ReportWire

Tag: Financial Planning

  • Gen Z Canadians face job losses—but time is on their side – MoneySense

    Young people face many of the same job challenges as older workers, plus some extra ones, like limited work experience. Still, they have one major advantage: time. Younger people have more years to save and invest. If you’re Gen Z and trying to improve your financial future in a shaky economy, starting now can make a big difference. 

    Economic outlook for Gen Z Canadians

    Gen Z includes people born between 1997 and 2012, which closely matches the 15–24 age group used by Statistics Canada. Here’s a snapshot of their financial situation.

    High cost of living

    Rising prices affect everyone. Inflation, high rent costs, and expensive groceries are putting pressure on young Canadians, just like older ones.

    Unemployment

    More than 50,000 young people claimed EI in one year alone. This number doesn’t include gig workers, contractors, part-time workers, or others who don’t qualify for EI. That means the real number of unemployed young people is likely higher.

    Employment

    Even those who are working are struggling. Many hold two or more jobs to keep up with costs. A KOHO survey found that Gen Z’s average monthly income is just $1,083. Nearly half (49%) expect to take on more work in the next year, and 70% say they feel financially unstable or only somewhat stable.

    Debt

    Younger Canadians generally have less debt than older groups, but the average is still close to $8,500 per person. That’s an increase of 3.84% from the year before, according to Equifax.

    Savings and investments

    Gen Z doesn’t have much left over to save. The KOHO study found that end-of-month balances averaged just $9 to $16. Still, savings among this group grew by 23% year over year. That effort to save and invest, even with tight finances, is a positive sign for the future.

    Gen Z’s long time horizon

    When it comes to saving and investing, how long your money stays invested matters just as much as how much you put in. The longer your money sits in an account or investment, the more interest it can earn. This is called a time horizon.

    Article Continues Below Advertisement


    The magic of compound interest

    Compound interest means earning interest on both your original money and the interest it has already earned. For example, here’s what happens if you invest $100 at a 2% interest rate:

    Starting amount Interest earned Ending amount
    Month 1 $100 $2 $102
    Month 2 $102 $2.04 $104.04
    Month 3 $104.04 $2.08 $106.12
    Month 4 $106.12 $2.12 $108.24
    Month 5 $108.24 $2.16 $110.40

    Savings accounts and GICs are examples of investments that earn compound interest. 

    Stock market fluctuations

    Stocks work differently because their value goes up and down. They’re riskier, but they can also offer higher returns. Having a long time horizon gives your investments more time to recover after market drops.

    Tools for young Canadian investors and savers

    Most people benefit from having different types of savings and investments for different goals. Here are some common options for young Canadians.

    Unregistered accounts: HISAs and GICs

    Unregistered accounts don’t have limits on deposits or withdrawals. They work like regular savings or chequing accounts.

    A high-interest savings account (HISA) is good for emergency savings because you can access your money anytime. A guaranteed investment certificate (GIC) locks your money in for a set period, which can work well for medium-term goals.

    These options are low risk because they guarantee your original money plus interest. The downside is lower returns compared to riskier investments.

    Compare the best HISAs rates in Canada

    Registered accounts: RRSPs, TFSAs, and FHSAs

    Registered accounts offer tax benefits that help Canadians save and invest more effectively.

    Keph Senett

    Source link

  • Moving abroad? Think about the tax consequences – MoneySense

    Changing your tax residency

    Canadian residents must report their “world income” in Canadian funds. When they become non-residents, they must file a final tax return as of the date of emigration to report income for the period of residency in Canada and, in some cases, pay a departure tax.

    Tax form filing requirements

    To begin, if the fair market value (FMV) of all property owned as of the date of emigration is more than $25,000, you’ll need to fill out and submit form T1161 List of Property of an Emigrant to Canada. This document must be attached to your T1 return. In fact, even if you don’t file a T1, failure to file this form by your tax filing due date will attract penalties.  

    To calculate a capital gain or loss on your deemed disposition, complete form T1243, Deemed Disposition of Property by an Emigrant of Canada and attach it to your T1 return. Some exceptions apply in both these cases, discussed below. 

    Should you owe money upon departure, but can’t pay because you haven’t sold your property or don’t want to, there is another important form: T1244, Election, under Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property. Expect to post security in these cases if the capital gain exceeds $100,000.

    Exceptions to reporting requirements

    You don’t have to report the following assets when you leave Canada:

    Note that in the case of your Canadian pensions, non-residents are subject to a 25% withholding tax on the income paid, which is withheld at source by the pension fund. Non-residents can apply to reduce the withholding tax every five years, using form NR5. There may be tax treaty variations, but this would normally be a final tax owed to Canada with no further tax filing obligations on this income source.  

    Note that filing a tax return annually is a prerequisite to receive Old Age Security (OAS) when living abroad. Recipients must meet two other criteria. They must have:

    • Been a Canadian citizen or a legal resident of Canada on the day before they left Canada
    • Resided in Canada for at least 20 years since the age of 18

    Income Tax Guide for Canadians

    Deadlines, tax tips and more

    If you hold the following taxable properties when you leave Canada, you won’t need to report them before you leave. The future disposition of these “taxable Canadian properties” will require filing when these assets are actually disposed of:

    Article Continues Below Advertisement


    • Canadian real or immovable property, Canadian resource property, and timber resource property 
    • Canadian business property (including inventory) if the business is carried on through a permanent establishment in Canada

    You can elect to report the FMV of these properties on departure by filing form T2061. This is known as an Election By An Emigrant To Report Deemed Dispositions Of Property And Any Resulting Capital Gain Or Loss.  

    That leaves the non-registered financial assets in investment accounts on your balance sheet to consider. They must be reported on the final return at their FMV, so choose your departure date carefully. Remember, you won’t need to file your T1 return until April 30 of the year after you leave.

    Even if you don’t have investments or real estate or business assets to report, you may not be off the hook: personal-use property with a fair market value of more than $10,000 must be reported on exit. That includes cars, boats, jewelry, antiques, collections, and family heirlooms if together these items are worth more than $10,000 in value.  

    Different rules for immigrants

    The rules are different rules for immigrants who now wish to move on. It is not necessary to pay departure tax on property owned when the person last became a resident of Canada (or property inherited afterward) if residency in Canada was 60 months or less during the 10-year period before emigration. This rule doesn’t apply, however, if the person is a trust, and the property is not “taxable Canadian property.” 

    Penalties for failure to file forms

    You’ll be subject to a penalty if you miss filing a final T1 return. Form T1161—your asset list—attracts its own penalties, too. Whether you file a T1 or not, the T1161 must be filed on or before your filing due date. The penalty for failing to file is $25 for each day it’s late, with a minimum of $100 and a maximum penalty of $2,500. Interest on the balance due and penalties is extra. 

    What about provincial taxes?  

    Remember, the Canadian tax filing system is based on residency, not citizenship. That means you report all your worldwide income in Canadian funds on your Canadian tax return. Your provincial share is normally based on where you lived on December 31 of the tax year. But this also changes to your date of emigration when you leave the country, for the purpose of determining provincial tax residency.  

    Coming back to live in Canada

    If you ultimately change your mind about emigrating or a foreign job opportunity runs its course, it is possible to unwind your departure tax when you become a resident of Canada again, as long as you still own the property you previously reported at FMV when you left Canada. The Canada Revenue Agency (CRA) notes that if you make this election for taxable Canadian property previously reported, you can reduce the gain up to the amount of the gain that you reported.

    For other properties, reduce the amount of the proceeds of disposition that you reported on your tax return by the least of the amount of the gain reported on your final T1 on departure, the FMV of the property when you returned, or any other amount up to the lesser of those two amounts. At this point your tax situation has become complex, so you’ll probably need professional help to get it right. Dealing with the CRA on these compliance issues can be very time-consuming. 

    Evelyn Jacks, RWM, MFA, MFA-P, FDFS

    Source link

  • A practical guide to investing at every life stage – MoneySense

    As your financial needs change from early career to mid-life to pre-retirement to retirement itself, so, too, should the way you approach your investments.

    Setting foundations and leaning into growth

    Even though retirement is likely decades away, getting started with investing when you’re in your 20s or early 30s is one of the best money moves you can make. You’re likely embarking on your career, so you’ll have a steady source of income. But more importantly, you’ve got decades to go until you’ll need to access your retirement funds, which gives you more leeway to weather ups and downs in the market. 

    In this stage, you should consider not only setting up your retirement funds, but also about setting aside money that you may need in the medium term, whether you’re saving for a house or car, or planning for a family.

    Investing focus: Diversify and grow

    If you invest early, even with modest contributions, you’ll have a major advantage over people who wait: time. 

    For your retirement fund, you can get started with an equity-focused mutual fund or exchange-traded fund (ETF). Both options may give you access to a broad swath of the stock market without having to actually buy individual stocks. You can start small and set up pre-authorized contributions that can help your investment grow over time. (At Tangerine, these are called Automatic Purchases, which can be set up for any of their 13 investment portfolios.)

