Writer offers six tips on how to achieve financial independence

Financial independence, writes CTV’s Christopher Liew, “is when an individual has accumulated enough wealth or has a passive income stream capable of covering all of their living expenses for the rest of their natural life without needing a paycheque or salary.”

While the idea of never having to work for a living again sort of sounds like full retirement, Liew’s article suggests that this financial independence can be attained through “hard work, planning, and consistent action.”

First, he writes, you need to increase your savings rate.

“Your savings rate is the percentage of your total after-tax income that you save,” he explains. By doing a thorough audit of what you are actually spending your money on, you may be able to find areas where you can cut back, he continues. “By saving more money, you’ll be increasing your savings rate.”

Next, Liew recommends that we start investing early. “Investing your money is one of the most common ways to achieve financial independence,” he explains, adding that “the earlier you start, the better, due to the magic of compounding returns.”

Make sure, the article continues, that you are taking full advantage of your Tax Free Savings Account (TFSA). “TFSA accounts are best used as investment accounts, and none of the earnings within the account are taxable,” he notes. You should also “maximize the value” of your registered retirement savings plan (RRSP) and/or registered education savings plan (RESP).

Another tip is to look for other sources of income, to boost your overall earnings and free up more money for savings, the article notes. These “extra” streams of income can include dividends from investments, freelancing, rental income, starting a business, negotiating a raise, or finding a higher-paying job.

Another great bit of advice in Liew’s article is to “live below your means.”

“If you spend all the money you make, it will be difficult to achieve financial independence. Living below your means can be one way to spend less. For example, if you get a promotion at work and your salary increases, try to keep your spending at the same level instead of immediately increasing your living costs. The value of delayed gratification will mean reaching your financial independence goals earlier,” he writes.

Finally, you’ll have an easier time of achieving financial independence if you have a “like-minded spouse,” Liew writes. If both of you are on the same page, your drive towards financial independence will be doubled, he concludes.

These are all great tips. When we were working full time we did “live below your means” by simply paying the bills based on the prior year’s salary and earnings, and banking the difference. This indeed boosted our pre-retirement savings.

One of the nice features of the Saskatchewan Pension Plan is its flexibility on contributions. You decide how much you want to contribute (currently, up to $7,000 annually) and SPP contributions can be done through pre-authorized debits, can be paid like bills online, and can even be paid using credit cards (including, as we found out, pre-paid gift credit cards). Check out SPP today!

We’d like to extend our happy retirement wishes to Bonnie Meier, Director of Client Service, who steps down at the end of 2022. We all thank her for her many years of dedicated service to SPP, and wish her all the best in the life after work that awaits her!

Join the Wealthcare Revolution – follow SPP on Facebook!

Not everyone is comfortable talking about money with family members – spouses, kids, and so on.

In fact, Kelley Keehn, writing for FP Canada notes that she has always found it interesting that “people naturally retreat when the topic of finances comes up.”

“While it’s perhaps not the most engaging dinner table discussion or a conversation-starter on a date, money is an important subject to be comfortable talking about,” she writes. “No matter our age, salary, social or relationship status, money is an essential part of our lives,” Keehn continues.

She cites a recent national survey by FP Canada, The Discomfort Index, as finding that the topics that make Canadians squirm the most are politics (26 per cent), relationships/sex (24 per cent) and then money – tied with religion – in third place at 23 per cent. By comparison, notes Keehn, only 12 per cent of respondents found talking about their health to be a “taboo” subject.

Strangely, notes Keehn, at a time when women’s earnings now account for 47 per cent of family income, women are “more likely to avoid the topic of money than men,” by a margin of 27 per cent to 18 per cent.

While most Canadians confide in their partners about money, there’s a whopping 40 per cent who won’t, Keehn reports. Only three per cent would talk about money with strangers, two per cent with “hairstylists and estheticians,” and one per cent won’t talk about it to anyone, Keehn adds.

Save with SPP did an interview with Kelley Keehn last year.

So, what can be done to get people talking?

Writing for the Sun Life blog, Sylvie Tremblay suggests that one barrier to money talk might be our level of financial knowledge. “All too often, resistance to talking about money in a real, substantive way stems from a lack of confidence,” she writes. Consulting a financial advisor – a view shared by Keehn – is a great way to educate yourself about the topic.

Another money talk ice-breaker could be picking a financial goal you both are interested and excited about – a major vacation, putting together a down payment, or setting up a registered education savings plan (RESP) for the kids.

Other ideas from Tremblay include making an annual “money talk” appointment with your partner, setting rules about “who is handling what” when it comes to money and bills, and finally, to get started on talking right away.

