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

Thanks for visiting.”

– Owen

Best Way To Save Money For A House? Save Or Invest?

Best Way To Save Money For A House? Save Or Invest?

What is the best way to save money for a house? This is an interesting question and the old advice might require a new perspective given the reality of the current housing market. Home prices have changed dramatically over the last few years and this is impacting how people are making decisions around home ownership.

Over the last few years we’ve seen the average home price increase faster than our ability to save for a down payment. This can make it difficult to save money for a house and this can push home ownership to later stages in life.

This trend in home ownership has been happening for decades, with home ownership shifting later and later. This may be due to a number of factors but there is a definite trend towards purchasing a home later in life.

In 1981 approximately 55.5% of those who were over age 30 lived in their own home.

In 2016 approximately 50.2% of those who were over age 30 lived in their own home.

With the continued increase in home prices since 2016 it’s reasonable to assume that home ownership will continue to shift into the 30+ age group.

So if purchasing a home is happening later in life, does that change the way we save money for a house? Does that change the way we build up our down payment?

Conventional financial advice would suggest that any savings required in the next 1-5 years should be kept in something safe, like a GIC or a high-interest savings account. Historically this meant that savings for a down payment would go into one of these safe investment vehicles.

But what if someone is starting their career in their early 20’s and isn’t planning to purchase a home until their early 30’s, late-30’s or maybe even their 40’s? Should they still be saving for a down payment in a safe investment like a GIC?

Maybe, or maybe not. In this post we’ll explore a different way to save money for a house. A way that is perhaps more reflective of purchasing a home later in life.

read more
What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway?

While its true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more
Creating An Emergency Budget For Your Retirement

Creating An Emergency Budget For Your Retirement

Having an emergency budget is not a new concept, it’s something we’ve written about before, but for retirees it’s particularly important. 

An emergency budget is a slightly reduced budget that can be executed in times of uncertainty.

For retirees, “uncertainty” is at its highest during a recession, when investment assets have drastically reduced in price. But “uncertainty” could also be high during a long periods of below average investment returns, stagnate economic growth, or high inflation rates.

Emergency budgets are important for retirees that rely on investment assets to fund part of their retirement spending.

Often, retirement projections are done using an average rate of return. This provides a nice pretty graph but doesn’t accurately represent the range of investment returns retirees may experience in retirement.

Variable investment returns are one of the largest risks a retiree will face. A period of low or negative investment returns early in retirement can be devastating to a retirement plan. This is known as sequence of returns risk. The sequence in which a retiree experiences investment returns can have a big impact on their retirement plan. A series of low or negative investment returns early in retirement can have a very negative effect.

One important way to counteract the effect of sequence of returns risk is to reduce the draw on investment assets during periods when stock market returns are low and/or negative for a period of time.

Reducing the draw on investments, even by a small amount, helps increase the success rate of a retirement plan.

There are a few important factors when creating an emergency budget.

read more
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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...

Best Way To Save Money For A House? Save Or Invest?

Best Way To Save Money For A House? Save Or Invest?

What is the best way to save money for a house? This is an interesting question and the old advice might require a new perspective given the reality of the current housing market. Home prices have changed dramatically over the last few years and this is impacting how people are making decisions around home ownership.

Over the last few years we’ve seen the average home price increase faster than our ability to save for a down payment. This can make it difficult to save money for a house and this can push home ownership to later stages in life.

This trend in home ownership has been happening for decades, with home ownership shifting later and later. This may be due to a number of factors but there is a definite trend towards purchasing a home later in life.

In 1981 approximately 55.5% of those who were over age 30 lived in their own home.

In 2016 approximately 50.2% of those who were over age 30 lived in their own home.

With the continued increase in home prices since 2016 it’s reasonable to assume that home ownership will continue to shift into the 30+ age group.

So if purchasing a home is happening later in life, does that change the way we save money for a house? Does that change the way we build up our down payment?

Conventional financial advice would suggest that any savings required in the next 1-5 years should be kept in something safe, like a GIC or a high-interest savings account. Historically this meant that savings for a down payment would go into one of these safe investment vehicles.

But what if someone is starting their career in their early 20’s and isn’t planning to purchase a home until their early 30’s, late-30’s or maybe even their 40’s? Should they still be saving for a down payment in a safe investment like a GIC?

Maybe, or maybe not. In this post we’ll explore a different way to save money for a house. A way that is perhaps more reflective of purchasing a home later in life.

read more
What Is A Spousal RRSP? And Why Should You Use It?

What Is A Spousal RRSP? And Why Should You Use It?

Income splitting is often talked about in reference to high-income earners, but what about the average Canadian family? For high-income earners there are income splitting strategies like spousal loans or “income sprinkling”. Spousal loans are for families with lots of non-registered savings and a large difference in marginal tax rates between spouses. “Income sprinkling” can be used by families who own a corporation (although with the new TOSI rules has changed dramatically).

But what about your average Canadian household? Are there are income splitting options for them?

One very accessible type of income splitting is a spousal RRSP. Unlike other income splitting strategies this one is very easy to set up, it doesn’t require a lawyer, and it’s easy to understand.

The big benefit of a spousal RRSP is that the average family can use it to “equalize” their registered assets before retirement. This allows for a more equal distribution of income in retirement and a lower overall tax bill for a household.

In addition to lower income tax it also opens up more opportunities to maximize government benefits in retirement.

But you might be wondering, isn’t it possible to split income after age 65 anyway?

While its true that after age 65 income splitting is much easier to do, it’s still a best practice to try to equalize registered assets before age 65. This allows for the maximum flexibility when creating a retirement drawdown strategy, especially when retiring early.

Equalizing registered assets can be extremely beneficial, especially before the age of 65 when there are fewer income splitting opportunities, for this reason we sometimes want to look at using a spousal RRSP to help split income in the future.

read more
Creating An Emergency Budget For Your Retirement

Creating An Emergency Budget For Your Retirement

Having an emergency budget is not a new concept, it’s something we’ve written about before, but for retirees it’s particularly important. 

An emergency budget is a slightly reduced budget that can be executed in times of uncertainty.

For retirees, “uncertainty” is at its highest during a recession, when investment assets have drastically reduced in price. But “uncertainty” could also be high during a long periods of below average investment returns, stagnate economic growth, or high inflation rates.

Emergency budgets are important for retirees that rely on investment assets to fund part of their retirement spending.

Often, retirement projections are done using an average rate of return. This provides a nice pretty graph but doesn’t accurately represent the range of investment returns retirees may experience in retirement.

Variable investment returns are one of the largest risks a retiree will face. A period of low or negative investment returns early in retirement can be devastating to a retirement plan. This is known as sequence of returns risk. The sequence in which a retiree experiences investment returns can have a big impact on their retirement plan. A series of low or negative investment returns early in retirement can have a very negative effect.

One important way to counteract the effect of sequence of returns risk is to reduce the draw on investment assets during periods when stock market returns are low and/or negative for a period of time.

Reducing the draw on investments, even by a small amount, helps increase the success rate of a retirement plan.

There are a few important factors when creating an emergency budget.

read more
Page 1 of 4712345...

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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