By Sheryl Smolkin

Turning over the calendar from April to May brings out the latent gardener in all of us. Beautiful shrubs, flowers and home grown vegetables are highpoints of summer even in parts of Canada when the season is short.

How to Start a Home Vegetable Garden – Benefits & Saving Money by Heather Levin on Money Crashers discusses the benefits of a home garden including relieving stress and saving money. Gardening can also be a family activity.

The Irish Food Board extols The Economic Benefits of a Well-Kept Garden. They include enhanced curbside appeal of your property and increased productivity of workers in offices and industrial buildings with landscaped areas.

Twenty expert tips to make you a better gardener by Canadian Gardening has all kinds of useful hints. For example, never plant trees that will become large with age too close to your house and set your lawn mower blades at 7.5 centimeters or higher to allow your lawn to go dormant during periods of drought.

Sheridan Nurseries offers great suggestions for growing roses. Roses should be watered regularly through the summer, every few days if there is no rain at ground level and not by overhead sprinklers. Avoid wetting the leaves as this promotes disease. Early morning is the best time to water as late evening watering also promotes disease.

And finally, if you have a small planting space, check out Rodale’s Organic Life’s 7 Secrets for a High-Yield Vegetable Garden. Did you know that you can get maximum yields from each bed if you avoid planting in square patterns or rows? Instead, stagger the plants by planting in triangles. By doing so you can fit 10 to 14& more plants in each bed.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Also read: How to plant an inexpensive, maintenance free garden

By Sheryl Smolkin

Findings from Sun Life’s 2015 Canadian Unretirement Index released earlier this year received extensive media coverage. The seventh report in an annual series tracks how workers’ attitudes and expectations about retirement are evolving in response to economic, health and personal factors affecting their lives.

The question central to the ongoing study is “Will you be working at age 66?” This year for the first time, more Canadians expect to be working full time at age 66 (32%) than expect to be fully retired (27%).

As indicated in past years, those who plan to work past 65 fall into two camps. Forty-one percent say they’ll do so because they want to while 59% feel they will need to. The gap between the two has been gradually widening since 2011 but closed significantly this year. In addition, another 27% say they will be working part-time, while 12% aren’t sure.

Nevertheless, on average, Canadians say they expect to retire at 64. That’s the lowest figure reported since 2009. Canadians anticipate working past 65 – either by choice or necessity – but that trend is offset somewhat by a significant number who expect an early retirement.

Compared to current retirees, working Canadians are two and a half times more likely to believe they are at “serious risk” of outliving their retirement savings. The actual average retirement age among current retirees was 61 and a whopping 88% retired before age 66. They intended to retire early (at 62 on average) and for the most part, they did so.

But their experiences differ markedly from today’s workers. Three-quarters (76%) benefited from a workplace retirement plan (68% had their own and another 8% were married to a plan member). By comparison, just 68% of working Canadians have a workplace plan (55% have one of their own, 13% will benefit from a spousal plan).

Retirees are significantly more confident about their government pensions (94% vs. 72% among working Canadians); their government-funded prescription drug benefits (82% vs. 68%respectively); and their employer pensions (71% vs. 65% respectively).

Indeed, working Canadians are more likely to be “not at all confident” than retirees about:

• Having enough money to enjoy the lifestyle they want: 36% working Canadians vs. 20% retirees.
• Having enough money to pursue their hobbies and interests: 33% working Canadians vs. 17% retirees.
• Being able to take care of medical expenses: 28% working Canadians vs. 11% retirees.
• Being able to take care of basic living expenses: 19% working Canadians vs. 5% retirees.

Nearly two-thirds (63%) of retirees are very/somewhat satisfied with their retirement savings. Only 44% of today’s workers say the same. When it comes to outliving their retirement savings, 55% of today’s retirees are unworried, 31% are unsure and 14% are worried. Contrast this with 30% of workers who say they are unworried. One-third (35%) are unsure and 36% are worried.

It makes sense that current retirees would answer more positively about retirement planning. Many of those who did not achieve their financial goals have adjusted accordingly. But clearly, there is more to this story.

Today’s workers have experienced a prolonged period in which low interest rates, volatile capital markets and a drop in employer-funded retiree benefits have combined to make retirement planning more challenging.

