Tag Archives: Globe and Mail

March 26: Best from the blogosphere

I’m just catching up after a few weeks in the Punta Cana sunshine. The resort where we were staying had excellent wifi everywhere so there was no escaping the relentless news cycle, especially in my home province of Ontario where the Progressive Conservative party elected Doug Ford as their new leader.

Shifting the focus back to Saskatchewan, Advisor.ca reports that there will be no longer be a provincial sales tax on agriculture, life and health insurance premiums. Premier Scott Moe pledged to bring in the exemption during the recent Saskatchewan Party leadership race. He said in a statement that the government is committed to helping families and small businesses. He added it will not impact the government’s three-year plan to balance the budget by 2020. The exemption covers premiums for crop, livestock and hail, as well as individual and group life and health insurance. It is retroactive to Aug. 1, 2017, the same day the province started adding the 6% PST to insurance premiums.

Boomer & Echo’s Robb Engen did the math on investment fees and he says the results weren’t pretty. Readers who shared their portfolio details with him revealed accounts loaded with deferred sales charges (DSCs), management expense ratios (MERs) in the high 2% range and funds overlapping the same sectors and regions. Portfolios filled with segregated funds were the biggest offenders. Saskatchewan Pension Plan offers professional fund management for 1% per year on average.

If you are planning foreign travel in the near future, Rob Carrick’s Globe and Mail article One bank dings clients who travel, while another lightens the load is a must read. He notes that Scotiabank recently introduced a strong new travel reward credit card that doesn’t charge the usual 2.5% fee on foreign currency conversions. In contrast, TD has been advising account holders that effective May 1, it will raise the foreign-currency conversion fee on ATM withdrawals and debit transactions outside Canada to 3.5% from 2.5%.

On Money After Graduation, Bridget Casey offers tips on how to hustle as a new parent. As a self-employed individual she didn’t qualify for government-sponsored leave which means she had to self-fund her own maternity leave. She has managed to get her baby on a schedule (the EASY Baby Schedule, if you’ve heard of it), and she says her days of procrastination are gone. She has also stopped working for free for “exposure” or attending events to “network.” Finally, she has hired a part-time nanny.

Alan Whitton aka BIGCAJUNMAN started the Canadian Personal Finance Blog 13 years ago and he says he is still financially crazy. He believes debt is a bad thing, he doesn’t buy individual stocks and thinks pay day loans are the devil’s work  (all of which sound pretty sane to me). He links to previous blogs he likes to re-read and enjoy plus blogs he has posted that have received the most views.  Take a look here. No doubt you will find some interesting reads.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Best from the Blogosphere: 2018 Federal Budget Edition

SOURCE: 2018 FEDERAL BUDGET, P. 47

What I find most interesting about budgets are the provisions that are often buried in the fine print and don’t make the front page of the newspaper. You will find links below to some widely-reported features of the 2018 Federal Budget and others you may not yet be aware of.

The graphic above illustrates how the new EI parental-sharing benefit will operate. The Investment Executive reports that in an initiative that was widely-anticipated in the lead-up to the February 27th budget, the Liberal government introduced a new Employment Insurance (EI) parental sharing benefit that will provide extended EI parental benefits when both parents agree to share parental leave. The proposed “use-it-or-lose-it” benefit will increase the duration of EI parental leave by up to five weeks for parents who share a standard 12-month parental leave, or up to eight weeks for parents who share an extended 18-month leave. This incentive is expected to be available starting June 2019.

And while details are sketchy, MPs may finally be entitled to long over-due maternity and parental leave. According to the Budget Papers (p.52):

“The Government is supportive of, and will work with Parliament on, the recommendations put forward in the report of the Standing Committee on Procedure and House Affairs entitled Support for Members of Parliament with Young Children. This includes…improving work-life balance, providing access to child care and designated spaces for the use of Members with infants and children, and a change to the Standing Orders of the House of Commons to allow an infant being cared for by a Member of Parliament to be present on the floor of the House of Commons. The Government will also bring forward amendments to the Parliament of Canada Act to make it possible for Parliamentarians to take maternity and parental leave.”

