Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Inflation is getting to retirees and some pre-retirees, Fidelity survey finds

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2024 Fidelity Retirement Report (CNW Group/Fidelity Investments Canada ULC)

More than four in five (82%) Canadian retirees say inflation is having a negative financial impact on them in retirement, according to a just-released report from Fidelity Investments Canada ULC.

The 2024 Fidelity Retirement Report also found that 43% of pre-retirees say the rising cost of living is delaying when they think they will retire. In addition, 59% of retirees report helping their non-student adult children in retirement: both with day-to-day expenses as well as big-ticket items like home purchases, weddings and even education savings for their grandchildren.

“It comes as no surprise that retirees are feeling the bite of inflation. Other macroeconomic issues such as a slowing economy, rising rates and volatile markets are also common factors that have negatively affected retirees financially,” says the report, “Pre-retirees are also feeling the pinch. We find that compared with last year, a larger share of pre-retirees are considering delaying their retirement in response to the rising cost of living.”

As you can see from the graphic below, the percentage of pre-retirees who plan to retire later than originally expected rose from 37% in the 2023 survey to 47% in the new 2024 edition.

While less than a third of those already in retirement have worked in some capacity once they have left full-time work, most pre-retirees anticipate that they will work at least part-time once they’re retired, according to the report.

While Fidelity cites rising inflation as one reason for this trend, it also says “most pre-retirees would like extra money for recreational purposes.” Further, the report says, “We also find that there isn’t a clear relationship between those working in retirement and their level of household income, suggesting that in general, many Canadians may be working or anticipating working to maintain a higher material standard of living, rather than just to keep up with the rising cost of essentials.”

 

Continue Reading…

Capital Gains Tax Increase? This new Calculator helps Corporation and Trust accounts

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By Ted Rechtshaffen, CFP

Special to Financial Independence Hub

As you may know, the recent Federal Budget announcement had a few important changes that can have an impact for some, but certainly not all.  The most discussed has been the increase to the capital gains tax.

The most directly impacted are those with investments in a Corporation or a Trust.  Not only will they face an increase in taxes on every dollar of capital gains (not just after $250,000 as it is on personal accounts), but this is forcing some important near term decision making.

For many people in this situation, the question for investments with unrealized capital gains is whether to hold those securities longer term or sell them prior to June 25th to avoid the new higher tax rate.

To help with that choice, we have just launched a new calculator aimed at this group.

It is free for anyone to access.  They don’t have to provide any details.

The calculator can be found at New Capital Gains Tax – Sell or Hold Calculator – TriDelta Private Wealth

Continue Reading…

Gold glitters amid Persistent Inflation and Rate Uncertainty

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Image courtesy BMO ETFs/Getty Images

By Chris Heakes, CFA

(Sponsor Blog)

Gold prices have gained more than 14% since late last year, renewing market interest for the precious metal.

Recent gains have been driven by an expectation that the U.S. Federal Reserve (Fed) is getting closer to reducing its trendsetting overnight rate, which led to a weaker U.S. dollar index to close 2023.

In recent months, inflation concerns have ramped back up with recent U.S. CPI data coming in slightly ahead of expectations. While consumer prices continue to trend in the right direction, higher shipping costs are becoming a concern with cargo ships having to avoid the Suez Canal. Shipping costs have surged 150% as a result, potentially add 0.5% percentage points to core inflation1: and re-igniting worries that CPI could accelerate again.

These developments have created a favourable environment for gold, given bullion tends to be used as a multi-purpose hedge for portfolios.

BMO Global Asset Management has launched a gold ETF that is backed by physical bullion. This ETF stores physical 400-oz. bars, secured in a local vault operated by BMO. Investing in the new BMO Gold Bullion ETF is efficient for investors as it is listed on the Toronto Stock Exchange (TSX) and trades like any stock or ETF. Additionally, since the underlying bullion holdings are professionally vaulted, investors do not have to worry about safe-keeping on their own. The BMO Gold Bullion ETFs are available at a cost-efficient management fee of 0.20%.

The BMO Gold Bullion ETF

Benefits

  • Amid reaccelerating inflation concerns and interest rate uncertainty, gold could be used as a defensive hedge.
  • Macro as well as weaker-U.S. dollar risks have risen in recent years, and could remain elevated going forward.
  • Gold offers effective diversification from stocks and bonds, which have experienced a notable rise in correlation3.

Why Gold could continue to Glitter

Gold is often used to hedge three main risks: macro-economic/geopolitical and inflation risks, as well as against a weaker U.S. dollar and fiat currencies4. All of these risks have risen in recent years and it is quite possible and perhaps probable that they will remain elevated going forward, spurring further demand. Continue Reading…

7 crucial tips for Homebuyers navigating the market in 2024

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By Jack Roberts

Special to Financial Independence Hub

2024 brings exciting opportunities for homebuyers in the real estate market. The market is poised for growth with the ongoing demand for housing and favorable economic conditions. However, buyers must navigate this landscape with informed decision-making. 

With interest rates expected to be cut by the Fed, the real estate market could experience a boom, and there are various options available for homebuyers. That said, it’s essential for potential buyers to prepare their finances ahead of time and explore affordable mortgage options. In addition, buyers should prioritize must-have features and location preferences to narrow their search. 

Below, you’ll discover 7 crucial tips for homebuyers in 2024. Homebuyers can confidently navigate the market by following these tips and achieve successful results in 2024.

