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TFSA or RRSP? 2019

One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?

Here’s the good news – it doesn’t have to be an either or choice.  Why not do both? Below are the features of both plans to help you understand the differences.

Tax Free Savings Account (TFSA)

  •  Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • For 2018, the maximum contribution remains at $5,500.  For 2019, that increases to $6,000.
  • There is carry forward room for each year in which the maximum contribution was not made. For those who have not yet contributed to a TFSA, the cumulative total contribution room for 2018 is $57,500.  It will increase in 2019 to $63,500. Read more

What does the New Year hold for mortgage rates?

Here’s an article that I came across in the Globe and Mail that I wanted to share which talks about Bank of Canada trends and what it might mean for mortgage rates heading into 2019.  Let me know your thoughts.

Click here to read the rest of the article on the Globe and Mail website.

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

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

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

25
Jan

Cardinal Quarterly – January 2019

MARKET OUTLOOK – 2019 should be a good year for investors. In fact, we think that we may already have seen the bottom of the recent market downturn, which briefly fell below the 20% bear market definition on the S&P 500 and was not far behind in Canada. Markets have been rallying in early January based on hopes that the U.S. and China can reach an agreement to end the trade war they are in. Talks may get derailed in the near-term causing markets to fall again, but even in this case, we would expect the market to bottom in the first quarter and recover quickly from there. We would not be surprised to see markets up 20% from Dec. 31st levels by the end of 2019.

Click here to read more:  Cardinal Quarterly – January 2019

 

 

22
Jan

DM Monthly Report – Jan 2019

BUILDING ON STRENGTH IN DM FOREIGN EQUITY – The DM Foreign Equity Portfolio essentially tracked the S&P 500 as it climbed during the first six months of 2018. When things headed south at the beginning of the fourth quarter, however, and many of the market’s most richly valued names took the brunt of the repricing, our focus on quality and fundamentals began to shine through. DM Foreign Equity opened up a significant gap against the broad market during the steep selloff and, by the time the punishing month of December was complete, it had surpassed the S&P by more than 6% for the calendar year.

Click here to read more:  DM-Monthly-Report-Jan-19

9
Jan

DM Q4 Portfolio Commentary

On market swings and the behavior of crowds – While taking in a recent NHL hockey game, we got to thinking about the peculiarities of human nature and how group dynamics might be making an outsized contribution to the recent plunge in stock prices.

Around the same time that we were watching the relatively well-heeled jostle for attention in ta t-shirt toss, a run-of-the-mill equity market correction was rapidly taking on a more bearish tone. In the space of just a few weeks, the collective perception of stock valuations and underlying business conditions was upended and measures of investor sentiment shot from mildly positive to deeply pessimistic.

Click here to read more:  DM-Portfolio-Commentary-Q4-18