Tag Archives: registered education savings plan

Mar 18: Best from the blogosphere

A look at the best of the Internet, from an SPP point of view

The unempty nest: a new problem for retirement savers

We’ve heard all about the main obstacles to retirement saving – paying off debt, the lack of workplace pensions, and competing savings needs, like ponying up for a down payment.

A recent article in The Guardian from Charlottetown, PEI, points out another problem that can crop up, which we’ll call the unempty nest, or caring financially for kids age 30 and beyond.

The article notes the somewhat shocking statistic that “more than half of Atlantic Canadian parents are still supporting their adult children between the ages of 30 and 35,” and how that helping hand is “putting a damper on their retirement plans.” The article cites numbers from a recent survey by RBC.

A whopping 58 per cent of Atlantic Canadian parents are in this situation, the article reports; for the nation as a whole the figure is a lower but still noteworthy 48 per cent. The article states that while 88 per cent of parents “were happy to be able to help support their adult children,” more than a third of them – 36 per cent – “were worried about the impact on their retirement savings.”

How much support are we talking about? The article says that the average Canadian pays “$5,623 annually to support adult children age 18-35 and $3,729 annually for… adult children age 30-35.”

Sixty-nine per cent of parents are helping adult children with education costs, 65 per cent help with living expenses (rent, cable and mortgages) and 58 per cent help with cell phone costs, the article notes.

There is no question that younger people are facing higher education, housing, cable and phone costs than their parents ever did, so these statistics aren’t all that shocking. It’s clear that today’s wages don’t align with living costs like they did decades ago. So what can one do?

The cost of higher education for your children can be addressed by signing up for a RESP when they are very young. According to the Canada Education Savings Program’s 2017 Statistical Review, the average tuition cost in Canada was $6,373, and there may be additional costs for “administration fees, books, tools and accommodation and living expenses.”

The publication shows how various programs can help people save up to $21,000 per child if they start at the child’s birth. Many people are taking advantage of this program, the publication notes – there was $55.9 billion in RESP assets in 2017, compared to just $23.4 billion 10 years earlier, benefitting more than 622,000 students.

Save with SPP can attest to the benefit of a RESP; the great thing about it is that your successfully educated child graduates with less student debt thanks to the RESP saving.

So what’s the takeaway? Even if you can only put a little money away for the kid’s education and your own retirement, that action will be far more beneficial than doing nothing at all. Slow and steady wins the race, and as far as retirement savings are concerned, the Saskatchewan Pension Plan  lets you contribute as little or as much (up to $6,200 a year) as you want.

Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Shelties, Duncan and Phoebe, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

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.