The First RRSP

The First RRSP

The first RRSP — then called a registered retirement annuity — was created by the federal government in 1957. Back then, Canadians could contribute up to 10 per cent of their income to a maximum of $2,500. RRSPs still remain one of the cornerstones of retirement planning for Canadians. In fact, as employer pension plans become increasingly rare, the ability to save inside an RRSP over the course of a career can often make or break your retirement.

The deadline to make RRSP contributions for the 2018 tax year is March 1st, 2019.

If you need help or advice with you tax planning or investments we are always available to help

Anyone living in Canada who has earned income has to file a tax return which will create RRSP contribution room. Canadian taxpayers can contribute to their RRSP until December 31st of the year he or she turns 71.

Contribution room is based on 18 percent of your earned income from the previous year, up to a maximum contribution limit of $26,230 for the 2018 tax year. Don’t worry if you’re not able to use up your entire RRSP contribution room in a given year – unused contribution room can be carried-forward indefinitely.

Keep an eye on over-contributions, however, as the taxman levies a stiff 1 percent penalty per month for contributions that exceed your deduction limit. The good news is that the government built-in a safeguard against possible errors and so you can over-contribute a cumulative lifetime total of $2,000 to your RRSP without incurring a penalty tax.

Find out your RRSP deduction limit on your latest notice of assessment clearly stated.

You can claim a tax deduction for the amount you contribute to your RRSP each year, which reduces your taxable income. However, just because you made an RRSP contribution doesn’t mean you have to claim the deduction in that tax year. It might make sense to wait until you are in a higher tax bracket to claim the deduction.

When should you contribute to an RRSP?

When your employer offers a matching program: Some companies offer to match their employees’ RRSP contributions, often adding between 25 cents and $1.50 for every dollar put into the plan. Take advantage of this “free” gift from your employers.

When your income is higher now than it’s expected to be in retirement: RRSPs are meant to work as a tax-deferral strategy, meaning you get a tax-deduction on your contributions today and your investments grow tax-free until it’s time to withdraw the funds in retirement, a time when you’ll hopefully be taxed at a lower rate. So contributing to your RRSP makes more sense during your high-income working years rather than when you’re just starting out in an entry-level position.

A good rule of thumb: Consider what is going to benefit you the most from a tax perspective.

When you want to take advantage of the Home Buyers’ Plan: First-time homebuyers can withdraw up to $25,000 from their RRSP tax-free to put towards a down payment on a home. Would-be buyers can also team up with their spouse or partner to each withdraw $25,000 when they purchase a home together. The withdrawals must be paid back over a period of 15 years – if you do not pay one fifteenth of the borrowed money, the amount owed in that calendar year it will be added to your taxable income for that year.

Unless it’s an emergency then it’s generally a bad idea to withdraw from your RRSP before you retire. You would have to report the amount you take out as income on your tax return. You won’t get back the contribution room that you originally used.

Also, your bank will hold back taxes – 10 percent on withdrawals under $5,000, 20 percent on withdrawals between $5,000 and $15,000, and 30 percent on withdrawals greater than $15,000 – and pay it directly to the government on your behalf. That means if you take out $20,000 from your RRSP, you will end up with $14,000 but you’ll have to add $20,000 to your taxable income at tax time. This is done to insure that you pay enough tax upfront for the withdrawal at the source so that you are not hit with an additional tax bill (assessment) when you file your tax return.

What kind of investments can you hold inside your RRSP?

A common misconception is that you “buy RRSPs” when in fact RRSPs are simply a type of account with some tax-saving attributes. It acts as a container in which to hold all types of instruments, such as a savings account, GICs, stocks, bonds, REITs, and gold, to name a few. You can even hold your mortgage inside your RRSP.

If you hold investments such as cash, bonds, and GICs then it makes sense to keep them sheltered inside an RRSP because interest income is taxed at a higher rate than capital gains and dividends.

