U.S. stocks posted solid gains on Monday as investors looked ahead to a busy week of earnings results, including key names like Apple, Amazon and Google parent Alphabet.

By Monday’s close, the Dow had surged more than 400 points, while the S&P 500 and Nasdaq rose 44 and 93 points, respectively. The TSX also ended the day higher, but gains were tempered by sharp losses in copper prices.

U.S. stock indexes rose again on Tuesday, propelled by better-than-expected earnings and tumbling bond yields, which fell in response to data showing U.S. home-price growth had slowed sharply. Tuesday’s rally sent the Dow to a six-week high, while the interest-rate-sensitive Nasdaq also had a strong showing. In Canada, the TSX rose 179 points, buoyed by shares of cannabis producers, including Canopy Growth Corp., which jumped more than 25% Tuesday.

The Bank of Canada (BoC) on Wednesday increased its benchmark interest rate by 50 basis points, moving the policy rate up to 3.75% for the first time since early 2008. Financial markets had been anticipating a larger hike of 75 basis points.

In the U.S., falling tech stocks dragged the Nasdaq and S&P 500 lower Wednesday after disappointing earnings reports from Google parent company Alphabet and Microsoft. Although the Dow finished flat, the S&P 500 lost 28 points, while the Nasdaq surrendered 228 points, or 2%. In Canada, the TSX rallied in light of the BoC’s smallerthan-expected rate hike.

U.S. stocks were mixed on Thursday, driven by continued uncertainty about the pace of interest rates and a new batch of corporate earnings. The latest GDP data showed that the U.S. economy grew at a 2.6% annual rate last quarter, the most recent sign that the economy is doing better than many had forecast. Fresh data also showed that the jobs market is holding up well. However, there continue to be disappointing earnings from key tech names like Facebook parent Meta Platforms, which fell 24% in afternoon trading after announcing disappointing results after Wednesday’s close. In Canada, the TSX rose 72 points to cap off a strong week

Dow, S&P 500 and TSX Register Gains; Nasdaq Drifts Lower

For the four trading days covered in this report, the Dow rose 951 points to close at 32,033, the S&P 500 added 54 points to settle at 3,807, while the tech-heavy Nasdaq dropped 68 points to close at 10,792. In Canada, the TSX jumped 491 points to end at 19,352.

Read more

source https://rosenbergdri.ca/earnings-take-centre-stage-as-investors-try-to-gauge-economys-health/

North American indexes ended lower on Monday, as investors continued to parse comments from Fed officials about the course of future interest rate hikes in the United States.

By Monday’s close, Wall Street’s main stock indexes registered mild losses, while the TSX fell 190 points, as lower oil prices weighed on the energy sector.

U.S. and Canadian stock indexes rallied Tuesday after fresh inflation data showed that the U.S. producer price index rose 8% year over year, down from September’s 8.4%. That was especially good news for the tech-heavy Nasdaq, which climbed 162 points, while the TSX, Dow and S&P 500 recorded more modest gains.

Wall Street’s main indexes ended lower on Wednesday as a downbeat forecast from Target spurred fresh concerns about retailers heading into the crucial holiday season. The TSX also ended lower, weighed down by declines in the energy and materials sectors. By Wednesday’s close, the Dow fell 39 points, the TSX lost 37 points, while the S&P 500 and Nasdaq dropped 33 and 175 points, respectively.

Data released Wednesday showed Canada’s annual inflation rate held steady at 6.9% in October, matching the previous month. Analysts are now expecting a 25- or 50-basis-point hike when the Bank of Canada meets again next month.

U.S. stock indexes fell on Thursday as hawkish comments from a key Fed official fueled concerns that the central bank won’t be pivoting away from higher rates anytime soon. Additionally, the number of Americans filing new jobless claims fell last week, indicating an exceptionally tight U.S. labour market, which should allow for more Fed tightening. By Thursday’s close, all three major U.S. indexes were down slightly. In Canada, the TSX lost 73 points on weakness once again in the energy and materials sectors.

North American Indexes Lose Ground

For the four trading days covered in this report, the Dow lost 202 points to close at 33,546, the S&P 500 dropped 47 points to settle at 3,946, while the tech-heavy Nasdaq sunk 178 points to close at 11,145. In Canada, the TSX lost 227 points to end at 19,884.

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source https://rosenbergdri.ca/weak-retail-sales-hawkish-fed-continue-to-weigh-on-indexes/

U.S. stocks retreated Monday, weighed down by Covid protests across China and hawkish comments from Fed officials about the future path of interest-rate increases.

Monday’s sell-off picked up speed in afternoon trading after Fed officials indicated that rates could be higher for longer as the battle against inflation continues. By Monday’s close, the Dow was off by nearly 500 points, while the S&P 500 and Nasdaq fell 62 and 177 points, respectively. In Canada, the TSX fell 163 points in mixed trading across sectors.

U.S. stocks closed mostly lower Tuesday as investors hit the pause button ahead of Fed Chair Jerome Powell’s planned remarks at the Brookings Institution on Wednesday. The Dow and S&P 500 finished flat, while the Nasdaq dropped 66 points. The TSX closed modestly higher, up half of a percent, on strength in materials and energy.

In U.S. bond markets, the yield curve on Tuesday remained inverted, with 10-year Treasurys climbing to 3.75%, while two-year Treasurys were up to 4.47%. Tuesday’s gap between 10- and 2-year notes is the largest in decades, signalling that interest rates could be nearing their peak and that a recession could be looming.

