Blog

Odette Morin

Odette Morin

Recent Posts

Contact us early to make your RRSP contribution!

RRSP is upon us and soon you will get an email from Anthony or Frank asking you whether you plan to make an RRSP contribution this year.  You should make arrangements early even if you don’t want to make the contribution right away simply because we will have more time to figure out what is best for you.

Here is what we will ask you to optimize your planning and maximize your tax saving now and at retirement.

  1. How much of a contribution do you want to make?  Of course, you should at least make enough of a contribution to meet your annual saving goal as calculated at your last annual review meeting or ask us and we will figure this out with you.
  2. Do you have the RRSP deduction room? If we do your taxes, we will know what your 2016 RRSP deduction limit is.  If not, you can sign a CRA authorization form to allow us to view your tax information online.
  3. If you have a spouse, we will need to know your spouse’s income as well as yours. We need this information to assess and determine if it is best to direct the contribution to a regular RRSP or a Spousal RRSP.
  4. We will also look at both your retirement savings total and try to equalize the accounts to be able to split income at retirement and save taxes.
  5. We will also ask whether your 2017 income is likely to be much greater than 2016’s income.  If this is the case, you can still make the contribution now but may be best to carry it forward to 2017 tax return.
  6. We will also make sure that you make your RRSP Homebuyers plan repayment if you have a repayment to make.
  7. Finally, if you plan to use some of your RRSP to buy a home, we will put these funds in a “short term” RRSP saving fund to avoid any fees and market losses.

Contact us early to get the most of your RRSP planning! Contact email hidden; JavaScript is required or email hidden; JavaScript is required

 

How bright is the future really?

I walked by a bank the other day. In the window was a cheery poster of a boomer on the golf course. The headline asked if you were ready for retirement. A positive image, but so misleading.

The reality is that we’re living longer. That means your savings will have to carry you for 20, 30, even 40 years. For many, not having enough money to play golf will be the least of our concerns.

The outlook isn’t sunny, but it can be. Before I give you the good news though, we need to face facts. From a report, released last year by the Broadbent Institute:

  • Half of Canadian couples between the ages of 55 and 64 have no employer pension.
  • Of those, less than 20% of middle-income families have enough saved to adequately supplement government benefits and pension plans.
  • A large percentage of working Canadians are heading into retirement without adequate savings to keep them out of poverty.
  • Income trends suggest the percentage of Canadian seniors living in poverty will increase in the coming years, especially for single women who already face a higher than average rate.
  • The poverty rate for seniors will climb at the same time as a sharply rising number of Canadians hit retirement age in the next two decades; more than 20 per cent of the population will be older than 65 within 10 years.

What’s more, people over 40 years old are using credit to pay for exotic vacations, bigger homes and other non-essentials. Imagine being in your 40’s and working on your debt instead of your retirement saving?

The good news is that you have the power to change how your future unfolds and you don’t have to do it alone. See your financial advisor! Book regular planning meetings and take control over your future.

Did you know that 57% of Canadians don’t have a financial advisor? People take their cars to specialists, but they don’t think to bring their financial future to experts.  Mon Dieu!

Okay, okay, I’ll spare you my rant. But do let me leave you with this – if you don’t get expert help to spend efficiently, maximize your retirement savings and defer taxes – funding your golf hobby will be the least of your concerns. Retirement can be freeing or devastating. How you experience it, is up to you.

What to expect with Trump as the new US President?

New York, NY USA - July 16, 2016: Donald Trump speaks during introduction Governor Mike Pence as running for vice president at Hilton hotel Midtown Manhattan

After a long and bitter campaign, the Donald Trump Republican party has firmly taken control of Capitol Hill, winning the Presidency, the Senate and the House of Representatives. While portfolio managers were positioned for a Hillary Clinton victory, the markets have been positive to a clear, uncontested election result and a pro-business president.

The market rally that followed the election, was almost as shocking as Trump’s win.  The Dow futures were 700points down as the Trump majority was forming up.  However, U.S. stocks rose sharply at market opening the next day on speculation that Donald Trump and a Republican-controlled Congress will pursue business-friendly policies.  The markets will be watching closely to see how Trump starts putting policy specifics to his broad plans.

President-elect Trump’s policies will be very different from President Obama’s. The primary beneficiaries of the Trump victory will be defence, infrastructure, engineering/construction and more domestically focussed companies. We also expect Trump’s victory to be slightly positive for oil prices.

