My latest MoneySense Retired Money column looks at a variety of tax and savings limits changes that are effective early in 2025. Click on the highlighted headline for the full column: What retirees need to know about tax brackets for 2025.
As the column notes, at or near Retirement taxes and inflation are the two big threats to preserving enough wealth to last a lifetime. The tax burden hits home with the annual tax-filing deadline in April, but the time to start thinking about the yearly ordeal is before year-end.
The complexity of this task is compounded by almost-annual changes to tax brackets, the Basic Personal Amount, OAS thresholds, inflation adjustments and much more. For starters, I recommend reading an excellent article by CIBC Wealth’s tax guru, Jamie Golombek, which appeared in the Financial Post here on Nov. 23rd, shortly after the Canada Revenue Agency released its new tax numbers for the year 2025.
Let’s look first at inflation, the second serious scourge retirees face if they live long enough. Here, a useful tool suggested by certified financial planner Morgan Ulmer is Statistics Canada’s Personal Inflation Calculator, which lets you compare your personal inflation rate to the general CPI.
Ulmer, of Toronto-based Caring for Clients, sees the higher tax brackets and inflation adjustments as an “opportunity for retirees to build a savings reserve.” CPP is indexed to inflation yearly while OAS is indexed quarterly. So “if a retiree is able to increase their spending at a rate that is less than CPI, the difference could be saved as an emergency reserve or invested in a TFSA.”
Inflation and Tax Bracket changes
Back to some key data cited by Jamie Golombek. The inflation rate used to index 2025 tax brackets and amounts will be 2.7%: just over half the 4.7% in effect in 2024. The good news is that the Basic Personal Amount (BPA) on which no federal tax is levied rises to $16,129 in 2025: It was $15,000 in 2023.
All five federal income tax brackets are indexed to that 2.7% inflation rate. In 2025, the bottom federal tax bracket of 15% will apply to incomes between zero and $57,375. The second lowest bracket of 20.5% will apply to incomes between $57,375 and $114,750. The 26% bracket applies to income between $114,750 and $177,882, while incomes between $177,882 and $253,414 will attract a 29% federal tax. After that the federal rate will kick in at 33%.
Below is a table summarizing that information prepared for MoneySense:
MoneySense.ca
Don’t forget there will be additional provincial taxes on top of the federal haul, also indexed to inflation at various provincial rates.
What is relevant for those in the Retirement zone is the higher threshold on Old Age Security: in 2025, according to Canada.ca, OAS begins to get clawed back for taxable income of $90,997. OAS benefits disappear entirely at $148,451 for those aged 65-74 in 2025, and at $154,196 for those 75 or over. Note the OAS clawback is based on individual incomes, not household income.
Deferring CPP and OAS till 70
Matthew Ardrey, portfolio manager and Senior Financial Planner for Toronto-based TriDelta Financial, agrees that tax brackets, whether federal or provincial, “become more of a consideration in retirement.” For many Canadians receiving employment income on a T-4, there is little we can do as retirees to keep income in the lower tax brackets. But there’s plenty to think about when considering tax minimization and decumulation strategies. Referring to Golombek’s article, Ardrey says that using federal brackets only, taxpayers can receive $57,375 of income and pay very low rates of taxation, especially when the $16,129 basic personal amount is considered.”
Retirees under age 70 can defer CPP and OAS until 70 and try to live on withdrawals from their registered plans instead. With no other income, taxpayers could have almost $50,000 of after-tax income, or $100,000 for tax-paying couples. Continue Reading…
Yes, interesting times may call for interesting portfolio changes! Or not. 🙂
Inspired by a few recent reader questions and a new blogger article I found that I will link to below, here is my quick take on whether I should be making any changes to our portfolio: with a new U.S. President.
Should I change our Portfolio – With a new President?
Reader questions, adapted slightly for the site:
Reader #1:
With a new U.S. administration about to take office on January 20, 2025, it’s easy to imagine things like tariffs on U.S. imports, an overheated U.S. economy, etc. fuelling the rise of inflation.