    For investments that you expect to use within the next 6–10 years, consider a more conservative approach, with funds that lean more heavily on predictable income such as bonds or GICs, which offer regular interest income and return your initial investment if held to maturity.which offer regular interest income and return your initial investment if held to maturity. These are considered less risky than stocks, though the stock market has historically performed better over time.

    Accounts to consider: TFSAs & RRSPs

    As a young adult, you might want investments that offer flexibility and tax-free growth. Take a look at a TFSA to get started. You can contribute up to the federally mandated annual limit (which accumulates each year) and have access to your funds if you need to withdraw them at any point. (Note, however, that if you store something like a GIC in your TFSA, you will still need to wait for the maturity date to access your money.)

    The registered retirement savings plan (RRSP, also called an RSP) is the other big one to consider. As the name suggests, it’s designed to be used in retirement. Like the TFSA, there are annual contribution limits. Like the TFSA, there are annual contribution limits. What’s different here is that your contributions are tax-deductible, meaning they can reduce the amount you pay in income taxes today. Instead, you’ll pay tax on the money when you withdraw it, likely in retirement when you will likely be in a lower tax bracket. 

    Article Continues Below Advertisement


    Both TFSAs and RRSPs can hold a variety of savings and investing vehicles, including mutual funds, ETFs, stocks, bonds or savings accounts. You can set up and manage your portfolio yourself or have an advisor/portfolio manager handle it for a fee, adjusting as you see fit over time.

    Balancing career and family

    By the time you’re in your 30s and 40s, your income may have risen, but you may also have taken on more debt and may even be caring for older relatives. At this point, you’ve got competing priorities: saving for retirement, putting down money on housing or paying down a mortgage, and supporting family.

    Because of these demands, you may be a bit more risk-averse with your investments than you were in your 20s. Instead of taking chances on investments with large growth potential, you might favour moderate-risk investments with steady returns or even an additional source of income, such as bond interest or stock dividends.

    Your investing focus: Balance

    Your primary goal during this stage of life may be maintaining your portfolio’s growth while starting to reduce risk. Instead of relying primarily on high-growth (and higher-risk) investments, consider introducing more moderate-risk options, balancing out your stock portfolio with bonds, money market funds, and other less volatile investments. 

    In other words, you may want to adjust your mindset from chasing returns to balancing your portfolio.

    Accounts and programs to consider: RRSP & FHSA

    You may already have an RRSP that you’re contributing to (perhaps in addition to a TFSA). During this stage of your life, consider prioritizing your contributions so the account becomes the backbone of your retirement savings. This means contributing the maximum amount allowed each year if you’re able.

    If you’re also at the point where you’re buying a home, look into a first home savings account (FHSA). This registered savings account allows you to contribute up to $8,000 per year to a maximum lifetime limit of $40,000. Your contributions are tax-deductible and eligible withdrawals are tax-free, giving you a nice lump sum towards a down payment.

    What about the Home Buyers’ Plan?
    The Home Buyers’ Plan allows you to withdraw funds from your RRSP, up to a maximum of $60,000 tax free, if you’re a first-time homebuyer or haven’t purchased or owned a property in the last four years. This can be a useful strategy if timing, eligibility, or cash-flow constraints make the FHSA less practical, or when you already have money sitting in an RRSP.

    Shifting towards stability and income planning

    As you enter your 50s and 60s, retirement is likely on the horizon. You may be thinking more about protecting your investments and trying to figure out how your savings will translate to actual income once you retire. At the same time, you may also be in your peak earning years, so protecting your money from taxes is still important.

    Jessica Gibson

    Source link

  • In planning for retirement, worry about longevity rather than dying young – MoneySense

    Or, as U.S. retirement guru Wade Pfau recently put it, “A retirement income plan should be based on planning to live, rather than planning to die.” The Michael James blog recently highlighted that quote.  

    Retirement is usually about planning for unexpected longevity, often exacerbated by inflation. After all, a 65-year-old Canadian woman can expect to live to 87—but there’s an 11% chance she’ll live to 100. 

    That fact was cited by Fraser Stark, President of Longevity Retirement Platform at Toronto-based Purpose Investments Inc., at a September presentation to the Retirement Club, which we described this past summer. Stark’s presentation was compelling enough that I decided to invest a chunk of my recently launched RRIF into the Purpose Longevity Pension Fund (LPF). A version of Stark’s presentation may be available on YouTube, or you can get the highlights from the Purpose brochure.

    Compare the best RRSP rates in Canada

    Stark confirms that LPF, launched in 2021, is currently the only retail mutual fund or ETF offering longevity-protected income in Canada. Note that LPF is not an ETF but a traditional mutual fund. It aims to generate retirement income for life; to do so, it has created what it describes as a “unique longevity risk pooling structure.” 

    This reflects what noted finance professor Moshe Milevsky has long described as “tontine thinking.” See my Retired Money column on this from 2022 after Guardian Capital LP announced three new tontine products under the “GuardPath” brand. However, a year ago Guardian closed the funds, so is effectively out of the tontine business. Apparently, it’s a tough slog competing with life annuities.

    Here’s the full list of wealth advisors and full-service brokers that offer it. Included are full-service brokerages (and/or their discount brokerage units) of the big banks, including Bank of Montreal, National Bank, and recently Royal Bank on a non-solicited basis. Among many independents offering it are Questrade and Qtrade. In addition, Stark says iA Financial allows investments in LPF on a non-solicited basis.

    Mimicking defined benefit pensions

    Purpose doesn’t use the term tontine to describe LPF, but it does aim to do what traditional employer-sponsored defined benefit (DB) pensions do: in effect, those who die early subsidize the lucky few who live longer than expected. 

    LPF deals with the dreaded inflation bugaboo by aiming to gradually raise distribution levels over time. It recently announced it was boosting LPF distributions by 3% for most age cohorts in 2026, following a similar lift last year.

    Article Continues Below Advertisement


    Here’s how Purpose’s actuaries describe LPF:

    “The Longevity Pension Fund is the world’s first mutual fund that offers income for life by incorporating longevity risk pooling, a concept similar to that utilized by defined benefit pension plans and lifetime annuities, to provide lifetime income.”

    Purpose envisages LPF working alongside annuities for some retirees (see my last column on why annuities aren’t as popular as some think they should be). LPF is not registered as a pension, but it’s described as one because it’s structured to provide income for life, no matter how long you live. It’s offered as a mutual fund rather than an ETF because it’s not designed to be traded, Stark said in one podcast soon after the launch. 

    Age is a big variable. Purpose created two classes of the Fund: an “Accumulation” class for those under age 65, and a “Decumulation” class for those 65 or older. You cannot purchase it once you reach 80. LPF promises monthly payments for life but the structure is flexible enough to allow for either redemptions or additional investments in the product—something traditional life annuities do not usually provide. When moving from the Accumulation to the Decumulation product at age 65, the rollover is free of capital gains tax consequences. 

    The brochure describes six age cohorts, 1945 to 1947, 1948 to 1950 etc., ending in 1960. Yield for the oldest cohort as of September 2025 is listed as 8.81%, falling to 5.81% for the 1960 cohort. My own cohort of 1951–1953 has a yield of 7.24%.

    How is this generated? Apart from mortality credits, the capital is invested like any broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is set as 49% equity, 41% fixed income and 10% alternatives. As of Sept. 30, Purpose lists 38.65% in fixed income, 43.86% in equities, 12.09% in alternatives, and 4.59% in cash or equivalents. Geographic breakdown is 54.27% Canada, 30.31% the United States, 10.84% international/emerging, and the same 4.59% in cash. MER for the Class F fund (which most of its investors are in) is 0.60%.  

    Stark says LPF has accumulated $18 million since its launch, with 500 investors in either the Accumulation or Decumulation classes. He also referred me to the recently released actuarial review on LPF. 

    Longevity income vehicles in the U.S.

    While LPF (and formerly) Guardian are the two main longevity product suppliers in Canada of which I’m aware, several products in the United States attempt to tackle the same problem in different ways. A few weeks ago, I did a roundup of the major U.S. offerings by contacting various U.S. and Canadian retirement experts through Featured.com and LinkedIn. The resulting blog covers products like Vanguard Target Retirement Income Fund, Fidelity Strategic Advisors Core Income Fund, Stone Ridge LifeX Longevity Income ETFs, and others. 

    For now, it appears Purpose is alone in this space in Canada, apart from fixed life annuities offered by insurance companies. The U.S. market is different because of Variable Annuities with income options. 

    Jonathan Chevreau

    Source link

  • From flight to fight: How to strengthen your financial resilience – MoneySense

    Financial stress is common. The nation’s Financial Consumer Agency reports that nearly half of Canadians have lost sleep because of it. In addition, it can be detrimental to physical and emotional well-being. 

    Luckily, there are simple steps you can take to strengthen your financial position. 