North American indexes rallied Wednesday after Fed Chair Powell signalled a potential slowdown in interest-rate hikes. Powell’s remarks sent the Dow more than 700 points higher, while the S&P 500 and Nasdaq jumped 3.1% and 4.4%, respectively. The TSX rose 176 points in Canada, hitting its highest close since early June. By Wednesday’s close, all four indexes had ended November with a second consecutive month of gains.

Stock indexes were mixed in Thursday trading as investors began pricing in a potential recession and its impact on corporate earnings. By the day’s close, the Dow dropped roughly half a percent, while the S&P 500 was essentially flat, and the Nasdaq registered minor gains. In Canada, the TSX rose slightly on strength in energy and materials.

Markets Register Modest Gains

For the four trading days covered in this report, the Dow increased 50 points to close at 34,397; the S&P 500 rose 51 points to settle at 4,077, while the technology-heavy Nasdaq added 256 points to close at 11,482. In Canada, the TSX gained 141 points to end at 20,525.

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source https://rosenbergdri.ca/fed-minutes-reveal-growing-sentiment-to-slow-rate-increases/

Upon retirement, you will be converting your working years’ accumulated savings into income in order to fund your financial goals.

In transitioning to your next chapter, it is important to have a Total Wealth Plan that considers a wide range of issues, including lifestyle expenses, longevity, interest rates, inflation rates, tax rates, market volatility and legacy planning. Of course, some of these items are beyond your control; however, you can still manage your expenses, determine your retirement age, and dictate the taxes you need to pay. Taxation, in particular, is an important aspect of retirement income planning, as some sources of income are taxed more favourably than others. Understanding these differences and planning around them can significantly impact the cash flow available to meet your goals and what you leave behind in your estate.

This article will explore the different sources of retirement income and how they are taxed.

Sources of retirement income

Common sources of retirement income include pensions, government benefits, registered plans, and non-registered investments. One often-asked question is which source of income to draw from first and how much to draw. Unfortunately, there is no one-size-fits-all strategy; everyone has different needs. Therefore, it is critical to understand the need for cash flow and how it will be accomplished based on your specific situation. Understanding your unique needs will assist you in determining how much money is enough for your retirement years. One common strategy is to layer different guaranteed and non-guaranteed income sources to draw tax-efficient funds sufficient for retirement spending.

Public pensions and government benefits

In Canada, the government provides retirement benefits based on an individual’s income and contributions during their working years. The three main government benefits that retirees can apply for include the Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP), Old Age Security (OAS), and a Guaranteed Income Supplement (GIS).

CPP monthly payments are taxable, and distribution can begin at age 65. The payment amounts depend on the premiums contributed to the plan and the age the pensioner begins to receive such payments. Enhancements were made to the CPP in 2019 to increase the amount to current pensioners. The benefits will increase from 25% to 33% of pensionable earnings, which will increase the premium payments from 2019 to 2023.

OAS monthly payments are also taxable and payable to Canadians aged 65 or older. Unlike CPP, OAS payments do not require contributions to the plan; however, they do consider the number of years of residency in Canada. The amount may be reduced if an individual spends less than 40 years in Canada after the age of 18. Furthermore, the benefit amount may be clawed back if the annual income exceeds the OAS threshold. The individual will be required to repay the government the pension income at 15% of the net income above the threshold.

OAS recipients may also qualify for GIS if their annual income is lower than the yearly maximum exemption amount. GIS will be eliminated if the taxpayer’s annual earnings exceed $3,500. The exemption amount is based on marital status and the current year’s income. The monthly payment is not taxable.

The government also provides allowances to low-income retirees aged 60 to 65 if their spouse is eligible for the GIS (allowance for people aged 60 to 64) or if their spouse has passed away (allowance for the survivor). Both allowances are not taxable.

Moreover, if the CPP and OAS recipient passes, the CPP Survivor’s benefit and OAS allowance for the survivor will be payable to the surviving spouse or common-law partner of the deceased. The CPP Survivor’s benefit is based on a few factors, including the age of the surviving spouse, other pension or disability benefits, and the deceased’s contribution to the CPP. The OAS allowance for the survivor is based on annual income. It is essential to notify the government upon the death of the benefit’s recipient to apply for the survivor’s benefit.

Please refer to our Retirement planning figures for the 2021 maximum government benefit amounts and their thresholds, if any.

When should one apply to receive CPP and OAS?

Canadians have some flexibility around when they elect to receive CPP and OAS. CPP benefits can be received as early as age 60. However, the payment will be reduced by 0.6% each month before age 65 when they receive this early pension. Therefore, the maximum pension reduction would be 36% if you decided to begin the CPP payment at age 60.

On the other hand, there is a 0.7% increase for each month you choose to defer your CPP payment beyond age 65, up to a maximum 42% increase at age 70. Similarly, OAS offers a payment deferral option for up to 5 years. If payments are deferred, there will be an increase of 0.6% for each month the payment is postponed, to a maximum of 36% increase at age 70. There is no option to receive OAS before age 65.

A key benefit of receiving payments later is larger monthly payments. Another advantage of deferring payments would be managing tax brackets, especially if the pensioner receives OAS payments. As mentioned above, OAS would be clawed back when annual income exceeds the threshold; hence, deferring income from CPP or OAS benefits may reduce the clawback. Furthermore, GIS and other government allowances may be reduced if the total income exceeds the allowances’ respective thresholds. Therefore, keeping the net income below the thresholds may maximize the benefit payments.

