Two (Less Obvious) Financial Benefits Of Owning A Home

Two (Less Obvious) Financial Benefits Of Owning A Home

There are a number of personal and financial benefits when owning a home. There is the stability, the forced savings of mortgage payments, the potential for appreciation etc. etc. But there are two somewhat less obvious benefits of owning a home.

These benefits will help homeowners financially, both before retirement in the accumulation phase and also after retirement in the decumulation phase. These benefits will make it easier for homeowners to achieve their financial goals, decrease taxes, and minimize government benefit clawbacks.

In this post we’re going to explore two, perhaps hidden, benefits of owning a home.

8 Ways The TFSA Could Change In The Future

8 Ways The TFSA Could Change In The Future

When you’re thinking about your financial future it’s important to consider risk. There are your typical risks, like the risk of losing money with investments, the risk of passing away unexpectedly, or the risk of not being able to work for an extended period of time. These are all common risks we need to plan for.

But there are also other risks too, ones that many of us might not include in our plans. These risks are less common, more speculative, but can be just as damaging. Risks like changes to government benefits, increasing tax rates, or changes to tax-advantaged accounts like the RRSP and the TFSA.

Based on age alone, the TFSA is relatively young, it’s barely entering the double digits. Although it was only introduced in 2009 it has already experienced a few dramatic changes during that time.

Anticipating changes to tax-advantaged accounts is an important part of any financial plan. A good plan should have enough room to absorb a few of these unexpected changes without causing major stress.

To ensure your plan is robust you need to anticipate these changes and understand how they might impact your plans.

In this post we’re going to speculate on a few ways that the TFSA could change in the future. This is pure speculation but it’s a good exercise to understand what changes might be possible in the future and how your plan can absorb them if they were to actually happen.

How To Estimate Retirement Spending

How To Estimate Retirement Spending

Retirement spending is one of the most important assumptions in a retirement plan. Making the right retirement spending assumption can make the rest of a retirement plan much easier. Making the right assumption can also make a retirement plan much more successful.

Making the wrong retirement spending assumption however could mean running out of money in retirement, or it could mean working longer than necessary, or it could mean accumulating millions of dollars late in retirement. All things we would prefer to avoid.

Of course, there are some simple “rules” for retirement spending like assuming 70% of pre-retirement income, but given how important retirement spending is in a retirement plan these generic rules can lead to issues in the future.

When creating a retirement plan it’s important to make the right retirement spending assumption. This means avoiding generic rules and instead understanding your unique spending needs today and how they might change in retirement. This also means understanding the impact of being wrong with your retirement spending assumption and how doing a “trial run” of retirement spending can help improve the level of confidence you have in your retirement plan.

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

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.

The Financial Benefits Of Marriage

The Financial Benefits Of Marriage

Getting married is a big step in a relationship. It often means changes to personal finances. Some of these changes can be quite positive. These changes can actually make it much, much easier to achieve financial goals.

In this post we’ll explore the financial benefits of marriage (or entering a common-law relationship).

There are obviously a lot of considerations when combining finances, but there are certain financial advantages that couples have versus individuals. These advantages can make it easier to achieve financial goals. There are tax advantages, saving advantages, spending advantages, debt advantages, and risk reduction advantages.

If you’ve recently entered into a common-law relationship, or if you’ve recently gotten married, then you might be interested to know the financial benefits of marriage.

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