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Odette Morin

Odette Morin

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The Death of Money

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A client of mine told me that she recently read the book called “The Death of Money”.  She asked my opinion on it.  She stated that she found the book “frightening”.  This book is a classic example of Doom and Gloom propaganda.  The book describes in detail what central banks do and how they affect currencies and global economies.  I have not read it, but I think it concludes that the central bank’s policies of excessive money supply could lead to outcomes like hyperinflation or devaluation of currencies (thus, “the death of money”).

I am generally weary of any extreme predictions or economic forecast. Doom and gloom and apocalyptic economic predictions have always been around.  I’ve heard it all over the years, the fall of currencies, countries, capitalism, disruptive technologies.  It’s normal investor behaviour to worry about investments and there are a lot of sources that try to pray on those fears, even profit from them.  Just like there are also “euphoric” and “sky is the limit” type economic predictions.

I always remind myself that stock markets have been around for 100+ years.  In the past century we’ve gone through events like the great depression, world wars, civil wars, cold wars, oil crises, financial crashes, rise and fall of emerging market nations, fiscal cliffs, the shift from British Pound to U.S dollar as the world currency reserve, etc…  In spite of all these events, markets are still around.  The financial crash of a 2008-09 was the most significant bear market event since the great depression of the late 20’s.  Six years later, the S&P 500 has not only recovered but is currently trading at record highs.

I also remind myself of the companies that make up the various markets.  Companies like Royal Bank, Telus, Coca Cola, Apple, Canadian National Railway, Fortis, Shopper’s, Amazon, Tim Horton’s, Suncor and so on.  Do we stop talking on cell phones, buying soft drinks and groceries, pumping gas, using bank accounts, drinking coffee, buying goods online, paying heating bills, and requiring medication because of central bank activity? The economic backdrop is important, but it is the ability of a company to make money that drives its stock price.  A bad economy will have a impact, but I do not think we should worry about all major companies disappearing overnight.

I hope this makes sense to you and give you a more rational look at things.

The New RRIF withdrawal rules

Federal Finance Minister Joe Oliver tabled the 2015 federal budget on April 21, 2015. This commentary summarizes the changes in the new budget that affect retirement income and savings. Budget changes that do not relate to retirement income and savings have been covered extensively by many accounting and tax advisory firms and will not be covered in this commentary.

Main Change – Minimum Withdrawal Factors for Registered Retirement Income Funds (RRIFs)

The main retirement-related change introduced in Budget 2015 is to adjust the RRIF minimum withdrawal factors that apply in respect of ages 71 to 94, as follows:

Age (at start of year) Existing Factor New Factor
% %
71 7.38 5.28
72 7.48 5.40
73 7.59 5.53
74 7.71 5.67
75 7.85 5.82
76 7.99 5.98
77 8.15 6.17
78 8.33 6.36
79 8.53 6.58
80 8.75 6.82
81 8.99 7.08
82 9.27 7.38
83 9.58 7.71
84 9.93 8.08
85 10.33 8.51
86 10.79 8.99
87 11.33 9.55
88 11.96 10.21
89 12.71 10.99
90 13.62 11.92
91 14.73 13.06
92 16.12 14.49
93 17.92 16.34
94 20.00 18.79
95 & over 20.00 20.00

 

The existing factors were determined on the basis of providing a regular stream of payments from age 71 to 100 assuming a 7% per annum nominal rate of return and indexing at 1% annually with factors capped at 20% for ages 94 and over. The new factors were determined assuming a 5% per annum nominal rate of return and indexing at 2% annually with factors capped at 20% for ages 95 and over.

Minimum withdrawal factors for ages 70 and under remain unchanged and continue to be determined by the formula 1 / (90 – age). Note that at the time of establishing the RRIF, individuals also have the option to base the minimum withdrawal amounts on the age of their spouse or common-law partner.

Similar rules will apply to those receiving annual payments from a defined contribution registered pension plan (RPP) or a Pooled Registered Pension Plan (PRPP).  These new factors will also apply to minimum payments from an Individual Pension Plan (IPP) after age 71 for members who are controlling shareholders or related persons.

The new RRIF rules have not been formally.  Stay tuned.  We will update you.

New $10,000 TFSA limit approved

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BREAKING NEWS
The CRA has come out and confirmed that the TFSA increase to $10,000/year is effective immediately (before budget gets passed into Law).  You can top up your limit now.
The total maximum contribution from all previous years to date is $41,000.  If you have maximized every year, and have already made your $5500 contribution this year, you can now add $4500.
Contact us if any questions or wish to make your top up TFSA contribution now. email hidden; JavaScript is required

2015 Federal Budget Highlights

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The Federal Government delivered its “New Balance” budget today offering lots of goodies for everyone. Here are the most important announcements affecting your financial planning:

  • No new tax cuts.
  • TFSA limit is being increased from $5500 to $10,000 per year effective immediately. This happens as soon as the budget is passed and approved. We will let you know as soon as we hear.
  • The RRIF (Registered Retirement Income Fund) MAP (Minimum Annual Payment) is being lowered. Under the current rules, a 71-year-old would have to withdraw 7.38 per cent of his or her RRIF in the first year, escalating all the way to 20 per cent by age 94. Under the new rules outlined in the budget, those limits have been ratcheted down to 5.28 per cent to start, and down to 18.79 per cent by 94. This truly is excellent news for retirees.
  • EI premiums to be reduced by 21% in 2017
  • EI compassion benefit (to take care of a sick family member) increased from 6 weeks to 6 months.
  • Small business tax reduced from 11% to 9% by 2019.
  • New government initiative to help Women owned businesses.
  • More financial help for Young entrepreneurs.
  • New retirement income benefit for veterans.
  • New home accessibility for seniors and people with disabilities. Starting this tax year, homeowners who spend up to $10,000 on renovations such as wheelchair ramps, walk-in bathtubs, non-slip flooring and grab bars can get a tax deduction for up to $1,500.
  • There is something for students too. Canada Student Grants eligibility will drop from 64 to 34 weeks.
  • The government is also changing the student loan program. Under current rules, any dollar over $100 a week that a student earns from a part-time job while studying reduces the loan amount they’re eligible for. The budget proposes eliminating that “penalty” from now on, which the government says would help 87,000 students a year.
  • 4 Billion surplus this year
  • Total overall debt $617Billion

More in tomorrow’s newspaper. Make sure to check our blog often. We will be commenting on these new government initiatives in the weeks ahead.

Sources: CBC news, CTV News, National Post, Globe & Mail

Vancouver is not the most expensive city for First-Time Home Buyers

Surprise! Surprise! Vancouver is not the most expensive city for first-time home buyers.

“Despite being Canada’s most expensive real estate market in general, Vancouver was second to another major city in terms of how much first-time home buyers spend on a property, according to a recent survey by Genworth Canada.

First-time buyers in the city spent a median of $420,000 on their first home – sneaking in at $5,000 less than the $425,000 median price spent in Toronto.

See results of the study here

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