Although there are benefits to deferring the payments, it is not necessarily the best option for everyone. Unfortunately, there isn’t a rule of thumb for the optimal age to start the benefit, as it depends on personal factors. First, if you require cash to fund your current expenses, you may not be able to wait a few more years to withdraw. Second, life expectancy may also affect the decision of whether to defer the payments. This is a difficult factor to consider as it is nearly impossible to predict one’s lifespan. However, unhealthy individuals who do not expect to live long may wish to receive the payment sooner.

Private pensions

Private pensions are generally employer-sponsored, often referred to as Registered Pension Plans (RPPs), but there are also Individual Pension Plans (IPPs) for private corporation business owner-managers. RPPs can be defined benefit (DB) or defined contribution (DC) plans, and participants receive periodic monthly pension payments upon retirement. DC plan payouts are based on the plan’s contributions and accumulated investment funds. Payments from DB plans are pre-determined based on the number of service years, salary, and additional contributions, if any.

The payments from all private pensions are taxable.

Registered plans

Those who do not have an employer-sponsored plan can accumulate retirement savings in private registered plans, such as a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA).

There is no obligation to withdraw from an RRSP under age 71, and you can control the timing and the amount you wish to withdraw. On December 31 of the year you turn 71, you must convert your RRSP to a Registered Retirement Income Fund (RRIF) and begin withdrawing at least the age minimum withdrawal limits. Any withdrawals above that amount will be subject to withholding taxes. Alternatively, the RSP can be collapsed and the entire balance taken into income, or the accumulated funds can be used to purchase a life annuity, which would provide annual income every year for life. All RRSP or RRIF (or registered annuity) withdrawals are fully taxable. 

A TFSA is also a great saving tool. Unlike the RRSP, the growth and withdrawals are entirely tax-free. This is an important attribute, especially considering the impact on OAS clawback and income-tested government allowances. As mentioned, structuring income from different sources depends on the individual’s circumstances.

Other funding

Private corporations

Business owners of private corporations may have the flexibility to draw different funds out from their corporations during their retirement. The most common approach is to take taxable, non-eligible dividends, which provide a small dividend tax credit. Corporations may also distribute tax-free dividends from their Capital Dividend Account (if there is a balance) or repay any remaining shareholder loans, which would also be tax-free.

The owner-managers of the corporations may also receive pension payments from an IPP if they set one up. They can start receiving the pension as early as 50 years old or defer as late as 71.

The shareholders can also sell their business to extract more cash. Any capital gains resulting from the sale are taxable. However, some shareholders may be eligible to claim a Lifetime Capital Gains Exemption (LCGE) (up to $892,218 in 2021) to offset this gain if certain conditions are met. The discussion on LCGE is beyond the scope of this article.

Other options

If more funds are still required for retirement, one may look at using a credit facility to supplement income. For anyone with accumulated cash values inside a permanent life insurance policy, they can be used as collateral for tax-free loans. For individuals with several years to retirement and excess capital or cash flow, redirecting assets into a permanent life insurance policy can yield significant benefits, including tax-free growth and the flexibility to generate this supplemental retirement income.

Many retirees sell their family home and move to smaller, less expensive homes. Downsizing their home could decrease any outstanding mortgage payments or maintenance costs, which generally means more cash in their pocket to spend.

These extra funding options could also be used for future planning, such as estate, gifting, or luxury expenses.

Summary

Retirement income planning should consider all available income sources and related tax implications to provide a better picture of after-tax cash flow in retirement to maximize retirement while protecting your estate. For example, if the individual’s income level is almost at the OAS allowance threshold, but they still require more cash, they may wish to draw from their TFSA to fulfill the additional needs and not trigger any taxable income that would reduce their benefit amount. This, however, may not be an option if the individual is 71 years old and required to withdraw from their RRIF. As such, it is advisable to call our office to learn more about Total Wealth Planning and how it can help you achieve your goals.

Speak with your own tax advisors about your own tax situation before implementing any tax planning strategies.

source https://rosenbergdri.ca/retirement-tax-planning-tips-sources-of-retirement-income/

More than ever, physical and mental health is top of mind, but what about financial wellness?

Research shows that physical and financial health are closely connected, and how an individual feels about their personal financial situation can impact both.

Financial wellness is defined by your relationship with money. It’s more than the numbers that show how your investments are performing. It’s the ability to meet your financial needs comfortably today, a feeling of security about your future, and the freedom to make choices that allow you to enjoy your life now and down the road.

Here are ten tips to help you achieve financial wellness:

1. Have a Total Wealth Plan in place

A Total Wealth Plan can help you prepare for future challenges and goals. According to FP Canada, 85% of Canadians with a detailed plan reported higher levels of financial well-being compared to those without one.¹ A Total Wealth Plan acts as a roadmap for your financial future, helping you balance and prioritize short- and long-term goals. These may include retirement, making significant purchases, funding your child’s education or preserving wealth for your family. The Rosenberg Dri Financial Group can work with you to develop a Total Wealth Plan and implement strategies to help you achieve your goals, enabling you to envision your future with clarity, peace of mind and confidence.

2. Undertake a strategic review of cash flow

Take the time to conduct a strategic review of your cash flow for the year. Reviewing your cash flow helps you keep track of your saving and spending and prepare for unexpected expenses. You may also find that you need to cut certain costs or increase your income or have excess cash you can put to better use. Strategically reviewing your cash flow can also help you earmark funds to reach future financial goals — for instance, making a large purchase like a new house or car.