For more information regarding WealthSense investments and RRSP’s

The Value of our Dollar…

The Value of our Dollar…

When will our dollar come back to a common value that we are comfortable with? Since the global oil rout began in late 2014, everyone has been trying to call a bottom in crude prices. Looking at it with a wider perspective, crude prices have a huge impact on the global economy as a whole, directly influencing those countries that are major exporters of it. Canada, the world’s sixth largest oil-producing country by volume is particularly exposed to fluctuations in crude prices, and its currency reflects this by showing a strong correlation to crude oil prices (given no other major economic developments).

Adding to this point, Canada’s largest trading partner for oil is just south, as the United States gobbles up more than 95% of its crude exports. Oil is priced in U.S. dollars (USD), so lower oil prices mean less U.S. dollars coming in per barrel exported. Less USD supply drives up the value of USD versus the Canadian dollar (CAD), resulting in a weaker Canadian dollar.

The weakening of the Canadian dollar is a major concern for anyone who has immigrated to the United States from Canada, and a great boon for anyone looking to move to Canada or buy property here.

So now for the 96.5-billion-barrel question: Have oil prices bottomed? Speculators look to global events for a clue as to a bottom forming for oil, as every OPEC meeting and every meeting between Russia, Iran, or Saudi Arabia about oil production immediately causes a spike in crude. If the talks yield nothing of substance, crude prices immediately fall back down. Is this just the Wall Street, or is there more to it? The answer lies in Economics 101: Supply and Demand.

Oil speculators know that a commodity’s price is dependent on the balance between the supply present and available for use and the current and future demand of that commodity. When representatives from OPEC, Russia, Saudi Arabia or Iran meet with each other, speculators are hoping for an agreement that affects the supply/demand balance with a lessening of the future supply via production cuts, or at least a freezing of the output to allow for demand to outpace supply. It is the underlying supply data, however, that suggests we’ve bottomed out in crude prices and thus the Canadian dollar in the short-term at least.

Is oil turning around, and could it possibly be undervalued.

Well if we look at the price at the pump it seems to be rising slowly. Although yesterday I bought some US currency and paid the highest exchange I have in recent years. Time will tell but as we know our currency is valued to our resources.


Do you have a plan?

Do you have a plan?

Most people are concerned about having enough money to meet their obligations at or in retirement. Using traditional planning methods such as buy term and invest the difference, and live off the earnings and retain capital are the most common methods used today.

This type of planning only works if you follow a regimented plan and you don’t spend the difference.  If you fail to invest the rest… it lessens the quality of life that one should be able to enjoy in the active years of retirement! It is upside down and backwards!

With our low-interest rate environment, it’s difficult to find sustainability in your portfolio. One way to extend the life of your capital is to consider equities in the form of dividend earning stock.

This tends to be a source of hedging against tax, inflation, fees and other wealth transfers, however, using equities means taking more risk.

Who wants to take more risk leading into retirement?

If you would like advice on reducing the risk, or with what type of investment vehicle may be best for your situation please contact us at

Visit us at at Henley Financial and Wealth Management

If indeed you are investing in equities please understand the risk involved within your investable assets. Investing in equities will depend on your risk tolerance and the reality of the situation. During retirement, you should lower the amount of Equities within your portfolio to protect you against the volatility of the markets. Leading up to retirement Equities can help build your portfolio but you must be able to accept the risk of volatility which the markets will provide.

Guaranteed Lifetime Withdrawal Benefit products offer a guaranteed income bonus and can provide a stable environment for investments moving forward with the option of a guaranteed lifetime income. This takes the guess work out the planning and provides you with a pension like asset.

Another strategy is to have adequate permanent life/asset insurance that frees up other assets such as non-registered savings, investment property equity or retained earnings in a business.

Having enough life insurance allows one to spend down taxable savings RRSP’s or RRIF’s during early/active retirement years (age 60-75) whereby you’re actually reducing the tax burden overall.