 

Importance of Informed Decision-Making

In the competitive real estate market of 2024, informed decision-making is crucial for homebuyers. Buyers can make well-informed choices that align with their goals and preferences by conducting thorough research and staying updated on market trends. 

Being informed allows buyers to understand the current market conditions, such as housing inventory and pricing trends, enabling them to make competitive offers and negotiate effectively. 

Moreover, buyers can ensure they are investing in a desirable location by gathering information about the neighborhood, schools, amenities, and future development plans. 

Informed decision-making also involves assessing the property’s condition, conducting inspections, and considering potential renovations or repairs. By making informed decisions, homebuyers can minimize risks, maximize their investment, and achieve long-term satisfaction with their purchase.

Financial Readiness and Budgeting

Financial readiness and budgeting are essential for homebuyers to navigate the 2024 real estate market. It is crucial to carefully assess personal finances and establish a realistic budget to ensure a successful buying process. 

Typically, banks have more stringent requirements than other lenders when trying to secure a mortgage to buy a home. That said, homebuyers should strive to save for a down payment and maintain a strong credit score to increase their chances of securing a favorable mortgage rate. 

Buyers can enhance their financial position and have a stronger negotiating stance by managing debts and ensuring sufficient savings. 

Additionally, it is important to consider other costs associated with homeownership, such as property taxes, insurance, and maintenance. 

By creating a comprehensive budget and sticking to it, homebuyers can confidently navigate the market and make informed decisions that align with their financial capabilities and long-term goals.

Now, if you’re looking to buy a home to fix and flip it — there’s financing for house flipping available.

Must-have Features and Location Prioritization

When buying a home in 2024, it is important to identify the must-have features and prioritize the location based on personal preferences and needs. Homebuyers should consider factors such as the number of bedrooms and bathrooms, the size of the yard, and the availability of amenities like parking and storage space. 

It’s also important to assess the proximity to schools, healthcare facilities, and transportation options. Making a list of non-negotiable features will help streamline the home search process and ensure that the chosen property aligns with the buyer’s lifestyle and long-term goals. 

By prioritizing the features and the location, homebuyers can find a property that meets their needs and enhances their overall living experience.

Due Diligence: Inspections and Property Conditions

During the home buying process, one critical step is conducting due diligence, specifically inspections and assessing property conditions. It is crucial to thoroughly examine the property to identify any potential issues or concerns before making a final decision. Hiring a certified home inspector can provide a comprehensive report on the property’s structural integrity, electrical systems, plumbing, and other essential components. 

Inspecting the property’s exterior, including the roof, foundation, and drainage systems, is also recommended. Evaluating property conditions helps buyers understand the potential costs and repairs they may incur. 

Homebuyers can make informed decisions by conducting due diligence and negotiate any necessary repairs or modifications with the seller.

Crafting competitive offers and managing Negotiations

Once you have found your ideal home, it’s time to craft a competitive offer and effectively manage negotiations. Start by determining the property’s fair market value based on recent sales and comparable properties in the area. This will help you make a strong, yet reasonable, offer.

Consider including contingencies in your offer, such as a home inspection or appraisal contingency, to protect yourself from potential issues. Remember, negotiations are a give-and-take process. Be prepared to negotiate on price, repairs, or other terms with the seller. Continue Reading…

Retired Money: How to double CPP benefits while also hedging against inflation and longevity

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My latest MoneySense Retired Money looks in more detail at the National Institute of Ageing’s recent series of papers on CPP (and OAS). As the Hub reported on April 11th, few Canadians are aware that delaying CPP benefits to age 70 can more than double (2.2 times actually) eventual monthly benefits compared to taking it early at age 60. That blog reproduced a chart from the NIA that showed just how much money Canadians are leaving on the table by NOT deferring benefits as long as possible.

The other major chart from the NIA paper is reproduced above, showing just how important most retirees view the guaranteed inflation-indexed income that CPP and OAS provide. As the new column points out, for many retirees — especially those who worked most of their careers in the private sector and don’t enjoy a Defined Benefit employer pension — CPP and OAS are the closest thing they’ll have to a guaranteed-for-life inflation-indexed annuity.

The new MoneySense column focuses on how delayed CPP benefits not only generate higher absolute amounts of income  but also carry with it the important related benefits of more longevity insurance and inflation protection.

You can find the full column by clicking on this highlighted headline: How to double your CPP income.

It features input from several well-known retirement experts, including noted finance professor and author Dr. Moshe Milvevsky, retired Mercer actuary Malcolm Hamilton, author and semi-retired actuary Fred Vettese, TriDelta Senior Financial Planner Matthew Ardrey and the lead author of the NIA report, Bonnie Jean MacDonald.

Delaying CPP is “the best annuity-buying strategy you can implement.”

Milevsky sums it up well, when he says “delaying CPP is the best ‘annuity-buying strategy’ you can implement. Everything else is just Plan B.” Audrey makes a similar point: CPP is “an annuity and an indexed annuity at that … This helps protect the purchasing power of this income stream through retirement. Many people wish they had an indexed DB [defined benefit] pension and in fact we all do. It is the CPP.”

You’ll probably see much more press on this topic as the NIA is releasing a paper each month between May and December. May 8th will be general education on the Canadian retirement income system while July 17th will explain the mechanics of delaying CPP (and QPP) benefits.