3. Establish a “reserve” fund

It’s important to have a reserve, also known as a rainy day fund, to cover costs related to unexpected life events. A common rule of thumb is to save up to six months of living expenses to protect you against sudden financial burdens.

Having access to a low-interest credit facility is also an option to consider.

If you currently don’t have funds set aside, try to earmark an amount you can save regularly and access for something unexpected like a significant home repair or illness in your family.

4. Save and invest for the future

No matter what you’re saving for, planning early is key to financial wellness. The earlier you start, the longer your savings can grow and help you achieve your long-term goals. To prioritize your savings, maximize contributions to vehicles that create tax-sheltered growth, such as your Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) and Registered Education Savings Plan (RESP). An RESP also allows you to benefit from government grants. If your employer offers a group retirement plan, pension plan or an employee share-ownership plan, take advantage of any available employer-matching programs.

5. Manage the taxes you pay

A proper tax plan can significantly boost your wealth throughout your working years, during retirement and when your assets are transferred to loved ones. A few items to consider: Are your investments held in the most tax-efficient type of investment account? Is there an opportunity to take advantage of strategies like income splitting, tax-loss selling, a spousal loan, charitable donations or an estate freeze? A customized Total Wealth Plan can include different strategies to discuss with your tax advisor that may help reduce or defer the amount of tax you owe. It can also offer you a range of options designed to deliver a regular stream of tax-efficient retirement income.

6. Understand your debt situation

From getting a mortgage to a line of credit, having some form of debt is common and can be a smart strategy in certain financial situations. Be sure to have a plan to pay off your debt and minimize interest charges. While interest on money borrowed to buy a home or for other personal use is not tax-deductible, the cost of borrowing to acquire assets to earn income (such as business, investments and rental property) may be tax-deductible. Speak with our office to discuss the merits of debt restructuring and innovative borrowing strategies to utilize borrowed funds for non-registered investments, which may improve tax efficiency and after-tax cash flow. And, of course, consult with your professional tax advisor before implementing any tax-driven strategies.

7. Consider insurance coverage

Insurance solutions can provide for the financial needs of your loved ones should something happen to you, your spouse or another member of your family. If the unforeseen happens, such as a disability, critical illness or a sudden passing, insurance can help protect your family and business from financial loss. It can also protect you, your family and your business by mitigating the risk of financial disasters and providing financial support when you need it most.

8. Consider making donations

If your budget and cash flow allow, making charitable donations is something you should consider. Not only will you feel a sense of pride by donating to a cause that is meaningful to you, but you will also save money on your taxes. For any donation made to a registered charity, you will receive a 15% federal tax credit on the first $200 of the donation and a 29% federal tax credit on any amount above that. In addition to the federal tax credit, each province offers tax credits that can also be claimed.

9. Create or review your estate plan

It’s crucial to have an estate plan to protect your loved ones and assets. Creating an estate plan is much more than just having a Will. It can help you prepare for care in the event of a critical illness and ensure your wealth is preserved and properly transferred to your loved ones in a tax-efficient manner. Key components of estate planning may involve preparing or updating a Will, tax planning, establishing Powers of Attorney (POA), charitable giving, updating beneficiary designations, and insurance solutions.

10. Take a financial inventory

Keep important documents like insurance policies, your Will(s), POAs and investment statements organized and readily available if needed. Also, note any valuable keepsakes, such as jewellery or artwork. It’s best to communicate with your loved ones regarding the location of these items, should they ever need to access them on your behalf.

Get started on a more secure and healthy financial future by contacting our office today.

¹ Financial Planning Standards Council, The Value of Financial Planning, 2012.

source https://rosenbergdri.ca/10-tips-for-financial-wellness/

Tax planning, like all wealth planning, is not simply a one and done exercise. Rather, it involves ongoing annual planning and review with your wealth and tax professionals, taking into account your particular facts and circumstances as they change and evolve.

The fourth quarter of the year is generally a good time to review your annual tax planning, especially as certain deadlines start to approach. Here are some tax planning tips to consider:

Important year-end deadlines

Keep these important dates in mind through the remainder of the year and into early 2023:

^* If the deadline falls on a Saturday, Sunday, or holiday, taxpayers have until the next business day to file. The deadline for filing your 2022 T1 personal income tax return is Monday, May 1, 2023.

Tax-loss selling

If you realized capital gains this year or during the prior three years, it may be beneficial to sell investments with accrued losses that are held in your non-registered investment account(s) before year-end to help offset the capital gains. An accrued loss is generated when the investments have a fair market value (FMV) less than their adjusted cost base (ACB).

The last trading day to realize losses for Canadian and U.S. securities is December 28, 2022, to ensure settlement of trades occur in 2022. You are required to apply your current year capital loss against your capital gains realized in the year. Any excess net capital losses can reduce your taxable capital gains in the three prior years or in any future years.

It is important to ensure that, if securities are sold at a loss, identical securities are not repurchased by you or an affiliated person within 30 days before or after the sale. Affiliated persons include your spouse or common-law partner (partner), corporations or partnerships controlled by you and/or your partner, or trusts where you or your partner is a majority beneficiary. These rules are known as the “superficial loss rules” – the loss incurred on a security sale is considered a superficial loss, which will result in the capital loss being denied. Instead of being able to claim the capital loss it will be added to the ACB of the identical securities that were purchased, which may reduce your future capital gain or increase your capital loss when you sell those repurchased securities.