More than ever, working Canadians have to plan, save and take full advantage of whatever plans their employer provides. The onus is on the individual to an extent current retirees did not experience. It is also on the financial services industry to support consumers with investor education and innovative product design.

All Canadians over age 18 are eligible to participate in the Saskatchewan Pension Plan which is a defined contribution plan with a fund return history of 8.2 % since inception (29 years) and 9.1% in 2014.

You can calculate your own personal Unretirement Index score, which measures your outlook on retirement, at www.sunlife.ca/unretirementindextool. My score is that I am “Clear and sunny, fully confident in my retirement and the countdown is on.” Since I was born in 1950, that’s not surprising. But I will probably be one of those people still working at least part time at age 66, not because I need to, but because I love my job. 

Also read: More people planning to work beyond age 65

By Sheryl Smolkin

Prime Minister Harper’s 2015 pre-election budget included several goodies for both people who are saving for retirement and seniors in the deccumulation phase. As you probably know by now, annual TFSA contributions have been increased from from $5,500 to $10,000/year and seniors will be permitted to withdraw money more slowly from their RRIFs so their savings will last longer.

If you are already a senior, you will be happy to know that Rob Carrick at the Globe and Mail characterized seniors as the runaway winners in the Budget. You got more elbow room to manage withdrawals from your RRIFs and a new tax credit to make your homes more accessible. Older Canadians are also major beneficiaries of the new $10,000 annual contribution limit for tax-free savings accounts and there is some financial help for people who look after gravely ill relatives

One of the sources of controversy after the budget was passed is whether it is safe to go ahead and top up your TFSA for 2016 before the budget is actually passed by Parliament. My take was that this is a majority government and there is no way the budget provisions will not become law. Jonathan Chevreau quoted me in Experts: go ahead and make that extra $4,500 TFSA contribution now: I just did.

And  since then Canada Revenue Agency has clarified the timeline of new TFSA limit. In a statement, they said:

“This proposed measure is subject to parliamentary approval. Consistent with its standard practice, the CRA is administering this measure on the basis of the budget announcement. Financial institutions may immediately allow existing and new account holders to contribute up to the proposed maximum.”

In a Maclean’s article, Stop pretending the TFSA expansion won’t be felt until 2080 Kevin Milligan notes that the most important feature of TFSAs is that room accumulates through time, starting at age 18. The annual limit started at $5,000 in 2009, moved to $5,500 in 2013, and the budget has now moved the limit to $10,000 from 2015 forward.

This means that 10 years from now in 2025, every Canadian who is age 34 or older will have full possible contribution room of $141,000. For a couple, that would be $282,000. The net result he believes is that very few people in the future will have any need to pay much tax on investment income as TFSAs will provide almost total coverage of assets.

Finally, Gordon Pape says in his Toronto Star column: RRIF withdrawal changes – it’s about time. His preference would have been for Ottawa to eliminate the minimum withdrawals entirely. After all, everything in an RRIF will eventually be taxed when the plan holder or the surviving spouse dies. The feds will get their share sooner or later — they always do. But he will take what he can get!

We will discuss the RRIF changes in more detail in a future blog on savewithspp.com.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

 

By Sheryl Smolkin

This month’s interview is with author and financial journalist Jonathan Chevreau. Jon was the Financial Post’s personal finance columnists for nineteen years, and subsequently the Editor in Chief of MoneySense Magazine for two years until he declared his personal “financial independence day” on May 20th, 2014.

He has relinquished the leadership role at MoneySense, but as editor-at-large, his work is still frequently featured. He also writes for many other online venues and in November of last year he launched his ambitious North American portal, The Financial Independence Hub.

I last interviewed Jon for savewithspp.com in the summer of 2012 about his financial novel Findependence Day. Today I’d like to explore what he describes as “the profound difference between the traditional concept of retirement and the paradigm shift he calls financial independence.”

Q. To start off Jon, what is the difference between financial independence or “findependence” and retirement?
A: Well Sheryl, I always say that when you’re findependent you’re working because you want to not because you have to, financially speaking. But of course the lines blur. For the media and the financial service industry, it’s retirement, retirement, retirement. They don’t really distinguish between the two concepts.

