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

Thanks for visiting.”

 

– Owen

The Hidden Tax Rate: Government Programs And Their Claw Back Rates

The Hidden Tax Rate: Government Programs And Their Claw Back Rates

There are many government benefit programs that are “income tested”.

You might be asking… “What does “income tested” mean exactly?!?”

This means that the benefits you receive will fluctuate with your net income.

Higher income means lower benefits. Lower income means higher benefits. For low or moderate income households this becomes a very important consideration when creating a financial plan.

At the most extreme, a family with two children earning around $50,000 can expect to lose 32.5% of the next dollar they earn due to these benefit claw backs. This is on top of their marginal tax rate of 29.65%. That means that between claw backs and income taxes over 60% of the next dollar earned will go to the government. Ouch!

While this is an extreme case it does illustrate the impact of these claw backs on certain income levels and family types.

The challenge with these benefits is that the calculation is often not straightforward. Specific rules and claw back rates are often hidden and not easily found. There are also considerations like marital status, number of dependents, disability, income and deductions. This makes it difficult to understand your particular claw back rate.

In addition, many income tested benefits are not based on gross income but on net income, more specifically adjusted family net income (AFNI). In the most basic sense this is your gross income minus any deductions.

One of the most interesting financial planning opportunities this creates is with RRSP contributions.

RRSP contributions are considered a tax deduction and will decrease your net income. This in turn will increase your government benefits. That’s right, the government will increase your benefits today if you save for the future. For low and moderate income households this can sometimes make RRSP contributions more appealing vs TFSA contributions.

This is a BIG post, there are eight government programs we’ll cover.

For each benefit program, we include the benefit amount, the claw back rate and the income level at which the benefit disappears entirely.

read more
Calling All Financial Voyeurs! See Our Emergency Budget

Calling All Financial Voyeurs! See Our Emergency Budget

When you’re on a tight budget the fear of the unknown is very real. Any little bump can cause major issues. Things like an emergency fund are key to help avoid those issues. An emergency fund helps bridge the gap when cash flow is tight. More importantly however is that an emergency fund helps you worry less about the unknown.

Emergency funds aren’t the only thing that can help you worry less.

There are many things you can do to increase your financial flexibility and worry less about those unknown problems that come up from time to time.

One thing you can do is have a high savings rate. Having a high (+20%) savings rate will give you room breathe.

Another thing you can do is have more than one income stream. Having income from your job, plus investments, plus rentals/AirBnB, plus side gigs will help increase your financial flexibility.

Lastly, and this is what I want to share with you now, having an emergency budget will help you prepare for the bad times and worry less during the good times.

read more
House Hacking Your Way To Zero Housing Costs

House Hacking Your Way To Zero Housing Costs

Today we have a guest post about house hacking from Erik. Erik a personal finance and self-improvement junkie who blogs over at The Mastermind Within. House hacking is one of those things I wish I knew about when I was a bit younger. It’s entirely possible to house hack your way to zero housing costs. Housing represents 35% of the average household’s budget so reducing that, even by a little bit, can mean a huge increase in your capacity to save.

In this post, Erik shares the 5 reasons why he believes house hacking is the best early age wealth building strategy. I hope you enjoy it!

read more
Page 3 of 1212345...

Owen Winkelmolen

Financial planner, personal finance geek and founder of PlanEasy.

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

Thanks for visiting.”

 

– Owen

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The Hidden Tax Rate: Government Programs And Their Claw Back Rates

The Hidden Tax Rate: Government Programs And Their Claw Back Rates

There are many government benefit programs that are “income tested”.

You might be asking… “What does “income tested” mean exactly?!?”

This means that the benefits you receive will fluctuate with your net income.

Higher income means lower benefits. Lower income means higher benefits. For low or moderate income households this becomes a very important consideration when creating a financial plan.

At the most extreme, a family with two children earning around $50,000 can expect to lose 32.5% of the next dollar they earn due to these benefit claw backs. This is on top of their marginal tax rate of 29.65%. That means that between claw backs and income taxes over 60% of the next dollar earned will go to the government. Ouch!

While this is an extreme case it does illustrate the impact of these claw backs on certain income levels and family types.

The challenge with these benefits is that the calculation is often not straightforward. Specific rules and claw back rates are often hidden and not easily found. There are also considerations like marital status, number of dependents, disability, income and deductions. This makes it difficult to understand your particular claw back rate.

In addition, many income tested benefits are not based on gross income but on net income, more specifically adjusted family net income (AFNI). In the most basic sense this is your gross income minus any deductions.

One of the most interesting financial planning opportunities this creates is with RRSP contributions.

RRSP contributions are considered a tax deduction and will decrease your net income. This in turn will increase your government benefits. That’s right, the government will increase your benefits today if you save for the future. For low and moderate income households this can sometimes make RRSP contributions more appealing vs TFSA contributions.

This is a BIG post, there are eight government programs we’ll cover.

For each benefit program, we include the benefit amount, the claw back rate and the income level at which the benefit disappears entirely.

read more
Calling All Financial Voyeurs! See Our Emergency Budget

Calling All Financial Voyeurs! See Our Emergency Budget

When you’re on a tight budget the fear of the unknown is very real. Any little bump can cause major issues. Things like an emergency fund are key to help avoid those issues. An emergency fund helps bridge the gap when cash flow is tight. More importantly however is that an emergency fund helps you worry less about the unknown.

Emergency funds aren’t the only thing that can help you worry less.

There are many things you can do to increase your financial flexibility and worry less about those unknown problems that come up from time to time.

One thing you can do is have a high savings rate. Having a high (+20%) savings rate will give you room breathe.

Another thing you can do is have more than one income stream. Having income from your job, plus investments, plus rentals/AirBnB, plus side gigs will help increase your financial flexibility.

Lastly, and this is what I want to share with you now, having an emergency budget will help you prepare for the bad times and worry less during the good times.

read more
House Hacking Your Way To Zero Housing Costs

House Hacking Your Way To Zero Housing Costs

Today we have a guest post about house hacking from Erik. Erik a personal finance and self-improvement junkie who blogs over at The Mastermind Within. House hacking is one of those things I wish I knew about when I was a bit younger. It’s entirely possible to house hack your way to zero housing costs. Housing represents 35% of the average household’s budget so reducing that, even by a little bit, can mean a huge increase in your capacity to save.

In this post, Erik shares the 5 reasons why he believes house hacking is the best early age wealth building strategy. I hope you enjoy it!

read more
Page 3 of 1212345...

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