Thoughts? Should we be using this reality in our investing style going forward? What changes should we consider? Also, with net interest income improving in that type of scenario. Banks seem like a good idea? Just a thought for a future article.
And…
Reader #2:
Mark, I know you’re investing more in U.S. stocks and global stocks using a low-cost indexed fund now vs. before – at least you have written about that for the last few years since the pandemic. So, with the pandemic now over and with the U.S. stock market up so much since 2023, what’s your investing plan when a new U.S. President comes into office? Do you still support that administration and that economy moving forward beyond 2025?
I’ll unpack a few themes to provide some answers…what I am doing and what I will continue to do.
1. Politics is messy, at best
Like the Revolution article above, although I don’t always get it right (!) on this site, I try to avoid writing too much about politics and/or the broader economic climate including the influence that each subject has with the other since these subjects are far too polarizing. It’s very difficult to have any meaningful discussion online these days…
2. Equity diversification still works
Until my overall investing approach stops working towards meeting my goals, I’ll keep at it.
For new and established readers on this site, you might be aware I’ve mentioned that our investing approach could be considered a “hybrid approach” – a structure that was established about 15 years ago as follows:
We invest in a mix of Canadian stocks in our taxable account – to deliver income and some growth, and
Beyond the taxable account, while we own a mix of Canadian and U.S. stocks, we own (increasingly) more low-cost ETFs like XAW and QQQ in particular in our registered accounts: inside our RRSPs, TFSAs and my LIRA for extra diversification.
I like the approach, the process and the results.
As a hybrid investor, I just don’t see how I should be making any significant changes to our portfolio for income, growing income, and total growth for the coming years.
If the market turns bearish, while most stocks will go down in price many blue-chip stocks will still pay dividends regardless of the market correction. The Boards know that shareholders invest in their companies for stable cashflow. Even dividends can be increased in a bear market by some companies. One good example is owning Fortis (FTS) – which has been paying higher dividends for 51 consecutive years through all kinds of market cycles…
I’m trying not to fix what isn’t broken per se.
That said, I also don’t see the U.S. stock market flying higher, up another 20% for 2025 coming.
Sure, that could happen I guess but 2023 and 2024 have been great investing years coming out of the pandemic for the U.S. so I would expect, at some point, some reversion to the mean will occur. If and when and how much that reversion will be, well, I have no idea… Continue Reading…
Unlock the path to Financial Independence with insights from 14 industry leaders who have mastered expense tracking to achieve their goals.
From uncovering spending patterns to ensuring every dollar is accounted for, business leaders share how these simple habits can transform financial awareness.
Packed with actionable advice and real-world experiences, this article offers a comprehensive guide to making expense tracking a cornerstone of your financial success.
Tracking Expenses Reveals Spending Patterns
Use Budget Trackers for Financial Goals
Monitor Spending to Identify Unnecessary Costs
Set Up Budgeting Apps for Expense Tracking
Regularly Review Spending for Financial Goals
Categorize Expenses to Optimize Spending
Track Every Dollar for Financial Awareness
Automate Expense Tracking for Financial Discipline
Avoid Lifestyle Inflation with Expense Tracking
Stay Educated on Personal Finance Strategies
Separate Commission Checks for Financial Stability
Use Zoho App for Expense Tracking
Make Expense Tracking a Habit
Treat Financial Education as Ongoing Process
Tracking Expenses Reveals Spending Patterns
Tracking expenses has been a game-changer for my Financial Independence journey. I started by meticulously logging every purchase, from my morning coffee to weekend activities. This habit revealed surprising patterns. For instance, I discovered I was spending an astronomical amount on dining out. By cooking more at home and finding free or low-cost activities, I’ve cut my food expenses by 40% without sacrificing enjoyment.
I’ve found that the key to successful expense tracking is making it a daily ritual, as consistent as brushing your teeth. I use a simple spreadsheet, categorizing expenses and color-coding them based on necessity. This visual approach helps me quickly identify areas where I’m overspending.
