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Less than half of Canadians will contribute to an RRSP this year

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ted_bnn_23feb15According to a recent poll done by a leading Canadian bank, more than half of us won’t be contributing to an RRSP this year.

BNN invited Ted Rechtshaffen to discuss the findings and share his insights on saving for our retirement.

Click here to watch this video

To better assist you in making effective savings decisions and as importantly how best to invest it, we invite you to connect directly for a no obligation discussion – simply click here and we will have one of our Wealth Advisors connect with you.

We also recently outlined the differences between an RRSP and TFSA (Tax Free Savings Account) contribution.

Other key findings of the bank sponsored poll include:

  • 54 per cent of Canadians indicate that they will not make an RRSP contribution for the 2014 tax year
  • 32 per cent of Canadians intend to contribute
  • 16 per cent have already made their RRSP contribution
  • 16 per cent say they plan to contribute
  • 14 per cent say they are undecided about contributing
Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

Renting during retirement? 10 cases where it might be right for you

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Home ownership is the deeply ingrained Great Canadian Dream. Adding to the dream is retiring as a homeowner without debt. Although that dream is alive and well, and something that most retirees hope for, there can be some very good reasons not to be a homeowner in retirement.

While renting in retirement may not be your goal, perhaps some of these 10 scenarios might get you thinking differently.

  • You can’t afford it. Either you have never been a homeowner because of the high costs, or you were a homeowner but simply needed the liquidity and access to the capital that was tied up in your home. While there are certainly ways to remain a homeowner and access some of the capital, the greatest access to capital is to sell your home.
  • You don’t want to carry debt in retirement. You can make a good case that having debt in retirement is just fine as long as you have home equity that is much larger than the debt. Having said that, it is understandable that many retirees don’t want the worry of debt. Usually the best way to achieve this is to sell real estate and use the capital to pay off debt (often debt still owing on the house).
  • You don’t want the responsibility of maintaining a house. Let it be someone else’s problem. It can be very nice to suddenly realize that the leaking faucet is no longer up to you to fix. It can be even nicer to know that the roof that needs replacing isn’t going to come out of your pocket (at least directly).
  • You don’t want to pay any more realty commissions and land transfer taxes. You may be at a stage of your life where health concerns are either a reality or looming larger. One less home purchase can save you tens of thousands of dollars by eliminating the money that disappears to real estate commissions and land transfer taxes.
  • You don’t want to be trapped in a home you can’t sell quickly. You don’t know how long you will be staying in your home. By renting, you have much greater flexibility to move, and with far fewer worries than if you own your home. This can be an even bigger worry outside of urban centres where it can take many months or even years to sell a home.
  • You want to spend more money while you are healthy enough to enjoy it. With a major amount of money freed up, you may feel more comfortable spending on vacations, cars, boats or other items that you have long dreamed about. Of course, this should be done with a long-term financial plan in place to ensure you can actually afford it. I have found that while many retirees can afford to do all of these things, “realizing” the cash in their homes often gives them the psychological comfort to start spending.
  • retire_rentYou want more diversification in your investments. While most people view their home as more than an investment, it can certainly be looked at as a large and extremely concentrated one. Let’s say someone owns a home worth $700,000, and they have a decent pension from work. They could very well have few other assets in their net worth. Maybe $150,000 in other investment savings. This person’s net worth is over-concentrated in real estate, and not just diversified real estate, but 100% in residential real estate in one location. By selling and investing the funds, they can now be much more diversified across a wide range of industries and types of investments.
  • You want to be able to test out different homes and places. Some people know they want to move to a condo. Some want a backyard garden. Some know the neighbourhood or city or small town they want to live in, some aren’t so sure. By renting you may be able to try out a few options to see which one is the best fit. I am not suggesting that moving is a fun or easy process, but it is a lot easier when you are just renting, as opposed to being an owner.
  • You may be needed out of town. Many retirees are happy to finally have their freedom and some independence from family. Others may want or need to move to be closer to children, grandchildren or increasingly elderly parents. Renting may allow you the freedom to spend significant time with family in other cities, without still being responsible for real estate back home.
  • You are spending less and less time at “home” anyway. Florida, Arizona, the south of France. Some of these places can be quite compelling in retirement. As you spend less and less time in Canada, does it really still make sense to own a home? By renting you may save a lot of money, especially if you are able to rent for only three or four months at a time. The monthly costs will likely be much higher due to the flexibility, but when compared to a full year of rent for a place that you won’t be in for months at a time, the cost savings and flexibility can be of great value.

Reproduced from the National Post newspaper article 27th January 2015.

Ted Rechtshaffen
Written By:
Ted Rechtshaffen, MBA, CFP
President and CEO
tedr@tridelta.ca
(416) 733-3292 x 221

Turn a spouse’s loss into your gain

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Before rebalancing a portfolio for a new client, I make it a habit to confirm the Adjusted Cost Base (ACB) of any holdings in non-registered investment accounts.   In knowing the ACB, I’m able to know the capital gain (or loss) that would be triggered and the associated tax liability (if any) of selling the portfolio.  Now, we don’t want to let the ‘tax tail wag the dog’ so to speak; if the portfolio needs to be changed it needs to be changed.  But if we can save taxes while doing so clients certainly appreciate it!

I recently came across a situation where using a little known strategy, I was able to do just that.  Let’s call these clients Bob & Sue.