The markets will be closely watching now for signs that Trump adopts a statesmanlike tone and selects a credible cabinet. . Remember that while Trump is president, he does not have a free reign.  He is constitutionally constrained by congress consisting of the senate and the house of representatives.

We expect higher volatility than normal as we go through the end of the year and into the first quarter. That’s where remaining disciplined with your asset allocation is really important.

Don’t hesitate to contact us should you want to discuss this event as it relates to your portfolio.  Either myself, Terry, Anthony or Frank will be happy to speak with you.

Below are the before and after November 8 election markets numbers.

Nov 8             Nov 10        Percentage Change
TSX             14,656            14,744            +0.60%
Dow Jones  18,332             18,807            +2.59%
S&P 500       2139                2167             +1.31%
Gold            $1247               1258             -1.26%
CDN$          $0.7516USD    $74.22USD     -1.25%

 

 

 

 

Vancouver’s Housing-Bubble Risk Unmatched on the Planet, says Swiss Bank

There is currently a certain fatigue felt in Vancouver regarding our Real Estate market. We get bombarded daily now by shocking news of unethical shadow sales deals, risky shadow lending, money laundering, property bought and sold like commodities, empty properties that could ease the scarce rental market and foreign buyers avoiding capital gains taxes on real estate gains. Many younger Vancouverites have given up hoping to ever own a home, while others have become instant millionaires recently by selling their west-end condos as a group to developers.

While this is happening, you can see cranes and construction at every corner of the city. Building towers are going up, and single family homes are being torn down to be replaced by multi-family dwellings. It’s everywhere and it is scary to see prices continue to go up, despite the common wisdom that this does not make sense. One of my clients is an architect for one of the prominent Vancouver developers. I asked him recently what his firm was doing right now in view of the current market. He responded: “We continue to build as fast as we can go”.

The recent foreign buyer taxes introduced by our city and government to attempt to cool it off seem to be working somewhat. It is still too early to tell, but this Greater Vancouver Real Estate sales price graph shows that prices have come down in August. Numbers of sales are also down.

gvrd-real-estate-graph

To gain some perspective, I looked at the Toronto real estate crash in the late 80s. I found a lot of similarities to our current situation.

According to Toronto Real Estate Board data, between 1985 and 1989 the average price of a house in the Greater Toronto Area (GTA) increased by 113%. Low unemployment, large inflow of immigrants and investment speculation helped to inflate the bubble.

“In (the) late 80s everyone thought that the housing prices were going to rise indefinitely. More people jumped into the market hoping to make a fortune causing an artificial increase in demand. Suddenly housing became scarce, which further increased the price. Developers decided to profit on this illusive scarcity by building condos left and right – many of them in downtown Toronto. During the peak of the bubble the borrowing cost started increasing and the 5-year fixed mortgage reached 12.7%. Coupled with the early 90s recession, a spike in unemployment and a drop in the inflow of immigrants to the area, housing prices in the GTA collapsed. Between 1989 and 1996 the  average price of a house in GTA  declined by 40% adjusted for inflation. Downtown of Toronto was hit the worst with over 50% decline in value of a home. Unaccounted for inflation, it took 13 years for the average house price to recover in the GTA.” (*)

Looking at the graph above, similar drops happened in Vancouver in the 80s and 90s.

Real estate markets are tightly influenced by interest rates. While current interest rates are far from the double-digits of the early 90s, a rise of 2% or 3% can have a dramatic impact, as I described in my interest rate article. When interest rates start rising, our real estate market will cool off, hopefully gradually.

So what can you do to prevent financial hardship? It is impossible to know if, and when, the real estate market will crash. The market could tumble next year or it could simply cool off gradually. We just don’t know.

So, to avoid financial distress, make sure to buy real estate for the long-term. Think with a 10-year window to make sure you can ride the potential downturn. Make sure that you can afford your mortgage, even if rates go up to 5% or 6%. Finally, only buy if your job is secure or you have sufficient short-term savings to be able to meet mortgage payments for at least 6 months in the event of a job loss or sickness.

Talk to us before buying a property. We can help you confirm whether your cash flow can safely cover the mortgage, property taxes, insurance, lifestyle and savings for retirement and children’s education.

 

(*) Read the full story here about the Toronto Real Estate bubble in the late 80s.