My advice? Start small and make it fun. Create a “Money Challenge” for yourself. Set a budget for exploring local attractions and see how creative you can get. You might find that free activities are more rewarding than expensive outings. Remember, some of the best things in life—like enjoying nature or spending time with loved ones—are absolutely free. — Joe Hawtin, Owner, Marin County Visitor
Use Budget Trackers for Financial Goals
Tracking expenses has been like having a financial compass, guiding me steadily toward my independence goals. It’s interesting how, when you start paying attention, those small, seemingly inconspicuous expenses add up much like stray grains of sand forming a desert. I remember when I first began meticulously noting every transaction: everything from coffee runs to larger business expenses. It was a revelation to see where my money actually went, allowing for informed adjustments.
One time, I noticed just how much I was spending on subscription services. It became evident that some provided value while others were just nice-to-haves that could be trimmed. This insight gave me the clarity and discipline needed to funnel resources into areas that genuinely supported my goals. At spectup, we often stress the importance of financial literacy and discipline to startups, emphasizing how a penny saved is indeed a penny earned, if not more.
For anyone aiming for Financial Independence, I’d suggest starting with a simple yet powerful tool: a budget tracker or even a basic spreadsheet. Regularly reviewing it can help spot trends, unnecessary outflows, and potential savings. Another tip is to categorize expenses into ‘needs’ and “wants” — a method that not only flags areas ripe for cutbacks but also enhances conscious spending decisions. Financial Independence is less about deprivation and more about strategic allocation and investments that align with one’s dreams and ambitions. This practice, over time, builds a healthy foundation for independence, much like a sturdy scaffold supporting the tallest of towers. — Niclas Schlopsna, Managing Consultant and CEO, spectup
Monitor Spending to Identify Unnecessary Costs
Keeping track of my spending has been crucial for achieving my Financial Independence goals. By monitoring where my money goes, I’ve been able to spot unnecessary expenses, like eating out too much or keeping subscriptions I don’t use anymore. This awareness helps me direct my money toward more important goals, such as saving for retirement or investing. Using a budgeting app has made it easier to track and categorize my spending, which highlights areas where I can improve.
One piece of advice I’d give to others is to set clear savings goals and treat them like must-pay bills, making them a priority over non-essential spending. It’s also important to have an emergency fund and ensure your budget can handle unexpected expenses without affecting your long-term goals. Regularly reviewing and adjusting your spending helps you stay focused and disciplined, speeding up your journey to Financial Independence. — Matthew Ramirez, Founder, Rephrasely
Set up Budgeting Apps for Expense Tracking
Tracking my expenses has been instrumental in keeping me focused on my Financial Independence goals. When I first started my company, managing finances was crucial not only to the business but also to my personal goals.
I began by setting up a dedicated budgeting app to track where every dollar was going, breaking down my expenses into categories like essentials, business investments, and personal spending.
This habit of tracking helped me identify patterns I hadn’t noticed: like small recurring costs that added up over time, which I could cut or reinvest.
One experience that really solidified the importance of tracking was when I noticed my dining-out expenses were eating into my savings goals more than I realized.
Cutting back on that allowed me to reallocate funds towards business tools that directly supported my company’s growth. For anyone aiming for Financial Independence, my advice is to start small but stay consistent.
Use a tool you’ll stick with, review your spending weekly, and set achievable targets. Monitoring expenses not only keeps you aware of spending but also provides a sense of control over your path toward financial freedom. — Aseem Jha, Founder, Legal Consulting Pro
Regularly Review Spending for Financial Goals
Tracking my expenses has been essential to staying on track with my Financial Independence goals. By regularly reviewing my spending, I’ve clearly understood where my money goes and where I can make adjustments. This transparency helps me avoid unnecessary expenses and prioritize saving and investing for long-term goals.
One key benefit of tracking my expenses is identifying patterns. For example, I noticed that small, recurring subscriptions were adding up over time, and cutting back on those had a noticeable impact on my budget.
Tracking my expenses also helped me evaluate the return on investment for both personal and business expenses, ensuring that every dollar spent aligns with my broader financial objectives.
For others aiming for Financial Independence, I advise starting small and being consistent. Use apps or spreadsheets to track every expense, no matter how minor it seems. Set realistic goals, like reducing discretionary spending by a certain percentage or automating savings. Most importantly, review your expenses regularly and adjust your strategy as needed.