Deferring capital gains

If you plan to realize capital gains before the end of the year, you may wish to review what your marginal income tax rate would be for 2022 as compared to 2023. If your tax rate is likely to be lower in 2023 because of your situation (retirement, maternity/paternity leave, back to school, etc.), you may consider deferring the realization of capital gains until January 2023 or later to reduce your overall tax bill for both years. Not only could you benefit from a lower tax rate next year but, more importantly, this strategy would enable a tax payment deferral of a whole year, as the taxes on a capital gain generated in 2023 are due by April 30, 2024.

As explained above in “Tax-loss selling,” you may also be able to offset any capital gains triggered next year with capital losses carried forward from previous years, reducing your tax obligation even more. However, given potential changes in the value of investments, you should consult with your investment advisor prior to implementing such a strategy.

Donations – cash and in-kind

If you are contributing to charitable organizations, these donations can help reduce your potential income taxes payable. The federal donation tax credit of 29% is applicable to donations over $200 (33% if you have income over $221,709), and there is an additional tax credit available provincially, with rates varying by province. Useful planning tips can include pooling donations with your partner and having one partner claim all donations. These can be made up to and including December 31, with the donation receipt dated accordingly.

Another strategy, called donations in-kind, is to donate qualifying securities with an accrued gain, including publicly traded securities. Your tax credit is based on the FMV of the shares when donated, and any gain triggered on the disposition has a zero percent inclusion rate, which essentially yields a tax-free charitable donation. There is an increased level of complexity when making donations in-kind, so it is important to discuss these with your investment and tax advisors well in advance of the December 31 deadline.

Tax-Free Savings Account (TFSA) contributions and withdrawals

Canadian residents aged 18 and older may contribute to a TFSA. Unlike an RRSP, TFSA contributions are not tax-deductible. Rather, all investment income and returns earned within a TFSA are tax-free. The annual maximum TFSA contribution amount is $6,000 in 2022 — rising to $6,500 in 2023 — and any unused contribution limit may be carried forward to future years. There is no deadline to make a TFSA contribution. The accumulated limit since 2009, when the TFSA was launched, and if you were 18 and older at that time, is currently $81,500.

TFSA withdrawals can be made at anytime tax-free. Generally, the withdrawn amount may be recontributed to the TFSA in the following calendar year unless you have unused TFSA contribution room in the year of withdrawal. Therefore, if you are considering a TFSA withdrawal in early 2023, you may wish to consider doing so in 2022 so that you will not have to wait until 2024 to be able to recontribute the withdrawn amount.

RRSP contributions

RRSP contributions are another way to manage your effective tax rate and liability. Contributions are tax-deductible against income up to your contribution limit. The maximum RRSP contribution limit in 2022 if you do not have any carryforward room is $29,210. RRSP contributions must be made by March 1, 2023, to be deductible on your 2022 personal tax return. Any undeducted contributions may be carried forward to future years, possibly when your tax rate may be higher.

Another option is to contribute to your partner’s spousal RRSP to facilitate income splitting in retirement. To accomplish this, the higher-income partner contributes to the plan of the lower-income partner, with the higher-income partner receiving the deduction. Withdrawals, despite being contributed by the higher income partner, are taxed in the hands of the lower income partner, allowing you, as a household, to take advantage of the lower marginal tax rate. If the annuitant partner withdraws a contribution from their spousal RRSP in the year the contribution was made or a contribution made in either of the two previous years, the withdrawal may be attributed back to the contributor partner, meaning it will be taxed in their hands, rather than the annuitant’s.

A new registered plan called the First Home Savings Account (FHSA) will allow first-time home buyers to contribute up to $8,000 per year starting in 2023. FHSA contributions are tax-deductible, like those made to your RRSP. However, unlike the RRSP, withdrawals from your FHSA are tax-free when used to purchase a home. Given the unique attributes of the FHSA, if resources to contribute to your RRSP are limited, you may consider holding off on contributing this year in favour of opening and contributing to an FHSA when it becomes available in 2023. Speak with your investment and tax advisors to determine which tax-deferred plan options are best suited for your investment goals.

Convert your Registered Retirement Income Fund (RRIF) and get access to the eligible pension income tax credit

If you are between ages 65 and 71 and are considering or are currently taking withdrawals from your RRSP, you may consider converting a portion of your RRSP to a RRIF to take advantage of the non-refundable Federal pension tax credit, applicable to up to $2,000 of eligible pension income. There is also an applicable provincial/territorial tax credit, except in Quebec, which varies by province. Eligible pension income for purposes of the pension tax credit includes RRIF income, the taxable part of life annuity payments and Retirement Pension Plan retirement benefits if you are 65 and over.

The Federal tax credit rate of 15% is applicable to the eligible pension income. By transferring $14,000 from an RRSP to a RRIF at age 65 and withdrawing $2,000 per year from age 65 to 71, you are ultimately saving $2,100 (15% x $14,000) of Federal income tax over seven years by claiming the pension tax credit, as compared to withdrawing the same $2,000 from an RRSP. There would be additional tax savings with the provincial/territorial tax credit, except Quebec. For couples, this amount can be doubled to $4,200 of Federal tax savings over seven years when each partner converts $14,000 of their RRSP to a RRIF and each withdraws $2,000 per year.