For super frugal people, financial independence can often occur decades before traditional retirement. When you talk about the “early retirement extreme” movement, what these people are really talking about is being financially independent.

Q: So in fact you have coined the term findependence to apply to people at various ages, not just older workers?
A: Yes. The Financial Independence Hub is relevant for people at all stages of life.

Q: You’ve left the corporate world. But you seem to be busier than ever, with all of your freelance writing, your blog, and spin-offs from your book Findependence Day. How would you describe your current status?
A: Busier than I want to be, really. I think you can relate to that one as well. On the Hub I reviewed books like Encore and I talk about this new phase of life. If you believe in extended longevity and a lot of people leave corporations, either voluntarily or involuntarily, in their late fifties, early sixties, I say there’s a fifteen to twenty year sweet spot.

You’re no longer an employee, but I don’t think you are ready to take year-long cruises and do nothing but watch TV, play golf, read and play internet bridge. I think that fifteen year period, is the new “encore stage.” You could also call it part-time or phased retirement.

Q: How many hours a week do you estimate you’re currently working for compensation and on your own projects?
A: I got into this in December (2014). I read a bunch of internet books. I was keen on “Multiple Streams of Internet Income” by Robert Allen, and a book by Tim Ferriss called “The Four-hour Work Week.” I decided by having more passive income and less renting my time out, I could go to a four-hour week. Unfortunately, it hasn’t really worked out.

It turns out that the path to a four-hour workweek for me is a nine-hour day. I would say that I probably still spend 40% of my time on the MoneySense blogging contract. Another 40% is spent on the Hub which is not billable time. About 20% of my time is taken up with other things like one-off speeches, book sales, blogs and articles.

Q: What are the pros and cons in your view of your current working arrangement, as compared to working as a full-time salaried journalist?
A: As a freelance contractor there are no employee benefits, sick days or paid vacations. I had a “man cold” last week and I had to barrel through it. Luckily, of course, I don’t have to commute.

It’s hard to match my previous gross income but it can be a little bit better on an after- tax basis depending on the legitimate employment expenses I can write off. When I balance it with the lack of commuting, I think it’s a better life-work balance. But like anything else, there are trade-offs.

Q: Do you think that Canadians across the board are working longer and contemplating encore careers, or is this really restricted to knowledge workers and entrepreneurs?
A: Well I think that’s an apt observation. When you’re a knowledge worker there’s a real blurry line between working and playing, because I think we actually find it quite fun to absorb lots of information on subjects that fascinate us. Whereas, as you point out if you are a labourer, the body is not as apt to keep on going past sixty-four or sixty-six.

Q: Youth unemployment is running around 14 %. Are older workers, who continue working, clogging up the pipeline for young people and mid-career workers who are trying to get a leg up on the employment ladder?
A: Well that is one perception I’m not sure is true. I suppose if we’re talking about a big corporation with your traditional pyramid, where basically there are only a couple of people at the top, then yes, older workers might be clogging up that traditional pipeline.

But I think when you’re talking about all the people leaving companies and then contracting back their services, at that point they just become a valuable asset. Younger people can still move up the ladder, and they can still access the expertise and skills of the older codgers, like me if they are retained as freelance suppliers to the company.

Q: Some people opt to work longer for their current employers or continue on a contractual basis. Then there are others who want more flexibility or to try something new. How can older workers go about finding an encore career?
A: They can go to findependencehub.com and check out the book reviews. Encore, the Big Shift, there are tons of these books out there. For some it might be going back to school, getting an MBA. A lot of people make complete changes. For example, Eleanor Clitheroe left Ontario Hydro and went to divinity school.

I have a friend who is actually downsizing and moving to the country, so that he can go from being a set designer to doing true art. Every second journalist I know wants to write the great Canadian or American novel. I compromised by writing Findependence Day which is a financial novel.

Q: Money won’t buy happiness but it helps. What are some of the factors that you think contribute to a happy retirement, other than having enough money?
A: There are obvious things.  Health, happiness, relationships, family, networks. There’s a book by Wes Moss called “You can retire sooner than you think.” One of the things he talks about is a retiree should have at least three or four passionate interests. This is why I decided to put internet bridge back on my list. Reading, volunteering and exercising would be others.