By staying disciplined and aware of your financial habits, you can gradually build a solid foundation for economic independence and peace of mind. — Fawad Langah, Director General, Best Diplomats
Categorize Expenses to Optimize Spending
Tracking my expenses has been essential to staying on course with my Financial Independence goals. As CFO, I’m used to analyzing budgets and understanding the power of detailed financial oversight. By tracking my personal spending, I’m able to identify where my money is actually going and, more importantly, make adjustments that align with my goals. Seeing exactly how much is allocated to necessities versus discretionary spending gives me a clear picture of my financial habits and where I can optimize.
One tip I’d share is to categorize expenses into “needs” and “wants.” This simple division has been invaluable, helping me prioritize what’s truly essential and allowing me to cut back on less critical spending without feeling deprived. I recommend using a reliable app or software for tracking; it keeps everything organized and accessible, making it easier to spot trends over time.
Another strategy I use is setting quarterly spending goals instead of focusing just on monthly budgets. This allows for flexibility while still maintaining oversight, so I can adjust for any unexpected expenses without losing sight of my broader financial objectives. Tracking expenses isn’t just about cutting costs, it’s about having a clear plan and adjusting as you go, helping you achieve financial freedom with greater control and less stress. — Brian Chasin, Chief Financial Officer, SOBA New Jersey
Track every Dollar for Financial Awareness
Tracking my expenses has helped me stay on track toward my Financial Independence goals. It’s one thing to have a general idea of where your money goes, but actually seeing every dollar laid out is a real wake-up call. When I started tracking everything, from big expenses like rent to small daily coffee purchases, I noticed patterns I hadn’t expected. Those small, everyday expenses add up fast, and seeing them written down made it easy for me to see where I could cut back without feeling like I was depriving myself. Instead, it helped me make decisions that were more in line with my long-term aims.
If you’re serious about Financial Independence, start with something simple, like a basic spreadsheet, and just stick with it. You don’t need any fancy software to see where your money’s going. I started by tracking every little thing: coffee, takeout, random purchases-and honestly, just seeing it all laid out showed me where my money was going. I started noticing spots where I could cut back without really missing out. Little tweaks like that can add up over time, and it’s an easy way to start working toward your bigger financial goals. — Mushfiq Sarker, Chief Executive Officer, LaGrande Marketing
Automate Expense Tracking for Financial Discipline
In my journey towards Financial Independence, meticulous tracking of my expenses has been a lynchpin. It has provided me with an accurate picture of where my money is going, empowering me to make informed decisions. For instance, by identifying non-essential expenditures, I was able to divert funds towards worthwhile investments, precipitating a 20% increase in my profitability over five years.
For those pursuing the same goal, my advice is to embrace automated financial management tools. These tools streamline expense tracking, allowing more focus on strategic decision-making. Also, I advocate for the adoption of a mindset that regards every expense as an investment:a strategy that has guided my own financial growth and stability. — David Chen, Director of Finance, Srlon
Avoid Lifestyle Inflation with Expense Tracking
Tracking expenses has been invaluable in maintaining focus on my Financial Independence goals. By monitoring where every dollar goes, I gain a clear picture of my spending habits and identify areas where I can cut back or adjust. It’s crucial to allocate spending in alignment with my values and long-term objectives, meaning I consciously choose to invest more on experiences that enrich my life rather than mindless consumption. Continue Reading…
A recent survey from Canadian fintech company Spring Financial, found that nearly three quarters (74%) of respondents plan on reducing holiday spending this year and shoppers, particularly Gen Z (66%) and millennials (64%), are finding the financial strain of buying gifts to be the most stressful part of the holidays.
The economy has been challenging this year so it’s no surprise that shoppers are feeling added stress this holiday season. Whether you’ve already started your shopping or you haven’t even started your list, below are some practical holiday shopping tips to help make your spending less stressful and more manageable.
