It’s almost that time again! Taxes will be due soon enough…

It’s almost that time again! Taxes will be due soon enough…

A new year means new limits. Here’s a list of new financial planning data for 2021 (In case you want to compare this to past years, that data is included). Pensions, RRSP, TFSA, CPP, OSA, New Federal Tax Brackets.

Pension and RRSP contribution limits

  • The new limit for RRSPs for 2021 is 18% of the previous year’s earned income or $27,830 whichever is lower less the Pension Adjustment (PA).
  • The limit for Deferred Profit Sharing Plans is $14,605
  • The limit for Defined Contribution Pensions is $29,210

Remember that contributions made in January and February of 2021 can be used as a tax deduction for the 2020 tax year.

Tax YearIncome fromRRSP Maximum Limit
20212020$27,830
20202019$27,230
20192018$26,500
20182017$26,230
20172016$26,010
20162015$25,370
20152014$24,930
20142013$24,270
20132012$23,820
20122011$22,970
20112010$22,450
20102009$22,000
20092008$21,000

TFSA limits

  • The annual TFSA limit for 2021 is the same at $6,000.
  • The cumulative limit since 2009 is $75,500 (assuming you were over the age of 18 in 2009)

TFSA Limits for past years

YearAnnual LimitCumulative Limit
2021$6000$75,500
2020$6,000$69,500
2019$6,000$63,500
2018$5,500$57,500
2017$5,500$52,000
2016$5,500$46,500
2015$10,000$41,000
2014$5,500$31,000
2013$5,500$25,500
2012$5,000$20,000
2011$5,000$15,000
2010$5,000$10,000
2009$5,000$5,000

Contribution amounts for 2021

  • Employee contribution = 5.45% (up from 5.25% in 2020)
  • Employer contribution = 5.45% (up from 5.25% in 2020)
  • Self employment = 10.9% (up from 10.5% in 2020)
  • The maximum employer and employee contribution to the plan for 2021 will be $3,166.45 each and the maximum self-employed contribution will be $6,332.90. The maximums in 2020 were $2,898.00 and $5,796.00.
  • CPP Benefits
    • Yearly Maximum Pensionable Earning (YMPE) – $61,600
    • Maximum CPP Retirement Benefit – $1203.75 per month
    • Maximum CPP Disability benefit – $1413.66 per month
    • Maximum CPP Survivors Benefit
      • Under age 65 – $650.72
      • Over age 65 – $722.25

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

YearMonthlyAnnual
2021$1203.75$14,445.00
2020$1175.83$14,109.96
2019$1154.58$13,854.96
2018$1134.17$13,610.04
2017$1114.17$13,370.04
2016$1092.50$13,110.00
2015$1065.00$12,780.00
2014$1038.33$12,459.96
2013$1012.50$12,150.00
2012$986.67$11,840.04
2011$960.00$11,520.00
2010$934.17$11,210.04
2009$908.75$10,905.00

Old Age Security (OAS)

  • Maximum OAS – $615.37 per month
  • The OAS Clawback (recovery) starts at $79,845 of income. At $129,075 of income OAS will be fully clawed back.

OAS rates for past years:

YearMaximum Monthly BenefitMaximum Annual Benefit
2021$615.37$7,384.44
2020$613.53$7,362.36
2019$601.45$7,217.40
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

New federal tax brackets

For 2021, the tax rates have changed.

Lower Income limitUpper Income limitMarginal Rate Rate
$0.00$13,808.000.00%
$13,808.00$49,020.0015.00%
$49,020.00$98,040.0020.50%
$98,040.00$151,978.0026.00%
$151,978.00$216,511.0029.00%
$216,511.00

CAN THE GRINCH REALLY STEAL CHRISTMAS?

CAN THE GRINCH REALLY STEAL CHRISTMAS?

As we continue to move through Covid-19 as a society we are often reminded of the times when we could do things we wanted without circumstance. Since the middle of March or 266 days ago, we can now describe ourselves as living in a suppressed environment. As difficult as that has been for many, we must understand that even if our reality has changed during this time our outlook on life should not be broken. We will survive this and this too shall pass as we are a resilient society.