The government has backtracked on key tax measures for small businesses. Mark Burgess at advisor.ca explains how the federal government will tie the passive income threshold to the small business deduction. He notes that the plan put forward in Tuesday’s federal budget takes a different approach to the one the government proposed last summer that received considerable blowback from business owners.

If a corporation earns more than $50,000 of passive investment income in a year, the amount of income eligible for the small business tax rate is reduced and more of the company’s active income is taxed at the general corporate rate. The $50,000 threshold originally announced in changes the government made to its proposals while under pressure from business groups in October is equivalent to $1 million in passive investment assets at a 5% return.

Julie Cazzen at Maclean’s lists 15 ways Budget 2018 will affect your wallet.  Here are a few of the interesting budget provisions she highlights:

  • The Canadian Child Benefit will be indexed to inflation starting July 2018.
  • You will be able to open an RESP and claim the $500 Canada Learning Bond grant at the same time that you apply for a birth certificate for your child. This will automatically enroll children born into low-income families for the grant.
  • Canada Student Grants and Loans has expanded eligibility for part time students, as well as full and part time students with children, and introduced a three-year pilot project that will provide adults returning to school on a full-time basis after several years in the workforce with an additional $1,600 in grant money starting Aug 1, 2018.
  • A new Apprenticeship Incentive Grant for Women will give women in male-dominated trades fields $3,000 per year of training (or up to $6,000 over two years). Almost all Red Seal trades are eligible.
  • The CPP death benefit is now $2,500 for all eligible contributors (whereas before it was pro-rated.)

Rob Carrick in the Globe and Mail discusses seven changes that could affect your finances. For example, following up on public consultations in 2016, the federal government is poised to announce improvements to Canada Deposit Insurance Corp. The consultations looked at adding registered disability savings plans (RDSPs) and registered education savings plans (RESPs) to the list of registered accounts that are covered and adding foreign currency deposits to covered products.

This would benefit snowbirds keeping large deposits in U.S.-dollar accounts. Other reforms could add coverage for guaranteed investment certificates of longer than five-year terms. Increasing the current $100,000 coverage limit for eligible deposits does not appear to be in the government’s plans.

Some other lesser known and unexpected Budget proposals reported by the Financial Post are:

  • The government will create an advisory council to begin “a national dialogue” on a national pharmacare program.
  • The government is moving to provide more support for Canadians suffering from mental health issues – including veterans – by helping them with the cost of psychiatric service dogs. Specifically, starting this year, the Medical Expense Tax Credit will be expanded to cover costs associated with the animals.

The federal government also announced in the budget that it will eventually move away from its problem-plagued Phoenix pay system – which has overpaid, underpaid or completely failed to pay tens of thousands of public servants – and invest $16-million over two years to develop a new pay system.

You can see the full document tabled in the House of Commons here.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Feb 19: Best from the blogosphere

Unfortunately, what goes up must come down and recent volatility illustrates that the stock market is no exception. Your head knows this is the time NOT to check your investments every day or start selling at a loss, but your heart is still going pitter patter at random hours of the day and night.

There is little doubt that unpredictable markets will likely be the norm for the near future. This week we present blogs and mainstream media articles to help you achieve the intestinal fortitude to ride out the storm, particularly if you are retired or close to retirement.

The S&P 500 and Dow Jones Industrial Average both entered correction territory in early February — closing down 10% from the all-time highs that each hit several weeks earlier. The TSX also shed hundreds of points. Fortune explained the drop this way:

“The selloff comes as investors grow worried that the stock market may have run up too much too fast in anticipation of the impact of President Trump’s tax reforms…..The Bank of England likely also fueled some concerns that central banks worldwide would boost interest rates.”

On the Financial Independence Hub, Adrian Mastracci wrote that although you may be rattled by the correction, Diversification keeps your nest egg on the rails. He explained that diversification among asset classes, economic regions, time to maturity, foreign currencies and investment quality increases the odds of you being right more often than wrong. When some selections are suffering, others can step up and help cushion the rest of your portfolio.

