“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

Canada Child Benefit Increase! What Will Your Monthly CCB Be?

Canada Child Benefit Increase! What Will Your Monthly CCB Be?

The Canada Child Benefit is one of the most generous government benefits in Canada and it just increased! Unlike many government benefits, the Canada Child Benefit is available to low, moderate, and also some high income families.

The amount you receive from the Canada Child Benefit (CCB) depends on a few factors, one is the taxable net income for the family (line 23600 on your tax return), another is the number of children in the family, and the final factor is the age of each child.

The Canada Child Benefit is an “income tested” government benefit. The higher your taxable net income is, the lower your Canada Child Benefit will be. For some high income families, at a certain level of income the Canada Child Benefit will be reduced to $0. Anyone with income above that income level will not receive any benefit. The tricky thing is that this income level is different depending on the number of children and their ages.

The Canada Child Benefit also changes every year. New benefits start in July and are based on prior years tax return (the first payment of the updated benefit is July 20th).

The Canada Child Benefit also increases with inflation. The new 2021 Canada Child Benefit has increased by 1.0% versus 2020.

So how much Canada Child Benefit can you expect in July? We’ve got a table below that shows the Canada Child Benefit based on family taxable net income (line 23600) in $10,000 increments, so you can figure out generally how much you can expect in July

read more
How The Age Amount Tax Credit Can Increase Your Marginal Tax Rate In Retirement

How The Age Amount Tax Credit Can Increase Your Marginal Tax Rate In Retirement

Marginal tax rates are important. The represent the income tax you pay on the next dollar of income. Knowing your marginal tax rate both now and in the future can be extremely helpful when doing tax planning.

One tax planning opportunity is to make an RRSP contribution in a high tax bracket and withdraw later in a lower tax bracket. This opportunity can help defer tax until retirement when RRSP withdrawals are made at a lower tax rate. Ideally, an RRSP contribution allows you to contribute at a high marginal tax rate and withdraw at a lower marginal tax rate in the future.

This difference in tax rates can lead to a lot of tax savings. Contribute at a 40% tax rate now and withdraw at a 20% or 30% tax rate in the future and for every $1,000 that goes into an RRSP there is $100 to $200 in tax savings over a lifetime. Expand that to tens or hundreds of thousands of dollars of contribution and you can begin to see the incredible opportunity that a bit of tax planning can create.

But what if your marginal tax rate in retirement isn’t quite what you think it will be? What if its higher than you think? What if the typical marginal tax rate tables are missing something? You might be underestimating your future marginal tax rate in retirement.

In this post we’re going to explore a tax credit called the Age Amount and in particular the way that the Age Amount is reduced (or clawed back) based on income in retirement.

We’re also going to explore how this may affect your marginal tax rate in retirement. As we’ll see, the marginal tax rate you’re planning for may not be the marginal tax rate you actually experience in retirement.

read more
Life Expectancy: How Long Will You Live?

Life Expectancy: How Long Will You Live?

If we knew how things would unfold in the future, then financial planning would be easy.

If we knew things like future investment returns and future inflation rates, then that would remove a lot of uncertainty in a financial plan.

If we also knew when we’re going to die, then we could make sure that we spend every penny and “bounce the last check”.

But because of all the unknowns, we have a lot of uncertainty within a financial plan. To create a great financial plan, we have to evaluate and plan for that uncertainty. We have to understand both the average and the extremes. We don’t want to run out of money in the future, so it’s important that we manage this uncertainty properly and avoid making bad assumptions.

Life expectancy is one of those assumptions and it’s a big assumption within a financial plan. Assume a life expectancy that is too short and there could be years (or possibly decades) of meager retirement income.

When it comes to life expectancy, we can’t just assume the average, we need to know how much longer our money needs to last. Is it 5-years past the average, 10-years, 20-years, or more? Hopefully it’s for a very long time.

read more

Owen Winkelmolen

Fee-for-service financial planner and founder of PlanEasy.ca

“Welcome to the PlanEasy blog! We make personal finance easy.