Knowing that with every passing day we are one step closer to understanding that we will not be able to celebrate Christmas with family and friends as we can already see the writing on the wall. The toughest part of this conversation is that someone else other than ourselves is making that decision for us. We must believe that these chosen officials are not trying intentionally to separate us from family on this special holiday as some would believe, but they are truly trying to keep us from having to endure any pain and suffering that would come from us failing to understand the severity of the circumstance if we fail to listen.

We already know there will be complaining. The only thing anybody should be complaining about is their health in this circumstance. Short of the death of a loved one, a terminal illness, or some other horrible tragedy, everything is controllable. If we’re in control of it, we have the ability to fix it. 

Where is the value in complaining? 

Instead of complaining about what could happen or when it does happen…Why not asses the situation, and find a solution. 

What if you could…

– Organize a catered dinner for loved ones who you cannot see this Holiday Season. 

– Create a Zoom, Google Chat, Face time, or just a simple phone call to create that festive moment with a cheer for the holiday season knowing that you will soon be able to get together as a family in a safer environment sometime in the future. Life is way too short to risk any lives because you fail understand why.

With this also comes with a lack of optimism about our future. There are a million reasons why not, but there is one good reason why, our future is bright we just have to persevere and understand there is a light at the end of the tunnel.

No matter what happens, we have to keep going we have a choice. We have come this far and yes; we are tired of not being able to do what we have done in the past. But isn’t this where the optimism lives knowing we will one day rise above this to return to what we know. If we truly believe as a society that we can do it no matter what, we’ve got this. The only reason we might bring up any excuses about the future is because you don’t believe there will be one. Do not let that kind of thinking ever get in the way of our success because we already know this, we are resilient and we will persevere. Many things have stood in the way of our success lately and we have found a way to move forward to this point in time. So, don’t give up now as this too shall soon pass!

To be able to get through this holiday season, We, need to have optimism. Every day is hard, and we all have to fight to win.

To that I say Happy Holidays and a Merry Christmas to all! So long 2020 and bring on 2021 I’m ready!

Lest we forget! Thank you to all that served and continue to serve our great country.

Lest we forget!  Thank you to all that served and continue to serve our great country.

Thank you for all that served our country, giving us the freedom we enjoy today. Thank you to all that continue to serve our country and put themselves in harm’s way to protect us from what the world has become.

I leave you with this poem below… a tribute to the fallen soldier.
The GreatWar 1914-1918
In Flanders Fields
Flanders Poppy on the First World War battlefields.
by John McCrae, May 1915

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields. Lest we forget.

One of the Biggest Assets in your life requires proper coverage.

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  1.  You have two life insurance options after securing your mortgage: insuring through the creditor or insuring through a life insurance company.
  2. Mortgage insurance is convenient, but the benefit is limited to the amount owing on the mortgage and is paid directly to the creditor and not your family.
  3. Life insurance is paid to your beneficiary and your coverage won’t decrease as your mortgage is paid down.
  4.  If you buy a bigger home, increasing your insurance coverage may be a smart choice.

Henley Financial and Wealth Management can provide expert guidance on both of these options.
When you buy a home, you need a way to help protect yourself and your family’s financial security, no matter what happens.

Your bank/lending institution will talk to you about mortgage insurance (also called creditor insurance) when you finance your house. You wil be told about the importance of this product for your mortgage. What it means…if you die, your mortgage with the lender is paid out, which is how the lender protects the institution if something should happen to you.

But what happens to your family if they don’t payout the mortgage because the death did not pass the underwriter approval after the fact. What you receive from the lender for your premium is a credit certificate not an actual insurance policy. After death, the credit certificate is sent to the insurer for underwriting at which time the underwriter will decide if the insured qualified for insurance. One of two scenarios will happen: the lender will payout the mortgage or refund the premiums. If its the latter it is because the insured did not qualify for insurance due to circumstance before death.

Is having mortgage insurance/credit insurance from your lender the best option for you?

If you want to protect more than just your home, individual insurance will better suit your needs. Individual insurance generally provides more control, options and benefits to help you financially protect what matters most. Underwriting is done at the time of application and an insurance policy is issued if you qualify. When the insured dies the benefactor can choose to payout the mortgage, use the money for the families individual needs or do both.

By comparing Mortgage Insurance and Individual Life Insurance, you ensure you’re giving yourself and your family the type of insurance protection that meets your personal needs and just protecting the lender.

