Tag Archives: RRIFs

C.D. Howe’s Malcolm Hamilton — it’s an exaggeration to say we are saving too little for Retirement

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Malcolm Hamilton (YouTube.com)

By Jonathan Chevreau

Financial Independence Hub

Don’t believe various reports that Canadians are saving too little for retirement, says C.D. Howe senior fellow Malcolm Hamilton in a report issued Thursday. You can get the full 30-page report on PDF by clicking here.

As is typical of Hamilton, now a retired actuary, the report is insightful and entertaining. While there are exceptions, generally speaking, “Canadians are reasonably well prepared for retirement,” he writes.

Right under the report’s Headline (Do Canadians Save Too Little?) the answer is delivered in small Italic type on the title page: “Reports of undersaving by Canadians for retirement are exaggerated. They rely on faulty assumptions, questionable numbers and ignore the diversity of individual retirement goals.”

Among the various reports cited, one is the Ontario Government’s backgrounders that served as its rationale for launching its own Ontario Retirement Pension Plan, more on which below. Continue Reading…

Memo to Liberals: lots of older middle-class Canadians have $10,000 TFSA capital “lying around”

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Liberal deputy leader Ralph Goodale (National Post.com)

The Financial Post ran an op-ed written by me today (A10), titled simply How to Max Out your TFSA. We’ve written on this topic before of course, but it specifically addresses an oft-repeated Liberal comment that few middle-class Canadians have “$10,000 lying around” for a TFSA contribution.

On the contrary, I argue, many middle-aged middle-class Canadians have hundreds of thousands of dollars in non-registered or “open” investment accounts, money that is subjected to annual rounds of tax on interest and dividends, and often capital gains, and which would love to find a tax-free home in a Tax Free Savings Account.

Similarly, many seniors already in retirement have large RRSPs or RRIFs that can also be a source of funds for a TFSA, once withdrawals are made and a one-time tax hit is sustained.

In fact, this weekend, I spent time with a 98 year old friend (a woman), who proudly informed me she recently put $10,000 into her TFSA and is saving up from her part-time job to put in another $5,000. Why? She felt she needed a bit of cushion in case some medical problem arises.

As the end of the FP piece notes, there are plenty of other potential sources too, including sale of a principal residence (perhaps in a downsizing situation), severance payments, life insurance proceeds, sale of a business, lottery wins and — this one’s for you, Justin — inheritance.

Gordon Pape on TFSA income investments

In a related column in the Globe & Mail last week, TFSA author Gordon Pape wrote an interesting piece about how TFSAs are now large enough that they can start spinning off tax-free income. His piece looked at ten Canadian dividend-paying stocks like BCE.

Gordon and I will be two of five speakers this Wednesday evening at The Financial Show at the Mississauga Convention Center. Details here.

For continuity and archival purposes, below is the op-ed on TFSAs, with a few subheads added: Continue Reading…

Post-budget primer on RRIF withdrawal strategies 2015 and beyond

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Adrian Mastracci, KCM Wealth

By Adrian Mastracci, KCM Wealth Management

Special to the Financial Independence Hub

“Be very mindful of your RRIF. Understand its purpose. Then review it periodically to make sure it’s on track to deliver.”

It’s time to start paying special attention to RRIFs.
Even if you don’t yet need one.

RRIFs (Registered Retirement Income Funds) are income withdrawal plans, while RRSPs are savings plans.

No deposits are allowed to be made into a RRIF after the RRSP conversion.

The venerable RRIF remains firmly entrenched as a prominent retirement planning vehicle.
It has become an essential foundation of many a retirement nest egg.

Starting a RRIF at age 71 implies long-term planning, say to age 90 and beyond, especially if there is a younger spouse.

That’s one very good reason to be aware of the details.

Two major changes were proposed in the recent Federal Budget, starting in 2015:

  • Minimum RRIF draws are reduced for ages 71 to 94 (See highlighted figures in table below).
  • Re-deposit of the difference in draws is allowed by Feb 2016.

Continue Reading…

A visual guide to the Budget

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wealthbarlogoIf you prefer pictures and graphics over text, you may enjoy this visual guide to Tuesday’s federal Budget, prepared by Vancouver-based robo-advisers, Wealthbar.com.

Until we figure out how to embed it here at the Hub, we’ll just send you over to the graphic housed at Wealthbar’s site. Just click on the red link below:

http://blog.wealthbar.com/visual-guide-to-the-2015-canadian-federal-budget/

Budget 2015: The Findependence Trifecta comes home!

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Horse racingHere’s my latest MoneySense blog, covering Tuesday’s federal budget: Seniors Hit Jackpot with Budget 2015.

As you will note from the adjacent illustration of a horse race, we have focused on the big three measures we called earlier today the Findependence Trifecta.

As we noted on the Hub shortly after 4 pm, all three measures came through as telegraphed in the major media in recent days, including MoneySense. That is, almost-doubled TFSA annual contribution amounts ($10,000), reduced RRIF withdrawal rates and reduced tax on small businesses.

Now what’s all this about trifectas? Back in February, we ran a blog both at the Hub and at MoneySense about my reflections on harness racing in Florida, and its (somewhat remote) application to asset allocation. For those not familiar with the term trifecta, here is Wikipedia’s definition.

In a nutshell, horse-racing enthusiasts (“gambling” is such a harsh term!) make a bet on three specific horses placing one-two-three in a particular race. As you can imagine, this is not too likely: it’s a lot easier to bet on a single horse to “show” by coming in either first, second or third. But to  correctly identify the first-, second- and third-place winners in exact order involves considerably longer odds. So it’s a big deal if you actually get it right and win a massive bet called the trifecta.

Of course, when it comes to financial independence, the analogy breaks down a little. But as I note in the MoneySense piece linked above, I think we should all be happy with the budget. Enjoy your potential future winnings from the Findependence Trifecta! 

For convenience and archival purposes, we’ve also republished a version of the blog below: Continue Reading…