We don’t know if it is true or not but we have heard that sometimes people do not always open all the investment statements that they receive in the mail.  Naw, that can’t be true!  We respectfully remind you that at this time of year it is more important than ever to check your mail to make sure you do not discard any valuable documents. Mutual Fund companies are now mailing out RRSP receipts that you will need when completing your 2009 income tax returns in the spring of 2010.  For RRSP investments made in 2009 you will receive receipts up to December 31, 2009. For RRSP investments made in 2010 you will receive “First 60 Days of 2010” receipts which must be entered on your 2009 tax returns even if you are not planning to deduct the entire amount for 2009 and are planning to carry some over to 2010 tax year.

Also mutual fund companies, banks and other financial institutions will soon be issuing T3 and T5 receipts reporting your 2009 investment income of interest, dividends and capital gains.  Alas, should you not receive an expected statement or should you misplace a receipt for an investment or RRSP arranged through us please just contact us and we will obtain a duplicate for you. Spring is coming and that means another wonderful and exciting tax season will soon be upon us. Make sure you have all your documents in order so you don’t miss any of the fun!

RRSP loan rates are the most inexpensive I have seen in years.  Our best rate is 2.75% for a one year loan.  Even 3, 5 and 10 years loans are low.  Does it make sense to borrow to make an RRSP?  Well it depends on your personal circumstances.

Generally speaking if the rate of return exceeds the loan rate it is a good idea.  With markets in recovery mode, it could not be a better time to invest also, for the long-term.  You also have to consider your cash flow however.  Make sure the payments are affordable and that your income is secure.

If you have a debt that you are trying to repay at a higher interest charge, you could use any refund to reduce it or pay it off!  You would have effectively used Canada Revenues’ money to reduce your debt!! I like that!!

Otherwise you could use the resulting refund to reduce the RRSP loan or apply it to your mortgage or use it for an extra RRSP counting for next year! 

Just contact us to assess your personal situation! 

Find out how much of your charity dollars goes to administration click to read

Canadians largely unaware of market rally click to read

Reading “The BRIC countries are Rich, But Poor” click to read

Reading “Jeff Rubin: Riding Hard and Fast on Energy” click to read

Are you a moving target?: How to avoid falling for an unscrupulous mover. http://bit.ly/5P5jxh

Bank of Canada keeps rate at 0.25%: Mark Carney stays true to promise and keeps interest rates low. click to read
Enjoy your week!

We’ve reached the 1st anniversary of the Tax-Free Savings Account and this means another $5,000 in eligible contributions (bringing the total to $10,000).  We’ve talked about TFSA strategies before, but there are so many key money-saving tips associated with this account, that they are definately worth mentioning again.

Below are two articles you must read on how and when to best utilize the TFSA.  They discuss ideas such as:

-TFSA vs. RRSP - Which should we use? When to use both? At what age, income level, and tax rate is one better than the other?

-Placing the refund of an RRSP contribution into a TFSA

-Which highly taxable assets should be placed in a TFSA?

-Using the TFSA as a homebuyer’s or emergency fund

-Income earned or withdrawals from a TFSA do not affect eligibility for income-tested government benefits and credits (important for retirement planning).

-Using the TFSA to supplement RESP savings.

Both articles explain these strategies in simple terms.  If you have any questions or would like to open a TFSA (if you haven’t already done so), please let us know.

Article 1: RRSP strategies from Advisor.ca

Article 2: RRSP strategies from Morningstar.ca

Ok, so what’s this Federal Government Home Renovation Tax Credit all about anyway?

Let’s begin by reviewing what is NOT eligible!  New appliances such as big screen TV’s, refrigerators, furniture, throw rugs, appliances, electronics, stereos and tools such as electric saws, drills et cetera are NOT eligible.  Also, routine maintenance repairs such as small paint jobs, cleaning the gutters, power washings are not covered.

Well what is eligible?

Essentially, repairs of a major or permanent nature would be eligible. These would include major structural renovations, new carpeting, major interior or exterior painting, new deck, new floors, new windows, new doors, major landscaping, new furnace, new roof, new plumbing or bathroom fixtures, et cetera would be eligible items.  Also, the expenditures have to be for your personal property. So your home, cottage or Canadian vacation property would qualify. Renovations for a rental or investment condominium or renovations to a basement apartment that you are renting out are not eligible for the credit. Renovations have to be done between January 27, 2009 and January 31, 2010. Remember that there is just one allowable claim per family.

How much is the credit worth?

The credit is 15% of renovation expenses between $1,000 and $10,000. If you spend $1,000 then you get zero. Between $1,000 to $10,000 you get 15% or $1,350.  So if your total cost was $15,000 you would get the maximum credit of $1,350. If your total cost was $7,000 you would get a credit of $900.