An article from the Desjardins Financial Security network gives some great ideas about talking money with your adult kids.

The article points out, citing research results reported upon by the New York Times, that 83 per cent of respondents (folks making more than $100,000 per year) said they would NOT disclose their income to their adult kids. Only 17 per cent said they would, the article notes, with the main reason given for a “no” being the belief that the parents’ finances are “none of their (the kids’) business.”

However, the article says, that’s not really the case.  First off, your money may be theirs one day – and data suggests that one-third of inheritors “squander their inheritance shortly after receiving it.” Talking about money with them now, and discussing how to make it last, the article suggests, is helpful.

If you support charities, this is a nice idea to discuss with the kids – perhaps you can help grow their giving values too, the article adds. A money discussion plays a huge part in boosting the financial literacy of your children, the Desjardins article states.

“Parents with a certain degree of wealth have an opportunity to gradually expose their adult children to complex financial concepts such as investments, business ownership or overall financial planning,” the article adds.

Finally, the article suggests, it’s never a bad idea to involve a financial advisor in matters relating to inheritances or “in-life” transfers of wealth to kids, to game plan for any tax issues in advance.

The bottom line here seems to be quite simple – if you aren’t talking money with your spouse, it’s probably time to start. If everyone knows where the money is going and why, you avoid surprises, which people really only like on birthdays and other key holidays. If you are on the same page with spending, you can get on the same page with saving.

Thinking about saving for retirement, for couples and also for individuals, is a key financial consideration. If you have a retirement plan at work, be sure to join it and learn about what features it offers, particularly when it comes to benefits for your survivors. This is a good idea for both partners.

If you are saving on your own, take a look at the Saskatchewan Pension Plan, marking its 35^th year of operations in 2021. The SPP offers you a “do it yourself” pension plan that not only invests your savings, but provides the possibility of a lifetime pension with benefits for your surviving spouse. Check them out today.

Join the Wealthcare Revolution – follow SPP on Facebook!

Year end – time to make sure you’re taking full advantage of employer retirement programs

The end of the year is always a highlight – the festive season, the New Year, family and friends; it’s an endless list.

But, according to a report from the Toronto Star, there’s another little item that should be on your growing year-end list – retirement, and particularly, any program you’re in at work.

“Many medium-to-large-sized employers offer some form of savings program for their staff; some with a matching component, such as the employer matches 50 per cent of the contribution that the employee makes up to a certain maximum value, while other programs are simply to facilitate savings exclusively from the employee. The draw for employees is that the funds are typically deducted right off one’s paycheque, and of course, the free money if a match is offered,” the Star notes.

You could be leaving that free money on the table if you haven’t signed up, the article warns.

Be sure, the article advises, to find out which employer-sponsored program you’ve signed up for.

“Have you enrolled in a defined benefit or defined contribution pension? Do you contribute to an RRSP or TFSA? Are you funding an RESP for your children? Is your company offering non-registered plans? Which accounts offer a company match, as these should be your priority to fund,” the Star notes.

You may have options to choose from if you are in a company retirement program – often mutual funds, ETFs, or target-date funds (or a combination of each).

Know what you’re paying into, the Star suggests. “Grab a list of what your fund options are and compare historical rate of return, risk level, the composition of the fund and read up on the fund’s objectives. In most cases, your company will be covering a large portion of the fees associated with these investments,” the article notes.

Finally, the article notes, be sure that if there is a company matching option, that you are signed up for it. The Star recommends that you “find out how to get the maximum matching dollars. For example, sometimes they scale the match up (or down) depending on how much you contribute. Simply take advantage of all the free money that’s available to you. It’s the easiest ‘return’ on your investment you’ll ever make,” the article advises.

Those without retirement programs at work must do the job on their own, the article concludes. If you are in this situation, “it’s then up to you to save independently.”

An option for that self-managed saving is the Saskatchewan Pension Plan . With SPP, your contributions are invested professionally and at a low fee. As of the end of September, 2019, the SPP’s balanced fund is up more than 10 per cent. In addition to growing your savings, SPP is equipped to offer you a multitude of ways to turn savings into lifetime income via annuities – SPP’s Retirement Guide provides full details.

There’s still time to sign up and join SPP prior to the RRSP deadline in 2020, so check them out today and make them part of your year-end to-do list.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

A look at the best of the Internet, from an SPP point of view

The unempty nest: a new problem for retirement savers

We’ve heard all about the main obstacles to retirement saving – paying off debt, the lack of workplace pensions, and competing savings needs, like ponying up for a down payment.