By deferring the use of RRSP’s and RRIF’s the tax on these assets is actually growing as invested capital. By using the funds sooner, rather than later, (yes you are paying more tax now) but you are paying a known tax, you have control over what the tax amounts are. If you wait long enough the government dictates the amount of tax owed yearly. Meaning if you defer too long, one conceivably can pay a much greater tax than ever saved by using the registered plan strategy!

Access equity sitting dormant in your paid off or very low debt home could also be a strategy that you could use during retirement. The reverse mortgage has been a component of retirement planning  over the last few years based on the low-interest rates on borrowed money. Again this strategy requires some professional advice.

Life insurance lowers the pressure of the capital to perform and lessens market volatility risk. It also lessens government control risk. Meaning, by using a registered plan strategy you absolutely are in a partnership with the government. RRSP and RRIF products are very much a controlled revenue source for the C.R.A. your strategy will dictate the how much income they will receive on your behalf.

If you are interested in creating more spendable income during the early retirement years without fear of running out of money we can show you how. For the most part, we can increase your spendable income into and during retirement without any additional out of pocket expense!

If we can recover 1%-5% of gross income from dollars that are unnecessarily being transferred away from you through tax, fees and other opportunity costs which can be redistributed to your retirement plan and increase lifestyle along the way. Would you be interested?

Let us provide you with an overall review of your entire investment and financial plan. We will do this with no obligation from you to move forward with any recommendations we may have, or we may find that you are well on your way and continue on that path. Either way, a second opinion never hurt anyone.

Our Home and Native Land…The True North Strong and Free. How did we not see this coming?

Our Home and Native Land…The True North Strong and Free. How did we not see this coming?

Our Home and Native Land…The true north strong and free

Albertans have been hit by a modern day gold rush. Oil prices have soared and adventures have flooded into the province, everyone wants to strike it rich, this black gold has been flowing freely and many have been riding the wave. These are the glory days in Alberta the spirit of Oil is alive and well.

Oil is everything in Alberta the province has been turned into a big money making machine. This has been the best time of the provinces existence, go big or go home. Suddenly they are more Oil companies setting up shop and the spin-off from the industry has created thousands of jobs.

As the price of Oil climbs so do the dreams of many… we are rich and this will last forever or so we all hope.

We know that oil has been leveraged to get the world to notice that there is a power in play, and oil and those who have it will be the power brokers in the world’s economy. This has help to create a boom in Alberta; millionaires are born money is everywhere. Alberta is rich! With this new found power in the world’s economy comes the boom of industry and everyone wants a piece of the action.

People from across the country flock to Alberta, construction is up and the vacancy rates are down. Everyone is in the search of high paying jobs living the dream of finding gold at the end of the rainbow.

Oil has helped to increase our stock portfolios, there is real estate speculating in Alberta, and of course, many have jumped into the oil ventures market. There is money to be made in every sector. Canada is the place to be our economy is booming we are a natural resource haven. When will it end?

Young entrepreneurs are getting together to start up Oil and Gas companies. There is a rapid expansion in the industry. It has lead to spin-off companies to help keep the production in place and drive the profits into the stratosphere.

Wow, we are a world power!

Then suddenly a worldwide economic recession hits and the price of Oil drops rapidly and the boom is over. The power brokers are no more the spin-offs are now gone and so are the dreams of many. We don’t see it coming because we don’t want it to end.

When do you think this happened?

Easily you could say 2015, but this actually happened in 1970 when oil was selling for $3 a barrel, and then climbed to $15 almost over night and by the end of the decade Oil was $40 a barrel. Then came the world’s economic collapsed in mid 80’s. By the mid-90’s we saw this cycle happen again, and we are seeing it happen yet again.

Canadians are resilient we have lived through the highs and lows of the times and we always recover. This time is no different the sun will soon shine on us again; we will rise up and take the world by storm the cycle will continue. Only the next time hopefully we can learn from our past that nothing lasts forever.