1.) Spread the joy of pre-loved items
This one might be easier said than done but with half of shoppers opting for gift alternatives, there’s a good chance your friends and family may be relieved about the idea of traditional gifts with more financially feasible alternatives. For example, places like Facebook marketplace often have gently-used children’s toys that offer a more budget-friendly price tag for the little ones on your list, while a traditional baking or book exchange can be a great alternative to Secret Santa games for the adults in your life.
2.) Set a budget and stick to it
It can be so easy to overspend during the holidays. There is always someone to shop for and shops — whether online or in-store — are set up in a way that encourages impulse buying and overspending. To set yourself up for success, set a budget and shopping plan before starting shopping to ensure you’re sticking to a spending limit that works for you. Don’t forget to account for all the extra expenses that come with this time of year like food, host gifts, and transportation to and from any holiday parties you have coming up.
3.) Compare your debt options
Sometimes, taking on a bit of debt is necessary to keep the holiday magic alive. The good news is, there are lots of financial options available to shoppers. Comparing the interest rates on any buy-now-pay-later programs as well as credit cards, lines of credit and loan is a great way to determine which debt option will be the easiest to pay off post-holidays. Continue Reading…
Stocks are expected to outperform bonds over the next 10 years but EAFE and Emerging Markets will probably do a little better than U.S. and Canadian equities, portfolio managers for Franklin Templeton Investment Solutions told advisors and the media in its 2025 Outlook session held Thursday in Toronto. The twice-annual economic outlook marks the 70th year that Franklin Templeton has operated in Canada: Sir John Templeton’s famous Templeton Growth Fund was launched in Canada in 1954. It has been in the U.S. more than 75 years.
Senior Vice President and Portfolio Manager Ian Riach [pictured left] said in a presentation distributed to attendees that “expected returns for fixed income have become slightly less attractive as yields have moved lower over the past year. EAFE and Emerging market equities [are] expected to outperform U.S and Canadian equities.” The most likely path to stable returns will be through “a diversified and dynamic approach,” he said.
Shorter-term Macro themes
Addressing major shorter-term themes, Riach said the United States continues to lead in Growth, while Canada is improving and the rest of the world is “challenged.” Inflation continues to trend down but some areas are faster than others. Fiscal policy “remains supportive” while “central banks remain data dependent.”
Addressing Canadian economic growth, Riach said Canada’s inflation backdrop “continues to surprise to the downside” and is now at target levels as leading indicators continue to improve from weak levels. Thus far, Canadians holding mortgages have not yet been impacted by higher interest rates, based on the cumulative share of mortgages outstanding in February 2022 that have been subject to a payment increase.
Economic Growth in Europe and Asia.
European sentiment is improving but remains at weak levels while Asian manufacturing “has started to fall,” he said. Economic growth in China remains weak: “Consumer sentiment has yet to recover from deteriorating property sector and labor market imbalances.”
Addressing Emerging Markets ex China, Riach said weakening leading manufacturing indicators will “challenge upside potential of cyclical regions broadly.”
In the United States, AI-related stocks (Artificial Intelligence) continue to power U.S. earnings growth expectations. However, Riach said, “this has been broadening to the ‘forgotten 493’ somewhat.” (i.e. away from the Mag 7.)
Inflation much improved
Worldwide, inflation is much improved and is now below Central Bank targets, Riach said.
Asset Allocation
Moving to recommended portfolio positioning, Franklin Templeton is overweight equities, underweight bonds and neutral on Cash. Within stocks, it is overweight Canadian and U.S. equities, Underweight EAFE (Europe Australasia and Far East) and Neutral on Emerging Markets.
The second major presentation was delivered by Jeff Schulze, Head of Economic and Market Strategy for Franklin Templeton’s ClearBridge Investments. Schulze [pictured on right] is known for his “Anatomy of a Recession” analytical work, which assesses 12 variables that historically foreshadow recession.
However, as the chart below shows, the recession dashboard is currently signalling expansion rather than recession:
Addressing employment, Schulze said that while the pace of job creation has slowed substantially over the past few years, “it has settled in line with the pace experienced during the previous economic expansion.” As a result, U.S. consumer spending is robust. Continue Reading…
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