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Steps to Avoid the OAS Clawback

According to the Canadian government website, Old Age Security is the largest pension program in Canada.  OAS pays a monthly income to seniors who are age 65 and over.  The amount of the payment is not based on past income but rather how long you resided in Canada after the age of 18.  If you have turned 65 you are eligible for the maximum OAS income if you have resided in Canada for at least 40 years after turning 18 AND have resided in Canada for at least 10 years prior to receiving approval for your OAS pension.  There are some exceptions for those who don’t fully qualify based on temporary absences during that requisite 10-year period.

For the last quarter of 2018, the maximum monthly OAS payment regardless of marital status is $600.85.  Don’t get too excited as, as the title suggests, the government can clawback part or all of your OAS benefit depending on your taxable income.  As of 2018, you can earn up to $75,950 in annual taxable income (up from $74,788 in 2017) without affecting your payment.  For every dollar earned over this threshold amount however, you will be taxed (referred to as an OAS recovery tax) at a rate of 15%. Once you reach taxable income in the amount of $ 123,386 the government will have fully recovered or clawed back the entire amount of your Old Age Security. Read more

Life Insurance – Do You Buy, Rent, or Borrow?

Without a doubt, life insurance is valuable protection provided by your employee benefit plan, but should it be the only life insurance coverage you have?  Probably not, if you want to ensure you have sufficient long term protection to cover all your family’s financial needs should you die unexpectedly.

In a recent study conducted by the Life Insurance and Market Research Association (LIMRA), it was reported that 61% of Canadians hold some form of life insurance.  Surprisingly, it also revealed that only 38% of Canadians own an individual life insurance contract. This means that almost 40% rely solely on the life insurance provided by their employer. This can be problematic.  The disadvantages of having your employee benefit plan as your only life insurance protection include the following:

It is probably not enough to pay off your mortgage and/or provide income for your spouse and family.

The amount of life insurance protection provided by group insurance in most cases is equal to only one or two times annual income.  If this is not enough to do the job, the addition of individual life insurance should be considered. Read more

Private Health Spending Plans for the Owner/Operator Business

Individuals who have incorporated their business such as consultants, contractors and professionals often find that providing affordable health and dental care coverage for themselves and their families can be an expensive proposition.

Take Bob for example.  Bob had just left his architectural firm to set up on his own.  In looking at the options available for him to replace his previous firm’s Extended Health and Dental coverage for he and his family, he discovered that the monthly premium would be between $400 and $500 per month.  This was for a plan that didn’t provide coverage for all practitioners and procedures, had an annual limit on the benefits, and a co-insurance factor of 20% (only 80% of eligible costs were covered).  There wasn’t even any orthodontia coverage although he could purchase that in limited amounts at an additional cost!  He also had to move quickly to replace his lost coverage as he had a pre-existing condition that most likely would not be covered if he waited too long to implement the new plan. Read more

Optimizing Wealth Through Asset Re-Allocation

If you are an active investor, your investment holdings probably include many different asset classes.  For many investors, diversification is a very important part of the wealth accumulation process to help manage risk and reduce volatility.  Your investment portfolio might include stocks, bonds, equity funds, real estate and commodities.  All these investment assets share a common characteristic – their yield is exposed to tax.  From a taxation standpoint, investment assets fall into the following categories:

Tax Adverse

The income from these investments are taxed at the top rates.  They include bonds, certificates of deposits, savings accounts, rents etc.  Depending on the province, these investments may be taxed at rates of approximately 50% or more. (For example, Alberta 48.0%, BC 49.8%, Manitoba 50.4%, Ontario 53.53%, Nova Scotia 54.0%). Read more

Canada Pension Plan – Should You Take it Early?

New Rules governing the Canada Pension Plan took full effect in 2016.  Under these rules, the earliest you can take your CPP Pension is age 60, the latest is 70. The standard question regarding CPP remains the same – should I take it early or wait?

If you take it at the earliest age possible, age 60, your CPP income will be reduced by 0.6% each month you receive your benefit prior to age 65.  In other words, electing to take your CPP at age 60 will provide an income of 36% less than if you waited until age 65.

CPP benefits may also be delayed until age 70 so delaying your CPP benefits after age 65 will result in an increased income of 0.7% for each month of deferral.  As a result, at age 70, the retiree would have additional monthly income of 42% over that what he or she would have had at 65 and approximately 120% more than taking the benefit at age 60. The question now becomes, “how long do you think you will live?” Read more

Why Private Wealth Management?

I am asked frequently the benefits of being in the Private Wealth Management (PWM) stream versus investing in mutual funds and/or bank funds. In order to answer this, we define PWM as the following:

  • Minimum investment $500,000
  • Custodial account (TD/National Bank/Laurentian Bank) managed by an Investment Counsellor (IC)
  • IC buys and sells securities within your account based on a rigid Investment Management Agreement (IMA) signed by you
  • A fixed fee of between 1-2% per annum is charged monthly based on the dollar amount of your account
  • The portfolio is managed according to the “discretion” of the IC, and done without your signature or acknowledgement. You give the IC the authority to trade on your behalf

Read more

ARTICLES OF INTEREST

7
Dec

DM Monthly Report – Dec 2018

SHOULD WE BE WORRIED ABOUT OIL’S RAPID DESCENT?  After having tracked steadily upward from a sub-$30 valley reached in early 2016, crude oil abruptly reversed course in mid-October, plunging by almost a third in just a few weeks. Because oil and gas remain key inputs to global growth, concerted price moves can sometimes provide clues to underlying economic health, even before changes in course show up in GDP and other key figures. If, for example, price is falling due to a drop-off in demand, it’s not unreasonable to surmise that general business activity has also cooled.

Click here to read more:  DM-Monthly-Report-Dec-18

7
Dec

Cardinal Update – December 2018

CANADIAN OIL: WHAT’S THE DIFFERENTIAL? Beginning in August of 2018 the differential between Western Canadian Select (WCS) and West Texas Intermediate (WTI) widened from <US$20/bbl to $50/bbl. In this note we will address why differentials have increased, our rationale for an average $25-$30/bbl differential in 2019, the low $20’s/bbl in 2020, and a longer-term view. In sum, we do not believe that panic is warranted.

The writing has been on the wall that a sub-$20/bbl differential was not sustainable. Utilizing Canadian production forecasts from CAPP and adding up available pipeline capacity, a clear gap between the two was emerging for late 2018/2019. With no pipeline capacity expected to start until late 2019, this production would have to be transported by rail.

Click here to read more:  Cardinal Update – December 2018

12
Nov

Holiday Spending Survival Guide

Are you crazy for the holidays, spending thousands of dollars on holiday gifts, lights, entertaining, food and decorations each year? If so, you’re not alone. Many Americans feel the sting of holiday spending well into the new year. If you love to celebrate the holidays but don’t love the financial pinch you experience afterward, there are several great tricks for giving and celebrating, without breaking the bank. Read more »