I think the biggest single thing is of course your partner. I’ve talked to people in the financial service industry, who’ve been divorced. They say the biggest mistake they ever made financially-speaking was to get a divorce, because their net worth was cut in two right off the bat. But obviously you don’t stay together for financial reasons if you don’t have a harmonious relationship. 

Q: Well the relationship issue is interesting and I think one of the things that I think about all the time, is you don’t know how much time you’re going to have. You’re worried about financing thirty years of retirement but who knows if you’ll have it. So if you put it off and you put it off you just might miss those golden years.

A: Various people have joked that financial planning would be the easiest thing to do on Earth if you just knew when you were going to die. Unfortunately, most people don’t.

Q: How long do you think you will continue to work?  Do you see full retirement any time in your future?
A: I have a vision, that eventually I will have a website that brings in lots of passive streams of income. My idea of a nice retirement or findependence is every three years, to leisurely write a book working four six-hour days a week. Then I would go on tour to promote it and bring in another stream of income. Instead of grinding out words for multiple clients I’d like to be financially independent enough to work on one big project.

Q: Thanks very much for talking to me, Jon. It’s always fascinating to talk to you.
A: Well thank you for allowing me to share some of my thoughts, Sheryl. I think you’re doing a great job, too, on Retirement Redux.

—-

This is an edited transcript of a podcast interview of Jonathan Chevreau conducted by telephone in March 2015.

By Sheryl Smolkin

If you haven’t filed your income tax return yet it’s really getting down to the wire. Whether you take advantage of them this year or next, here are some tax tips that could put more money in your pocket,

Are you entitled to a tax refund for your medical expenses? by Brenda Spiering on Brighter Life draws on her experience following her son’s accident when she learned that the part of his dental bills not covered by her health insurance at work could be claimed as a tax credit along with a portion of her health insurance premiums.

Tax accountant Evelyn Jacks addresses The Mad Dash to April 30th in Your Money. Your Life. She says once you have filed your taxes, the most important question is how you will spend your tax return. Some options are: pay down debt; save in a TFSA; use RRSP room; invest in an RESP; or invest in a Registered Disability Savings Plan.

Hey last-minute tax filers: Don’t make these common, costly mistakes says Stephen Karmazyn in the Financial Post. For example, only eight percent of taxpayers are planning to claim the Canada Employment Amount (which is a credit for work-related expenses such as home computers, uniforms, supplies) even though anyone with a T4 income can make a claim.

In a timeless blog on Retire Happy, Jim Yih offers RRSP and Tax Planning Tips. He recommends that only one spouse claim charitable deductions. That’s because the credit for charitable donations is a two-tiered federal credit of 16% on the first $200 and 29% on the balance (plus provincial credits). Spouses are allowed to claim the other’s donations and to carry forward donations for up to five years. By carrying forward donations and then having them all claimed by one spouse, the first $200 threshold with the lower credit is only applied once.

And in a Global news video Smart Cookies: Last Minute Tax Tips, Kate Dunsworth shares last minute reminders for people who have been procrastinating with their taxes. She says if you are expecting a refund and you are not planning to file on time because you don’t owe anything, you are basically giving the government a tax free loan. And if you owe money, you will be penalized for every single day you file late. Also, repeat late offenders will be penalized up to double.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

 

By Sheryl Smolkin

According to the 2014 Bridal Survey conducted by weddingbells.ca, in 2014 an estimated 162,056 weddings took place in Canada and 65% of them took place between June and September.

That means dozens of your friends and neighbours are probably trying to balance their wedding budgets, booking venues and “saying yes to the dress” as you read this blog. But how many of them are factoring in the impact their upcoming nuptials could have on their insurance or any previous estate planning?