    Canadians are concerned

      According to the MNP data, the majority of Canadians (59%) expect a worsening of the economy in the coming year. Specific concerns include increasing unemployment (52%), spiking housing (59%) and healthcare (48%) costs, and higher taxes (53%). On a macro level, respondents expressed the belief that 2026 would bring rising poverty and inequality (62%) and a worsening government deficit (66%).

      Economic pressure is nothing new for Canadians, but bright spots have been few and far between since the COVID-19 pandemic. In the past six years, households have struggled with inflation, tariffs, and a shrinking job market. By now, it’s understandable if Canadians feel like they’re living in a never-ending financial crisis.

      The bad news is that it’s not all in our heads. MNP reports that only 47% of Canadians have an emergency fund to cover six months, and 41% say they’re $200 or less away from financial insolvency on a monthly basis.

      Best savings accounts in Canada

      Find the best and most up-to-date savings rates in Canada using our comparison tool

      Financial fight or flight

        Money pressures are common, but how you respond can be the difference between relative peace of mind and paralyzing fear. According to MNP, nearly three in five (59%) are adopting a “fight” mentality and taking proactive steps to protect themselves. Strategies include consolidating debt, adjusting their budgets, and seeking out help from a financial professional. 

        However, nearly a third (32%) are avoiding the problem—an anxiety response colloquially known as “flight”. If you avoid thinking about or discussing finances, or if you feel unable to act at all, you might be in a flight response. 

        “Sustained financial pressure is prompting both decisive action and withdrawal among Canadians,” says Grant Bazian, president of MNP LTD, adding that financial flexibility—or lack of it—may be the difference between someone who fights or flees. 

        Article Continues Below Advertisement


        Take small steps toward financial flexibility

          There’s no quick fix to improving your financial flexibility, and it can be mentally and emotionally fraught to even think about. That said, small steps in the right direction will help you escape the cycle of fear around money. Here are some places to start:

          • Budget. If you already have a budget, now is a good time to revisit it. If you don’t have a budget, build one. Once you have accounted for all of your income and expenses, you can find ways to cut or redirect your spending.
          • Prioritize emergency savings. Experts suggest having between three and six months worth of savings in the bank to support you in case of job loss or other emergencies. Even a small but regular contribution will add up over time.
          • Pay down debt. Debt, especially on a credit card, can destroy your financial health. Regular interest rates can be as high as 25%, and increase what you owe quickly, because of compound interest. You can improve your position by not spending on credit, moving debt to a lower-interest credit card, and considering consolidating your debt.
          • Increase your income. Reducing your spending is only half the equation. If you can increase the amount of money you bring in, you’ll have more to work with. Consider a second job or a side gig. Sell off unused or unwanted items and put the proceeds towards your emergency fund or debt. 
          • Ask for help. Many people have shame or secrecy around money issues which stops them from getting the assistance they need. There are professionals and resources available to help you reach your financial goals. 

          Financial anxiety is widespread in Canada, but ignoring it only deepens the strain. And while broader economic pressures may feel out of reach, personal financial resilience is not. Take deliberate steps today to ease stress, build a more stable foundation, and gain a sense of control over your finances. 

          Get free MoneySense financial tips, news & advice in your inbox.



          About Keph Senett


          About Keph Senett

          Keph Senett writes about personal finance through a community-building lens. She seeks to make clear and actionable knowledge available to everyone.

    Keph Senett

    Source link

  • Moving back home can save money—but only if you plan – MoneySense

    While moving back home could help achieve your goals faster—paying down debt, boosting your emergency fund or saving for a house—experts say it’s important the decision is grounded in intention and that you have a proper plan.

    Plan timelines and expectations in advance

    Jeri Bittorf, financial wellness co-ordinator at Resolve Counselling Services, said moving isn’t going to solve all your problems without having measurable goals in place. Set a timeline for your savings goal, such as six or 18 months, to keep you on track and so your parents know you will eventually move out.

    Bittorf suggested people think about the hidden costs of living at home. “Moving back in with family doesn’t mean you’re going to have no expenses,” Bittorf said. “(Your parents) might also be feeling some financial burdens based on the economy right now.”

    She said it’s important to determine whether you’d be expected to pay any rent or contribute to utilities and groceries. Meanwhile, other expenses could go up, such as gasoline costs, parking fees, or public transit costs because of a longer commute.

    “I do have clients that sometimes think, ‘Oh, I’m going to move an hour and a half outside of the city to move in with family’ and then not realize the commute,” Bittorf said. “That’s not only a financial sacrifice, there’s also this emotional and personal sacrifice (of) being on the road three hours a day.”

    It’s also easier to fall back into old habits of the parent-child role when living under the same roof—an age-old challenge. A constant barrage of questions about where you’re going and when you’d be back, or whether guests are allowed at home, can become overwhelming, Bittorf said. “That can be a really hard thing, especially if you’ve lived on your own for an extended period of time,” she said, adding that it may not always be worth the mental peace.

    Revisit the arrangement with regular check-ins

    Bruce Sellery, CEO of Credit Canada, said start by listing the pros and cons to help gauge if this move is right for you. Some benefits could be higher savings, helping with chores, not having to pay for laundry and even some logistical benefits, such as living in a nicer neighbourhood again. But it also comes with risks of relationship stress, co-dependency, and holding back on your romantic life.

    Then, think about the ways to mitigate those cons, he said. That means honest conversations, for example. When someone in their 20s decides to move back home, Sellery said the conversation should be framed like a request—not an announcement. He said that could open up a broader conversation about financial goals and whether parents are comfortable with it. 

    Article Continues Below Advertisement


    Bittorf said it’s important for the family to be on the same page about expectations as well as deciding what financial information you would like to keep private. “Your family might know that you’re moving in because of debt, but that doesn’t mean they get to ask you all the time, ‘How’s your debt repayment going? How much money did you make this month?’” she said. “You want to be very clear on what type of questions you’re willing to answer.”

    But that doesn’t rule out check-ins. Sellery said it’s also important to discuss the living situation on a regular basis. “The monthly check-in is two questions: What’s working well and what’s not working so well?” he said. That opens up room to talk about solutions to make things work, Sellery said. But if communication breaks down, there’s always an option to live separately again.

    “It really becomes more of a business relationship in some ways, because as a parent, you’re under no obligation to house a 25-year-old,” Sellery said. 

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about financial literacy:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    The Canadian Press

    Source link

  • How automation can simplify your finances – MoneySense

    Make finances easier with automation

    Automating your finances generally means setting up automatic payments for bills and recurring investment or savings deductions from your bank account. It may sound tedious to set up but once most bill payments are automated, experts say it can bring structure to your finances and set your budget up for success.

    “It goes a long way to automate things and make your life easier,” Marques said. “Even if you’re quite a proactive person, it just makes it easier to stay on track and ensure that you’re making progress toward your goals.” She said it takes away the ability to negotiate with yourself. For example, people with a spend-first mindset might put off savings contributions. But if that amount is automated, it is easier to think of it as a bill. “You just get it done,” she said. 

    Automation supports, not replaces, budgeting

    Another benefit is avoiding late fees or charges on bills and credit cards. Marques said anything from rent to utilities to savings to investing can be automated. For variable bills, such as a credit card, she suggested automating the credit card bill payment at a minimum amount and paying off the rest manually each month.

    But automation doesn’t replace the need for budgeting. Budgeting will always be a key pillar in personal finance planning, said Michael Bergeron, certified credit counsellor and manager at Credit Canada. “The automation just supports. It’s a strategy that helps us stay within our budget,” he said. For example, if you’ve paid off your debt, that money can now be automated to allocate elsewhere, such as savings or investments—and that insight only happens when you keep up with your budget.

    Know what can (and can’t) be automated

    However, many people don’t know how to automate payments. Bergeron said the first step to automation is having a structured budget, which caters to needs, wants, and other priorities. “Once we have a structured budget in place, then we can look at what are we going to automate,” he said.

    Marques said a simple way to know what can be automated is by listing all your fixed recurring expenses, such as rent or mortgage, car insurance, and phone bill, among others. Then, look at the days you get paid and start aligning bill payments and savings to your paydays. For example, fixed payments, such as rent, can be aligned with the paycheque that comes in right before the due date and can be set up for automatic deductions. Most recurring payments for bills and savings can be easily set up with online banking platforms or utility services such as network providers or insurance firms.

    Bergeron said people still need to keep a close eye on their bank statements to make sure there are no double charges, technical errors, or overdraft charges. Also, some automation setups may have an end date, which means you’d have to reset the payments. “If you don’t pay close attention to that, then obviously some missed and late payments could take place,” he said.

    It’s likely not possible to automate all your variable expenses, such as grocery bills or fuel expenses. “There will always be some form of money management structure that you have to manually take the lead on to make sure we’re following our budget to the best of our capabilities,” he said.