RESP contributions

For new parents or grandparents, setting up and contributing to an RESP before December 31 could be a smart way to start saving early for your (grand)child’s post-secondary education. RESP contributions are not tax-deductible, but they do grow tax-deferred in the RESP. Withdrawals to pay for your child’s education costs will be taxed in their hands. Depending on your children’s marginal income tax bracket, this may yield low-taxed education savings if they do not have other sources of income. If ever your child decides not to continue education after high school, there are ways to transfer the funds to another qualifying child or to your RRSP, subject to your contribution limit, in a tax-efficient manner.

Contributing to an RESP allows you, or rather your child, to benefit from the Canada Education Savings Grant (CESG) equal to 20% of the first $2,500 in contributions per year, or $500 annually, up to a lifetime maximum CESG amount of $7,200 per beneficiary/child. There may be an acceleration to receiving the CESG depending on your family income. A CESG exceeding the $500 limit could be received in the following year if sufficient carry forward room exists, up to a maximum of $1,000 (20% of $5,000 in contributions). Although there is no annual contribution limit for an RESP per se, there is an annual CESG limit of $1,000. There is also a lifetime RESP contribution limit of $50,000 per beneficiary. If you have the available funds, consider front-loading a new RESP with $16,500 ($2,500 + $14,000) to receive the annual maximum CESG and to maximize tax-deferred investment earnings on contributions that will not generate CESG payments. Indeed, because the contribution limit is $50,000 and contributions of up to $36,000 will generate the maximum amount of CESG payments (20% x $36,000 = $7,200), the additional $14,000 may be contributed as early as possible to maximize investment growth. Speak to your investment and tax advisors for further details if you wish to fully use the benefits of an RESP.

Pay investment expenses

Certain investment-related expenses must be paid by year-end to be able to claim a tax deduction or credit in 2022. Generally, these expenses include interest paid on money borrowed to earn income from property or investment advisory fees paid for non-registered accounts.

Commissions and transaction fees paid for the purchasing and selling of securities in non-registered accounts are not deductible on your income tax return. Rather, the commissions paid are added to the securities’ ACB or claimed as a selling cost of the security, which may lower your capital gain or increase your capital loss when you sell the security.

This article is only a reminder of general year-end tax planning considerations and deadlines. Everyone’s situation is unique, and any general tax planning opportunity may not benefit every person. Speak with your own tax advisor for further discussion and analysis and before implementing any tax planning strategies.

source https://rosenbergdri.ca/2022-year-end-tax-planning-tips/

We plan to provide for our loved ones, but we should also plan for ourselves. While estate planning is important for planning and arranging for one’s affairs after death, contingency planning arranges for managing one’s affairs in life when we cannot make decisions for ourselves.

A Power of Attorney (POA) enables another person (known as a donee) to make such important financial and/or personal care decisions for the person who may be impacted (known as the donor). The donee must act in the best interest of the donor in accordance with their wishes set out in the POA.

Types of Powers of Attorney in Ontario

Under Ontario law, two types of POAs are addressed in the Substitute Decisions Act:

POA for property can be continuing or non-continuing. A continuing POA for property covers a person’s financial affairs and allows the appointed donee to act, even when the donor becomes mentally incapacitated. It generally authorizes the donee to execute anything regarding the donor’s property except executing their will. However, it can also be subject to specific conditions or restrictions, such as the limited authority to delegate certain functions. A non-continuing POA for property also covers a person’s financial affairs but cannot be used if the donor becomes incapacitated. For business matters, it is often activated for a specific period or for a particular task, such as managing a specific financial transaction.

POA for personal care covers a person’s health care decisions if the donor becomes incapacitated. It includes all personal decisions such as where the donor lives, their nutritional requirements and what kind of medical treatment they will receive. It can also have specific conditions or restrictions. Unless stated otherwise in the document, the donee is only allowed to make medical or long-term decisions if a medical professional or evaluator’s assessment finds the donor mentally incapable. However, other personal care decisions can be made without such requirements. It often also includes an advance health care directive (or a living will which can be a separate document) that sets out that certain medical treatments can be withheld under specified conditions, such as where there is no hope for recovery and the situation is terminal.

The terminology and legal requirements for POA vary by province. For more information for Ontario and references set out herein, see The Ministry of the Attorney General on Powers of Attorney.

Considerations for POA appointments

The donee(s) can be more than one person the donor knows well and trusts with important decisions. They must manage the affairs for the exclusive benefit of the donor and may be required to account for all their important decisions. The donee for the POA for personal care must be at least 16 years old, and for POA for property must be at least 18 years old. The donee can be a family member, a friend or a corporate trustee such as Scotiatrust®, with specific professional expertise in acting POA for property.

If the property involves corporate shareholdings, then particular attention should be paid to the corporate structure and voting procedures. If the donor was a director, the donee could not automatically step in as a director. The donee must satisfy all corporate requirements before taking action. If the donee is a shareholder in other corporations, then there could be adverse tax consequences to the donee involving the availability of the small business deduction. Given the fiduciary responsibilities of the donee(s), care and consideration should be taken as they can be exposed to personal liability for financial damages. It is recommended that before accepting an appointment, legal advice be obtained.

Capacity issues to consider

For a POA to be valid, the donor must be mentally capable at the time of execution. To be mentally capable of giving a POA for property, you must understand the nature of your assets, be aware of your obligations to dependents and understand the power and authority you give to the donee.

 To be considered mentally capable of creating a POA for personal care, it must be clear that you understand the donee has a genuine concern for your welfare and that there may be a need for the donee to make personal care decisions in the event of a mental disability. It is good practice to include a statement from the witnesses that neither of them has any reason to believe that the donor is incapable of giving the POA. In certain circumstances, it may also be advisable to have a health professional be a witness.