Sue is a high income earner (48% marginal tax rate) while Bob earns less and has a marginal tax rate of 20%.  Sue has a non-registered investment account in her name only, with a capital gain position of $30k.  Bob also has a non-registered investment account in his name with a capital loss position of $30k.  The tax liability for the household ‘as is’ would be $4,200 as follows:

Sue:  ($30,000 gain x 50%) x 48% = $7,200 owing.
Bob: ($30,000 loss x 50%) x 20% = $3,000 value of carrying loss forward.

If Sue had capital losses from previous years she could use them to offset her taxable capital gain.  In this instance, she did not.

Bob has a capital loss which he can carry back three years, or carry forward indefinitely to offset gains in other years.  However, being the lower income spouse the loss is less valuable to the household.  This is where the strategy comes in.

Bob sells the securities in his account for $40k (with an ACB of $70k) incurring a capital loss of $30k.  Sue immediately buys the same number of shares of the securities for $40k.  This step triggers the superficial loss rule, which comes into play when a taxpayer sells securities at a loss, and the identical property is acquired by the taxpayer, their spouse, or a corporation controlled by the taxpayer or their spouse within a 61-day period around the sale (30 days before the sale and 30 days afterward).  Under this rule Bob is denied use of the $30k loss, and the amount is added to the cost base of the securities purchased by Sue.

Sue’s cost base has now increased to $70k.  She must hold the securities for at least 30 days, but can sell them any time after that.  If we assume the share prices stay the same during that period, she will be able to declare a loss of $30k on the sale.  This loss can be applied against the capital gains in her account thus eliminating the $4,200 tax liability for the household.

While this wouldn’t apply to too many clients, it is an example of the types of strategy that we at TriDelta try to consider for all clients – wherever it can add value.

Brad Mol
Written By:
Brad Mol, CFP, CIWM, FMA
VP, Wealth Advisor
brad@tridelta.ca
(416) 802-5903

Plan a ‘free’ Thailand vacation and… surgery.

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We’re fortunate in Canada given that we have a great health system, but we’re often subjected to long waits for important lifesaving surgery or wish for better access to specialists. New options have emerged in recent years and more of us are taking advantage, particularly medical tourism.

thailand2According to Wikipedia, Medical tourism or health tourism is the travel of people to another country for the purpose of obtaining medical treatment in that country. Traditionally, people would travel from less developed countries to major medical centers in highly developed countries for medical treatment that was unavailable in their own communities. The recent trend is for people to travel from developed countries to third world countries for medical treatments because of cost and other considerations.

Medical tourism is however controversial for a number of reasons, especially in Canada given our national health care system and its expense.

A number of our hospitals are considering ways to boost profitability by hosting international patients. For example Sunnybrook Hospital’s board quietly approved a program at the end of last year. So far they have welcomed a Barbadian woman who paid about $60,000 for radiation treatment for breast cancer, and a Jamaican man who paid $20,000 for radiotherapy for prostate cancer according to the Globe and Mail.

Canada’s publicly funded health-care system is respected globally and would easily attract medical tourists, according to a 2011 analysis from Deloitte Canada’s health services division. The question is, can Canada offer medical services to foreigners without displacing locals whose hefty taxes built the health care system. Opponents argue that patients from abroad could displace tax-paying Canadians or enable wealthy locals to buy their way to the front of the queue.

The Registered Nurses Association is calling for an outright ban; http://rnao.ca/news/ban-medical-tourism-rnao-speaks-out-medicare

Then there is the other side, Canadians traveling abroad for health care services, whatever the reason. This presumably won’t hurt our health care system in the short term, but will start to raise questions why we pay taxes if better health services are available elsewhere.

Regardless, medical tourism continues to grow and provide affordable alternatives. An excellent CNN documentary aired last week  titled; ‘Surf, sand … and surgery? Inside the world of medical tourism.’ This is a must watch program that brings much needed perspective to this controversial topic and will help you decide if its good, bad or indifferent
This means that you can get what amounts to a free vacation given the significant savings on your next medical bill by having the work done in Thailand or another medical destination offering lower costs than Canada.

At TriDelta Financial we strongly believe in a balanced lifestyle, which incorporates wealth and health amongst other aspects, which is why we see medical tourism as a viable alternative in certain situations.

Anton Tucker
Written By:
Anton Tucker, CFP, FMA, CPCA, FCSI
Executive VP
anton@tridelta.ca
(905) 330-7448

Should you contribute to your RRSP, TFSA or pay down debt

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lorne_bnn_jan2015

Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor at TriDelta Investment Counsel spoke with Catherine Murray on BNN’s Market Sense. Lorne discussed the tax benefits of RRSP contributions, at which income levels RRSP contributions are most advantageous and he also reviewed strategies for consolidating and reducing debt.

Click here to watch the full interview.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
lorne@tridelta.ca
416-733-3292 x225

Are Canadian banks still a buy?

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lorne_bnn_jan2015With Canadian bank stocks declining approximately 15 percent as a group over the past 3 months, Lorne Zeiler, VP, Portfolio Manager and Wealth Advisor, TriDelta Investment Counsel, was recently interviewed on BNN regarding his view that now is a good time for long-term investors to add exposure to Canadian bank stocks.  Reasons for Mr. Zeiler’s bullish long-term view include compelling valuations (11.0X EPS 2015 expected earnings), high current dividend rates (4.0%+ for most Canadian banks, but payout ratios remain at approximately 45% of projected earnings), earnings stability and their strong business franchises.

Click here to watch the full interview.

Lorne Zeiler
Written By:
Lorne Zeiler, MBA, CFA
VP, Wealth Advisor
lorne@tridelta.ca
416-733-3292 x225
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