    Article Continues Below Advertisement


    While automation is likely to work for most people, Bergeron said it could be challenging for those who aren’t technologically savvy. He said if there’s a barrier, he doesn’t recommend automating finances until they understand the value and benefits of it. “But for the majority, it is a highly valued benefit for most people,” Bergeron said.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more news:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    The Canadian Press

    Source link

  • How often should you check in on your finances? – MoneySense

    What to check monthly

    Budgeting should happen consistently and frequently, said Jason Heath, an advice-only financial planner at Objective Financial Partners. “If you really want to get into the weeds on what you’re spending money on, trying to find ways to spend less, that should be a very frequent exercise,” he said, suggesting people do it monthly—or, if they’re new to budgeting, weekly.

    Heath said budgeting is especially important for those who have difficulty paying off their credit card on time or hitting their financial goals. Keeping a frequent check could help you see spending patterns and allow for changes to stay on course.

    People should also be reviewing their credit card statements to make sure there are no unexpected deductions or charges, said Wendy Brookhouse, certified financial planner and founder of Black Star Wealth. “Make sure that you catch that right away,” she said, so that you are able to fix the problem before it snowballs.

    What to check quarterly

    Brookhouse said it’s important to check in on your credit score every three months. She suggested reviewing both your Equifax and TransUnion reports. “Believe it or not, they may not always be the same,” she said. “You want to make sure that there’s nothing erroneous on it, identity theft …  because even if you found it today, it could take you a long time to get that removed,” Brookhouse said.

    featured

    Home Trust Secured Visa Card

    Build your credit with guaranteed approval regardless of your credit history for no annual fee (deposit required).

    GO TO SITE


    Interest Rates:
    19.99% purchase, 19.99% cash advance, N/A balance transfer

    featured

    MBNA True Line Mastercard credit card

    An ideal option for cardholders looking to consolidate and manage debt.

    GO TO SITE


    Interest Rates:
    12.99% purchase, 24.99% cash advance, 17.99% balance transfer

    Secured Neo Mastercard

    Rebuilt your credit with a secured card while earning cash back on your everyday purchases.

    GO TO SITE


    Interest Rates:
    19.99% purchase, 22.99% cash advance, N/A balance transfer

    A check-in on subscriptions or charges on accounts, such as Amazon and Apple, should also be on your quarterly to-do list, she said. For example, scrutinizing your Amazon or Apple accounts could help catch any charges for games or movies that your kids may have purchased.

    Also, check on subscriptions you may have signed up for trials on and forgot to cancel. “Review your donations,” Brookhouse said. “When I say donations, I mean the things you’re buying and subscribing to that you are no longer using, so you’re in effect donating to the company.”

    Then, go shopping every three months for better phone and Wi-Fi plans or even auto insurance. “Make sure you have the right plan for the right price because if your usage has changed or your patterns have changed or there’s new programs out, you may find there’s something better for you and that’s more cost-effective,” she said.

    For people who are business owners or have significant taxable non-registered investments, tax planning should be on their frequent checklist, Heath said. “The more complex somebody’s situation is, tax planning is definitely at least a quarterly discussion,” he said.

    Article Continues Below Advertisement


    What to check annually

    Checking in on investments is an annual affair, Heath said. “Investments are something you would benefit from looking less frequently,” he said. “For a lot of investors, quarterly or annually is probably enough as far as taking a deep dive on your investment.”

    For people who are T4 employees with straightforward deductions, tax check-ins can be done annually, Heath said. However, he said people should plan their taxes proactively instead of retroactively when the tax season for the past year comes around in April. Instead, think about what you need to do for the current tax year while you still have time to take action.

    Compare life insurance quotes and save

    Request a personalized quote and consult with an expert about your coverage needs. Get the protection you need at the right price.

    Most yearly check-ins, such as reviewing your investments or life insurance, should also be reviewed during major life changes, Brookhouse said. “If you had a child, that may change your insurance requirements. If you get divorced, that could be a change,” she said. Brookhouse suggested looking at planning documents, such as checking if your will’s executor is still up to the task and whether the document expresses your current thinking.

    Another yearly review to-do should be bank fees. Brookhouse said people should shop around to make sure they can find the lowest fee for their needs, remembering that fees may have crept up over time.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about saving:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    The Canadian Press

    Source link

  • So you fell short of your financial goals in 2025—here’s how to do better – MoneySense

    Many Canadians missed key goals

    A year ago, 51% of respondents to a similar poll said they wanted to pay off their debt in 2025 but only 26% managed to do so. A similar number, 49%, aimed to save for the future over the past year but only 30% of this year’s respondents reported accomplishing that task. In late 2024, 36% of respondents said they wanted to make or update their wills in 2025 but only 9% actually did. Of the 18% who were in the market for a home in 2025, just 4% bought one. 

    In fact, the share of the population with major financial to-dos crossed off their list may have taken a small step backwards in 2025. Forty percent reported having a will (versus 41% in 2024), 34% had life insurance (from 35% a year earlier) and 24%, power of attorney (compared to 27% in 2024). Only 30% of respondents said they have discussed a financial emergency plan with their families and have the related planning documents, such as a will, in place.

    The findings all came from an online survey of 1,503 Canadian adults who are members of the Angus Reid Forum. The poll took place in October. The results are considered accurate within 2.5 percentage points 19 times out of 20.

    Compare the best TFSA rates in Canada

    Why Canadians fell behind

    Although inflation has eased off as a threat somewhat—72% of respondents said they worried about its impact on their finances, compared with 86% a year ago—new risk factors such as tariffs (53%) and unemployment (44%) rank high among the reasons for not reaching financial goals. More than a third (37%) felt worse off than last year and 46% said they had to dip into savings to cover expenses. The share of Canadians who feel optimistic about their financial future dropped to 46% in 2025 from 53% in 2024.

    “All of these factors caused Canadians to by and large put off these financial to-dos related to their long-term financial health and wellness in favour of just dealing with the day to day,” says Erin Bury, Willful’s co-founder and chief executive officer. Also interfering with people’s ability to hit their objectives are generally low levels of financial literacy and the difficulty of making hard decisions and delaying gratification in the face of marketing, peer pressure and social media that urges us to do the opposite.

    “Ignorance comes into it. It’s really common to avoid thinking or planning for the future and avoiding thinking or planning for anything uncomfortable,” Bury says. “Most people are just focused on ‘How am I going to get through 2026?’, not ‘What’s my financial picture going to look like in 2056?’”

    Steps to get back on track in 2026

    Bury recommends writing down your financial goals as a first step towards getting ahead in 2026. Refer to and adjust them if necessary throughout the year. Put reminders on your calendar. The month-to-month contributions don’t have to be huge to make a difference over the long haul.

    “I have an RESP for my kids. I’m not putting in thousands of dollars a month, just a small amount,” she says. “The biggest asset we have in investing is time.”

    Article Continues Below Advertisement


    Willful has created a month-by-month checklist to help keep estate and other financial objectives top-of-mind in 2026. They include topping up your RRSP for the 2025 tax year in February, centralizing your account information in one place in April and setting up a password manager for your various accounts in October.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about financial planning:



    About Michael McCullough


    About Michael McCullough

    Michael is a financial writer and editor in Duncan, B.C. He’s a former managing editor of Canadian Business and editorial director of Canada Wide Media. He also writes for The Globe and Mail and BCBusiness.

    Michael McCullough

    Source link

  • Plan for financial success in 2026 – MoneySense

    Experts say you don’t have to rush the analysis during the peak holiday season. Instead, you can split the task into smaller chunks and prioritize based on deadlines. First, think about the major changes in your life this year, said Brian Quinlan, a chartered professional accountant with Allay LLP. “What has happened to your life in terms of marriage, babies, finishing school—and what’s happened with your finances?” Quinlan said.

    Key tax moves before year-end

    The Canada Revenue Agency runs the personal tax year in line with the calendar year. That means the deadline to reduce your tax bill and contribute to most registered accounts is Dec. 31, though a notable exception is the RRSP contribution deadline, which is typically the beginning of March in the following year.

    “What do you need by year end to make sure you’ve got the best tax break or take advantage of tax incentives that you can?” Quinlan said. “You would hate to find out something in early January (that) you’ve missed something.” Medical bills, charitable donations, childcare expenses or settling investment management fees are examples that can save you a few dollars during the tax season come April if the payments have a 2025 date stamp. The higher the cumulative donations in a given calendar year, the more you benefit during tax season, for instance.

    Another popular tax strategy that is timed to the end of the calendar year is tax-loss selling, which is when money-losing investments in non-registered accounts can be sold to realize a loss which can then be used to offset capital gains, thus reducing the investor’s taxes owing.

    The deadline to contribute to your first home savings account, which allows contributions of $8,000 a year, is also aligned with the calendar year—and allows tax deductions, said Shannon Lee Simmons, a certified financial planner and founder of the New School of Finance.The contribution room, however, carries over to next year. “Anything that has a hard deadline, you should be talking to whoever the professional is in your life (before Dec. 31),” Simmons said. “Everything else can probably wait until the new year.”

    But it’s all right if you can’t make time before the year ends, said certified financial planner Jessica Moorhouse. “Don’t sweat the small stuff if there are a few tax credits that you could have got and you didn’t,” she said. “Let’s try again for next year.”