Please review your provincial legislation and contact a legal professional for specific guidance.

We work with the Scotia Wealth Management team of experts to assist clients with their estate and contingency planning.

Please contact our office  to see how we can help.

Please speak with your own legal advisors about your own situation before implementing any planning strategies.

source https://rosenbergdri.ca/the-role-of-power-of-attorney/

Determining if your loved one requires at-home care is not an easy decision to make.

If you have a family member who is ill or elderly, they may be able to remain in their home, with some assistance, instead of being hospitalized or admitted to a nursing or long-term care home. The extent of the service required will vary.

Depending on the circumstances, you, your family or friends may be able to provide some of this help. This is an area where you should have an open and honest discussion with everyone involved to determine if this is a practical solution. Your loved one’s needs might be relatively modest and can be met without putting unreasonable demands upon anyone else’s time. In other cases, you may decide that outside help is required. Some of the areas of assistance to be considered are:

Live-in assistance

Their condition may be such that they will require more constant care with an attendant in their home for most or all of the day. The relative costs of having your loved one live in a residential facility would need to be considered, as well as the emotional factors since many older adults are attached to their homes and are very reluctant to move to a care facility.

Adult daycare

Many communities offer facilities where seniors can spend their days in a safe, social environment.

Respite Care

If you or other family members provide in-home care for your parent, there are Respite Care programs where a qualified attendant will visit periodically to provide care for your parent so the primary caregiver can ‘take a break.’ This can be an essential service for the caregiver(s) to prevent the build-up of stress.

Meals

Your family member may be able to manage to make themselves breakfast and lunch but do not feel up to making an evening meal. You and your family may decide that you can do some periodic shopping to keep them supplied with essentials and provide an evening meal. However, family schedules and proximity can make providing regular meals impractical, so a popular alternative could be ‘ordering from a meal delivery service or a similar program in your community.

Transportation

If your loved one is ill but still able to get around, you will need to consider the extent of their mobility and needs. Devices such as canes and walkers can greatly assist people with reduced mobility. Electrically powered scooters are another option. If they are relatively mobile, they may want to get out periodically to shop or attend doctor’s appointments. You and other family members or friends may be able to arrange a schedule to make these trips. If this is not practical, many communities have organizations that provide transportation services for those with limited mobility and volunteer drivers who can take the patient to doctor’s appointments or therapy sessions.

If they can still drive their car, you should consider getting a disabled parking sticker to minimize their walking. The appropriate provincial ministry will require a signed statement from a qualified health professional that the applicant qualifies on medical grounds.

Home and garden care

If they are able and prefer to remain at home, they will probably require some assistance in maintaining their home and garden. You and your family members may be able to arrange an acceptable schedule and list of responsibilities. Required assistance will probably include laundry and cleaning, as well as, garden maintenance, snow removal, etc.

If family and friends cannot manage these things, local volunteer services may be available to assist infirm/disabled persons. You may have to make arrangements with local companies that will require paying commercial rates, which must be factored into the budget.

Visiting and monitoring

When your loved one is at home, you will want to regularly arrange for visitors to call. This will help confirm they are managing okay on their own and provide some important social contact.

Where to start

Our office has access to a great deal of information on the support services available. For example, in Ontario, the Ministry of Health and Long Term Care is an excellent place to start learning about the options available to assist people in finding and funding in-home care.

For more information on planning at-home care for your loved one, contact our office today

source https://rosenbergdri.ca/considering-home-care-for-a-sick-or-elderly-family-member/

For many Canadians today, caring for an aging parent or a family member is a defining part of life.

According to Statistics Canada, one in four Canadians provides care or help to a family member or a friend with a long-term health condition, a physical or mental disability, or an aging-related need.¹

Taking on caregiver responsibilities can be especially stressful for those in the “sandwich generation” as most still have careers to grow, children to raise, and financial obligations to meet, in addition to providing care for aging parents.

When caring for a parent or an ill family member, the demands on your time and finances can add up quickly. While the shift to becoming a caregiver can be difficult, taking steps now to prepare a thoughtful plan can help you provide your loved ones with the personal and financial support they need.

Not sure where to start? Here are five key steps that can help ease the transition to caregiving:

1. Don’t wait to have important conversations

It’s never too early to start talking with your family members to ensure everyone is on the same page when a care crisis occurs. Specifically, talk to your parents about their intentions for the future when they’re still capable of managing their affairs.

Discussing mortality with your parents and understanding their financial plan for their golden years can seem awkward at first. However, the longer you delay, the more emotionally charged those conversations can become, and the less time you’ll have to create an action plan. Including other family members in the dialogue helps ensure everyone is engaged and aligned with your parent’s wishes. Discussion topics could range from choosing a primary caregiver and addressing family dynamics to estate planning and general financial management.

Did you know?

• Nearly half of caregivers in Canada are primarily caring for a parent or parent-in-law.
• 54% of caregivers in Canada are women.
• Two-thirds of caregivers are 45 or older.
• One in three caregivers provides one to three hours of care per week.

Source: Statistics Canada, General Social Survey – Caregiving and Care Receiving, 2018.

2. Understand your parents’ financial picture

While finances can be sensitive, being aware of your parents’ financial situation allows you to prepare and mitigate potential issues. From the number of bank accounts to where legal contracts are stored (wills and deeds), be proactive by taking an inventory of their financial resources.