Caught in the cross fire of Oil.

Caught in the cross fire of Oil.

As they say, the cure for high prices is higher prices.

That always seems to make the high prices more reasonable, Its called sticker shock we become acclimatized to paying a high price for our consumer goods.

But the truth at the heart of the collapse in oil prices in 2015, a force that will shape our personal finances in the coming year, is that we will become acclimatized to these low gas prices. In the GTA, it’s good news. The commute is cheaper and so is the cost of heating our homes. It adds up to a tax cut as good as the one the Liberals are giving us.

The downside of cheap gas is the upside to other expensive consumer goods across the board. So much for the savings established at the pump

In the west, where 40,000 industry-related jobs have disappeared, more pain is on the way because the energy rout may only be midstream. Even if it isn’t, more jobs will likely go. Until the price of oil stabilizes, the only thing companies can do is guess and keep cutting to make sure their costs stay below their falling revenues.

It’s hard to recall that 18 months ago, oil was at $110 (U.S.) a barrel. Today it’s trading under $35, two-thirds lower.  If you think about that in terms of your household, how would you fare if your family income was cut by 69 percent?

This is all about a fight for control of the world’s oil market, dominated by the Organization for Petroleum Exporting Countries (OPEC), of which Saudi Arabia is the lead. As China’s insatiable demand for energy drove up prices, a search for cheaper supplies made sense. New technologies made it easy to drill into shale formations and fracture the rock to release oil, creating a plentiful supply of energy in North America.

A sign of the times is that the U.S. lifted a 40-year ban on the export of domestically produced oil. That is because fracking is making the U.S. almost energy self-sufficient, just as China’s economy is slowing — and so is its need for oil. In the meantime, Iran is adding two million barrels to world markets as part of its nuclear deal.

The Saudis seeing a long-term threat to their oil power have ensured that OPEC continues to produce at the same pace to keep up market share. The Saudi goal is to drive the higher-cost fracking industry under. Our, even more, expensive oil sands are caught in the crossfire.

OPEC shows no signs of standing down.

The dollar

In June 2014, with $110 oil, the loonie sat at 92 cents (U.S.). It cost us $1.09 for one American dollar. Today, it was at 72 cents, a drop of 22 percent. Which is $1.38 to $1 at the consumer level!

If oil rebounds, so will the dollar; if not, it may fall further which is something Canadians living close to the borders care a lot about. Even if you don’t live close to the border that cheap flight or vacation in the U.S. is no longer an option.

Canadian stocks

Toronto share prices are down 9.8 percent year to date. Energy stocks make up about 10 per cent of the TSX and have fared much worse. The TSX Energy Index is down 26 percent.

If oil prices improve, these shares will too.


We climbed out of our 61-cent-dollar hole in 2000, gradually getting to par in 2009 without much inflation. Our exports to the U.S. were cheaper and so more attractive, creating profits and jobs. By substituting Mexican avocados for California ones, we energized our economy without higher prices. Cross your fingers we can do that again.

Interest rates

If we can’t and inflation starts picking up, rates may rise even though the Bank of Canada doesn’t want them to. If so, housing starts will cool, consumer spending will fall and we’ll all have a harder time.

There are a lot of ifs, and’s and maybe’s here and, as always, beware of forecasts. Between now and this time next year, anything can happen. As I stated in a previous article no one can predict the future but much speculation will spin these storylines moving forward. All we can do is live life have fun and enjoy the day as it comes.

Since gas is cheaper in your area fill up and enjoy the ride as it will not last. We know  all too well that things go up and down over night. This soon shall pass and we will be talking about something completely different in 12 months time.


What can we learn from our past?

What can we learn from our past?

1987 was our first experience with a violent correction in financial markets since 1929 and it taught us a few things about investing. Or so you would think!