A recent article in The Guardian from Charlottetown, PEI, points out another problem that can crop up, which we’ll call the unempty nest, or caring financially for kids age 30 and beyond.

The article notes the somewhat shocking statistic that “more than half of Atlantic Canadian parents are still supporting their adult children between the ages of 30 and 35,” and how that helping hand is “putting a damper on their retirement plans.” The article cites numbers from a recent survey by RBC.

A whopping 58 per cent of Atlantic Canadian parents are in this situation, the article reports; for the nation as a whole the figure is a lower but still noteworthy 48 per cent. The article states that while 88 per cent of parents “were happy to be able to help support their adult children,” more than a third of them – 36 per cent – “were worried about the impact on their retirement savings.”

How much support are we talking about? The article says that the average Canadian pays “$5,623 annually to support adult children age 18-35 and $3,729 annually for… adult children age 30-35.”

Sixty-nine per cent of parents are helping adult children with education costs, 65 per cent help with living expenses (rent, cable and mortgages) and 58 per cent help with cell phone costs, the article notes.

There is no question that younger people are facing higher education, housing, cable and phone costs than their parents ever did, so these statistics aren’t all that shocking. It’s clear that today’s wages don’t align with living costs like they did decades ago. So what can one do?

The cost of higher education for your children can be addressed by signing up for a RESP when they are very young. According to the Canada Education Savings Program’s 2017 Statistical Review, the average tuition cost in Canada was $6,373, and there may be additional costs for “administration fees, books, tools and accommodation and living expenses.”

The publication shows how various programs can help people save up to $21,000 per child if they start at the child’s birth. Many people are taking advantage of this program, the publication notes – there was $55.9 billion in RESP assets in 2017, compared to just $23.4 billion 10 years earlier, benefitting more than 622,000 students.

Save with SPP can attest to the benefit of a RESP; the great thing about it is that your successfully educated child graduates with less student debt thanks to the RESP saving.

So what’s the takeaway? Even if you can only put a little money away for the kid’s education and your own retirement, that action will be far more beneficial than doing nothing at all. Slow and steady wins the race, and as far as retirement savings are concerned, the Saskatchewan Pension Plan  lets you contribute as little or as much (up to $6,200 a year) as you want.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

1. Before you start reading this blog, I’m warning you that it does not contain typical financial advice. After all, at this time of year personal finance writers and bloggers wax lyrical about all of the important things you should do with your income tax return, like reduce debt; contribute to your RRSP, TFSA or your kids RESP; or pay down your mortgage. I know. I’ve already written that article.

1. According to Tim Cestnick at the Globe and Mail, CRA pegs the average Canadian tax refund is about $1,400. I agree with him that if you receive a $1,400 tax refund each year for 25 years and invest that refund at 8% (which may appear on the high side but is realistic over a 25-year time horizon), you’d have $102,348 at the end of that time.
2. But what if once, just once, you blow it all on one or more items on your personal wish list? Maybe the memories you buy with that windfall will ultimately turn out to be an excellent investment or satisfy a greater need than a few extra dollars in the bank when you retire.
3. So continuing on this heretical tangent, here are some ideas to think about.
4. Take a vacation:  Whether renting a cottage for a week with the family or jetting off to Disneyland, you will be buying the gift of time with your loved ones and a break from workplace stress.
5. Replace energy-inefficient appliance: Investing in a new washing machine can save you $415 dollars over the 11 year life of the appliance. Throw in a clothes dryer and energy savings will amount to another $160. And if you don’t have to go to the laundromat and pay a repairman every time one of these appliances conks out, you’ll save time and time is money.
6. Home repairs: You need a new roof. Or, you’ve been meaning to upgrade your kitchen and bathroom. Investing your tax return in your home will increase your enjoyment and it may enhance the value of the property.
7. Hire household help: Divorces are expensive. We have been married for 41 years and I intend to stay that way. I attribute my stable marriage in part to a regular cleaning lady. My husband and I both hate cleaning and I hate clutter. Bringing in a pro is one of the best investments we ever made.
8. Get a pet: We have gone from a sheltie to two Nova Scotia Duck Tolling Retrievers to a tiny cockapoo in the course of our marriage. They get us off the couch and walking which is good for our health. And there isn’t a day that goes by when they don’t make us laugh. Our succession of cats has been more sedentary but they were always good for a therapeutic cuddle.
9. Seek financial advice: A financial plan is a road map for life and retirement. You get what you pay for. Invest your tax return in a consultation with a well-reputed independent financial advisor who can help you develop a strategy and a timeline to reach your goals.
10. Support sports or the arts: Join the museum or the art gallery. Get seasons tickets for a theatre company. Take your kids to a rock concert or a football game. Learning is not only done in school and bonding with your family while you cheer for your favourite team can’t be beat.
11. Pamper yourself: Depending on the size of your return, spend it on you. Get a new haircut. Have a spa day. Buy a new outfit. With your updated look you will have the confidence to face another day at work or maybe even look for a new, better-paying job.
12. You get the idea. By all means pay off your student loan, save for the down payment on a house and get rid of credit card debt. But every now and then if you can afford it, spend your tax return on yourself and your family. After all, you’ve earned it.