Thanks for visiting.”

– Owen

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

Canada Child Benefit Increase! What Will Your Monthly CCB Be?

Canada Child Benefit Increase! What Will Your Monthly CCB Be?

The Canada Child Benefit is one of the most generous government benefits in Canada and it just increased! Unlike many government benefits, the Canada Child Benefit is available to low, moderate, and also some high income families.

The amount you receive from the Canada Child Benefit (CCB) depends on a few factors, one is the taxable net income for the family (line 23600 on your tax return), another is the number of children in the family, and the final factor is the age of each child.

The Canada Child Benefit is an “income tested” government benefit. The higher your taxable net income is, the lower your Canada Child Benefit will be. For some high income families, at a certain level of income the Canada Child Benefit will be reduced to $0. Anyone with income above that income level will not receive any benefit. The tricky thing is that this income level is different depending on the number of children and their ages.

The Canada Child Benefit also changes every year. New benefits start in July and are based on prior years tax return (the first payment of the updated benefit is July 20th).

The Canada Child Benefit also increases with inflation. The new 2021 Canada Child Benefit has increased by 1.0% versus 2020.

So how much Canada Child Benefit can you expect in July? We’ve got a table below that shows the Canada Child Benefit based on family taxable net income (line 23600) in $10,000 increments, so you can figure out generally how much you can expect in July

read more
How The Age Amount Tax Credit Can Increase Your Marginal Tax Rate In Retirement

How The Age Amount Tax Credit Can Increase Your Marginal Tax Rate In Retirement

Marginal tax rates are important. The represent the income tax you pay on the next dollar of income. Knowing your marginal tax rate both now and in the future can be extremely helpful when doing tax planning.

One tax planning opportunity is to make an RRSP contribution in a high tax bracket and withdraw later in a lower tax bracket. This opportunity can help defer tax until retirement when RRSP withdrawals are made at a lower tax rate. Ideally, an RRSP contribution allows you to contribute at a high marginal tax rate and withdraw at a lower marginal tax rate in the future.

This difference in tax rates can lead to a lot of tax savings. Contribute at a 40% tax rate now and withdraw at a 20% or 30% tax rate in the future and for every $1,000 that goes into an RRSP there is $100 to $200 in tax savings over a lifetime. Expand that to tens or hundreds of thousands of dollars of contribution and you can begin to see the incredible opportunity that a bit of tax planning can create.

But what if your marginal tax rate in retirement isn’t quite what you think it will be? What if its higher than you think? What if the typical marginal tax rate tables are missing something? You might be underestimating your future marginal tax rate in retirement.

In this post we’re going to explore a tax credit called the Age Amount and in particular the way that the Age Amount is reduced (or clawed back) based on income in retirement.

We’re also going to explore how this may affect your marginal tax rate in retirement. As we’ll see, the marginal tax rate you’re planning for may not be the marginal tax rate you actually experience in retirement.

read more
Life Expectancy: How Long Will You Live?

Life Expectancy: How Long Will You Live?

If we knew how things would unfold in the future, then financial planning would be easy.

If we knew things like future investment returns and future inflation rates, then that would remove a lot of uncertainty in a financial plan.

If we also knew when we’re going to die, then we could make sure that we spend every penny and “bounce the last check”.

But because of all the unknowns, we have a lot of uncertainty within a financial plan. To create a great financial plan, we have to evaluate and plan for that uncertainty. We have to understand both the average and the extremes. We don’t want to run out of money in the future, so it’s important that we manage this uncertainty properly and avoid making bad assumptions.

Life expectancy is one of those assumptions and it’s a big assumption within a financial plan. Assume a life expectancy that is too short and there could be years (or possibly decades) of meager retirement income.

When it comes to life expectancy, we can’t just assume the average, we need to know how much longer our money needs to last. Is it 5-years past the average, 10-years, 20-years, or more? Hopefully it’s for a very long time.

read more

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

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