2018 Financial Planning Guide: The numbers you need to know

2018 Financial Planning Guide: The numbers you need to know

A new year means new limits and data.  Here’s a list of new financial planning data for 2018 (In case you want to compare this to past years, I’ve included old data as well).

If you need any help with your rrsp deposits or clarification on other retirement issues please do not hesitate to contact Henley Financial and Wealth Management, we are here to ensure your financial success.

Pension and RRSP contribution limits

  • The new limit for RRSPs for 2018 is 18% of the previous year’s earned income or $26,230 whichever is lower less the Pension Adjustment (PA).
  • The limit for Deferred Profit Sharing Plans is $13,250
  • The limit for Defined Contribution Pensions is $26,500

Remember that contributions made in January and February of 2018 can be used as a tax deduction for the 2017 tax year.

Financial Planning CalculationMore articles on RRSPs

TFSA limits

  • The TFSA limit for 2018 is $5,500.
  • The cumulative limit since 2009 is $57,500

TFSA Limits for past years

More articles on the TFSA

Canada Pension Plan (CPP)

Lots of changes are happening with CPP but here’s some of the most important planning data.

  • Yearly Maximum Pensionable Earning (YMPE) – $55,900
  • Maximum CPP Retirement Benefit – $1134.17 per month
  • Maximum CPP Disability benefit –  $1335.83 per month
  • Maximum CPP Survivors Benefit
    • Under age 65 – $614.62
    • Over age 65 – $680.50

Reduction of CPP for early benefit – 0.6% for every month prior to age 65.  At age 60, the reduction is 36%.

CPP rates for past years:

For more information on CPP

Old Age Security (OAS)

  • Maximum OAS – $586.66 per month
  • The OAS Clawback (recovery) starts at $74,788 of income.  At $121,720 of income OAS will be fully clawed back.

OAS rates for past years:

Year Maximum Monthly Benefit Maximum Annual Benefit
2018 $586.66 $7,039.92
2017 $578.53 $6,942.36
2016 $570.52 $6,846.24
2015 $563.74 $6,764.88
2014 $551.54 $6,618.48
2013 $546.07 $6,552.84
2012 $540.12 $6,481.44
2011 $524.23 $6,290.76

For more information on OAS Clawback:

New Federal Tax Brackets

For 2018, the tax rates have changed.



Welcome to Mortgage Insurance – Protect yourself not the lender!

Welcome to Mortgage Insurance – Protect yourself not the lender!

Your home is one of the most important purchases you’ll make and protecting it is crucial. Mortgage protection plans offered by your lender are policies that insure your mortgage against the death of the title holder and pays the outstanding balance to the lender to cover the lenders potential loss. When you need protection and security after a death, the lender seem more concerned about their bottom line than your families well-being.

The problem with the lenders (bank, credit union) plans is that you, the homeowner, do not own the actual Insurance Policy. Mortgage insurance from your lender is held by the lender and only paid out to lender, and not to your family, which leaves loved ones with little to no income replacement and no financial security.

An Individual Life Insurance Policy can be up to 40% less than the lenders offerings (depending on age and health) because the lender are the go between to the insurance company. The increased cost is added to the price of the insurance to cover the non licensed brokers fees. So not only is it costly to insure through the lender the actual coverage is not benefiting those who matter most. Individual mortgage insurance keeps your home in your family’s hands and protects the families interests, because your family deserves Financial Security upon death – not your lender. For a comparison of Individual plans versus lender plans and understanding the value of individual mortgage insurance policies versus your lender’s policies, means looking at what each policy can offer you. Please see the table below to see why a lender’s mortgage insurance plan doesn’t offer the freedom and security of insuring yourself individually.

Contact Henley Financial & Wealth Management if you have any questions or need help insuring your home for your families financial security. We are happy to help save you money while creating a positive financial future.