****

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

What I find most interesting about budgets are the provisions that are often buried in the fine print and don’t make the front page of the newspaper. You will find links below to some widely-reported features of the 2018 Federal Budget and others you may not yet be aware of.

The graphic above illustrates how the new EI parental-sharing benefit will operate. The Investment Executive reports that in an initiative that was widely-anticipated in the lead-up to the February 27th budget, the Liberal government introduced a new Employment Insurance (EI) parental sharing benefit that will provide extended EI parental benefits when both parents agree to share parental leave. The proposed “use-it-or-lose-it” benefit will increase the duration of EI parental leave by up to five weeks for parents who share a standard 12-month parental leave, or up to eight weeks for parents who share an extended 18-month leave. This incentive is expected to be available starting June 2019.

And while details are sketchy, MPs may finally be entitled to long over-due maternity and parental leave. According to the Budget Papers (p.52):

“The Government is supportive of, and will work with Parliament on, the recommendations put forward in the report of the Standing Committee on Procedure and House Affairs entitled Support for Members of Parliament with Young Children. This includes…improving work-life balance, providing access to child care and designated spaces for the use of Members with infants and children, and a change to the Standing Orders of the House of Commons to allow an infant being cared for by a Member of Parliament to be present on the floor of the House of Commons. The Government will also bring forward amendments to the Parliament of Canada Act to make it possible for Parliamentarians to take maternity and parental leave.”

The government has backtracked on key tax measures for small businesses. Mark Burgess at advisor.ca explains how the federal government will tie the passive income threshold to the small business deduction. He notes that the plan put forward in Tuesday’s federal budget takes a different approach to the one the government proposed last summer that received considerable blowback from business owners.

If a corporation earns more than $50,000 of passive investment income in a year, the amount of income eligible for the small business tax rate is reduced and more of the company’s active income is taxed at the general corporate rate. The $50,000 threshold originally announced in changes the government made to its proposals while under pressure from business groups in October is equivalent to $1 million in passive investment assets at a 5% return.

Julie Cazzen at Maclean’s lists 15 ways Budget 2018 will affect your wallet.  Here are a few of the interesting budget provisions she highlights:

• The Canadian Child Benefit will be indexed to inflation starting July 2018.
• You will be able to open an RESP and claim the $500 Canada Learning Bond grant at the same time that you apply for a birth certificate for your child. This will automatically enroll children born into low-income families for the grant.
• Canada Student Grants and Loans has expanded eligibility for part time students, as well as full and part time students with children, and introduced a three-year pilot project that will provide adults returning to school on a full-time basis after several years in the workforce with an additional $1,600 in grant money starting Aug 1, 2018.
• A new Apprenticeship Incentive Grant for Women will give women in male-dominated trades fields $3,000 per year of training (or up to $6,000 over two years). Almost all Red Seal trades are eligible.
• The CPP death benefit is now $2,500 for all eligible contributors (whereas before it was pro-rated.)

Rob Carrick in the Globe and Mail discusses seven changes that could affect your finances. For example, following up on public consultations in 2016, the federal government is poised to announce improvements to Canada Deposit Insurance Corp. The consultations looked at adding registered disability savings plans (RDSPs) and registered education savings plans (RESPs) to the list of registered accounts that are covered and adding foreign currency deposits to covered products.

This would benefit snowbirds keeping large deposits in U.S.-dollar accounts. Other reforms could add coverage for guaranteed investment certificates of longer than five-year terms. Increasing the current $100,000 coverage limit for eligible deposits does not appear to be in the government’s plans.

Some other lesser known and unexpected Budget proposals reported by the Financial Post are:

• The government will create an advisory council to begin “a national dialogue” on a national pharmacare program.
• The government is moving to provide more support for Canadians suffering from mental health issues – including veterans – by helping them with the cost of psychiatric service dogs. Specifically, starting this year, the Medical Expense Tax Credit will be expanded to cover costs associated with the animals.