    Take stock of your finances in January

    Once the holiday madness is over and the new year is rung in, you can take the time to review your finances—including your budget, goals and net worth. “Once you’ve done all the transactions that need to happen, then we’re going into future-forward mode,” Simmons said.

    She suggested thinking about what your income for the year is likely to look like. For example, do you expect your income to be stable or is there uncertainty? “If you feel like your economic future this year is looking a little uncertain or you’re nervous about income, then I would beef up the emergency accounts,” Simmons suggested.

    Article Continues Below Advertisement


    If there’s any money left over after your basic bills and living costs are covered, then think of your broader priorities. If you have consumer debt, prioritize paying it off. Or start funding an emergency account if you don’t have one, she said.

    Focus on sustainable, long-term financial planning

    If you already have a decent emergency fund and no debt, that money can then go into other long-term plans, such as retirement, paying off a mortgage or saving up a down payment, Simmons said. “But it’s the third priority,” she said. “We want to make sure that we have no consumer debt and that our emergency stuff is intact before we move on to those more exciting financial goals.”

    Then, set micro-timelines to track progress toward your goals and stay realistic. Often, people set unreasonable expectations, such as never going out for lunch or planning to contribute an exorbitant amount to their tax-free savings account every month.

    “They inevitably fail because life is expensive and then they give up on the whole plan,” she said. “If we were realistic and made a plan that is sustainable from the get-go, then the likelihood of failing is much less and sticking to it is way better,” Simmons said.

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more news:



    About The Canadian Press


    About The Canadian Press

    The Canadian Press is Canada’s trusted news source and leader in providing real-time stories. We give Canadians an authentic, unbiased source, driven by truth, accuracy and timeliness.

    The Canadian Press

    Source link

  • The 4% rule, revisited: A more flexible approach to retirement income – MoneySense

    I had originally planned to focus exclusively on that book but ended up on a related project on my own site, which involved asking more than a dozen financial advisors on both sides of the border what they think of the 4% Rule and the tweaks Bengen covers in his follow-up book. The survey was conducted via LinkedIn and Featured.com, which has long supplied content for my site. You can see the complete set of responses on my blog, but at over 5,000 words, it’s a tad long for the space normally assigned to this Retired Money column.

    Here, I focus on the most insightful comments and add a few thoughts of my own. Let’s jump right in. 

    Trusts and estates expert Andrew Izrailo, Senior Corporate and Fiduciary Manager for Astra Trust, recaps the basic thrust of the original 4% Rule:

    “The 4% Rule, created by CFP Bill Bengen in the 1990s, remains one of the most referenced retirement withdrawal guidelines. It suggests withdrawing 4% of your portfolio in the first year of retirement and adjusting that amount for inflation each year. The idea was to provide a sustainable income stream for at least 30 years without depleting your savings.”

    Bengen’s new book “revisits this concept using updated data and broader asset allocations,” summarizes Izrailo, “He now argues the safe withdrawal rate could rise to around 4.7%, supported by stronger market performance and portfolio diversification beyond the original stock-bond mix.”

    4% is just a starting point

    Like many of the other retirement experts polled, Izraelo sees the 4% Rule as “a reliable starting point, but not a fixed rule.” The 4% guideline “offers structure for retirees who need clarity on how much to withdraw each year, but real-world conditions require flexibility.” 

    For American investors, Izrailo still begins with 4% as a baseline because “it remains simple and conservative. Then I evaluate three major factors before adjusting: market volatility, portfolio performance, and expected longevity.” For Canadian retirees, “I tend to start lower, around 3.5%, due to differences in taxation, mandatory RRIF withdrawal rules, and the impact of currency and inflation differences compared to U.S. portfolios.” 

    Compare the best TFSA rates in Canada

    Toronto-based wealth advisor Matthew Ardrey of TriDelta Financial was not part of the Featured roundup but agreed with the general view that while a helpful starting point, the 4% Rule is only a guideline. “When I meet with a client, I don’t rely on the 4% rule at all,” said Ardrey, who has worked with clients for more than 25 years. “I’ve learned that rules of thumb—like the 4% rule—pale in comparison to the clarity and confidence that come from a well-crafted” and personalized financial plan. Such a plan should reflect each person’s unique circumstances, priorities, and goals, allowing them to build the right decumulation strategy for their situation.

    “I would never want a broad guideline to stand in the way of someone taking their dream retirement vacation or helping their children purchase their first home,” he says. “Instead, I focus on creating a detailed plan that shows exactly how those goals can be achieved. And of course, life isn’t linear. A strong plan is something we can revisit and adjust as life changes, providing updated guidance to help keep retirement on track.”  

    Article Continues Below Advertisement


    After reading A Richer Retirement, tour operator Nassira Sennoune says Bengen succeeds in transforming “what was once seen as a strict withdrawal formula into a flexible approach that prioritizes experience, adaptability, and peace of mind …  Bengen’s message is that Retirement should not revolve around fear or limitation. Instead, it should be about living fully within realistic financial boundaries. By adjusting withdrawals according to personal goals, market performance, and the natural flow of retirement years, retirees can enjoy their savings as a source of freedom rather than anxiety.”

    Almost all the experts caution against taking a one-size-fits-all approach to the 4% Rule or its variants. Financial advisor and educator Winnie Sun, Executive Producer of ModernMom, has over 20 years working with clients. She starts with 4% as the baseline, then adjusts it based on actual client spending patterns and market conditions. “I had a couple last year who were terrified to spend more than their calculated 4%—even though their portfolio had grown 30%—and they were skipping vacations they’d dreamed about for decades. We bumped them to 5.5% for two years because the math worked and life is short: they finally took that trip to Italy. The biggest mistake I see isn’t about the percentage itself, it’s that people forget about tax efficiency in withdrawal sequencing.”

    Oakville, Ontario-based insurance broker James Inwood says the 4% rule is “a decent guideline, but it’s not some magic number you can set and forget. I’ve watched people get into trouble because they didn’t account for medical bills, which are a real wild card here in Canada,” he shares. “I always tell people to build in a cash buffer and check in on that withdrawal rate every couple of years instead of just locking it in permanently.”

    Broader asset allocation

    Bengen is now recommending a broader asset diversification to add in small percentages of international equities and small-cap stocks in addition to his historic investment portfolio of 50% U.S. large-cap stocks and 50% intermediate bonds, says attorney Lisa Cummings.  “He claims with this broader diversification the safe withdrawal rate could now be up to 4.7% under the best-case scenario, 4.15% worst case.” 

    Today’s retirees have to deal with both rising inflation and longer lifespans, she adds, so she advises clients to have a two-year cash cushion in case of prolonged negative markets, and otherwise maintain a flexible annual withdrawal range ranging between 3.5 and 4.5%. 

    David Fritch, a CPA with 40 years of experience serving small business owners, stopped treating the 4% Rule as gospel once he noticed their retirement income rarely came from just traditional investment portfolios. “Most had business sale proceeds, real estate holdings, and irregular cash flows that made the 4% rule almost irrelevant.” 

    He also realized the sequence of withdrawals and which vehicles created the withdrawals were more important than mere annual percentages. “Forget the percentage and work backward from your actual monthly expenses, then layer in guaranteed income sources (Social Security, pensions, annuities) before touching portfolio money. Most of my retired clients ended up withdrawing 2–3% because they structured things right on the front end.” 

    Late-career income fluctuations can change calculations

    Digital marketer Fred Z. Poritsky says late-career income career changes can radically affect retirement withdrawal math. The 4% rule assumes you’re done earning but “if you’re keeping one foot in the working world (consulting, part-time, passion projects that earn), you can probably push 5–6% in those active years since you’re adding income streams.”

    Jonathan Chevreau

    Source link

  • Balancing personal and financial goals as you build a new life in Canada – MoneySense

    For many newcomers to Canada, personal and financial goals can feel like they are pulling in opposite directions. You want to say yes to everything—travel, dinners out, live music, social events—but you’re also thinking about building an emergency fund, saving for retirement, and staying out of debt. Add to that the cost of settling in, a limited credit history, and (in many cases) living off savings or a survival job, and it becomes clear that trying to do it all right away can be risky.

    This article isn’t about me, but I will say this: my family and I chose to focus on building a strong financial foundation before chasing all the extras. At the same time, we were very aware of how easy it is to fall into the trap of grinding so hard that you lose steam. If the journey to build a better life becomes joyless, it can be hard to remember why you moved in the first place.

    You can’t do everything at once—and that’s okay

    The truth is that it’s hard to prioritize when you’re trying to settle in and feel like you belong. The urge to do and see everything is real. But when your early days in Canada are being funded by personal savings—or worse, high-interest credit—impulsive spending can get dangerous fast. 

    Without a financial plan, it’s easy to overspend—and because newcomers often have no credit history, the only credit products available may come with steep interest rates and strict limits. One misstep can quickly spiral. Instead of trying to do everything, consider what really matters most in the short term. What helps you feel grounded? What creates forward momentum? What is truly urgent, and what can wait?