Build a financial security plan that will help protect your mortgage and what matters most in your life.

 

How to win using annuities in retirement

How to win using annuities in retirement

 

In this underused strategy, weigh your age and interest rates, then get the timing right.

by Jonathan Chevreau

November, 2016

Presented by: Henley Financial & Wealth Management , If you would like a detailed explantion of how this could work for you please feel free to contact Winston L. Cook

The good news is most of us can expect to live longer. The bad news is that the decline of defined-benefit pensions, along with chronically low interest rates, makes it harder for us to avoid outliving our money.

For those without workplace defined-benefit pensions, annuities can offset that risk by acting as a form of longevity insurance. You hand over capital to an insurance company today in exchange for a guaranteed flow of income for as long as you live. In a real sense a DB pension, with its guaranteed payouts, is annuity-like. As are programs like the Canada Pension Plan (CPP) or Old Age Security (OAS).

Despite similar terminology, defined-contribution pensions, RRSPs, TFSAs, and non-registered savings are not real pensions, cautions Schulich School of Business finance professor Moshe Milevsky. While those vehicles will help out in retirement, the only way you can create a real guaranteed income for life is to annuitize, he explains in the second edition of Pensionize Your Nest Egg.

Nevertheless, annuities are underutilized because they are misunderstood or viewed as undesirable. Yet, new “fintech” alternatives may do the same thing as annuities, only using terms such as peer-to-peer longevity insurance or investment funds with longevity insurance.

 

Milevsky argues that even at today’s rock-bottom interest rates, annuities should pay more than comparable fixed-income investments because of the built-in mortality credits. “Anyone who bought an annuity five years ago is very happy,” Milevsky says.

He adds: “Everyone should have a source of income that’s predictable, inflation-adjusted and will last for the rest of their lives.” The trick is knowing when to annuitize. The longer you wait, the more you receive on a monthly basis. Milevsky’s rule of thumb is to annuitize when the death rate exceeds the interest rate. For example, relatively few die by 65, so the death rate is under 1%; buy an annuity now and it will give you little more than current interest rates. Wait until your mid-70s and the death rate starts to rise. That’s when annuities start to look much better.

This question often arises the year a retiree turns 71 and is forced to convert an RRSP into a Registered Retirement Income Fund (RRIF) or an annuity. Fee-only planner Marie Engen, co-owner of Boomer & Echo, says this is not an either/or case. You probably should do both, particularly as you move into your 70s and 80s. Ideally, she says, pensions and annuities will cover basic retirement expenses, leaving the rest for investment growth and more liquid access to money for more enjoyable lifestyle expenses.

For healthy males, Milevsky suggests annuitizing between 70 and 80, adding 5% or 10% more each year, until you’re almost entirely annuitized between ages 80 and 95. Because spouses and children can be impacted, the whole family needs to join the conversation, particularly since capital that has been annuitized can’t be converted back. That means your heirs will inherit little or none of what is annuitized.

 

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Keep in mind the distinction between registered and non-registered annuities. Payments from registered annuities are fully taxable like RRIFs and, on death, heirs will be taxed based on a same-day valuation. According to Ivon Hughes of Montreal-based LifeAnnuities.com, a healthy 65-year-old male not wanting a guarantee period would get $531.49 monthly income from a $100,000 registered annuity. At age 71 this income rises to $636.34, and at age 80, he’ll get $946.76.

With non-registered “prescribed annuities” the interest paid out is taxable but not the return of capital. Keep in mind, the Canada Revenue Agency is updating its mortality tables and increasing the taxable portion—people are living longer. That makes annuitizing with registered funds more attractive, Milevsky says. A $100,000 non-registered annuity without a guarantee period pays out $509.97 at 65, $606.12 if acquired at 71, and $789.03 at age 80.

Milevsky favours plain-vanilla annuities and cautions against buying too many bells and whistles: every time you add guarantees, minimums, and survivorship benefits, you water down the mortality credits.

To mom on her day!

A Mother loves right from the start.

She holds her baby close to her heart.

The bond that grows will never falter.

Her love is so strong it will never alter.

A Mother gives never ending Love.

She never feels that she has given enough.

For you she will always do her best.

Constantly working, there’s no time to rest.

A Mother is there when things go wrong.

A hug and a kiss to help us along.