The federal government also announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system – which has overpaid, underpaid or completely failed to pay tens of thousands of public servants – and invest $16-million over two years to develop a new pay system.

You can see the full document tabled in the House of Commons here.

—

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

 

Today I’m interviewing Evelyn Jacks for SavewithSPP.com. Evelyn is the founder and president of Knowledge Bureau, a virtual campus focused on professional development of tax and financial advisors. She was recently named one of Canada’s Top 25 Women of Influence. She is also one of Canada’s most prolific and best-selling authors of 51 personal tax and wealth management books, and a highly respected financial commentator and speaker.

Every year there are income tax changes and they impact individuals filing personal tax returns. First of all, I’d like to highlight some of 2017 changes that listeners should keep an eye on when they’re getting ready to complete their tax return.

Q: Evelyn, taxpayers with children are going to see a major change in tax credits for 2017. Can you bring us up to date on what these changes are? 
A: Yes, absolutely. The most notable changes found in the past are that the children’s arts amount which was the non-refundable tax credit on the Federal tax return has been eliminated and in addition, the refundable tax credit for the children’s fitness amount is gone.

On the employer’s side, the government has also discontinued a 25% investment tax credit for child care spaces of March 22, 2017. These are quite significant changes, especially because on the federal return, there are no other places, with the exception of disabled children, to claim minor children.

Q: What has happened to tax credits for tuition, education, and textbook amounts?
A: Again here, we’re seeing some significant changes. As of January 1, 2017, only the tuition credit can be claimed on the Federal tax return and then only if the total exceeds $100 in the year. What’s happened is that the finance department has removed the monthly education amount of $400 for full time students and $120 for part-time students, as well as the monthly text book amount, which was $65 for full-time students and $20 for part-time students.

However, when you look at the tax return you are still going to see references to the tuition education and textbook amount found in Schedule 11. That’s important because, students can still carry forward any unused amount from all three components of this credit from prior years.

The other thing I should mention is that the provinces all have education credits but that’s changing too, so, in Saskatchewan, for example, there has been an elimination of both the tuition and education credits as of July 1, 2017. Therefore, on the Saskatchewan provincial return you can only claim those credits for half of the year.

Q: Now, the public transit credit is also gone. What’s the effective date on that? 
A: On the Federal side, we saw that credit eliminated as of July 1, 2017. So again, it’s a situation where you’re going to have to keep your receipts and make the claim, just for half the year in 2017.

Q: In your view, what was the Liberal government’s rationale for eliminating these credits, and what did taxpayers get in return?
A: Well, the government is really undergoing quite a significant tax reform at the moment. When they came in with their first tax changes after the election, one of the first things they did was reduce the middle-income tax rate, for income between about $46,000 and about $92,000, from 22% to 20.5%. In addition,  they created an upper income tax bracket increasing the tax rate from 29%-33% on income over $202,800. The third thing they did was they introduced the more generous child benefits.

In fact, that benefit has recently been indexed for the beneficiaries starting in July 2018. If your family net income is under $35,450 then you’ll be able to receive over $500 a month for each child under the age of 6, and around $450 a month for each child age 6-17. These are quite lucrative amounts but they require the filing of a tax return and the combining of net family income.

Q: The eligibility for medical tax credits for fertility treatments has been expanded retroactively. Please explain those changes and what actions taxpayers who are impacted should take to realize the full benefit of these changes.
A: Yes, starting in 2017 and subsequent years, the expenses for medical treatments to conceive a child will be deductible even if the treatments are not required because of a medical condition, which was the criteria in the past. If the expenses ocurred in a year from 2008 forward they can still be adjusted, because we have a 10 year adjustment period that we can take advantage of.

Q: What, if any, other surprises might tax payers have when they start filling out their 2017 tax return?
A: Well, there are a lot of things that change every year including indexing of various tax credits, tax rates and claw back zones. But I think the one big change that I’d really like to point out is the caregiver credit. It’s new for 2017, and it replaces three credits from the past: the family caregiver tax credit, the caregiver tax credit, and the tax credit for infirm dependents. So now one caregiver can get credit.

The second thing is that there are two different amounts: one that I call a mini-credit of $2,150, and one that I’m going to call the maxi-credit of $6,883. So on the mini-credit side you must claim this. It’s the only credit you can claim for an infirm or disabled minor child. But not necessarily one who receives a disability tax credit, but someone who is infirm as it relates to normal development of other children on both a physical or a mental basis.