For example, the diversified Saskatchewan Pension Plan Balanced Fund is professionally-managed by Greystone Managed Investments and Leith Wheeler Investment Counsel. As of December 31, 2017 the balanced fund portfolio is invested as follows:

  • 30.6%: Bonds and mortgages
  • 19.3%: International equities
  • 19.2%: Canadian equities
  • 18.8%: U.S. equities
  • 10.2%: Real estate
  • 1.9%: Money market

SPP has rated the volatility of this fund as low to medium. Nevertheless, the fund does not have any return guarantees.

The Globe and Mail’s Rob Carrick offers reasons why you should be grateful for the market freakout. “The markets are likely to be ornery for the next while, but there’s no need for radical surgery on properly diversified portfolios of stocks, bonds and cash that you’re holding for the long term,” he says. “Think about strategically adding stocks, not subtracting. After any big market decline, put a little money into quality stocks or exchange-traded funds and mutual funds that hold them.”

On the HuffPost Ann Brenoff addresses How To Handle A Stock Market Drop When You’re Retired. She acknowledges that for retirees or those close to retirement recent market gyrations are gut-wrenching. She comments, “Even those in their 60s likely have many investment years ahead of them. And with that length of time, you will have plenty of opportunity to recover from these types of market drops, she said. The key, though, is staying invested.” Brenoff also points out that if you were invested even just a few months ago, there’s an excellent chance you’re still ahead despite two days of falling prices.

Several months ago Ian McGugan’s column in the Globe and Mail suggests Five things to do if you’re nearing or in retirement and fearing a market pullback. He cites several takeaways from Wade Pfau, an economist at American College in Philadelphia:

  1. If you’ve won, stop gambling.
  2. Plan for lower returns.
  3. Think safety, not wealth.
  4. Consider alternatives such as annuities.

Pfau also recommends you ask yourself two questions if you are in doubt whether to stay heavily invested in the stock market: “How would you feel if your wealth doubled? How would you feel if your wealth fell in half? “Most people find the prospect of losing a substantial part of their portfolio far outweighs the possible pleasure of having substantially more,” he said.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Jan 8: Best from the blogosphere

Welcome to a wonderful New Year. Most of the country has spent the last few weeks in a deep freeze with Saskatoon temperatures dipping below -30 C. It’s even -21 C in Toronto!

Nevertheless, residents of Spy Hill, Saskatchewan where the temperature was -43 with the wind chill on Christmas morning displayed their very warm hearts when they sprang to action on Christmas Day to help passengers on a frozen train.

Here is what a few of our favourite personal finance writers have been writing about during the holidays.

Jonathan Chevreau on the Financial Independence Hub reviewed the New York Times best seller Younger Next Year – Live Strong, Fit and Sexy Until You’re 80 and Beyond. Chevreau said, “The book is all about taking control of your personal longevity, chiefly  through proper nutrition but first and foremost by engaging in daily exercise: aerobic activity at least four days a week and weight training for another two days a week — week in and week out, for the rest of your life.”

Boomer & Echo’s Robb Engen wrote Save More Tomorrow: The Procrastinator’s Guide To Saving Money. He discussed behavioural economists Shlomo Benartzi and Richard Thaler’s Save More Tomorrow program which not only suggests that monthly savings be automated but that savings rates be automatically increased when individuals get raises or earn more money from side hacks or freelance gigs.

Bridget Casey from Money After Graduation encouraged readers to see through their financial blind spots. “Reducing your spending and increasing your income by any amount is always good for your net worth, but if you’re looking to get the most bang for your buck, your efforts should be directed towards major wins ahead of small victories. A good exercise is to identify the three largest expenses in your budget and try to reduce them by 15% each or more,” she suggests.

Barry Choi explained on Money We Have why he is changing careers after 18 years. It was hard to walk away from a well-paid job in television but with a young baby, working the 3 PM to midnight shift was no longer sustainable. He got a part-time position as an editor for RateHub three days a week and he plans to continue writing for a variety of travel and other publications. Although he took a pay cut to leave his full-time position, his financial advisor helped him to realize he doesn’t need to make nearly as much as he thought to maintain the family’s lifestyle.

