Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

How to break up with the IRS through expatriation, Part II: The exit tax

Posted By |

By Elena Hanson

Special to the Financial Independence Hub

In my last blog I talked about expatriation and reasons you may want to give up U.S. citizenship or long-term resident status (i.e., green card). The key reason to expatriate is to end the reporting and tax obligations that come along with the privilege of being a U.S. citizen, especially when you don’t reside there. But before ending your obligations, you may have to pay expatriation tax, also known as exit tax.

Canada has a similar tax, called departure tax, but it’s imposed on your assets when you are no longer willing to reside in Canada.

Who is subject to the exit tax?

Generally, exit tax applies to U.S. citizens who terminate their citizenship and to long-term residents who terminate their status. However, if you are a long-term resident or green card holder who was not a U.S. resident for eight out of the 15 years leading up to expatriation, you are not subject to the exit tax.

In fact, just being a U.S. citizen or long-term resident doesn’t automatically subject you to exit tax upon expatriation. Last time we discussed implications of being deemed a covered expatriate for U.S. tax purposes. You must satisfy one of three tests, which are aimed at identifying people who are high-earning, high net-worth individuals and who are not compliant. Continue Reading…

Retired Money: Can the Work-from-Home theme protect growth stock portfolios from Covid damage?

Posted By |
MoneySense.ca/Photo by Claudio Schwarz on Unsplash

My latest MoneySense Retired Money column looks at the theme of emphasizing Work-from-Home (WFH) and Stay-at-Home (SAH) stocks to stay partially invested in stocks but to protect against the ravages of a second wave of the Coronavirus bear market. Click on the highlighted headline to access the full column: Unpacking the new Work-from-Home ETFs.

Thus far, investors have enjoyed a solid recovery from the initial shock of March. How much depends on the extent to which they embraced the SAH stocks and avoided those directly in the Covid-19 blast zone: airlines, cruise ships, hotels, office REITs and others directly affected by global lockdowns.

Periodically the latter rebound on renewed Covid optimism, and are hence dubbed “Recovery” stocks. These have so far proven to be short-lived bounces. But the hoped-for V shape economic recovery expected by optimists seems now more elusive as major American states like Texas and Florida lock down again over a second Covid wave. That bolsters the case for a more long-term stance on WFH/SAH stocks like Zoom Video (ZM), DocuSign, Netflix and Teledoc (to name four I own and so far have profited from.)

Don’t forget the big tech companies like Facebook, Amazon, Google and Netflix (FANG) as well as Apple and Microsoft, all of which locked-down consumers rely on to keep a semblance of social interaction going with the outside world.

2 WFH ETFs coming

At least two WFH ETFs are in development to capitalize on this trend, more on which below. But by the time they are available it may be a bit late: most of the names are obvious ones and can be purchased individually at full-service or discount brokerages. There are 100 (mostly U.S.) stocks in Jim Cramer’s Covid-19 index, which he created soon after the pandemic and bear market began. Continue Reading…

The Evolution of Real Estate Investing

Posted By |
Image by Pixabay

By Emma Williams

Special to the Financial Independence Hub

An insight into the modern methods of real estate that is much more accessible and inclusive!

We have now shifted from steel locks to smart locks in our homes, but for a long time, the conventional real estate systems continued functioning with similar patterns. One of which is real estate investments.

Real estate investment involves the purchasing and sale of a real estate asset for rental profits or market returns. Historically, this investment has yielded better and continuous returns for investors. However, a major roadblock to this remained its accessibility and high barriers in terms of capital and liquidity. For a long time, this segment was exclusive to a specific niche.

However, with modern instruments and advanced innovations at hand, real estate investment has the potential to widen its range. Through these new models, the potential of real estate investment has entirely been transformed.

Let’s take a look at the future of real estate investment with such modern innovative tools.

Investing With REITs

Image by Pixabay

Real Estate Investment Trusts (REITs) are one of the techniques that has made property investments accessible to a certain extent. With REITs, individuals invest in companies that further deal with real estate investments. In return, shareholders receive dividends in proportion to their investment share in the company.

With REITs, instead of directly investing in real estate an individual would invest in a company that has invested, in part, in real estate. The company then offers dividends through its rental income to its stakeholders. Any investor can hold shares and indirectly become an investor in a real estate asset. This eliminates the need for high capital needed in a traditional system. Continue Reading…

The Market and the Economy are not the same

Posted By |
Storm clouds looming?