If you are in need of a mortgage please contact  Bayfield Mortgage Professionals a trusted professional and mortgage broker.

Individual Plans Versus Your Lender

 Questions? Individual Insurance Policies Mortgage Loan Insurance from your Lender
Do I own my insurance policy? Yes No, The owner is your lender.
Who can be the beneficiary of the policy? Anyone you choose. Only the lender can receive the benefits from the policy.
When does coverage end? It depends on the term that YOU choose. Coverage ends when the mortgage is paid.
Do I have the same coverage for the life of the policy? Your coverage stays the same throughout the term of the policy. The coverage decreases relative to the value of the remaining loan.
What can your coverage be used for? Any purpose. The benefits are paid as a sum to your beneficiary to be used how they wish. The coverage may only be used to cover the balance on the loan.
Can I get lower rates if I’m a non-smoker/in excellent health? Yes. You usually pay as much as 50% less on your insurance premiums. No, premiums are determined under one rate system.
If I sell my home am I still protected? Yes. Since you are the owner of the policy. No, you will need to obtain a new policy.
Can I convert or renew my policy to change the terms or coverage? Some policies may be renewed or converted to another policy. No, you may not convert nor renew coverage. You may not transfer this coverage into a new policy.



Start the New Year with a check up!

Looking at your finances and trying to figure out how to deal with multiple goals can be frustrating. We want it all – who doesn’t? But for most of us it’s not that easy. Which goals do you save towards first, second, and so on?

  • How do you prioritize retirement savings, children’s education, a new vehicle and mortgage pay down?
  • How do you pay off debt and still have savings?
  • How do you invest in your future and deal with current obligations?
  • Have you even looked at your Financial Security as it relates to your family?

It’s tough to manage all your short, medium and long-term financial goals at once. On one hand, focusing on just one thing can leave you financially vulnerable in some areas. On the other hand, spreading your finances too thinly in order to focus on all your goals at once can create uncertainty.

Let us help you create a path to success see below our 2018 Financial Check List. If you have any questions, needs or wants, please do not  hesitate to contact us  at Henley Financial and Wealth  Management  


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Sorry to burst your bubble, but owning a home won’t fund your retirement

Sorry to burst your bubble, but owning a home won’t fund your retirement

As I was looking through past articles I saw this and was intrigued. There are many who will do well when they “downsize” their family home as the article states. But with the cost of housing even for a smaller home or condo on the rise the nest egg is becoming much smaller for the younger (45 -55) home owner. My thoughts are simple, if you have a Million dollar home that you want to sell and downsize to a $500,000 home. You probably don’t need to worry about your retirement fund, you will have the money you require to live a wonderful life.  Unfortunately everyone does not own a million dollar home, and everyone will not be able to “down size” to a smaller home at half the cost of their present home. Baby Boomers will be able to take advantage of today’s real estate market. But generations X, Y and Z will need a better plan for the future.

Everyone requires a solid financial plan your financial plan can, and should include downsizing the family home. Which economically, physically and mentally, will make sense as you grow older. But again as the article states this is only a piece of the puzzle.

As you read the article, if you have any questions, or require any help with your financial plan please contact us at Henley Financial and Wealth Management .

All the best.

Winston L. Cook

A disturbing number of people are building their retirement plans on a weak foundation – their homes.

Years of strong price gains in some cities have convinced some people that real estate is the best vehicle for building wealth, ahead of stocks, bonds and funds. Perhaps inevitably, there’s now a view that owning a home can also pay for your retirement.

home buying puzzle

Don’t buy into the group-think about home ownership being the key to wealth. Except in a few circumstances, the equity in your home won’t pay for retirement. You will sell your home at some point in retirement and use the proceeds to buy your next residence, be it a condo, townhouse, bungalow or accommodation at a retirement home of some type. There may be money left over after you sell, but not enough to cover your long-term income needs in retirement.
In a recent study commissioned by the Investor Office of the Ontario Securities Commission, retirement-related issues topped the list of financial concerns of Ontario residents who were 45 and older. Three-quarters of the 1,516 people in the survey own their own home. Within this group, 37 per cent said they are counting on increases in the value of their home to provide for their retirement.