And finally, Globe and Mail personal finance columnist Rob Carrick offers the following  eight dos and don’ts for your personal finances in 2018:

  • DO brace for higher borrowing costs.
  • DON’T expect much improvement on savings rates.
  • DO expect more hysteria about cryptocurrencies
  • DON’T buy in unless you have the right mindset
  • DO be cautious with your investment portfolio
  • DON’T forget bonds or GICs
  • DO emphasize fees as a controllable factor in your investing
  • DON’T forget the value proposition

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Dec 4: Best from the blogosphere

I had the pleasure of attending the 2017 Canadian Personal Finance Conference in Toronto in late November. It was a great opportunity to renew friendships with bloggers and financial writers from across the country. Here’s what some of them have been writing about lately.

Rob Carrick from the Globe and Mail writes about How e-transfers are ousting paper cheques. Isn’t that the truth! Since I started my writing business almost 10 years ago I can count on the fingers of one hand the number of cheques I have written. I use e-transfers almost daily.

On Money We Have, Toronto-based personal finance expert Barry Choi discusses the ins and outs of churning credit cards in Canada. Applying for credit cards to get bonus points and cancelling them soon after can affect your credit score but Choi says, “You could apply for 2-3 credit cards in one month and it probably wouldn’t be a big deal. Just don’t do it every month, and don’t apply for a ton of cards if you plan on getting a mortgage soon. Lenders will wonder why you need access to so much credit.”

Mr. CBB reports on how Mrs. CBB saved their Christmas budget $400 by shopping on line so far. She purchased a toy for a discounted price on Amazon Prime which was reduced by 50% on Black Friday but it would have cost $7.99 to return. Amazon customer service sent her a return label so she could by two new ones (one for a gift) for the same price. She also managed to purchase $600 worth of clothing for just under $200.

Wayne Roth on Retire Happy considers whether you should annuitize your retirement income. He is generally not a fan of annuities but acknowledges that an annuity can be useful for creating a secure source of retirement income. You lose some upside potential but an annuity allows you to eliminate major investment risks and it provides income that you cannot outlive – no matter how long you survive. Risk-adverse people don’t mind missing on those large gains in order to gain protection on the downside.

And finally, on another note, if you are in the Saskatoon area from now until January 7th, don’t miss the BHP Billiton Enchanted Forest Holiday Light Tour. It is one of Canada’s most spectacular drive-thru Christmas Light Shows and Saskatchewan’s top winter visitor attraction. 2.5km of animated light displays are scattered throughout an urban forest. Proceeds go to Saskatoon City Hospital Foundation and Saskatoon Zoo Foundation.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 27: Best from the blogosphere

Tim  Stobbs from CanadianDreamFree at 45 who met his FIRE (financial independence retire early) goal several months ago recently wrote:

“One particular lesson that has really hit home for me since I early retired is this: FIRE doesn’t change your core personality.  You see I had this lovely fantasy in my head that I would be more active and perhaps start exercising regularly when I left work. I would run or do yoga like every other day.  Of course, I’ve never made working out a priority earlier in life so this really hasn’t changed that much since I retired.” 

That must be why over 12 years since I left my corporate job and a year into semi-retirement my closets could still use a good cleaning and I struggle to make it to the gym three times a week.

That also may explain Why being rich makes people anxious. Kerry Hannon from the New York Times reports in The Toronto Star that multi-millionaire Thomas Gallagher who is retired from his position as vice chairman of Canadian Imperial Bank of Commerce World Markets says, “Emotionally, I don’t come from money; I got very lucky on Wall Street. I have more money than I had ever imagined, but I still worry — do I have enough, if I live longer than I thought?”

And financial anxiety among Canadians is not only surprisingly pervasive and but not limited to the very rich or the very poor.  Rob Carrick in the Globe and Mail discusses a survey by Seymour Management Consulting which reveals that One in two Canadians is a bundle of nerves about money. Low-income people are most stressed, but one in three people with incomes of $100,000 or more are on the list of worriers.

So How do you know when it is the right time to retire? Retire Happy’s Jim Yih says retirement readiness is not tangible. He notes that one of the most significant trends is that more and more people want to work in retirement, plan to work in retirement and/or are being pulled into work in retirement.

“There are more opportunities than ever to work in retirement.  In fact the new terminology that is not so new anymore is the idea of planning a PHASED RETIREMENT or a TRANSITIONAL RETIREMENT. Personally, I think it’s great and I think a lot of people are finding success with this idea,” he comments.