How exactly do I get the credit? Does the Canadian government send me a cheque?

You will claim the credit when you file your 2009 income tax in the spring of 2010.  Let’s say you spent $7,000 and therefore your credit is $900. On your 2009 tax return the income tax that you would otherwise owe will reduce by $900. So essentially, if you are due a refund then your refund will increase by $900. If you owe taxes then your tax bill will reduce by $900. If you have a modest income for 2009 (under $10,000) you would not enjoy the credit because you would not owe any tax anyway. You do not have to send receipts in with your tax return but you must be able to provide them should Canada Revenue request them as part of their routine review request.

How can I get more information?

Canada Revenue has an explanatory website feature at this address below.

http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhmrnvtn-eng.html#q6

A new Investors Group survey of 500 Canadian boomers—aged 43 to 63—finds a large proportion are either supporting their children, their parents or even both!  More than 40% of those respondents said that they expect the support will erode their ability to save for retirement.

Two-in-ten boomer parents have a child aged 19 or over living at home. More than half of these (58%) say their adult child makes no financial contribution to the household.

The boomers in the most difficult financial situation are those providing financial support to both parents and children simultaneously. One in 10 boomers are currently in this group.

The individual surveyed were asked the question what kind of impact supporting both their parents and children was having. Four out of 10 say they are reducing the amount they expect to save in retirement, and one quarter of respondents say they have adopted a less comfortable lifestyle or had to actually take on more debt.

Helping boomer clients efficiently support family members is an area we can add value. We can crunch the number, evaluate the impact and help you make appropriate planning decision.  The worst would be to delay the planning.  It is best to incorporate the situation into the plan.

As the new year begins, we wish everyone a Happy New Year and provide some GDP growth forecasts for 2010.

From a Globe Advisor article titled “Commodities Rally to Drive Provincial Rally”

Summary:
-Scotia Economist Alex Coustas makes positive growth predictions for all Canadian provinces:

-British Columbia will see GDP growth of 3.0%, driven by Asian commodity demand and port activity as well. The province should also see some benefit from the Winter Olympics.

-Alberta and Saskatchewan will see GDP growth of 2.9% and 2.8% due to strong demand for oil and potash extraction.

-Ontario and its auto sector was one of the hardest hit provinces during the recession.  However, the governement stepped in and kept automakers afloat.  Ontario will see GDP growth of 2.7%.

-Manitoba and Quebec both held up well during the recession and should see GDP growth of 2.6% and 2.2%.

-The Maritime Provinces also weathered the recession fairly well and will therefore have a less pronounced bounce back.  They will see GDP growth of around 2%.  At 2.9%, Newfoundland will have the strongest GDP growth thanks to its strong exposure to energy and mining industries.

Notes:

-Another optimistic article for Canadian markets.  As long as there is strong demand for commodities in emerging markets, Canada will continue to benefit.

-Rohit Sehgal, fund manager for Dynamic Power Canadian Growth, one of the best performing Canadian Equity funds of the past 10 years, predicts that the rebound in energy demand in developing nations could push the TSX composite index to 13,000 next year (The index is at 11,700 as of Dec 31st, 2009)

From a December Fortune Magazine article titled “Redefining Emerging Markets”:

Summary:
-Countries such as Brazil, India, and Korea are being labeled “advanced emerging markets” because of high national income levels or developed market infrastructures.
-These advanced emerging markets are unlikely to experience the downfall of the Dubai World debt situation. 
-There are still some skeptics of emerging markets who point to catastrophic episodes from the 80s and 90s, such as Brazil’s inflation crisis.  However these countries have learned from these episodes, and implemented structural changes to reduce risk and maintain growth. 
-Around 15% of the MSCI All Countries World Index comes from emerging markets
-Brazil and India stock market fell harder than the US markets in 2008, but rebounded higher.  Their GDP is expected to grow 3% compared to 1.5% for the US
-Economic indicators still show a strong correlation between emerging and developed markets, especially China, the main trading partner of Latin American and East Asian countries.

Comments:
-The last 5 years have been very strong for emerging markets.  According to the MSCI emerging markets index, as of November 30th the 5yr return has been 13.3%.
-Long-Term (10 years) forecasts predict that they will continue to outperform against developed economies like the US and Europe.
-All well-diversified equity portfolios should have some emerging market content.  A typical You First long-term growth portfolio will have around a 10% weighting in emerging markets. 

I’ve added a video link below to an October 18th, 2009 interview with Patricia Perez-Couttes, who discusses the opportunities in emerging markets.  She manages AGF Emerging Markets, one of the top-performing emerging markets funds and one that’s been voted top emerging market fund in Canada for three consecutive years at the Canadian Investment Awards.

Click here to view the video.