How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

How To Maximize Your Canada Child Benefit (CCB) And Gain $1,000 to $10,000+

If you currently have children, or if you’re planning to have children soon, or if you know someone with children, then this blog post could help you increase the Canada Child Benefit (CCB) by $1,000’s or even $10,000’s.

The Canada Child Benefit is a generous government benefit. It’s available to families with children aged 17 and under. This benefit is based on taxable income and can be maximized with some careful planning.

By using just two common accounts, the TFSA and the RRSP, we can maximize the Canada Child Benefit (CCB) and also minimize income tax.

The net result is $1,000’s or $10,000’s in additional Canada Child Benefit (CCB) and potentially $100,000+ in additional net worth over the course of a financial plan.

In this blog post we’re going to go through a specific example of how one family can boost their Canada Child Benefit by over $55,000, and when combined with income tax reductions, improve their overall net worth by $300,000+

6 Reasons To Start CPP At Age 60

6 Reasons To Start CPP At Age 60

When is the best time to start CPP benefits? In some cases, delaying CPP until age 70 is a wise choice. But in other cases, it might be best to start CPP at age 60.

In this blog post we’re going to look at six good reasons to start CPP at age 60.

Starting CPP at age 60 will mean a smaller monthly benefit but it also means getting CPP income earlier. Starting CPP at age 60 will decrease the size of the benefit by 36% versus the calculated amount at age 65, but even this reduced amount can be $10,000 per year or more!

This reduction in CPP benefits is called the actuarial adjustment and it’s 0.6% for each month that CPP starts before age 65. The maximum reduction is 36% if CPP starts at age 60 but this same rule applies to any start age in between. Start CPP 2-years early at age 63? That’s a 14.4% reduction (24-months x 0.6% per month). Start CPP 3.5-years early at age 61.5? That’s a 25.2% reduction (42-months x 0.6% per month).

Despite the reduction in monthly benefits there are a few very good reasons to start CPP at age 60…

4 Common Mistakes When Investing With ETFs

4 Common Mistakes When Investing With ETFs

Investing with ETFs has become commonplace over the last 5-10 years, and with good reason, investing with ETFs can provide an easy, low-cost, highly diversified way to create an investment portfolio. But with all the attention ETFs have been getting, it’s understandable that mistakes are being made when self-directed investors are implementing their ETF portfolios.

As an advice-only financial planner, we work with a lot of self-directed investors who want to create a more detailed financial plan. We see a lot of investment portfolios, some of which are excellent, and some with opportunities to improve.

ETF investing has become popular thanks to personal finance bloggers like Canadian Couch Potato. By copying a simple 3-4 fund Canadian Couch Potato portfolio, it’s easy to create a simple, low-cost, and highly diversified investment portfolio.

This low-cost index investing approach is typically what people are referring to when they talk about ETF investing. The issue is that this nuance/detail is often not mentioned or glossed over when ETFs are discussed in the media/newspapers/online forums etc.

The result is that there are many self-directed investors who are keen to use ETFs but are making “mistakes” that could increase their investment fees, decrease their level of diversification, increase their level of risk, or decrease their long-term returns.

Mistakes is in quotations because these are only mistakes when compared to a simple 3-4 fund portfolio (or an even simpler all-in-one portfolio). Some investors may not think these are mistakes at all, but I would challenge any self-directed investor to watch out for the mistakes below, and carefully consider if they may be making some or perhaps all these mistakes when creating an investment portfolio.

The Larger Your Portfolio The Less Often You Should Check It

The Larger Your Portfolio The Less Often You Should Check It

When it comes to financial planning we often focus on the numbers, net worth, debt, rate of return etc. But half of financial planning has nothing to do with the numbers. Half of financial planning is about behavior. It’s about managing our behavior, our expectations, our emotions etc.

When it comes to personal finance, and specifically investing, we are often our own worst enemy. We make financial decisions based purely on emotion, often costing us more money down the road.

One of the most common mistakes we make is checking our investment portfolio too often. Investment portfolios are not something that should be checked daily or weekly (unless you’re day trading, which is a whole other conversation)

Checking our investment portfolios has become even easier with online brokerage accounts and financial aggregator apps like Mint.

But… just because it’s possible doesn’t mean you should.

The problem with checking your portfolio too often is that we don’t feel gains the same way we feel losses, even if they’re worth the exact same amount.

The emotional impact of a $10,000 loss is more than the emotional benefit from a $10,000 gain. It’s completely illogical, but that’s how we feel. We experience the emotional impact of losses more than gains. We remember losses more vividly, and for a longer period of time than we do for gains.

This is a problem when it comes to investing. Even though a well-diversified portfolio should gain over the long-term, it will likely experience some big swings in the short and medium-term. By checking our portfolios too often we experienced all those gains and losses, and because we feel losses more than gains, the net effect is that we can feel a bit sad.

What we need to do is check our portfolio less often, especially for medium and large portfolios. Let me explain why…

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? How does the average Canadian family split income and minimize tax? A spousal RRSP is one way for the average Canadian family to easily split income in retirement.

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 easy and 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, why would I need a spousal-RRSP?

While it’s 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.

The Benefits Of Retirement Planning

The Benefits Of Retirement Planning

Retirement planning is complex and includes many important considerations like retirement spending, income tax planning, income splitting, maximizing government benefits, deciding when to take CPP and OAS etc. etc.

All of these individual parts work together to create a great retirement plan. They are so important that even a small mistake can mean lower retirement spending or a higher chance of running out of money in the future. It could mean $10,000’s in extra tax or $10,000’s in reduced government benefits.

With a typical retirement plan spanning 30-40+ years it’s easy to understand how small change in assumptions can have a big effect on a retirement plan.

There are also many small decisions to consider when planning retirement, like when to convert RRSPs to RRIFs, when to start CPP, when to start OAS, how much to draw from investment assets, which investment assets to draw from first etc. etc.

In this post, we look at some of the important parts of retirement planning. What they are, what you should consider, and some additional resources to help.

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