By John De Goey, CFP

Special to the Financial Independence Hub

We’re now into the last week of the first half of 2020: and what a six months it has been!  The news for capital markets has been mixed, as markets have tumbled frighteningly and then rebounded smartly.  If one were to naively look at market levels at the start of the year and at the end of June, one might think that very little happened: that it was a pedestrian, non-descript half year.  In stark contrast, no one would say anything of the sort regarding the broad economy.  Unemployment was at generational lows at the start of the year yet stands at generational highs presently.  The same goes for economic output and GDP growth.  What gives?

In previous posts, I’ve noted that there are certain things that are, by definition, unknown and …  in a very real sense … unknowable.  Pundits, however, are all over the map in their presumptuousness and certitude about what is known.  Since my day job involves acting as a fiduciary for a select number of Canadian families, I want to stress that I do not hold out as having any unique insights about current conditions, but that I do have some serious concerns.  The future is unknowable.  The present, however, looks awfully risky to me.

What I continue to find fascinating is the way identical facts can be given radically different narrative spins.  The stock market (or, more properly…. ‘stock markets’) is/are indeed very different animals from the broader economy.  My concern remains that a disproportionate number of commentators point this out as justification for markets going ever-higher over the last three months or so.  In short, these pundits suggest that the market is “right” and that the economy is “wrong.”

A massive disconnect

I find that narrative telling.  After all, the same facts could just as easily lead to the opposite conclusion.  What if the market is “wrong” and it is “right” to be deeply concerned about the overall economy?  No reasonable person would dispute that there is currently a massive disconnect between the two.  Valuations for stock markets are pretty much universally in the top decile (meaning they have been cheaper less than 10% of the time based on historical metrics).  Meanwhile, the overall economy is unequivocally in the bottom decile based on historical standards and – depending on who you believe and how current your data is – possibly even in the worst 1% (!) ever.  There are many credible people who believe the economy has not been this bad since the depths of the great depression in the 1930s. Continue Reading…

The need to pivot: Covid-19 as a Fire Drill for Retirement

Posted By |

By Darren Coleman

Special to the Financial Independence Hub

If you’ve been playing Lingo Bingo during this Great Disruption, then the word “Pivot” must occupy the centre square on everyone’s playing card. It is simply the business word of 2020 and it means a fixed point on which things oscillate or rotate. It’s a term commonly used in sports like basketball or football when a player stops rapidly and then moves in a different direction. And we use it because in order to keep moving our businesses forward right now we have to do precisely that.

For me the first few weeks of the pandemic felt like some kind of weird reverse camping trip. Why? We had to make due with limited supplies, were in familiar yet oddly strange surroundings, and likely didn’t have enough toilet paper. Fortunately, family and friends were safe, everyone was home, and we mostly had to contend with a series of inconveniences rather than anything really serious. I appreciate this has not been the case for a great many.

Back to business. Or rather, back to trying to figure out how we’re going to keep doing business because so much has changed. My staff and I were working from home, trying to create new processes and procedures, making sure our remote systems were 100%, and trying to source everything from new computer headsets to home office chairs and other items so we could remain productive. My focus, as leader of a large and successful wealth-management team, was to keep everyone functioning at a high level and ensure clients were engaged since they too were going through a unique and challenging experience.

In short, we had to pivot.

Walking with Charlie: a video blog

One of the best things I did throughout all this was walk my dog. Everyone needs to take a break when working at home, so I would take my dog Charlie for walks. One day I decided to bring my GoPro with me. I would use the great trick of YouTube (which is to create what I call “mass intimacy” and talk to many even though it feels like I’m talking only to you). It would allow me to share my thoughts and comments with our clients and professional network.

This video blog was intended to be a bit of fun, and a way to stay in touch with clients quickly and efficiently. What with COVID I wanted to lighten the mood and also provide a philosophical framework for how we are thinking nowadays, and how we are processing the changes all around us.

In my first video, I encouraged viewers to find positive changes they can make while in lockdown. Instead of binge-watching Netflix, perhaps they could attend to those chores they’ve been avoiding or take up projects they’ve been putting off. Maybe organize the photo albums or learn to play the piano, for example. The point was to keep people moving in a positive direction to counter all the negative news flow we are experiencing.

It’s my belief that this pandemic is a health crisis for some: and a financial challenge for many more. In later videos, I discussed a variety of topics, such as how to be a better consumer of news, and how to handle the financial hitchhikers we encounter in life. I also provided some education as a way to increase financial literacy by sharing cash-flow budgeting techniques, along with key questions you should ask of your professional advisors. Continue Reading…