The folks at the web site insureeye.com recently asked licensed life insurance broker Tamara Humphries for her opinion on what you need to know about life and health insurance if you are getting married. Here are a couple of interesting issues she raised:

1. Amount of coverage: Once you get married, and especially if you have or will be having children, you should consider increasing in your life insurance coverage. There are various life insurance calculators online including this one from Sun Life that will help you calculate how much you need. Your financial advisor can also assist you.
2. Group Benefits: Understand the life and health insurance plans both you and your partner have at work, and how benefits are coordinated. If one supplementary health plan is particularly good, you may wish to opt out of the other.
3. Changing your beneficiary: If your previous life insurance policy named, for example, your parents as beneficiaries, you may want to make your spouse the beneficiary instead. You can change this beneficiary designation at any time upon notice to your insurance company unless you have made the beneficiary designation irrevocable.
4. Family life insurance: As an alternative to two life insurance policies for each spouse, you can get one policy for both of you, which often results in lower premiums overall. This policy is often called family or joint-first-to-die (JFTD) policy. JFTD policies pay only at the first death. It is important to know if one spouse dies, the surviving spouse will not have life insurance. If you prefer to keep separate policies after the marriage and get the policies from the same provider, you might benefit from a multi-life discount.
5. Look for bundles: Bundles still work. If you or your spouse already have a home and/or auto insurance provider, there may be an option to get a bundle discount when adding a life insurance policy from the same company. Some insurers, called universal insurers, offer all insurance products – life, property and health insurance.

Also keep in mind that when you get married, (see Public Legal Education Association of Saskatchewan) unless you indicate in your Will that you are making the Will in contemplation of the marriage or a spousal relationship, your entire Will is cancelled. This general rule does not apply where an individual makes a Will while living in a spousal relationship and later marries that spouse.

Ending a spousal relationship can also revoke or cancel your Will or parts of it. For example, if you name your spouse as your Executor or leave part of your estate to your spouse, those parts of your Will are revoked or cancelled after you divorce, or after 24 months of separation in the case of other spousal relationships, unless you expressly say otherwise in your Will.

In Alberta and British Columbia, however, new laws state that marriage, or the entrance into an adult interdependent partnership (common-law relationship) does not automatically revoke a Will.

Since the laws across the country are no longer consistent, deciding which laws apply if the person married in one province and died in another, can be unclear. Further, if a person marries or dies outside of Canada, the decision as to which law applies becomes even more complicated. To avoid such difficulties, it is best to enter into a Will and revoke the old one upon marriage, or when entering into a common-law relationship.

By Sheryl Smolkin

Spring has definitely sprung in our neck of the woods and yesterday I woke up to a neighbourhood of happy smiling people wbiking, jogging and cleaning garages.

This week we feature a blog from Blonde on a Budget Cait Flanders who is nine months into her shopping ban. Of course, as she notes in Nine Months Without Shopping and Takeout Coffee, she gets to make up the rules as she goes along. So she discarded a ripped pair of jeans and replaced them. She also broke her “no take out coffee” ban a few times when she was out with friends. Nevertheless, she has upped her savings goal from $100/month at the beginning of the period to $250/month and she has a nice little nest egg to show for it.

On Boomer & Echo, Robb Engen writes about how we can always find joy in the smallest things like using a cash back credit card for his everyday purchases. I know what he means. I prefer my travel rewards credit cards, but it feels great when I accumulate enough points at Shoppers Drug Mart or Longo’s and the cashier asks me if I want to take $20 or $30 off my bill.

Sean Cooper writes on Retire Happy about three More Costly Pension Mistakes and How to Avoid Them. They are: not updating your spouse and beneficiary designations; not joining your company pension plan right away; and, not starting your pension as soon as you are entitled to a unreduced pension.

The question that every person who is saving for retirement struggles with is Will they run short in Retirement? As part of the Masters of Money series on GetSmarterAboutMoney.ca, Allison Griffiths acknowledges that few working people have any idea how much money they will need and she offers an approach to budgeting that can help them nail down these elusive numbers.

Spring is the time when new university and college graduates hit the street looking for their first career position. On stupidcents.com blogger Tom Drake discusses best careers for the future. With baby boomers aging in the next 20 years, he says those who are involved in health care such as dental hygienists, registered nurses and physical therapy assistants will be in demand. But software developers and construction equipment operators are also growth areas.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

 

By Sheryl Smolkin

Piles of laundry loom ever larger and more ominous if you don’t stay on top of this tedious task. Who hasn’t discovered when dressing for an important meeting that their favourite white shirt has a big stain or needs ironing?