Retired actuary Anna Rappaport identifies the same trend in an opinion piece Moving To The Next Step: Reboot, Rewire, Or Retire? for Forbes. She suggests that while many people may seek to continue working at traditional jobs into their 70s or 80s, others may wish to leave their career positions to build new career paths. People who held senior roles during their careers often find rewarding a period of professional activity with less responsibility, before totally leaving the labor force. Some seek memberships on corporate and/or nonprofit boards. Other people seek volunteer or not-for-profit roles, working in areas that are meaningful to them.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 20: Best from the blogosphere

I finally found time to clean out the 700+ emails in my in box and here are some of the gems from both the mainstream media and the blogosphere I found hiding there.

The federal government has announced expanded parental leave and new caregiver benefits that will come into effect December 3rd. Eligible new parents will be able to spread 12 months of employment insurance benefits over 18 months after the birth of a child. However, the government will not increase the actual value of employment insurance benefits for anyone who takes the extended parental leave.

The change in leave rules will automatically give the option of more time off for federally regulated workplaces, which include banks, transport companies, the public service and telecoms, and is likely to spur calls for changes to provincial labour laws to allow the other 92% of Canadian workers outside of Quebec access to similar leave. Anyone on the 35 weeks of parental leave before the new measures officially come into effect won’t be able to switch and take off the extra time.

How do you know when it’s the right time to retire? Retire Happy’s Jim Yih advises boomers considering retirement to have a plan that includes both lifestyle issues and money issues.  He says, “Too often the retirement plan focuses only on the financial issues. You can have all the money in the world but if you don’t know how to spend it or have good people around you or you don’t have your health, what good is the money?”

In the Globe and Mail, Morneau Sobeco actuary Fred Vettese says Few Canadians are destined to hit their retirement income ‘sweet spot’. What is an adequate income level to retire? According to Vettese for most people, it means having enough income to maintain their pre-retirement standard of living for the rest of their lives. “Put another way, spendable income in retirement would be 100% of what it was during one’s working years,” he says. “We’re unlikely to hit the 100% target every time, so let’s consider anything between 85% and 115% to be in the “sweet spot.”

If you sometimes get discouraged reading about “wunderkind” who save millions and retire super early, FIREcracker, writing on Millenial Revolution says Don’t Let Comparisons Derail Your FIRE (financial independence, retire early) Journey. “Don’t compare your beginning with someone’s middle or end. Instead of comparing yourself to other people, look back at your own journey and see how far you’ve come, she says. “And remember, even though there are hordes of people in front of you, there are also hordes behind you. They would switch places with you in an instant.”

And finally, make sure your retirement savings plan includes adequate amounts for health care. Health spending in Canada will likely hit $242 billion in 2017, says a report from the Canadian Institute of Health Information (CIHI). CIHI calculates that health spending in Canada is expected to reach $6,604 per capita this year – or about $200 more per person compared to last year. The report also says total health spending per person is expected to vary across the country, from $7,378 in Newfoundland and Labrador and $7,329 in Alberta to $6,367 in Ontario and $6,321 in British Columbia. The public private split remains fairly constant with 30% covered by private out of pocket payment or private insurance and 70% by the public purse.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 31: Best from the blogosphere

If you buy a house or re-finance your existing home beginning in 2018, you may need a higher income to qualify for a mortgage.  Borrowers who are renewing mortgages will not have to meet the new stress-test standard as long as they stay with the same bank. However, renewals done with another lender will have to qualify under the revised standards because they require new underwriting.

As Sean Cooper explains in What OSFI’s (Office of the Superintendent of Financial Institutions) Tightened Rules on Uninsured Mortgages Means for Homebuyers on RateSupermarket.ca, under these new rules, buyers with a 20% down payment or more will have to undergo a more rigorous stress test, and qualify based on the highest posted five-year fixed rate – 4.64%, roughly 200 basis points higher than actual mortgage rates.

“Last year, in an effort to cool down hot real estate markets in cities like Toronto and Vancouver, Ottawa introduced new mortgage rules on only insured mortgages – meaning those who put less than 20% down.” Cooper notes. “But since then, the uninsured mortgage market has grown. So, to help reign in this segment of the market, OSFI is now proposing extending the stress test to uninsured mortgages.”