The survey results for pre-retirees – people aged 45 to 54 – suggest a strong link between financial vulnerability and a belief in home equity as a way to pay for retirement. Those most likely to rely on their homes had larger mortgages, smaller investment portfolios, lower income and were most often living in the Greater Toronto Area. They were also the least likely to have started saving for retirement or have any sort of plan or strategy for retirement.

The OSC’s Investor Office says the risk in using a home for retirement is that you get caught in a residential real estate market correction that reduces property values. While housing has resisted a sharp, sustained drop in prices, there’s no getting around the fact that financial assets of all types have their up and down cycles.

But even if prices keep chugging higher, you’re limited to these four options if you want your house to largely fund your retirement:

  • Move to a more modest home in your city;
  • Move to a smaller community with a cheaper real estate market, probably located well away from your current location;
  • Sell your home and rent;
  • Take out a reverse mortgage or use a home equity line of credit, which means borrowing against your home equity.

A lot of people want to live large in retirement, which can mean moving to a more urban location and buying something smaller but also nicer. With the boomer generation starting to retire, this type of housing is in strong demand and thus expensive to buy. Prediction: We will see more people who take out mortgages to help them downsize to the kind of home they want for retirement.

Selling your home and renting will put a lot of money in your hands, but you’ll need a good part of it to cover future rental costs. As for borrowing against home equity, it’s not yet something the masses are comfortable doing. Sales of reverse mortgages are on the rise, but they’re still a niche product.

Rising house prices have made a lot of money for long-time owners in some cities, but not enough to cover retirement’s full cost. So strive for a diversified retirement plan – some money left over after you sell your house, your own savings in a tax-free savings account and registered retirement savings plan, and other sources such as a company pension, an annuity, the Canada Pension Plan and Old Age Security.

Pre-retirees planning to rely on their home at least have the comfort of knowing they’ve benefited from years of price gains. Far more vulnerable are the young adults buying into today’s already elevated real estate markets. They’re much less likely to benefit from big price increases than their parents were, and their ability to save may be compromised by the hefty mortgages they’re forced to carry.

Whatever age you are, your house will likely play some role in your retirement planning. But it’s no foundation. You have to build that yourself.


Planning for the future…

Planning for the future…

I’ve been asked many times about the taking your Canada Pension Plan (or CPP) early. It’s one of the issues facing seniors and income management of their retirement funds, my conclusion is that it makes sense to take CPP as early as you can in most cases.  Again there are a number of factors that can determine this process and they should be considered. We can help you understand which makes the most sense for you. Contact us at Henley Financial & Wealth Management.

In seeking the answer of when to take your CPP – ask yourself these five questions…

1) When will you retire?

Under the old rules, you had to stop working in order to collect your CPP benefit. The work cessation rules were confusing, misinterpreted and difficult to enforce so it’s probably a good thing they are a thing of the past.

Now you can start collecting CPP as soon as you turn 60 and you no longer have to stop working. The catch is that as long as you’re working, you must keep paying into CPP even if you are collecting it. The good news is that paying into it will also increase your future benefit.

2) How long will you live?

This is a question that no one can really answer so assume Life Expectancy to be the age factor when considering the question. At present a Male has a life expectancy of 82 and a female has a life expectancy of 85. These vales change based on lifestyle and health factors but it gives us a staring point.

Under the old rules, the decision to collect CPP early was really based on a mathematical calculation of the break-even point. Before 2012, this break-even point was age 77. With the new rules, every Canadian needs to understand the math.

If you qualify for CPP of $502 per month at age 65, let’s say you decide to take CPP at age 60 at a reduced amount while instead of waiting till 65 knowing you will get more income by deferring the income for 5 years.