A person that can claim this mini-credit is someone for whom you are a claiming a spousal amount or an equivalent to spouse amount. Now, the maxi-credit generally is claimed for an eligible dependent who is over the age of 18. But in some cases, if you have a spouse with a low income, you can claim a top-up credit of up to $1,683.

So you’re going to have to take a close look at Schedule 5 on the tax return and at net income allowance, particularly for low income earning spouses, to make a complicated tax calculation. What you need to remember is that your dependents no longer need to live with you. You cannot claim this amount for someone age 65, who is healthy, which is what you could do before under the caregiver amount.

Q: It sounds very complicated. Can taxpayers typically rely on their tax software to guide them and ensure they get all the credits and deductions they are entitled to? In what circumstances do you think that they should seek professional advice?
A: Well, you know, I’m a big fan of tax software because these programs, first of all, take the worry out of the math for you, and some of the math calculations, particularly as you are calculating federal and provincial taxes is very complicated. But the tax program is not necessarily going to prepare the tax return to your best advantage. There are lots of ways to do the math correctly. What you are aiming for is to calculate to your family’s overall benefit, and to do some tax planning as well.

For example, there are a number of carry-forward provisions that people may not be aware of, or they don’t enter properly. You can carry forward charitable donations to up to five years. You can carry forward capital losses in stock market investments indefinitely to offset capital gains in your future.

The other thing is that starting in 2017, you absolutely have to file the refund titled T2091, a designation of principle residence form, even if you sell a tax-exempt principle residence. Anyone who sells property starting in 2017 has to fill in this complicated form. The tax software may or may not tell you about that, and if you miss it you could be issued a penalty of up to $8000. That could really hurt.

Q: What are the most frequent errors or omissions tax payers typically make when completing or filing their income tax return?
A: Any expense that is discretionary, so, I’m thinking of child care expenses and other kinds of expenses where people have out-of-pocket costs. Moving expense are really lucrative, for example. Also, missed medical expenses are very common.

Q: If you had three pieces of advice to offer tax payers to help ensure they file a correct tax return, and get all the credits and deductions they are entitled to, what would they be?
A: The first thing is to catch up on any delinquent filed returns. The option to benefit from the long available disclosure program is actually changing and it will close for some people, effective March 1, 2018. So if you chronically ignore your filing obligations, not only will you be unable to avoid tax-evasion policies, you may not be able to avoid interest relief in some harsher cases. That’s really important. Catch up if you’re behind.

The second thing is to make a RRSP contribution by March 1st this year because that RRSP contribution will reduce your family net income, which will increase things like your child’s health benefits, your GST credit or other refundable or non-refundable tax credits. The RRSP contribution is your ticket to bigger benefits or bigger tax refunds.

The last thing I would say, the average income tax refund in Canada is $1,735, which is a lot of money. That’s just your overpayment of taxes. Most people don’t realize that’s an interest-free loan that you give to the government. Turn that around, and put that money to work for you. Invest it in a TFSA because that’s going to allow you to earn tax- free investment savings for your future, or if you have children in the family, why not take advantage of the lucrative Canada Education Savings Grants and the Canada Learning Bonds by investing in an RESP. There’s lots of ways for people to leverage the money that they pre-paid to the tax department.

That’s really helpful Evelyn. Thank you very, very much. It was a pleasure to chat with you today.

Thank you so much for giving me the opportunity.

***

This is an edited transcript of an interview recorded 2/07/2018.

Canadians can receive easy-to-understand interpretations of breaking tax and investment news by subscribing to Knowledge Bureau Report at www.knowledgebureau.com.   Look for the Newsroom Tab. You can also follow Evelyn Jacks on twitter @evelynjacks.

—

 

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

The “holy trinity” of tax-assisted savings plans available to Canadians are TFSAs, RRSPs and RESPs. RESPs (Registered Educational Savings Plans) are primarily designed to help families to save for post-secondary education.

Each year, on every dollar up to $2,500 (to a life time maximum of $50,000) that you contributed to an RESP for a child’s education after high school, a basic amount of the Canada Education Savings Grant of 20% may be provided. Depending on the child’s family income, he/she could also qualify for an additional amount of CESG on the first $500 deposited, which means $100 more if the 2017 net family income was $45,916 or less and up to $50 if the 2017 net family income was between $45,916 and $91,831.

In total, the CESG could add up to $600 on $2,500 saved in a year. However, there is a lifetime CESG limit of $7,200. This includes both the basic and additional CESG. Lower income families may also be eligible for the Canada Learning Bond (CLB) that could amount to an additional $2,000 over the life of the plan.