The crash of 1987 was a violent correction in financial markets. Share prices had been on a tear during the first half of the year. Year-over-year through August, the Dow Jones was up 44 per cent. The TSE, as it was called then, was up 34 per cent year-to-date. Good times were rolling. Although this is nothing like what has happened in the last part of 2015 and the beginning of 2016. Good times have been rolling since the correction of 2008 -2009.

In October of 1987, things fell apart. The psychology turned on hints that interest rates might rise and a sense that prices had galloped ahead too far, too fast. Markets trembled on Fri., Oct. 16. Monday, Oct. 19, saw a record 23 per cent drop for the Dow Jones Industrial Average, and 11 per cent drop for the Toronto Stock Exchange. Sounds and looks familiar to all things we hear today.

The scale of the collapse was well beyond anyone’s ability to measure; the damage was the worst since 1929. Early forms of computer trading, which sold blocks of shares as prices fell, helped pile on the downward pressure.

Ever wonder what tycoons like Jim Pattison or Warren Buffet did when everyone is screaming that the world will end in the face of market corrections. They bought shares, mostly in blue chip companies. In the face of a total market collapse, they would be diving in. Why not, opportunities like this didn’t come along very often — great companies with great businesses at a bottom of the barrel prices.

When I started in this business I would hear the seasoned veterans at round table talks advocate for buying low and selling high. Which sounded like reasonable advice to me, and if I followed their advice I would create a sound financial investment portfolio for my clients.

Markets always seem to recover, regardless of the pessimists. The Dow ended 1987 with a small gain, as did the TSX, which was up 3 per cent on the year. It takes a while for the lessons to sink in, but here’s how to look back on that experience

imagesNobody can predict the future though many claim they can. How long or lasting will this setback be is only a guess by anyone claiming to know. In 1987 and in 2001, the corrections were short and sharp.

In 2008-09, it lingered. But when prices took off in mid-2009, it was a four-year spree. One reason was record low-interest rates; the other was an expectation of a global recovery that would fuel profits.

But the recovery has been weak and share prices have run ahead of the profits behind them. The rise in share prices has not been supported by growth. The issue for Canada is the rapid fall in commodity prices. Our resources are not all we have going for us, but the global war for oil dominance has caught us smack in the middle. Companies that are dominant with a history of profitability are good bets in good times and bad. Sentiment can turn quickly. Irrational exuberance can give way to irrational pessimism. The TSX is down again, as is the price of oil and the loonie. It may go on for a while yet. There’s no question it hurts, but where we are in the last week of January isn’t necessarily where we’ll be at the end of the year.

So how are Gas Prices at the pump determined?

12541044_10153742094295837_1881084127321648906_n (1)As I was driving home yesterday I noticed that the gas priced at 72.9 cents a litre earlier in the day was now 92.9 cents a litre. Now I know that the dollar rose by .005 of a cent against the mighty US dollar and Oil was up by .21 cents yesterday but how does that make the price at the pump jump .20 cents a litre in a day.

To put the jump in price in perspective, that would mean a $15.00 difference when filling up my SUV, which has a 75-litre tank. So it does make a big difference for those who commute daily.

So how are Gas Prices at the pump determined?

Until recently the Oil companies were gloating over record profits. I realize this not to be the case now but when a barrel of oil was at record highs, gas was $1.50 per litre. Now that a barrel is at its lowest point in the last 30 years the price of gas does not seem to be following the trend at the pump. Yes, it is cheaper than it was but still expensive based on the price of a barrel of oil. Or is it?

In 1984 gas was 39.9 cents a litre and a barrel of oil was $28.75… Well, today a barrel of oil is $28.76 and gas is 89.9 cents a litre on average.

So why is there such a difference?

The break down at the pump is determined by the following factors

Crude oil – The cost of raw material for making gasoline, which accounts for 40% – 55%

Taxes – Federal, Provincial and Municipal tax  applied to the cost per litre, which accounts for 25% -35%

Refining costs – The difference between what it cost to buy crude oil and what refined gas sells for in the wholesale market accounts for 10% – 25%

Marketing Costs – This covers the retail margin for expenses and profits of 4% -6%

Distribution – Transportation to various regions is between 21% – 26%

US dollar – Crude is bought and sold in US dollars

Supply and Demand – Predictable impact on the price

So what affects the price range at the pump?