Always there when we need her near.

As I look back on my life

I find myself wondering…

Did I remember to thank you

for all that you have done for me?

For all of the times you were by my side

to help me celebrate my successes

and accept my defeats?

Or for teaching me the value of hard work,

good judgement, courage, and honesty?

I wonder if I’ve ever thanked you

for the simple things…

The laughter, smiles, and quiet times shared?

If I have forgotten to express my gratitude

For any of these things,

I am thanking you now…

and I am hoping that you’ve known all along,

how very much you are loved and appreciated.

As always we never get around to thanking the ones

We love when we can… give your mother a hug because you never

Know when that time will come and you wished you could one last time.

Part 2, of the great debate… Pay down the Mortgage or contribute to your RRSP!

Part 2, of the great debate… Pay down the Mortgage or contribute to your RRSP!

 Part 2, of the great debate… With RRSPs at the forefront of everyone’s minds I want to continue to share with you comments on the most common debate. In Part 1, we talked about three questions you should ask yourself, below we will show how you might be able to contribute to your RRSP and put a little extra down on your Mortgage.

Should I pay down the mortgage or contribute to the RRSP? 

 

Generally speaking, either financial strategy is a good choice. It is better than spending the money on things that have no inherent financial value. It is also better than “investing” (I use that term loosely) in depreciable assets like cars. Let’s compare the financial benefit of the two alternatives. First, let’s look at your mortgage. We know that mortgage rates are around 2.7%. You might think that paying down the mortgage means you forego paying 2.7% in the future, and therefore, the mortgage pay-down has a financial benefit of 2.7%. Most mortgages are not tax-deductible thus you must earn more than a dollar to pay down a dollar of debt. In fact, you probably need to earn about $1.23 to pay down a dollar of debt (depending on your tax bracket – Middle income is about 23%). Therefore, paying off your mortgage has an after-tax benefit of over 2.7%. Remember, the higher the interest rate on the mortgage, the more attractive it is to pay down the mortgage.

Now let’s look at the RRSP.  If you are in the middle marginal tax bracket, you will save around 23% in tax (combined federal and provincial; note: rates vary from province to province). In a higher tax bracket, an RRSP contribution might save you as much as 46% in tax savings. The bottom line is that when you compare the two scenarios, a dollar put toward the mortgage saves you 2.7% in interest while a contibution to your RRSP could save you 23% in tax (as discussed 23% is around the middle-income tax bracket). Given the choice, you would likely take a 23% saving over a 2.7% saving. The final point in favor of making an RRSP contribution is that making the RRSP contribution may give you the opportunity to  invest in your RRSPs and pay down the mortgage. For example, let’s assume you have $10,000 and you are in a 23% marginal tax bracket. By contributing to the RRSP, you could save $2,300 in taxes and potentially get that in a refund. Once you get the refund, you can then take the $2,300 and pay that down on the mortgage. You have created $12,300 out of $10,000, $10,000 went into your RRSP and because of that contribution, the government potentially refunded you $2,300, which you then put towards the Mortgage.

Generally speaking, anytime, you can pay down a big debt it is beneficial to your overall financial security. The ability to invest in yourself and pay down the mortgage if done correctly creates financial success.

Reality tells us that this is not a debate but sound advice… we are in control of our own situation – sometimes using your rebate to pay for a vacation seems like a better option. The choice is yours make (and you deserve it), but you only have one opportunity per year to double dip between your investments and debt reduction. The choice is yours!

Note: Please be advised that the percentages used in this article are for ease of calculations to help you understand the concept and are not meant to be everyone’s valuation each person’s situation is different.

Think of everyone during the Holidays

Some thoughts around the holidays…It is important to remember that not everyone is looking forward to Christmas or the New Year. Some people are not surrounded by large wonderful families and friends. Some of us have problems during the holidays and are overcome with great sadness when we remember the loved ones who are not with us. For many, it is their first Christmas without a particular loved one, many others lost loved ones at Christmas time. And, many people have no one to spend these times with and are besieged by loneliness. We all need caring, loving thoughts right now. May I ask my friends wherever you might be, to make someones day with a smile, take the time to support to all those who have family problems, health struggles, job issues, worries of any kind and just need to know that someone cares. Please do it for all of us, for nobody is immune.

Peace, Joy and Love.