Often, the most difficult decisions are those that must be made during a time of crisis. Downsizing, clearing clutter, getting organizing, simplifying, whatever you call it, it's easier to do when broken down into manageable tasks....
MoreMany Canadians would like to own their own home, but feel the need to come up with a larger down payment before taking that big step. What many people don’t realize is they can utilize existing government programs to essentially have the government make that down payment for them.
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MoreMany retirees do not realize that they can “share” their Canada Pension Plan (“CPP”) retirement pensions with a spouse or common-law partner. Upon request, the government will equalize the two pensions, so that both parties will receive, and pay taxes on, the exact same amount of pension. The potential advantage of such sharing is the tax reductions generated by income-splitting, where part of the tax bill can be shifted from a higher marginal tax bracket individual to a lower marginal tax bracket spouse or partner.
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MoreMoving Your Folks
by Gail Shields and KAren Shinn
Often, the most difficult decisions are those that must be made during a time of crisis. Downsizing, clearing clutter, getting organizing, simplifying, whatever you call it, it's easier to do when broken down into manageable tasks.
Getting your own house in order is difficult enough; the real challenge comes when you're faced with helping your parents downsize.
The emotional aspects of selecting furniture and keepsakes to take to a new place - condominium, retirement residence or long-term care facility - can be overwhelming. This is a project that should be approached with a clear plan, lots of patience and a sense of humour!
Where do you begin to help sort through years of accumulated treasures and the memories that accompany them?
Toss out the garbage!
When you get rid of the obvious garbage, you set the stage for the rest of the downsizing process. Every home has a collection of boxes of bags and bagas of boxes, empty bottles, foil pie plates, chipped mugs, odd socks, dog-earred paperback books, fast-food flyers, broken appliances and ugly lamps. Now is the time to get rid of them.
Purge clothes closets!
Be ruthless! If your parent is moving to a place where laundry will be done for them, select clothing that requires minimal care.
Select furniture to be moved!
Armed with an accurate floor plan for the new place, select items that are both functional and familiar. Take only enough furniture to fit the space, not overwhelm it.
Pack decorative items!
These items make the new place feel "just like home". Favourite paintings, framed photographs, treasured souvenirs and gifts from grandchildren help with the transition from the family home and provide something to talk about when friends come to visit.
Gather hobby equipment!
Without the worries of home ownership, your parents will find themselves with more time to enjoy life. It's easier to adjust to a new environment if there's a collection of favourite books, hobby supplies and/or familiar board games on hand.
Downsizing sounds so simple and yet, this is one of the most challenging tasks you and your parents will ever go through. Take the time to listen, laugh, cry and celebrate the memories with your parents. It will make the transition easier for everyone!
Have the government make your down payment for you
Brian Langlois CFP
Many Canadians would like to own their own home, but feel the need to come up with a larger down payment before taking that big step. What many people don’t realize is they can utilize existing government programs to essentially have the government make that down payment for them.
The program we are going to look at is the first time home buyer plan which allows you to draw up to $25,000 out of an RRSP, when you purchase your first home. To qualify as a first time home buyer, you or your spouse cannot have owned a home in the current year or the four preceding years. Now the obvious question is, “How does this help if I don’t have an RRSP or money to put into an RRSP?”
Well let’s assume we have a Canadian couple, both in an average 47% tax bracket. They can take an RRSP loan for $25,000 each to invest in their RRSP. Once the money is in the account for 3 months, provided they meet all the requirements to qualify as a first time home buyer, they can withdraw the funds from their RRSP under the first time home buyer’s plan. So far things aren’t looking much better; when the money is withdrawn from the account they are going to have to pay off the loan attached to that account. So now they have borrowed $50,000 and paid back $50,000 plus interest, how does this help? We haven’t looked at their tax return yet. Claiming the full $50,000 at the 47% average tax bracket, they would receive $23,500 from their tax return, the interest on the loan based on current rates would be, approximately $406, so in essence they have just received a $23,100 down payment from the government.
Now the $50,000 does have to be replaced in their RRSP, but they have 2 years before that needs to start being paid back. After that, they each need to pay $1,666.66 a year for 15 years into their RRSP or have that amount added to their income. Since it is money they borrowed from themselves there is no interest on the money borrowed out of the RRSP and being “forced” to save for your retirement is never a bad thing.
There are restrictions on the homebuyer plan and you should make sure you are fully aware of the limitations before deciding if this is the right strategy for you.
If you would like more information about the first time home buyers plan or would like to see if this strategy could work for you do not hesitate to contact a representative from Langlois Financial Services.
“Share and Share Alike” – with your CPP Retirement Pensions
Mike Langlois CSA
Many retirees do not realize that they can “share” their Canada Pension Plan (“CPP”) retirement pensions with a spouse or common-law partner. Upon request, the government will equalize the two pensions, so that both parties will receive, and pay taxes on, the exact same amount of pension. The potential advantage of such sharing is the tax reductions generated by income-splitting, where part of the tax bill can be shifted from a higher marginal tax bracket individual to a lower marginal tax bracket spouse or partner.
Consider the situation of Richard and Janine, both age 65 and both receiving a CPP retirement pension, all of which was earned during the course of their marriage. Richard, who is in a 40% tax bracket, worked full-time throughout their marriage and receives $750 a month, or $ 9,000 a year. Janine, who is in a 24% tax bracket, took several years off work to raise their children and receives $250 a month, or $3,000 a year. Between them the couple pays tax on their CPP pensions of $4,320 a year: $3,600 for Richard ($9,000 x 40%) and $720 for Janine ($3,000 x 24%).
If the couple decided to share their pensions each would receive $500 a month ([$750 + $250] / 2 = $500), or $6,000 a year. Between them they would only pay $3,840 a year in taxes: $2,400 for Richard ($6,000 x 40%) and $1,440 for Janine ($6,000 x 24%).
The pension sharing would result in an annual tax saving for the couple of $480 ($4,320 - $3,840 = $480). This would put an additional $40 a month in their pockets, after-tax….. every year for as long as they both shall live!
In order for a couple (married or common-law) to qualify for retirement pension sharing both parties must be at least age 60. If both qualify for the pension both must share (although one may still share with the other if only one qualifies for a pension). Only that portion of the pension earned during the couple’s marriage (or period of living together) may be shared. So pension benefits earned by either (or both) party prior to marriage or cohabitation does not get taken into consideration.
Both parties must agree to share and sharing is terminated in the event of separation, divorce, the death of either of the parties, or at the request of either party.
To find out how CPP sharing might benefit you, contact one of the professionals at Langlois Financial Services Inc. we are always happy to help.