Lowestrates.ca blogger Alexandra Bosanac further clarifies in This is how OSFI’s new mortgage rules will affect Canadian homebuyers that the new OSFI rules will apply to buyers who apply for uninsured mortgages including those with a 20% down payment or more and those buying homes worth $1 million or more. “They will be stress tested to show they can afford a mortgage, either at the five-year average posted rate, or two percentage points higher than the rate their bank or broker offers them (whichever one is higher),” she says.

Bosanac offers an interesting example of how the new rule changes will impact homebuyers. A couple buying a home for $500,000 with a $125,000 down payment would be paying $1,743 a month at the the current lowest variable five-year mortgage rate in mid-October available in Ontario of 1.99%. However, under the new rules, that same couple will be stress tested prior to qualifying to ensure they can pay the mortgage at two percentage points higher — 3.99%. That means they will have to be able to show they can afford to pay a mortgage of $2,165 a month. That’s a difference of $422 a month, or $5,064 a year.

Globe and Mail mortgage columnist Robert McLister offers 10 ways the new mortgage rules will shake up the lending market. He suggests  that unless provincial regulators follow OSFI’s lead (which if history is a guide they won’t), it will be a bonanza for some credit unions because many credit unions will still let you get a mortgage based on your actual (contract) rate, instead of the much higher stress-test rate. He expects to see a rush of buying before the end of the year from people who fear they won’t qualify after January 1.

Furthermore, critics say new mortgage rules will push borrowers to unregulated lenders according to Globe and Mail reporters Janet McFarland and James Bradshaw. They spoke with OSFI superintendent Jeremy Rudin who acknowledged that OSFI is offloading risk to the unregulated lending sector, which doesn’t come under federal control, “That would not be an intended consequence, nor would it be a completely unanticipated consequence,” he told reporters.

Former MP Garth Turner blogging at The Greater Fool anticipates that real estate values will decline across the country as a result of the changes, which means home purchases could be a potential wealth trap, particularly for first time buyers who cannot afford losses.

In After Mom, he notes that in order to avoid paying mortgage insurance, many young buyers borrowed from parents to get over the 20% line so they would not have to pay mortgage insurance. As a result CMHC-insured loans plunged more than 40% at the same time real estate activity rose, the number of borrowers increased and overall mortgage debt swelled.

He concludes, “The average down payment gift from parents to kids in households making $100,000 or more is now over $40,000. Let’s hope Mom has a bunch more money to bail junior out when prices fall, rates rise and that first loan renewal comes round. Stress, baby.”

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Oct 23: Best from the blogosphere

Sustaining a blog for months and years is a remarkable achievement. This week we go back to basics and check in on what some of our favourite veteran bloggers are writing about.

If you haven’t heard, Tim Stobbs from Canadian Dream Free at 45 has exceeded his objectives and retired at age 37. You can read about his accomplishment in the Globe and Mail and discover how he spent the first week of financial independence here.

Boomer & Echo’s Robb Engen writes about why he doesn’t have bonds in his portfolio but you probably should. He acknowledges that bonds smooth out investment returns and make it easier for investors to stomach the stock market when it decides to go into roller coaster mode. But he explains that he already has several fixed income streams from a steady public sector job, a successful side business and a defined benefit pension plan so he can afford to take the risk and invest only in equities.

On My Own Advisor, Mark Seed discusses The Equifax Breach – And What You Can do About It. In September, Equifax announced a cybersecurity breach September 7, 2017 that affected about 143 million American consumers and approximately 100,000 Canadians. The information that may have been breached includes name, address, Social Insurance Number and, in limited cases, credit card numbers. To protect yourself going forward, check out Seed’s important list of “Dos” and Don’ts” in response to these events.

Industry veteran Jim Yih recently wrote a piece titled Is there such a thing as estate and inheritance tax in Canada? He clarifies that in Canada, there is no inheritance tax. If you are the beneficiary of money or assets through an estate, the good news is the estate pays all the tax before you inherit the money.

