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Odette Morin

Highlights to the 2017 Liberal Government 2nd federal budget

Finance Minister Bill Morneau delivered the Liberal Government’s 2nd annual budget today called the “Innovation Budget”. Here are the key budget highlights:
 
  • The biggest and most welcome news for investors is that no changes were made to the capital gains tax, stock options or dividends inclusion. There were fears that the Liberal government was going to increase the taxation of capital investment gains but they decided to hold off on any tax hikes for now.
  • No major new taxes.
  • 2% tax increase on alcohol and tobacco.
  • Public transit tax credit is cancelled. Instead, the government will invest $20 billion over 11 years – to improve transit systems and encourage usage across Canada.
  • Cancellation of Canada Savings Bonds.
 New programs introduced
 
  • The budget follows through on promises to let parents take their Employment Insurance parental leave benefits over 18 months rather than 12, giving them the choice of taking the existing 55 per cent benefit rate over a year or 33 per cent over a year and a half. They also propose letting women start their maternity leave 12 weeks before their due dates rather than eight weeks prior.
  • On assistance for families, the government will be pledging $7 billion for affordable child care over 10 years to create up to 40,000 more spaces.
  • The government also plans to devote $6 billion over 10 years for home care and $5 billion over 10 years for mental health initiatives through individual deals with the provinces and territories.
  • $691.3 milions will be spent over five years to expand the caregiver benefit for Canadians supporting critically ill and injured family members.
  • Military spending will also be bumped at a cost of $8.5 billion in capital spending for nearly two decades down the road.
  • $395.5 millions over three years to expand the youth employment strategy.
  • $279.8 million over five years for the Temporary Foreign Workers Program.
  • $57.8 million for mental health for federal inmates.
  • $50 million over two years for teaching initiatives to help children learn to code.
  • $27.5 million for programs to help newcomers get foreign credentials.
  • The government is committing money for skills, innovation and jobs, with $594 million set aside for this year, rising to $1.4 billion by 2021-22.
  • The most expensive item of this budget is spending on infrastructure and social programs, including $20.1 billion promised over 11 years for public transit.
  • $3.6 million over three years to create an LGBTQ secretariat at the Privy Council Office to advance human rights
  • $523.9 million over five years to prevent tax evasion and improve compliance. The budget forecasts the government will make an additional $2.5 billion over five years from those measures to catch fraud and tax evaders.
The federal deficit is projected to be $28.5 billion for the 2017-18 year, compared to $23 billion this year – both higher than projected in the fall. The budget offers no timeframe of when the government will balance the books. The budget predicts the economy will grow slightly this year, keeping the ratio of federal debt to GDP fairly flat, at 31.6 per cent in this year compared to 31.5 per cent last year.
 
Sources: CTV News, BNN, CBC & Globe & Mail.
Odette Morin

Fear Not, You Too Can Live The Dream

Most of us dream one day of having a leisure life and kissing goodbye to the grueling 5 days a week work schedule.  How nice will it feel to be able to sleep in, go for long walks, travel and live the good life.  This dream however is very costly.  You need a lot of money to fund retirement for 30-40 years. A 2016 study by RBC, shows that 56% of non-retired Canadians were worried that they would not be able to enjoy the lifestyle to which they were currently accustomed.

What’s the solution?  Face reality, get the facts on your situation and fear not.

A new Leger poll for Mackenzie Investments finds that 42% of Canadians currently have a financial advisor, while 57% do not. Older Canadians are significantly more likely to have an advisor, Leger says, which may account for their more positive sentiment towards RRSP season than those who are younger. Leger also found most Canadians (68%) say their mood for the approaching RRSP deadline is “indifferent.”
About a quarter of Canadians (26%) say they feel “confident” or “excited” heading into RRSP season. For Canadian respondents who use a financial advisor, that figure jumps to 40%. Leger surveyed 1,522 Canadians online between January 2 to 5, 2017.

So, get help to gain clarity on the future and save as much as you can to ensure a comfortable, stress free retirement!

Odette Morin

OAS restored to age 65

Trudeau oas

 

Justin Trudeau announced yesterday that next week’s federal budget will restore eligibility for Old Age Security to age 65 from age 67.

“We are keeping the old retirement age at 65,” Mr. Trudeau told the room of journalists and businesspeople. “How we care for our most vulnerable in society is really important.”

He said his predecessor, Stephen Harper, was wrong to move the Old Age Security eligibility to 67 from 65. Mr. Harper raised the age in the 2012 budget, making it effective for 2023.

“We think that was a mistake,” Mr. Trudeau said.

We are delighted by this news for all our younger clients born after 1958. The benefit is currently $570 per month indexed quarterly.

We will have a summary of the 2016 budget highlights on Tuesday. Stay tuned!

 

Odette Morin

Announcement: Anthony obtains his CFP designation

Please join us in congratulating Anthony on completing the Certified Financial Planner certification.

After 3 long years of courses, while working full time, and 9 exams, Anthony has passed the final Certified Financial Planner exam. He just received his diploma this week. Congratulations Anthony! We are very proud of you.

You First is a team. So go ahead and contact Anthony directly for your planning and investments at email hidden; JavaScript is required. Anthony is smart, creative and very thorough. He will be a great help in ensuring that your financial goals are met, that your money grows and that you get all the tax write offs you are entitled to.

Anthony

Odette Morin

When to avoid RRSP

For most people, RRSPs are pretty hard to beat however they are a few instances that quickly come to mind when RRSPs are not the way to go.

 

  1. When you need the money in the short term, you should avoid contributing to an RRSP.  Not only you will owe the tax refund back, but you will also lose your deduction limit. Some tax advisers would recommend a short-term RRSP when your tax rate is high and will drop in the following year to benefit from the tax difference but again, I do not advocate this because eroding your contribution room is quite costly. The tax free compounding is very valuable over the long-term.
  2. When your income is going to be higher at retirement.  This is very rare but if you anticipate your income to be higher at retirement than it is today, you should avoid making an RRSP contribution. Avoid a situation where you obviously have to pay more tax later than the tax saving today.
  3. When you are close to the GIS qualification. If your savings are modest and you anticipate having very low income at retirement, it would be best to avoid RRSPs which could jeopardize qualifying for the Guaranteed Income Supplement.
  4. When you expect a very large RRSP at 71. If you calculate that your RRSP will be so big at age 71 that the minimum annual payment might clawback your Old Age Security (OAS) benefit it would be best to stop contributing to your RRSP.

If you meet one of these situations, you may be best to contribute to a TFSA or make a non-registered investment.

Careful calculations and projections must be made to plan properly.  Make sure to discuss these few points with us at your next annual review meeting.

 

RRSP or not

Odette Morin