    Focus on the foundation

    There’s a difference between building a life and decorating it. In those early months, start with the essentials—the things that give you stability, reduce your stress, and set you up for long-term success.

    Earning, saving and spending in Canada: A guide for new immigrants

    Here are a few financial goals that are worth tackling early.

    1. Build your credit history

    Get a secured credit card, if necessary, and use it for manageable expenses like phone bills or groceries. Pay it off in full every month. This helps you build a strong credit profile, which will eventually open doors to lower interest rates and better financial products.

    featured

    Home Trust Secured Visa Card

    Build your credit with guaranteed approval regardless of your credit history for no annual fee (deposit required).

    GO TO SITE


    Interest Rates:
    19.99% purchase, 19.99% cash advance, N/A balance transfer

    featured

    MBNA True Line Mastercard credit card

    An ideal option for cardholders looking to consolidate and manage debt.

    GO TO SITE


    Interest Rates:
    12.99% purchase, 24.99% cash advance, 17.99% balance transfer

    Secured Neo Mastercard

    Rebuilt your credit with a secured card while earning cash back on your everyday purchases.

    GO TO SITE


    Interest Rates:
    19.99% purchase, 22.99% cash advance, N/A balance transfer

    2. Set up an emergency fund

    Even if you’re starting small, building a financial cushion gives you breathing room. Try to set aside enough to cover one month of basic expenses, and grow it over time.

    Article Continues Below Advertisement


    3. Understand the Canadian financial system

    This includes learning the difference between TFSAs, RRSPs, RESPs, and more. Many financial institutions, community organizations, and nonprofit agencies offer newcomer-specific resources. Take advantage of them.

    Compare the best TFSA rates in Canada

    4. Avoid high-interest debt

    Unless absolutely necessary, avoid payday loans or quick-cash offers. These products often have extremely high interest rates and can lead to long-term financial stress. If you are unsure, ask questions. Get advice before you borrow.

    5. Make small progress on long-term goals

    Even small, regular contributions to your child’s education fund or your own retirement savings can have an outsized impact over time. The key is to get started.

    But don’t put life on hold

    Now here’s the important part: building a financial foundation does not mean you have to live a joyless life. You didn’t move here to just pay bills and build spreadsheets; you moved here for something more. And if you strip away everything fun or fulfilling in the name of discipline, you may find yourself questioning whether the move was worth it.

    What helped me was learning to make room for both—a night out every now and then, a concert ticket, a staycation with my family. Nothing extravagant, just moments that reminded us that we were here to live, not just survive.

    If you plan for it, joy doesn’t have to be expensive, it just needs to be intentional.

    A quote that changed my perspective

    I recently saw a quote on Instagram that stayed with me:

    “Your life will change when you realize you are not building wealth for the things you can buy. You are building wealth for the problems you won’t have. The emergency that doesn’t devastate you. The opportunity you can take. The pressure you don’t feel. Wealth is peace, not possessions.”

    Vickram Agarwal

    Source link

  • How to prepare for the $84 trillion wealth transfer | Long Island Business News

    The great wealth transfer is upon us.

    DAVID MAMMINA: ‘It really depends on the person themselves on how they want to determine how their money goes when they pass.’

    An estimated $84 trillion to $124 trillion is expected to go from baby boomers to Gen Xers, millennials and Gen Z over the next 20 years or so, notes David Mammina, partner and financial advisor for Coastline Wealth Management.

    With these numbers and factors in mind, a reputable estate attorney, CPA and financial planner can help manage that transfer of wealth.

    “The team can really look at what’s the best way to deploy trusts. The CPA can determine the best way to save on taxes,” said Mammina, adding that a financial planner can help clients determine how much can be gifted.

    Advisors can tailor a program to an individual’s desires: Whether they want to set up philanthropic donor trusts, gift early so they can see the next generation enjoy it, or invest so there’s a bigger pot for their heirs to inherit.

    “It really depends on the person themselves on how they want to determine how their money goes when they pass,” Mammina said.

    Financial planners will bring in estate attorneys to set up trusts, which helps expediate the transfer of assets. Accountants can start converting IRAs and 401Ks into Roth IRAs, so the assets grow and transfer to the next generation, tax free.

    Teaching the next generation about investing, compounding interest, diversification and risk is also key.

    “It just makes it a little bit of an easier transition when everybody is part of the picture,” Mammina said.

     

    Focus on income taxes

    ASHLEY WEEKS: ‘Very often, it makes sense to involve a professional. It could be a lawyer that serves as trustee. It could be an accountant, a bank or financial institution.’

    As baby boomers age, wealth management starts to center on helping younger generations become good stewards of these resources, notes Ashley Weeks, a wealth strategist at TD Bank.

    “How do we pass the wealth along with the least amount of friction and protect ‘kids‘ going forward?,” said Weeks, noting that the focus should be on income taxes on retirement accounts.

    Instead of selling an asset, you can borrow against it, using it as collateral.

    “You don’t have to pay tax when you take out a loan and let that property benefit from the step up in basis at death,” she said.

    There are challenges in passing along retirement accounts, which don’t get the benefit of a step-up in basis. One possibility is to convert an IRA into a tax-free Roth account.

    “You can pay tax now, but your heirs are not going to be forced to pay taxes on that money when they pull it out after they inherit it,” Weeks added.

    A revokable trust allows assets to bypass the probate process and help protect assets from heirs’ spouses, in the event of divorce.

    To prevent disputes between heirs, grantors should choose their trustees wisely.

    “Very often, it makes sense to involve a professional. It could be a lawyer that serves as trustee. It could be an accountant, a bank or financial institution,” she said.

     

    Diversify your portfolio

    BHAKTI SHAH: ‘It’s important to have an independent valuation to understand what the business is worth.’

    For family business owners, their company is typically their largest asset and the one that’s most dear to them, notes Bhakti Shah, partner and chair of PKF O’Connor Davies’ trusts and estate division.

    If they have concentrated risk in that business, one strategy would be to diversify.

    “Diversify by maybe selling some shares outright to create a more mixed allocation in their asset portfolio,” Shah said.

    If selling is not an option, gifting–either in outright gifts or in a trust—is another possibility.

    Irrevocable trusts provide a greater layer of protection than outright gifts: The asset is protected from creditors or former spouses.

    Work with a team of trusted advisors: An accountant to ensure assets are properly transferred; a lawyer, for a trust, which is a legal entity; and a financial advisor, to manage the transfer of assets.

    “That whole team of professionals is working for you to make sure they’re looking at it from all different angles so that your wishes are being handled according to plan,” Shah said.

    For business owners, having a plan that defines the transition and ownership will put you ahead of the game.

    “It’s important to have an independent valuation to understand what the business is worth,” said Shah, who adds that it could help determine their options as they transition out of the business.

     

    Keeping the peace

    DAVID FRISCH: ‘The founder has to understand the tax consequence of selling. Then you start bringing the family in.’

    For business succession planning, founders must decide how involved they want to remain with the business. In instances when they’re closely linked to their companies, founders usually get a higher payout if they stick around for a year or longer before transitioning out, notes David Frisch, founder and CEO of Frisch Financial Group.

    “The first step—before the family gets involved—is having the conversation with the owner to say, ‘What do you want to do?” Frisch said.

    There’s also the question of how to divide all major assets between the children: the business, real estate holdings and the brokerage account.

    “The founder has to understand the tax consequence of selling,” said Frisch, adding, “Then you start bringing the family in.”

    In addition to a financial advisor and attorney, you might want to also bring in a psychologist to handle the emotional issues of who gets what, who becomes the boss, etc.

    “If nobody wants to run it, it’s certainly easier to sell to a third party, because it takes a lot away from the potential fighting that may be involved,” Frisch said.

    He advises that founders should plan well ahead of retiring:  “Five years before is typically when the founder should start thinking about the next chapter.”


    ARLENE GROSS, LIBN CONTRIBUTING WRITER

    Source link

  • Most Canadians feel confident about affording life milestones—but many are still putting them off – MoneySense

    But long-term confidence doesn’t mean that Canadians are untouched by the current economic environment. While 68% said they’re confident they’ll ultimately meet their milestones, over half (51%) said that they’re currently putting off at least one major financial goal. 

    How can Canadians make sure that they hit the milestones they’re planning for? FP Canada’s survey highlights a huge confidence gap between those who currently work with a financial planner and those who don’t. Of those working with a financial planner, 79% say they’re confident about their goals, compared with just 59% of those without professional guidance. 

    Laura Bishop, Qualified Associate Financial Planner (QAFP) at IG Wealth Management, says that financial planners can help Canadians of all ages and income levels prepare for life milestones with the help of an expert who knows the market in and out. “It’s not just for the wealthy,” she says. “It’s for anyone who wants to make intentional decisions about their money.”

    Find a qualified financial advisor near you

    Search our directory of credentialled advisors providing financial and investing services across Canada.