How much they have and where the assets are located can help support your parents when an unexpected event occurs. If there’s a risk that their retirement savings may fall short of their needs, re-examining their investment strategy or adjusting their planned cash flow may be options. If you think they’ll require your financial support at some point, you will need time to plan accordingly.

3. Prepare for unexpected costs

Health costs can rise significantly as we age. Between 65 and 74, approximately one in eight Canadians require help due to a long-term health condition, but this figure jumps with age. By age 85, 37% of women and 24% of men live in a retirement or nursing home.2 Even if you’re not looking at the long-term care option for your parents, speaking with a care advisor can help you determine the type of living situation best suited for them. Assisted living facilities and home accommodations/services can be expensive and come with their benefits and challenges. Keep in mind that costs vary depending on the required services and province.

Tax considerations for caregivers

Depending on your situation, tax credits and benefits may be available to help offset the financial burden of being a caregiver. Consult your tax advisor for more details.

• Compassionate Care Benefits
• Canada Caregiver Amount
• Disability Tax Credit
• Home Accessibility Tax Credit

Creating an emergency fund can help you better manage and plan for unexpected events if you need to take unpaid leave or modify your work schedule to care for your parents. Planning for these possibilities can provide you and your loved ones with greater peace of mind.

4. Where there is a will, there is a way

Many Canadians do not have a will. In the event of their incapacity or death, they may be leaving their estate in disarray. Delays and unnecessary expenses can accumulate if there is no executor to act as the estate’s administrator. There is also a risk that the deceased’s wishes are left unclear or misinterpreted, which can lead to family conflict.

Proper planning helps ensure assets are distributed how your parents want and in an orderly fashion that minimizes the tax burden on beneficiaries and the estate. If your parents already have a will and a Power of Attorney, be sure these documents stay updated and note where they’re safely stored so you can quickly locate them. You can contact us about how Scotiatrust® can help with estate planning, trustee services, or with solutions for Executors and Powers of Attorney.

5. Consider your own caregiving goals

While it may be difficult to put your goals first while caring for others, planning is critical so you do not lose sight of your goals and the care you may need in the future. When your needs are taken care of, you will be more effective at helping others. Take the time to take an inventory of your current and expected income, ensure you have sufficient funds in retirement, and build contingencies in your Total Wealth Plan, not only for the care you may need when you get older but also to provide care for someone else.

We can work with you to help formulate a roadmap for your family, your business, and your future with a Total Wealth Plan that addresses the steps you need to take to achieve greater certainty for what lies ahead.

Contact our office to learn more.

¹ Statistics Canada, General Social Survey – Caregiving and Care Receiving, 2018.
² There is Money on the Table: Challenges and opportunities of marketing to an older population, Environics Analytics, April 2019.

source https://rosenbergdri.ca/planning-how-to-care-for-aging-parents/

Financial abuse can take many forms. Recognize the different types that target seniors.

Did you know fraud is the number one crime committed against older Canadians?¹ It’s true—and sadly, financial abuse is more widespread than ever among vulnerable seniors. Here’s how you can help protect yourself and your loved ones.

Types of financial abuse

Financial abuse involves one party unjustly trying to take money, property, or information from another. Anyone can perpetrate this type of abuse, but often it is someone close to the victim, like a family member, friend, or caregiver.

Here are a few common examples of financial abuse that targets seniors:

Financial scams

These usually occur over the phone or online and involve a fraudster impersonating a trusted person or entity, like a bank, government agency, company, or family member. The fraudster then attempts to persuade the victim to send them money or gain access to the victim’s personal or financial information.

Power of Attorney abuse

While Powers of Attorney are typically a valuable estate planning tool, there is the potential for them to be abused. The person appointed as your loved one’s Attorney (not to be confused with a lawyer) may take advantage of their position and try to control your loved one’s finances for their benefit.

Undue influence

This occurs when individuals take advantage of their relationship with the victim to persuade them into making decisions against their wishes. This can include withdrawing money from bank accounts, changing official documents to the fraudster’s name(s), or changing the victim’s will in a self-dealing manner.

Red flags

Several warning signs may indicate your loved one is being financially abused:

• Increased dependence on one person, such as a friend or caregiver
• Abrupt increase in spending activity or withdrawals
• Unexplained charges on credit cards
• Newly created joint accounts
• Sudden changes to legal documents, including wills and Powers of Attorney

Prevention strategies

Secure personal information

It is crucial to keep personal and financial information safe and secure. This includes name, address, birth date, Social Insurance Number (SIN), and bank information. Ensure your loved one does not give this information to anyone over the phone or online that they have not directly contacted. Also, shred and dispose of any documents containing personal information.

Power of Attorney

Ensure your loved one appoints (a) trustworthy Attorney(s) for Property who will act in their best interests. You may suggest they appoint several people or a trust company to ensure their affairs will not be mismanaged.

Name a Trusted Contact

To help protect investors, particularly older and vulnerable individuals, from financial abuse and exploitation, the Canadian securities regulators recently introduced the Trusted Contact Person (TCP) initiative. If you have an investment account, you may be able to name a TCP. This individual cannot be involved in making financial decisions for you but is identified to your investment advisor as someone who can provide objective information if specific concerns are raised related to your overall personal and financial well-being.

Don’t be afraid to say no

Remember, your loved one should never be afraid to say no if they feel pressured or coerced into making unwise financial decisions.

If you have questions, please contact our office.

¹ https://www.canada.ca/en/employment-social-development/corporate/seniors/forum/fraud-scams.html

source https://rosenbergdri.ca/protecting-seniors-from-financial-abuse/