Mary is 46 and single. Her son is 13. They live in a rental apartment in British Columbia.Tijana Martin/The Globe and Mail
Content from The Globe’s weekly Retirement newsletter. Sign up here
Mary is 46 and single again. Her son is 13. They live in a rental apartment in British Columbia.
Mary is self-employed and planning to take on more work now that her son has reached his teens. Her goal is to save enough for the day when she leaves the work force. As an accountant, her skills are in demand.
Mary grosses about $90,000 a year in business income, against which she has $25,000 in expenses. She also gets child support of $800 a month and the Canada child benefit of $506 a month.
Short term, she hopes to increase her income, save a lot and invest the money. Longer term she plans to send her son to college – she has started a registered education savings plan (RESP) – plus save as much as possible and invest. Her retirement spending goal is $60,000 a year after taxes, more than she is spending now, excluding savings.
“Can I ever retire as a renter?” Mary asked in an e-mail. “I would like to partly retire at age 60 but I don’t know if this is at all feasible,” she wrote. Her job is stressful. “But I do enjoy the work, so I could still do some work after age 60,” she added. “How much money will I have by then?”
In this Financial Facelift, Justine Kelly, a personal financial planner at Modern Cents, an advice-only financial planning firm, looks at Mary’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Trudeau announces renter-focused measures ahead of 2024 budget
Prime Minister Justin Trudeau announced a handful of measures aimed at helping renters that will be part of next month’s 2024 budget, including a $15-million tenant protection fund and a Canadian renters’ bill of rights.
Mr. Trudeau and Finance Minister Chrystia Freeland made the announcement Wednesday in Vancouver.
The dollar amounts involved are relatively small, but government officials say this will be the first of several announcements over the coming weeks that will unveil specific elements of the April 16 budget.
“We’re bringing forward a number of measures today to focus on renters, but over the next weeks, we’re going to be talking about all the different things we’re doing to bring in fairness for young people and for all Canadians,” Mr. Trudeau said.
Wednesday’s announcement says the $15-million tenant protection fund would provide money for provincial legal aid organizations “to better protect tenants against unfairly rising rent payments, renovictions or bad landlords.”
Read the full article here.
Four housing credits and rebates to put money back in homeowners’ pockets
If your client is purchasing a new home or embarking on a renovation, there’s an opportunity to advise them on the tax credits and rebates they can claim, writes Globe Advisor reporter Deanne Gage in this article.
“Clients might not be aware of all the tax credits available to their specific situation,” says Julia Chung, president and certified financial planner at Spring Planning Inc. in Vancouver. “Many times, clients will also not tell you about some of their plans because they didn’t even realize it would be relevant to their tax situation.”
That lack of client communication, or proactivity from their advisor, could translate into leaving money on the table. Below are four tax credits or rebates to help homeowners keep more money in their pockets.
Get the expert breakdown on the home accessibility tax credit; the multigenerational home renovation tax credit; the home buyers’ amount and the HST new housing rebate here.
For more from Globe Advisor, visit our home page.
In case you missed it
Seven tax tips for snowbirds
The deadline for filing taxes in Canada for 2024 is April 30. As the big day approaches, Globe Advisor and Globe Investor have teamed-up to offer advice on how to maximize returns, find credits and avoid an audit. The full series can be found here.
It’s a dreamy idea to be a snowbird: skipping out on winter and spending the colder half of the year in sunny destinations in the southern United States or Mexico, writes staff reporter Salmaan Farooqui in this personal finance article.
But seniors who opt for this lifestyle could find themselves buried under loads of unexpected tax paperwork if they don’t make the necessary preparations, says Stefanie Ricchio, a tax expert and spokesperson for TurboTax Canada.
That’s because splitting your time and possibly your assets between two countries can make for a complicated financial situation in which you have to file taxes to both governments.
Statistics Canada estimated in 2019 that between 300,000 and 375,000 Canadians live the snowbird lifestyle in the U.S. and Mexico alone.
This arrangement comes with its own tax implications, so we spoke to Ms. Ricchio and Yannick Lemay, a tax specialist with H&R Block, to compile some tips if you plan to spend more time down south here.
There are good ways to make life more affordable for Canadians. Cutting the carbon tax isn’t one of them
“Whenever I hear politicians propose to cut the carbon price, I can’t help but think back to my childhood growing up with divorced parents,” writes columnist Paul Kershaw, in this personal finance article.
“On the rare occasions my dad took me for weekends, he would offer me candy and let me stay up late.