    The biggest challenges to Canadians’ financial plans come from daily life

    Among the most significant challenges Canadians said they face when planning for life milestones include paying off debt (31%) and general economic uncertainty (35%). 

    But the biggest challenge of all? For 41% of Canadians, not enough is left over once their necessary expenses are paid. For survey respondents aged 35-54, nearly half (48%) named this as their primary challenge. 

    In other words, it’s not just the big swoops and dips of economic uncertainty, or the individual burden of debt, that’s putting a pause on some Canadians’ financial confidence. For many Canadians, daily life is too expensive to make steps toward big financial plans right now.

    The generational planning split: Travel comes first for Gen Z

    The three most common life milestones that Canadians are saving for today include retirement or semi-retirement (50%), travel (42%), and buying a home (19%). But for younger Canadians, travel takes top priority, while more traditional goals like retirement and homeownership are taking a back seat. 

    These are the top milestones for Canadians aged 18-34: 

    • 43% are saving for travel
    • 38% are saving to buy a home 
    • 34% are saving for retirement

    Compare those with the top milestones for the 35-54 age group: 

    Article Continues Below Advertisement


    • 61% are saving for retirement 
    • 47% are saving for travel
    • 25% are saving for their children’s education 

    For both age groups, travel is a major financial priority, even beating out goals like retirement, homeownership, and education.

    Best savings accounts in Canada

    Find the best and most up-to-date savings rates in Canada using our comparison tool

    A spending mindset

    According to Bishop, Canadians’ love of travel isn’t just a coincidence. She links it to the COVID-19 pandemic, noting that since 2020 many Canadians have shifted away from just focusing on long-term savings goals to include short-term spending in their financial priorities. 

    “Since COVID,” she says, “a lot more people are looking at living their best life.”

    “It’s about clarity”: How working with a financial planner can build confidence around money

    Bishop doesn’t want Canadians to put off working with a financial planner out of a misplaced fear that they’ll lose control over their finances—or a belief that it’s only a service for the very wealthy. 

    Anyone can work with a financial planner, she says, and young people in particular can benefit from the financial education and insights they offer. “It’s not about giving up control; it’s about gaining clarity.”

    For Bishop, the job of a financial planner is about more than expertise in markets or investment strategies. “Money is an emotional conversation,” she says. Many people, especially those who don’t feel confident about their financial goals, don’t tell even their closest friends about their financial situation—but Bishop has these honest, open conversations every day with her clients. 

    “A good planner will help clarify and simplify complex decisions,” Bishop says. “A great planner will align those decisions with your priorities, your goals, and a personalized plan for you.”

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about financial planning:



    About R.E. Hawley


    About R.E. Hawley

    R.E. Hawley is a senior writer and editor with over a decade of combined experience in the education and insurance spaces. R.E. values creating accessible content on complex financial topics that people can use to make informed decisions.

    R.E. Hawley

    Source link

  • 5 On Your Side: How to plan your digital estate for peace of mind

    It’s
    not pleasant to think about death or a medical emergency, but one of the
    greatest gifts you can give your loved ones is being prepared for those
    situations.

    You might be familiar with traditional estate planning, but there’s
    also what’s called digital estate planning. Consumer Reports has five things to do
    right now to make things easier in a crisis.

    Having
    a will and power of attorney will help your loved ones follow your wishes, but
    there’s more to do.

    Think about your online accounts and which bills you pay
    with a swipe. Are there important documents in your cloud storage? And what
    about all those photos on your phone? Create a digital estate plan.

    First,
    set up an ‘in case of emergency’ document. Jot down the names, phone numbers,
    and emails of important people in your life. List the location of important
    documents, like birth certificates, passports, and social security cards.

    This
    document should also have your bank accounts, investments, and recurring bills,
    including when they’re due and how you pay them, including autopay.

    Two,
    share your passwords. To pay your bills and manage other affairs someone needs
    your log-in info. If you don’t want to spell out your passwords, give hints or
    keep it simple with a password manager.

    Consumer Reports recommends using
    1Password. The $60 a year family plan covers up to five people who get access
    to shared folders.

    The
    third thing to do is designate a legacy contact for your online accounts. A few
    tech companies let you grant control to someone else. For example, Google’s
    Inactive Account Manager, Facebook Legacy Contact and Apple’s Legacy Contact,
    to name a few.

    Next,
    add your digital assets to your traditional will so that everything is together
    in one place and easy for your family or close friends to find.

    Finally, have an emergency planning
    meeting.

    Tell your loved ones your wishes and where they can find this
    information. Providing easy access to online accounts can make a painful time
    less stressful. And having things in order will give you peace of mind.

    For your social media posts and stories,
    you can use the free social media will generator
    from Epilogue. It creates a document that has your wishes on what to do with
    your Facebook, Instagram, LinkedIn and other social media accounts.

    Source link

  • Who you gonna trust: Barry Ritholtz or Jim Cramer? – MoneySense

    The first can be regarded by retirees and those on the cusp of retirement as a must read: William Bengen’s A Richer Retirement, the long-awaited update of his classic book on the much-cited 4% Rule: Conserving Client Portfolios During Retirement. First published in 2006, that book was really aimed at financial advisors but became popular with the general investing public after it got extensive press exposure over the years.

     The 4% Rule—which is actually closer to a 4.7% Rule depending how you interpret it—refers to the “safe” percentage of a portfolio that retirees can withdraw each year without running out of money in 30 years, net of inflation. Bengen’s term for this is “SAFEMAX.”

    The new book is supposedly aimed at average investors. Still, I found it pretty technical, filled chock-a-block with charts and tables that are probably more accessible to the original audience of financial professionals. Counting some useful appendices, the book is just under 250 pages.

    After wading through all Bengen’s tweaks meant to minimize the impact of inflation, bear markets, and unexpected longevity, I was left with the impression the original 4% Rule remains a pretty good initial guestimate for what retirees can safely withdraw in any given year. 

    Sure, 3.5% or 3% may be technically “safer,” especially if you expect to live a very long life or want to leave an estate for your heirs. I’ve even seen arguments that a 2% retirement rule may be appropriate for extremely risk-averse retirees. 

    On the other hand,  it’s not too dangerous to withdraw 6% or 7% or more as long as stock markets and interest rates cooperate. That’s what many retirees intuitively do anyway; they reduce withdrawals in bear markets, and splurge a bit in raging bull markets. 

    It’s also worth noting that whether you choose 3%, 5%, or larger percentages, that guideline really just applies to your investment portfolios, whether held in tax-deferred or tax-exempt accounts or taxable ones. Most Canadian retirees can also count on the Canada Pension Plan (CPP) and Old Age Security (OAS), not to mention employer pensions. Those lacking big defined-benefit pensions but who have plenty saved in RRSPs and TFSAs can choose to pensionize or partially pensionize their nest eggs by buying annuities. (For timing, see this piece published recently on my blog.) For that concept, refer to Professor Moshe Milevsky’s excellent book, Pensionize Your Nest Egg.  

    Making money in any market

    More controversial is Jim Cramer’s How to Make Money in Any Market. I know it’s fashionable for some mainstream financial journalists to disparage the long-time host of Mad Money and in-house stock-picking guru on Squawk on the Street. I never watch him on TV (MSNBC) but often listen to his podcasts while walking or at the gym, usually at 1.5x speed and skipping over interviews with the CEOs of more speculative stocks I have no interest in. Cramer’s critics tend to be diehard indexers who swear it’s impossible to consistently pick stocks and “beat” the market over the long run. I tend to side with them, but more on that below.

    Article Continues Below Advertisement


    Obviously, Cramer begs to differ, often trotting out testimonials from Nvidia millionaires who bought that spectacular artificial intelligence (AI) chip stock the moment he named his dog after it (sadly now deceased). Cramer devotes an entire chapter to that call, which he mentions every chance he gets. I did buy that stock too, although I was too late and risk-averse to bet the farm enough to change my life with it.

    What his critics may not realize is that even Cramer believes in indexing at least 50% of a portfolio. In fact, he tells newcomers to stocks that their first $10,000 (US) should go in an S&P500 index fund. Hard to argue with that.

    Where I part ways is his book’s recommendation of holding just five stocks for the 50% of a portfolio that is not indexed. That would mean holding around 10% of your total portfolio in each such stock, which is way more concentrated than most investors would countenance. Much of the book goes into how to choose the kind of secular growth stocks he prefers, with the help of modern AI tools like ChatGPT, Grok, and all the rest.

    I used to wonder about his show’s regular segment, Am I diversified?, where readers submit their five picks for Cramer’s consideration. I’d be surprized if there is an investor anywhere whose portfolio is that concentrated. Even Cramer’s much-cited Charitable Trust holds many more than five stocks. 

    Canada’s best dividend stocks

    How not to invest

    This leads me to the third book I ordered from Amazon, recently reviewed by Michael J. Wiener of the Michael James on Money blog: Barry Ritholtz’s book How Not to Invest. Cramer cynics might quip that would have been a better title for How to make money in any market had it not already been taken by Ritholtz; Cramer has after all famously inspired some ETF companies to provide “reverse Cramer” funds that short his major long recommendations. 