And when it comes to laundry, the larger your family, the bigger the problem is. In the interests of saving you both time and money, here are 10 tips on how to do laundry more efficiently culled from internet sources and my own experience.

1. Outsource: My dirty little secret is that I rarely do our laundry. One of the luxuries working after retirement buys is a weekly housekeeper who does it for us. But if you have a partner or children, teach them how to do laundry early and make it part of their weekly “To Do” list.
2. Make it easy: We have our own washer and dryer. However, because they are located in the basement, once a load goes in its easy to forget it still has to be dried and folded. If you are looking for a rental apartment or a new home, having laundry machines on the first floor or even the second floor where the bedrooms are will make the whole laundry cycle less onerous.
3. Use cold water: There are many commercial laundry detergents available for cold water washing. Your clothes will come out just as clean, and you will use much less energy heating hot water. Your clothes may actually last longer.
4. Minimize dryer use: Few of us use a clothesline anymore, but those who do say you can’t beat the fresh smell of sheets dried outside. Even if you don’t have a suitable location for a clothesline, you can use a free standing clothes rack for drying more delicate items like lingerie and sweaters in your bath tub.
5. Maintain your dryer: Be diligent about emptying the dryer lint after every load. Also look for the external vent and make sure it’s not obstructed. Lift up the vent and make sure there’s no lint or anything else that has built up. The external vent blows out very moist air removed from the clothes. If it can’t get out, it stays in your clothes, increasing drying time and increasing your expenses.
6. Double up: Ideally you should wait to do laundry until you have full loads. But sometimes that’s impossible if you only have a few coloured or white items that need washing but they are needed immediately. However you can save money on electricity if you wait to dry several small loads together.
7. Read the tags: Are you sending clothes to the dry cleaners that you could wash at home? Most people know enough not to try and launder a good wool suit, but cleaning and washing silk is apparently easy if you follow some precautions. Mountain Equipment Co-op gives instruction for washing down coats and sleeping bags. While they suggest only doing so if you have a front loading washer, I’ve never had a problem with my top loader.
8. Read the detergent label: Most of us grew up using up to a cup of washing detergent for each load. Now most kinds including liquids are much more concentrated. Read the label on the box to ensure you are using the quantity that is right for your machine. Using less detergent will save you money and your clothes won’t wear out as fast.
9. Compare detergent costs: It used to be that detergent came only in powder form in boxes of various sizes. Now you can also buy liquid detergent for your clothes and even detergent pods. Figure out on a per load basis what is the least costly and works best for your family. It is not the cheapest but we prefer liquid detergent because it doesn’t leave a soap residue on our clothes.
10. Wear things more than once: Some kids have their favourite clothing items they would never put in the wash unless you peel it off them. Others throw things in the laundry even if they were just trying them on to see if they are part of a suitable outfit for school the next day. There is a happy medium that will mean fewer loads and less wear and tear on your clothes.

Also see:
12 Laundry tips for maximum energy savings
How to Save Money on Laundry
5 Ways to Save Money on Doing Laundry
How To Do Laundry on the Cheap
10 Ways to Save Money when Doing Laundry

By Sheryl Smolkin

There were several interesting provincial budgets this week with provisions impacting the cost of health care for seniors.

The Saskatchewan budget removed 6,000 seniors from the province’s drug plan. Previously the threshold of $80,255 was the cutoff for the drug plan. Anyone with a taxable income in excess of that amount was not eligible for the program. Now, the threshold will be lowered to $65,515.

The Alberta budget added a new Health Care Contribution Levy payable through the income tax system that will cost each Albertan up to $1,000 per year. Coverage and eligibility for provincial public health care programs remain unchanged. Unlike the previous Alberta Health Care Insurance Plan premium eliminated after 2008 that was a flat fee for individuals, the Levy has a progressive structure (See Table at p.87). Each member of a family filing an income tax return who has income over $50,000 will be subject to the levy and seniors are not exempt.

On another note, Mr. Money Moustache, a Canadian blogger living in the U.S. was recently profiled in the Globe & Mail. He and his wife retired at age 30. He says A Lifetime of Riches is As Simple As a Few Habits. This means doing less pointless driving around in your car and making fewer visits to restaurants, bars, and coffee shops. He also says alcohol, drugs, cigarettes, TV watching, video game playing, procrastination, unhealthy eating, sedentary living, and unnecessary shopping are other habits that stand between the average person and a truly wealthy life.