However, when someone passes away, the executor must file a final tax return as of the date of death.  The tax return would include any income the deceased received since the beginning of the calendar year.  Some examples of income include Canada Pension Plan (CPP), Old Age Security (OAS), retirement pensions, employment income, dividend income, RRSP and RRIF income received.

When the Canadian Personal Finance Blog’s Alan Whitton (aka Big Cajun Man) started investing, he was given a few simple rules that he says still ring true today. These Three Investment Credo from the Past are:

  • Don’t invest it if you can’t lose it.
  • Invest for the long term.
  • If you want safety, buy GICs.

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 on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Your guide to upcoming CPP changes

In June 2016 federal, provincial and territorial finance ministers finally reached an agreement to expand the Canada Pension Plan. However, because the changes will be phased in over an extended period, there has been considerable confusion among many Canadians about how both CPP contributions and benefits will increase, and who the winners and losers will be.

The Globe and Mail reports that an expanded CPP is designed to address the shortfall in middle-income retirement planning that is occurring as a result of disappearing corporate pensions. “Most at risk are workers under the age of 45 with middling incomes – say, families earning about $50,000 to $80,000 a year,” note authors Janet McFarland and Ian McGugan. “Without the defined-benefit pensions that their parents enjoyed, many could hit retirement with little in savings.”

Here is what you need to know about the planned CPP changes.

Effects on CPP retirement pension and post-retirement benefit:
Currently, you and your employer pay 4.95% of your salary into the CPP, up to a maximum income level of $55,300 a year. If you are self-employed you contribute the full 9%.

When you retire at the age of 65, you will be paid a maximum annual pension of $13,370 (2017) under the program if you contributed the maximum amount each year for 40 years (subject to drop out provisions). People earning more than $55,300 do not contribute to CPP above that level, and do not earn any additional pension benefits.

The first major change will increase the annual payout target from about 25% of pre-retirement earnings to 33%. That means if you earn $55,300 a year, you would receive a maximum annual pension of about $18,250 in 2017 dollars by the time you retire — an increase of about $4,880/year (subject to the phase in discussed below).

The second change will increase the maximum amount of income covered by the CPP (YMPE) from $55,300 to about $79,400 (estimated) when the program is fully phased in by 2025, which means higher-income workers will be eligible to earn CPP benefits on a larger portion of their income.

For a worker at the $79,400 income level, CPP benefits will rise to a maximum of about $19,900 a year (estimated in 2016 dollars). Contributions to CPP from workers and companies will increase by one percentage point to 5.95% of wages, phased in slowly between 2019 and 2025 to ease the impact. The federal finance department says the portion of earnings between $54,900 and $79,400 will have a different contribution rate for workers and employers, expected to be set at 4%.

The enhancement also applies to the CPP post-retirement benefit. If you are receiving a CPP retirement pension and you continue to work and make CPP contributions in 2019 or later, your post-retirement benefits will be larger.

Impact on CPP disability benefit/survivor’s benefit
The enhancement will also increase the CPP disability benefit and the CPP survivor’s pension starting in 2019. The increase you receive will depend on how much and for how long you contributed to the enhanced CPP.

Impact on CPP death benefit
There is currently a one-time lump sum taxable death benefit of $2,500 for eligible contributors of $2,500. This amount will not change.

The main beneficiaries of the CPP changes will be young employees, who are less likely to have workplace pension plans than older workers. To earn the full CPP enhancement, a person will have to contribute for 40 years at the new levels once the program is fully phased in by 2025. That means people in their teens today will be the first generation to receive the full increase by 2065.

The recently released Old Age Security report from chief actuary Jean-Claude Ménard which includes the GIS illustrates how higher CPP premiums scheduled to begin in 2019 will ultimately affect the OAS program.

The report reveals that because of the planned CPP changes, by 2060, 6.8% fewer low-income Canadians will qualify for the GIS, representing 243,000 fewer beneficiaries. This will save the federal government $3-billion a year in GIS payments.

In other words, higher CPP benefits mean some low income seniors will no longer qualify for the GIS, which is a component of the Old Age Security program. The GIS benefits are based on income and are apply to single seniors who earn less than $17,688 a year and married/common-law seniors both receiving a full Old Age Security pension who earn less than $23,376.

Also read: 10 things you need to know about enhanced CPP benefits

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.