Contributions to RESPs are not tax deductible, but the money in the account accumulates tax-free. Contributions can be withdrawn without tax consequences and when your child enrolls in a university or college program, educational assistance payments made up of the investment earnings and government grant money in the RESP are taxable in the hands of the student, generally at a very low rate.

When our children were young, we purchased Group RESPs for them and their grandparents also purchased additional units. I was so impressed with the program that I even took a year before transitioning from family law to pension law and sold RESPs.

Each child collected about $8,000 from the plan over four years of university, which helped them to graduate debt free. Fortunately, both my daughter and my son took four straight years of university education so there was no problem collecting the maximum amounts available to them minus administrative fees.

However, I’ve come to realize the potential downside of Group RESPs so we started contributing $200/month to a self-administered plan with CIBC Investor’s Edge for our granddaughter soon after she was born. She is now 5 ½ and as I write this, there is already $22,000 in the account.

Our decision to self-administer Daphne’s RESP was influenced in part by what I learned from other personal finance bloggers about the potential downside of group plans.

Robb Engen notes that group plans tend to have strict contribution and withdrawal schedules, meaning that if your plans change – a big possibility over 18 plus years – you could forfeit your enrollment fee or affect how much money your child can withdraw when he/she needs it for school.

With a Group RESP, contributions, government grants and investment earning for children the same age as yours are pooled and the amount minus fees is divided among the total number of students who are in school that year. Typically the pool is invested in very low risk GICs and bonds.

In contrast, there are no fees in our self-administered plan other than $6.95 when we make a trade. The funds are invested in a balanced portfolio of three low fee ETFs. We can easily monitor online how the portfolio is growing and as Daphne gets closer to university age we can shift to a more cautious approach.

Macleans recently reported that the total annual average cost of post-secondary education in Canada for a student living off-campus at a Canadian university is $19,498.75 and it will be much higher by the time your child or grandchild is ready to go off to college. So learn as much as you can about RESPs, get your child a social insurance number, set up a program and start saving.

However, as Engen suggests before you choose a group or individual RESP provider make sure you read the fine print and ask about:

• Fees for opening an RESP;
• Fees for withdrawing money from a RESP;
• Fees for managing the RESP;
• Fees for services and commissions;
• What happens if you can’t make regular payments;
• What happens if your child doesn’t continue his or her education; and
• If you have to close the account early, do you have to pay fees and penalties; do you get back the money you contributed; do you lose interest and can you transfer the money to another RESP or different account type.

****

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Well it’s that time again. We have a bright shiny New Year ahead of us and an opportunity to set goals and resolutions to make it the best possible year ever. Whether you are just starting out in your career, you are close to retirement or you have been retired for some time, it is helpful to think about what you want to accomplish and how you are going to meet these objectives.

My resolutions are to make more time to appreciate and enjoy every day as I ease into retirement. I also want to take more risks and develop new interests. Two of the retirement projects I have already embarked on are joining a community choir and serving on the board; and, taking courses in the Life Institute at Ryerson University. After all, as one of my good friends recently reminded me, most people do not run out of money, but they do run out of time!

Here in alphabetical order, are resolutions shared with me by eight blogger/writers who have either been interviewed for savewithspp.com or featured in our weekly Best from the Blogosphere plus two Saskatchewan Pension Plan team members.

1. Doris Belland has a blog on her website Your Financial Launchpad . She is also the author of Protect Your Purse which includes lessons for women about how to avoid financial messes, stop emotional bankruptcies and take charge of their money. Belland has two resolutions for 2018. She explains:

• I’m a voracious reader of finance books, but because of the sheer number that interest me, I go through them quickly. In 2018, I plan to slow down and implement more of the good ideas.
• I will also reinforce good habits: monthly date nights with my husband to review our finances (with wine!), and weekly time-outs to review goals/results and pivot as needed. Habits are critical to success.

2. Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances and blogs at Money We Have. He says, “My goal is to work less in 2018. I know this doesn’t sound like a resolution but over the last few years I’ve been working some insane hours and it’s time to cut back. The money has been great, but spending time with my family is more important.”

3. Chris Enns who blogs at From Rags to Reasonable describes himself as an “opera-singing-financial-planning-farmboy.” In 2017 he struggled with balance. “Splitting my time (and money) between a growing financial planning practice and an opera career (not to mention all the other life stuff) can prove a little tricky,” he says. In 2018 he is hoping to really focus on efficiency. “How do I do what I do but better? How do I use my time and money in best possible way to maximize impact, enjoyment and sanity?”