    Ritholtz’s book clocks in at almost 500 pages but is quite readable. It has attracted multiple testimonials ranging from William Bernstein (“Destined to become a classic.”) to DFA’s David Booth, Shark Tank’s Mark Cuban and author Morgan Housel, known through The Motley Fool, and who penned the foreword.

    Ritholtz organizes his book in four parts: Bad Ideas, Bad Numbers, Bad Behavior, and Good Advice. While Cramer tempts us into individual stock-picking, Ritholtz reminds us that few can do it well; nor can most of us successfully pull off market timing. He devotes a fair bit of space to how badly some pundits’ predictions have panned out in the past. I was left with a renewed appreciation for the benefits of indexing, certainly for the core of portfolios if not for their entirety. As he puts it: “Index (mostly). Own a broad set of low-cost equity indices for the best long-term results.” He lists five advantages to indexing: lower costs and taxes, you own all the winners, better long-term performance, simplicity and less bad behaviour. 

    Fortunately, ordinary investors have many advantages over the pros, such as not having to benchmark against indices or worry about investors who sell a fund, the ability to keep costs low, and in theory a much longer time horizon. But the clincher is that “indexing gives you a better chance to be ‘less stupid.’”

    Jonathan Chevreau

    Source link

  • How to bridge the gap until an inheritance – MoneySense

    CPP/OAS strategy without other pensions

    You can begin your Canada Pension Plan (CPP) retirement pension as early as age 60 or defer it as late as age 70. For each month you defer it after age 60, the pension rises.

    If you start your pension at 60 and continue to work, you must continue to contribute to the pension until at least age 65. This will generally increase your pension, with an adjustment each year, but not as much as deferring it.

    Since you already started your CPP, there is not much of a strategy there, Esther. But for others reading along, a healthy senior who expects to live well into their 80s should strongly consider deferring the start of their pension. They will receive more cumulative CPP dollars if they live to their late 70s. Even after accounting for the time value of money from drawing down other investments, or not being able to receive and invest the payments, someone living to their mid-80s and beyond may be better off financially. 

    There is also the benefit of having more guaranteed income that is simple and indexed to inflation, providing cost of living and longevity protection—especially for someone without a defined benefit pension plan. 

    Although you plan to start your Old Age Security (OAS) at age 65, Esther, you may want to think twice about this for two reasons:

    1. The same logic as CPP applies. You can defer your OAS as late as age 70 and it, too, rises for each month of deferral. If you are healthy and expect an average or longer than average life expectancy, deferral may give you more lifetime retirement income, despite the temptation to have more cash flow today. 
    2. There is an OAS pension recovery tax if your income exceeds about $95,000 in 2026. If you are still working and receiving both CPP and OAS, you want to be careful about losing some of the OAS pension you are hoping to begin. This means-tested clawback of OAS is 15 cents on the dollar above that threshold, causing an effective tax rate of 43% to 52% and rising at $95,000 depending on your province or territory of residence. 

    Given your expected low income in retirement, it could be a costly decision to start OAS. There is also a low-income supplement called Guaranteed Income Supplement (GIS) that an OAS pensioner with a modest income may qualify for that could factor into your future income planning, Esther. 

    Compare the best RRSP rates in Canada

    Travelling in retirement

    Your plan to travel while you are young and healthy is an important reason not to work too long or wait to do things too late into your retirement. There needs to be a fine balance between saving for tomorrow and living for today—it is one of the biggest risks of retirement planning. 

    Conventional retirement planning methods focus on minimizing the risk of running out of money before you are 100, but this can also maximize the risk that you miss out on life experiences.

    Article Continues Below Advertisement


    Counting on an inheritance

    You must be careful budgeting for an inheritance that could be lower than expected, and may come later than anticipated. It is a risky part of retirement planning even if you have full visibility about a parent’s finances. 

    The substantial nature of the inheritance you foresee, Esther, is an important factor in your own retirement planning. Given that you are 64, I assume your mother is well into her 80s or beyond. 

    In your case, the key to bridging the gap until that inheritance is definitely real estate. 

    Real estate strategy in retirement

    The benefit of owning vs. renting from a financial perspective is overblown, in my opinion. Until recently, real estate prices appreciated at an extraordinary pace in many Canadian cities, leading some to believe it is the key to wealth creation.

    Real estate should not be an investment, unless it is a rental property earning rental income. A principal residence should probably grow at slightly above the rate of inflation, in line with wage growth. Perhaps this is the reason prices have flatlined or declined recently. Although interest rates have risen, they have only gone up to normal levels, not extraordinarily high rates. 

    A discussion of real estate price appreciation often ignores property tax, maintenance, renovations, and interest costs, as well. 

    All that to say that selling and renting would not be a failure in this financial planner’s opinion, Esther. But you would want to consider an apartment or seniors’ community where you could live as long as you wanted, as opposed to a condo with a landlord that has risk with regards to being a long-term residence. Being forced to move in your 70s or 80s on 90 days’ notice may not be a good risk to take. 

    One solution you may not have considered is borrowing against your debt-free condo. You can apply for a mortgage or home-equity line of credit based on your income and qualifying ratios. A line of credit may be more flexible than a lump-sum mortgage deposited to your bank account, because you can withdraw funds as needed and pay interest as you borrow. 

    Jason Heath, CFP

    Source link

  • 3 signs you need to take control of your parents’ finances – MoneySense

    These episodes, combined with my mother’s observations about increasing forgetfulness and compulsive behaviours, led us to get him medically tested. The diagnosis was direct: early-stage dementia. His doctor suspended his licence and directed me to take immediate control of his finances. That moment introduced my family and me to a harsh reality. While we all expect our parents to age and need help, the sudden immersion into managing someone’s declining health can be shocking and leave us unprepared for the caregiving responsibilities ahead.

    Warning signs you may need to step in

    Many of the signs may at first seem quite innocent and subtle, but if you notice them occurring frequently and consistently, they could be flags to get a diagnosis. These can include:

    • Repetitive conversations: Constant circling around the same pattern of compulsive thoughts. 
    • Failing to recognize familiar faces: Several times my father failed to recognize long-time family friends he once spoke to on regular basis. There were times he even failed to understand who I was, which was so disheartening.  
    • Social withdrawal: As health difficulties progress, the person’s social circles shrink slowly but then dramatically. As my father’s condition progressed, both my parents detached themselves from their fairly large social networks. COVID-19 accelerated the process. 

    A job you never applied for

    These behaviours are often more dismaying to family members than to the person with the health issues. 

    If you’re reading this and thinking about your own aging parents—or if you’re already in the thick of it like I still am—you’re not alone. According to a 2022 report from Statistics Canada, around one in four Canadians aged 15 and older (7.8 million people) provided care to a family member or friend with a long-term health condition, a disability, or problems associated with aging. These 2018 figures likely underestimate the true prevalence of caregiving, especially in the wake of the COVID-19 pandemic, which increased the demand for elder-care services.

    Managing your parents’ finances can feel like a full-time job. I’m now six years into this journey and it’s been a never-ending roller-coaster of phone calls, emails, and appointments with banks and service providers. It is hard enough to stay on top of your own and immediate family’s finances. You must now understand all of your parents’ financial quirks, ranging from their income sources and recurring expenses to what investments they have, if any. At times it feels like an endless scavenger hunt searching for documents, bank accounts, invoices, legal documents, insurance policies, and online accounts. 

    Have a personal finance question? Submit it here.

    Levels of caregiving

    In most cases, you are not undertaking this in a bubble. You must navigate through family dynamics, often resulting in difficult and emotional conversations with your parents and other family members. You may need to consider difficult decisions, likely creating resistance as pride and independence are tested. From my experience, this has been the most draining part of this experience, both emotionally and physically. 

    Financial caregiving can fall into different levels depending on the capabilities of your parents. It could be simply providing your parents with advice and guidance in the form of reviewing and explaining financial accounts and documents. It could fall in the form of suggesting methods for better organizing their financial affairs. 

    If your parents’ health impairments are more advanced, an active participation may be necessary in the form of paying bills, filing tax returns on their behalf, or accompanying them to appointments with their bank or financial advisor. At the most extreme level—which is what I had to go through with my father—legal interventions using a power of attorney to make financial and health-related decisions on their behalf may be required, which require a high level of commitment and attention to detail.

    Article Continues Below Advertisement


    More lessons to come

    In our upcoming series on MoneySense, I’ll be sharing the practical lessons learned from my journey: the essential documents you need to locate, the conversations to have before they become urgent, the financial red flags to watch for, and the systems that can help preserve your parent’s independence while protecting their financial security.

    While we can’t prevent our parents from aging, we can certainly be better prepared for the financial realities that come with it that hopefully will allow them to retain some dignity in their lives and set a positive example for our younglings to pay it forward. 

    Get free MoneySense financial tips, news & advice in your inbox.

    Read more about planning for (and in) retirement:


    Aman Raina, MBA

    Source link