Under Canada Pension Plan benefits, you can take income at age 60 based on a reduction factor of 0.6% for each month prior to your 65th birthday. Therefore your benefit will be reduced by 36% (0.6% x 60 months) for a monthly income of $321.28 starting on your 60th birthday.

Now fast-forward 5 years. You are now 65. Over the last 5 years, you have collected $321.28 per month totalling $19,276.80. In other words, your income made until age 60 was $19,276.80 before you even started collecting a single CPP cheque if you waited until age 65. That being said, at age 65 you are now going to get $502 per month for CPP. The question is how many months do you need to collect more pension at the age of 65 to make up the $19,276.80 you are ahead by starting at age 60? With simple math it will take you a 109 months (or 9 years) to make up the $19,276.80. So at age 74, you are ahead if you start taking the money at age 60, you start to fall behind at age 75.

The math alone is still a very powerful argument for taking CPP early.

So, “How long do you expect to live?”

3) When will need the money?

When are you most likely to enjoy the money?  Before the age 74 or after age 74, for most people, they live there best years of their retirement in the early years. Therefore a little extra income in the beginning helps offset the cost of an active early retirement. Some believe it’s better to have a higher income later because of the rising costs of health care and this is when you are most likely to need care.  Whatever you believe, you need to plan your future financial security.  It is hard to know whether you will become unhealthy in the future but what we do know is most of the travelling, golfing, fishing, hiking and the things you want to do and see are usually done in the early years of retirement.

4) What happens if you delay taking your CPP?

Let’s go back to age 60 you could collect $321.28 per month. Let’s you decide to delay taking CPP by one year to age 61. So what’s happens next? $3,855.36 from her CPP ($321.28 x 12 months), but chose not to, so you are able to get more money in the future. That’s fine as long as you live long enough to get back the money that you left behind. Again, it comes back to the math. For every year you delay taking CPP when you could have taken it, you must live one year longer at the other end to get it back. By delaying CPP for one year, you must live to age 75 to get back the $3,855.36 that you left behind. If you delay taking CPP until 62, then you have to live until 76 to get back the two years of money you left behind.

Why wouldn’t you take it early given the math? The only reason I can think of is that you think you will live longer and you will need more money, as you get older.

Any way the math adds up… you can always take the money early and if you don’t need it  put it in a TFSA and let it make interest. You can use it later in life if you choose.



A tax-free compounding account… In your portfolio that may have been over looked – $52,000 for each spouse to be exact, start planning now!

The tax-free savings account (TFSA) is starting to grow up.

Introduced in the 2008 federal budget and coming into effect on Jan. 1, 2009, the TFSA has become an integral part of financial planning in Canada, with the lifetime contribution limit now set to reach $52,000 in 2017.

Start taking advantage of this savings today.

Remember when you thought $5,000 did not amount to much as an investment. If you had taken advantage of this program you could have another $60,000 to $70,000 for each husband and wife invested in savings today. That’s $120,00 -$140,000 of Tax free Value based on the average market return since 2009.

Used correctly the TFSA can supplement income lowering your tax base during retirement. The gain made in a TFSA is tax-free, and therefore so are withdrawals — Did you know? That the money coming out of the account does not count as income in terms of the clawback for Old Age Security, which starts at $74,780 in 2017.

The TFSA has also become a great vehicle for dealing with a sudden influx of wealth. For people who downsize and sell their house or receive an inheritance, this money is already tax-free. Do not make it taxable in the hands of the government again.

Contact me for more information regarding this and other investments that have been overlooked. It never hurts to get a second opinion regarding your future.



Things you may or may not know about Registered Education Savings Plans

Things you may or may not know about  Registered Education Savings Plans


When learning about the lingo of RESP’s you will find some useful information within this article that will catch your attention, as most people who invest in their children do so, because they understand the need to help in the future. Although, they most likely will not understand the ins and outs of the program that they have been investing into for the future. We at Henley Financial & Wealth Management are always here to help you understand the process.  Please contact us with any questions you may have.

