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

Thanks for visiting.”

– Owen

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
Planning On Starting A Family? Six Ways Your Finances Will Change

Planning On Starting A Family? Six Ways Your Finances Will Change

Starting a family is expensive. Estimates are thrown around that it costs in the low six figures to raise each child. Amounts like $100,000 or $200,000 per child are often quoted. While these are probably a bit dramatic, and include the opportunity cost of one parent staying at home, the fact is that starting a family can cause a number of changes to your personal finances.

Anticipating these expenses can ease the financial cost of starting a family (or at least make it a bit less stressful). If you know what’s coming, you can plan accordingly.

When you’re starting a family it’s easy to get caught up in the excitement. There are lots of new things that need to be purchased and there’s a strong desire to do the best for your future family. All these emotions can mean that things sometimes get a bit out of control (I speak from personal experience!) Purchases for beds, strollers, car seats, clothing etc. etc. can quickly add up to thousands of dollars.

In addition to new purchases, families often go through major cash flow changes when starting a family.

On the income side, parental leaves from work can significantly reduce income when starting a family. Of course there are sometimes “top ups” from employers, but those only last for weeks or a few months at best, and employment insurance is only 55% to 33% of your pay up to the max (depending on if you choose the 12-month or 18-month option). Even with these programs there is often a large decrease in income when starting a family.

One the expenses side, the big one is of course daycare expenses. Daycare expenses last for a few years but for most families this expense will go away once kids start school. But even when daycare expenses disappear there are still ongoing expenses for things like food, clothing, activities etc. etc., and these can add up over time.

And if all of that wasn’t challenging enough, starting a family also comes with new tax advantaged accounts like the RESP and new government benefits like the Canada Child Benefit (CCB).

To avoid being too overwhelming let’s look at the six major ways that your finances can change when you’re starting a family and how you might go about making the best decisions for your financial future.

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...

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
Planning On Starting A Family? Six Ways Your Finances Will Change

Planning On Starting A Family? Six Ways Your Finances Will Change

Starting a family is expensive. Estimates are thrown around that it costs in the low six figures to raise each child. Amounts like $100,000 or $200,000 per child are often quoted. While these are probably a bit dramatic, and include the opportunity cost of one parent staying at home, the fact is that starting a family can cause a number of changes to your personal finances.

Anticipating these expenses can ease the financial cost of starting a family (or at least make it a bit less stressful). If you know what’s coming, you can plan accordingly.

When you’re starting a family it’s easy to get caught up in the excitement. There are lots of new things that need to be purchased and there’s a strong desire to do the best for your future family. All these emotions can mean that things sometimes get a bit out of control (I speak from personal experience!) Purchases for beds, strollers, car seats, clothing etc. etc. can quickly add up to thousands of dollars.

In addition to new purchases, families often go through major cash flow changes when starting a family.

On the income side, parental leaves from work can significantly reduce income when starting a family. Of course there are sometimes “top ups” from employers, but those only last for weeks or a few months at best, and employment insurance is only 55% to 33% of your pay up to the max (depending on if you choose the 12-month or 18-month option). Even with these programs there is often a large decrease in income when starting a family.

One the expenses side, the big one is of course daycare expenses. Daycare expenses last for a few years but for most families this expense will go away once kids start school. But even when daycare expenses disappear there are still ongoing expenses for things like food, clothing, activities etc. etc., and these can add up over time.

And if all of that wasn’t challenging enough, starting a family also comes with new tax advantaged accounts like the RESP and new government benefits like the Canada Child Benefit (CCB).

To avoid being too overwhelming let’s look at the six major ways that your finances can change when you’re starting a family and how you might go about making the best decisions for your financial future.

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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