“‘Why can’t you be more like him?’” I’d yell after returning home as my mom made me do my homework, eat vegetables and go to bed on time.”
So it is with proponents of Axe the Tax. They offer us candy, when the federal government, like Kershaw’s mom, expects us to live responsibly.
Our kids, he adds, are counting on us to be good ancestors, since their health, safety, air, water and food is put at grave risk when we pollute too much. That’s why Kershaw begged all politicians to stand by the historic decision to put a price on carbon and move forward with the scheduled increase on April 1. There are better ways to improve affordability, such as policies to reduce housing, child care and other major costs of living.
“Don’t get me wrong, I know the candy is appealing,” says Kershaw. Those opposed to the federal carbon price promise to save us money. Generally they won’t, he notes, because research conducted at the University of Calgary shows the carbon price contributes less than 1 per cent to our major costs of living, such as rent and food.
Read the full article here.
Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on Twitter, Facebook and subscribe to Paul’s Hard Truths podcast.
Retirement Q & A
As part of the ongoing series, Planning for the CPP, we invite readers to ask questions about their Canada Pension Plan (CPP) retirement benefits and find experts to answer them.
Q: I was on the fence about delaying my CPP. I ended up taking my OAS benefits at 65 and delayed my CPP until January 2023, a month after I turned 66. Being born in December meant my income in 2022, when I was 65, was minimal, with no RRSP withdrawals and minimal stock sales, so I had low capital gains. I received the GIS in May 2023 automatically following the completion of my 2022 tax return. To my surprise, I was also eligible for other low-income benefits. Had I known, I may have delayed my CPP benefits for another year.
We asked David Field, a certified financial planner (CFP) who runs Papyrus Planning in Mississauga, to review this reader’s situation with CPP, Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) benefits.
It’s always a pleasant surprise to qualify for additional income. Although the OAS is taxable income, it’s not used in the income calculation for the GIS. As the GIS is a benefit under the OAS program, when you started your OAS, your income from 2022 must have fallen below $21,456 ($28,320 for a household) to receive the GIS in 2023.
When trying to maximize your GIS income, there are usually two strategies: start your CPP at 60 and withdraw from any RRSPs or Life Income Fund (LIF) before 65, or delay your CPP until 70 and any RRSP or LIF withdrawals until 70 or 71.
The first strategy is usually for people who have earned a lower income most of their lives or haven’t been able to save much for retirement. That will allow them to maximize their GIS and OAS income. Usually, any savings in an RRSP will be minimal. Any money withdrawn could then be saved in a tax-free savings account (TFSA), as withdrawals from TFSAs will not reduce GIS income.
The second strategy is best for those with low expenses or sizable non-registered savings. It allows qualification for the GIS for a few years, but once the CPP starts, and then registered retirement income fund (RRIF) or LIF withdrawals are required at 72, the GIS usually goes away. It sounds like you’re following this strategy.
Whether this second strategy is best for you depends on how much you have saved in RRSPs or locked-in retirement accounts (LIRAs), the size of your CPP retirement benefit, your goals (how you want to spend your money), and the province or territory you live in.
For those with large savings in their RRSP or LIRAs, it may be more advantageous to withdraw from those savings – even if the income is not needed – as it provides more time to withdraw fully taxable income at lower tax rates. That’s especially true if you have a pension or RRIF income to split with a spouse. Also, spending money when you’re younger is usually more enjoyable than when you are older. If you don’t need the money, saving it in a TFSA works well to ensure tax-free growth.
Melting down RRSPs or LIRAs often works better in provinces and territories with many marginal tax rates. For provinces with just a few marginal tax rates, this strategy may not make tax sense, as it might be better to let your investments grow longer in the shelter of the RRSP or LIRA. However, it may make sense when compared to your retirement goals.
If you already maximize your TFSA contribution room without additional RRSP or LIRA withdrawals, withdrawing early may also not make sense as you will lose out on tax-sheltered growth.
When qualifying for the GIS, it’s important to remember that there’s a delay because the Canada Revenue Agency requires you to file your taxes to identify your income. Service Canada will then use this information in July to adjust your GIS and OAS payments. So, when you file your taxes in 2024 for your 2023 taxes, you may see an adjustment up or down in your GIS payments in July of this year.
Have a question about money or lifestyle topics for seniors? E-mail us at sixtyfive@globeandmail.com and we will find experts and answer your questions in future newsletters. Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Sign up for our weekly Retirement Newsletter.