Let’s begin…

The CESG contribution limit is different than the RESP limit. The maximum annual amount of Basic CESG (Canada Education Savings Grant) that can be paid in any year was increased to $500 from $400 (and to $1,000 from $800 if there is unused grant room from previous years). The lifetime CESG for each child is still $7,200.

You can create a family plan or an individual plan. If you have one child, and intend to have more children, a family plan can be an attractive option. You can name one or more children as beneficiaries (the child using the funds in the future), and add or change beneficiaries at any time. If one of your children decides not to attend a post-secondary institution, your other children can make use of the funds.

With a family plan, all beneficiaries must be related to you. They can include children, adopted children, grandchildren, and brothers and sisters. You cannot include an unrelated person in a family plan.

A portion of contributions to the plan must be allocated to each beneficiary, although not necessarily equally. For example you can allocate a greater percentage to an older child who becomes a beneficiary a few years before university to quickly build education savings for that child. Meanwhile, younger children could be allocated less because there is plenty of time until they attend college or university. Contributions for each beneficiary can be made until the beneficiary turns 31.

The CESG is paid into the family RESP in the name of each beneficiary until that beneficiary turns 18. Most RESP’s, family or individual must be collapsed on or before the last day of their 35th year of existence. This should provide enough time to meet education savings needs of most families, including those with children of substantially different ages.

An important thing to know regarding RESP and CESG…

In the RESP world, $7,200 is an important number.  It’s the total amount of RESP grant money that can be paid to any one child.  This means that once a child has received $7,200 of grants – any future contributions will not receive any grant money. Meaning if there is a $50,000 maximum contribution to a RESP, only $36,000 of that RESP contribution will be credited with the 20% ($7,200) CESG.

This rule also applies to the RESP withdrawal phase. When you are making payments to a student – that child cannot receive more than $7,200 worth of grants.  Any excess amount of grants paid to a child will have to be returned to the government.

All withdrawals of contributions from an RESP account can be sent to either you (subscriber) or the student (beneficiary).  If you request a withdrawal of accumulated income in the form of an EAP (educational assistance payment), the money has to be sent to the student.

Specify if the withdrawal is to be from contributions, non-contributions or both

There are two parts to an RESP account:

  1. Contribution amount.  This is the total amount of all your contributions to the account.
  2. Accumulated Income.  This is all the money in the RESP, which are not contributions.  RESP grants, capital gains, interest payments, dividends are all included in the Accumulated Income portion.

Example of contribution amount and accumulated income amount 

Let’s say you contributed $2,400 per year for 15 years to an RESP account. 20% grants were paid on all the contributions and the investments have gone up in value.

  • Account is now worth $50,000.
  • Total contributions are $36,000 (15 x $2,400).
  • Accumulated income amount is $14,000 ($50,000 – $36,000)

You can make two types of withdrawals from an RESP account if your child is attending post secondary school:

  1. PSE (Post-Secondary Education Payment) is a withdrawal from the contribution amount.
  2. EAP (Educational Assistance Payment) is a withdrawal from the Accumulated income.

Some interesting facts about PSE and EAP:

  • PSE payments are not taxable income and there are no limits on withdrawals.
  • EAPs are taxable in the student’s hands.
  • There is no withholding tax on EAPs.
  • The financial institution at the end of the year will issue a T4A slip for any EAP made during the year.
  • There is a $5,000 limit for EAPs in the first 13 weeks of schooling.
  • When doing a withdrawal, you will have to specify how much of the money will be coming from contributions and how much from accumulated income.

So you now have some of the ins and outs of making contributions and withdrawals to and from an RESP. The rules can be confusing and complicated so when in doubt, seek the help of a financial advisor to guide you through your options.

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