4. Lorne Marr is Director of Business Development at LSM Insurance. Marr has both financial and personal fitness goals. “I plan to max out my TFSAs, RRSPs and RESPs and review my investment mix every few days in the New Year,” he notes. “I also intend to get more sleep, workout 20 times in a month with a workout intensity of 8.5 out of 10 or higher and take two family vacations.”

5. Avery Mrack is an Administrative Assistant at SPP. She and her husband both work full time and their boys are very busy in sports which means they often eat “on the run” or end up making something quick and eating on the couch.  “One of our resolutions for next year is to make at least one really good homemade dinner a week and ensure that every one must turn off their electronic devices and sit down to eat at the table together,” says Mrack.

6. Stephen Neiszner is a Network Technician at SPP and he writes the monthly members’ bulletin. He is also a member of the executive board of Special Olympics (Kindersley and district). Neiszner’s New Year’s financial goals are to stop spending so much on nothing, to grow his savings account, and to help out more community charities and service groups by donating or volunteering. He would also like to put some extra money away for household expenses such as renovations and repairs.

7. Kyle Prevost teaches high school business classes and blogs at Young and Thrifty. Prevost is not a big believer in making resolutions on January 1. He prefers to continuously adapt his goals throughout the year to live a healthier life, embrace professional development and save more. “If I had to pick a singular focus for 2018, I think my side business really stands out as an area for potential growth. The online world is full of opportunities and I need to find the right ones,” he says.

8. Janine Rogan is a financial educator, CPA and blogger. Her two financial New Year’s resolutions are to rebalance her portfolio and digitize more of it. “My life is so hectic that I’m feeling that automating as much as I can will be helpful,” she says. “In addition, I’d like to increase the amount I’m giving back monetarily. I donate a lot of my time so I feel like it’s time to increase my charitable giving.”

9. Ed Rempel is a CFP professional and a financial blogger at Unconventional Wisdom. He says on a personal finance level, his resolution are boring as he has been following a plan for years and is on track for all of his goals. His only goal is to invest the amount required by the plan. Professionally, he says, “I want 2018 be the year I hire a financial planner with the potential to be a future partner for my planning practice. I have hired a couple over the years, but not yet found the right person with the right fit and long-term vision.”

10. Actuary Promod Sharma’s resolutions cover off five areas. He says:
    

• For health, I’ll continue using the 7 Minute Workout app from Simple Design.
• For wealth, I’ll start using a robo advisor (WealthBar). I’m not ready for ETFs.
• For learning, I’ll get my Family Enterprise Advisor (FEA) designation to collaborate better in teams.
• For sharing, I’ll make more videos.
• For giving, I’ll continue volunteering.

****

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

It’s getting close to the end of the year and the holiday season is upon us. Here are some examples of subjects  personal finance bloggers havw been writing about recently.

Marie Engen (Boomer & Echo) offers tips on How To Leverage Technology Into Good Financial Habits. She notes that most banks have a budgeting app that tracks your spending so you get a better idea of where your money is going. If all your accounts don’t reside with just one financial institution, there are lots of mobile apps and budgeting software available, such as the popular Mint.com, GoodBudget and You Need a Budget.

Chris Nicola on the Financial Independence Hub tackles the perennial question, Should you take early CPP benefits or defer as long as possible?  Using Statistics Canada figures, he calculates that a woman maximizes her total CPP payout by waiting until age 70, resulting in an average of $75k (36%) more than if she took it at age 60. A man maximizes his total CPP a little earlier, at age 68, receiving an average of $50k (27%) more than at age 60.

Maple Money’s Tom Drake addresses the question: Should You Invest in Group RESPs? He concludes that the risk with group plans comes if you drop out early. Many of these types of RESPs have high enrollment fees. It’s not uncommon to pay up to $1,200 in fees. With Group RESPs, you don’t pay that amount up front. Instead, it is deducted from your returns when you close the plan early. Therefore if you withdraw from the plan before it matures, you could face big penalties — and even have  your contributions eaten up by the fees.

And getting back to how to save money and still enjoy holiday entertaining and gift giving…..

Holiday décor hacks for having a dinner party by personal finance writer, on-air personality, speaker and bestselling author Melissa Leong suggests that you create your own decor very cheaply, whether by gathering some greens or acorns from outside and dumping them in a vase or using wrapping paper to wrap empty boxes, make napkin rings or use as a table runner.

What If This Christmas… You Didn’t Have to Worry About Money? by Chris Enns on From Rags to Reasonable offers the following suggestions:

• Figure out how much you want to spend.
• Figure out how much you can afford to spend.
• Buy a prepaid credit card and use it as the ONLY way you pay  for Christmas-related materials.

—

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.