The explanation…

The price of crude oil is the main contributor to the general increase in retail gasoline. Generally, Crude oil prices depend on several factors including worldwide supply and demand, the stability of the distribution network, the value of the U.S. dollar, and the price speculation.

The Organization of the Petroleum Exporting Countries (OPEC), a cartel of 13 oil-rich countries, which produces about 40 percent of the world’s crude oil, exerts significant influence on prices by setting production limits on its members. The United States consumes more oil and refined products (such as gasoline, diesel, heating oil, and jet fuel) than any other nation in the world. 
The demand for crude oil in China has risen with their populations, increased trade, and a growing internal economy. Interruptions in the flow of crude oil through the distribution network can cause gasoline prices to rise, including natural disasters like Hurricane Katrina, the Gulf Coast-BP oil spill, political instability in countries like Iraq, Libya, Yemen, Saudi Arabia, Venezuela, Nigeria, or monetary instability. Oil is traded on the world market in U.S. dollars. When the value of the dollar drops compared to other major currencies, producers earn less and compensate by raising the price per barrel of oil.

Government taxes are the second largest part of retail gasoline prices at the pump.Then you have speculation in the commodities markets where crude oil is traded also drives up the cost. Financial speculators make money on the fluctuations in prices of commodities like oil by placing bets that the price will go up or down.

 Refiners lose money when plunging prices require them to sell gasoline for less than the crude oil they bought. Refining costs and profits vary due to the different gasoline formulation. Refiners blend formulas and such blends are more complex and more expensive to make. Many contain ethanol, an alcohol mixed with gasoline to create a cleaner fuel that can account for up to 15 percent of some gasoline blends.

Retail dealer’s costs include wages and salaries, benefits, equipment, lease/rent, insurance, and other overhead. An individual dealer’s cost of doing business varies depending on location and number of local competitors.

Stations next to each other may have different traffic patterns, rents, and sources of supply that affect their prices. Gasoline often costs more in wealthy neighborhoods, because stations pass along higher real estate costs. Credit card companies also earn 2.5 percent of the transaction cost as opposed to a flat fee, which impacts dealer margins.

Supply and demand creates a predictable impact on the price of gas. The supply of Oil does not come out of the ground in the same form from everywhere in the world. You have a Light to Heavy and Sweet to Sour crude, the price of Oil is quoted as Light / Sweet crude. This is in high demand as it has fewer impurities and takes less to refine into gasoline. But most of the Oil available throughout the world is heavy/sour crude. This is where the most money is for the refineries because they can obtain Heavy / Sour crude for a lower price due to the large supply meaning a higher return on investment but it is a lower quality of crude. Which again is why they mix gasoline with ethanol to help create a cleaner fuel at the pump. Although when you have too much oil on the market the return on investment is cut drastically.

The consumer creates the demand the more cars on the road the more demand for gas. Simple math if you oversupply then the price is lower if you undersupply the price is higher. The consumers will fluctuate based on price but by a very small percentage.

So what we are seeing is the perfect storm between supply and demand, the strong US dollar and a lower commodities market thus creating a lower price at the pump. The cost of doing business has gone up over the last 30 years creating a difference in price at the pump between 1984 and 2016 on the same cost of a barrel of oil. But based on recent profits made in the industry everyone with the exception of the consumer is now  experiencing a loss of revenue.

So I guess you have to pay attention to the price at the pump to make the most of your savings while you can. We all know that this will not last forever at some point there will be a reduction in production and the wheels of profit will start to turn again.

We still really don’t know why the price at the pump can fluctuate so drastically daily as in the image above.  All we can do is laugh and understand that supply would be up and demand would be down at this location.