On Brighter Life, Sun Life VP Kevin Press presents blogs that will refresh your understanding of employee pension plans and employee benefit plans. He notes that Canadians who do not enjoy employer-sponsored benefit plan membership are at a significant disadvantage because provincial plans provide limited levels of coverage. What’s more, your reimbursements for health and dental claims are not taxable. So you’re almost always better off if your employer sponsors a plan versus paying you a higher salary.

And finally, an interesting post on Our Big Fat Wallet about getting compensated for a flight delay. Dan booked his ticket with Travelocity and he was not notified when the return flight was cancelled. Fortunately, the airline re-booked him several hours later and he received a $100 rebate from Travelocity and $75 from his Scotiabank Momentum Visa Infinite card that provides coverage of up to $500 per trip for trip delays of four hours or more.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

 

By Sheryl Smolkin

One of the perks of growing older is that there are some additional tax credits you can take advantage of when you file your income tax return. For example, the pension income tax credit is available to you if you are under age 65, but the amounts that qualify for this tax credit are different, depending on whether you are pre or post age 65.

The federal non-refundable tax credit applies to up to $2,000 of eligible pension income. That means you will get back a maximum of 15% or $300. Provincial tax savings are in addition and can bump up your total savings by an additional $350 to $700 depending on your province of residence.

Since you can transfer up to 50% of pension income to your spouse for tax purposes, a couple can each access this tax credit even if only one of the pair is receiving an eligible pension.

If you are younger than age 65, the only pension income that is eligible for the pension tax credit is either from a superannuation/pension plan, annuity payments from the Saskatchewan Pension Plan or annuity income you are receiving because of the death of your spouse or common-law partner. The income you receive in these circumstances might be in the form of Registered Retirement Income Fund (RRIF), Registered Retirement Plan (RRSP) or Deferred Profit Sharing Plan (DPSP) income, but only if you have been receiving this income since your spouse passed away. 

If you are 65 or older eligible income can be:

• Income from a superannuation or pension plan.
• RPP lifetime benefits.
• RRIF income.
•  DPSP income.
• RRSP annuity income.
• EBP benefits.
• Regular annuities.
• Elected split pension income.
• Variable pension benefits.
• Foreign pension income unless the foreign pension income is tax-free in Canada because of a tax treaty or income from a United States Individual Retirement Account.

For a more detailed list of pension and annuity income eligible for the pension tax credit, check out CRA’s Eligible Pension and Annuity Income (less than 65 years of age) and Eligible Pension and Annuity Income (65 years of age or older) charts.

The following income does not qualify as pension income for the pension income tax credit:

• Old Age Security or Canada Pension Plan benefits
• Quebec Pension Plan benefits
• Death benefits
• Retiring allowances
• RRSP withdrawals other than annuity payments
• Payments from salary deferral arrangements, retirement compensation arrangements, employee benefit plans, or employee trusts.

A recent decision of the Tax Court of Canada in Taylor v. The Queen clarified the meaning of “annuity income from an RRSP.” Sarah Taylor began withdrawing money from an RRSP when her husband died. According to the terms of the RRSP she had total discretion with respect to the timing and the amounts of the withdrawals.

To minimize withdrawal fees, she decided to take funds out only once a year. In 2011 she withdrew funds a second time to make an unusual tax payment. The two payments to her were $12,500 and $6,250. Her accountant argued that once she turned 65 in 2011 these amounts and other similar annual withdrawals should be treated as annuity payments as required by the definition of “pension income” for the purposes of the pension tax credit.

Madame Justice Judith Woods ruled that withdrawals made by Taylor from her RRSP were not annuity payments and did not qualify for the pension tax credit because her financial institution had no obligation to make payments on a recurring basis.

The lesson to be taken from this court case is to be certain you understand the rules with respect to RRIF withdrawals and the pension tax credit.  Some people who do not have eligible pension income at age 65 opt for an interim approach. If you move $12,000 into a RRIF and then withdraw $2,000 a year for six years, these withdrawals will allow you to qualify for the full pension tax credit.