that we’re going to see tremendous innovation in taxation.  Do you want to set the table for the article you wrote in the Financial Post, where you talked about where this is coming from, and why Canadians might be on alert for what might be coming to tax the equity in their homes.

Kim Moody: The point of the piece was mainly just to put Canadians on notice that you had the Prime Minister and the finance minister sitting down with what I call a pretty radical
think tank.  I consider them an ideological bastion of radical thought but that issue aside,
they call them call themselves a think tank, and this particular one, led by Paul Kershaw of
Generation Squeeze, has stuff on their website that pretty much attacks older Canadians:
basically saying they’ve gotten rich by going to sleep and watching TV. Unbelievable. Whoever approved that, it’s just so offensive. But that issue aside,  the whole connotation of the messaging is that, hey, these people are rich. We’ve got these poor young Canadians who are not rich and they can’t afford houses because you’re rich and …

Darren Coleman Someone should do something about it, right? That’s the trick.

Kim Moody

Kim Moody: Someone should do something about it. And their solution is to introduce a so-called Home Equity tax on any equity of a million dollars or more. And they call it a modest surtax of 1% per year. So it’s like another, effectively property tax … It’s just so nonsensical and so offensive on a whole bunch of different levels. Like you think about grandma and grandpa, yeah, they’ve got equity in their homes, but they don’t have a lot of cash. They’ve been working hard their entire lives to pay off their houses. And yes, they want to transfer down to their kids at some point, but right now, they’re living again, and they’re making ends meet by living off their pensions that they worked hard, and you’re expecting them to shell out more money for that, and I find that offensive.

…. Back to the original premise of why I wrote the article:  to let Canadians know that our leaders are entertaining stuff like this. It doesn’t mean they’re going to implement it, but they’re actually entertaining radical organizations like this and secondly, just to put Canadians on
notice that this is just the beginning. If this regime continues with out-of-control spending and no
adherence to basic economics, then we could expect a whole bevy of new taxes.

Darren Coleman  

Indeed, they’ve already done some of this, right? So you know that this idea about we’re going to tax home equity, either through some kind of annual surtax on equity over a certain amount, or we’re going to put a capital gain on principal residences. And I would argue that for years now, Canadians have had to report the sale of the principal residence on their tax returns, which is a non-taxable event, yet you now have to tell them, and if you don’t, there’s a penalty. Continue Reading…