Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Is RV Traveling a sound Retirement Strategy?

Posted By |
rv-925610_640
Living the RV dream. Photo courtesy Pixabay.com

By Barney Whistance

Special to the Financial Independence Hub

At some point we’ve all daydreamed about what our retirement might look like. For some, a cabin in the woods might be their dream life. Others may want a condo near the beach or high-rise apartment in the city. Many daydreams also include travel, both in and outside the U.S.

Ample Hollywood movies about the joys and headaches of the retirement life have given nods to the recreational vehicle (RV) retirement lifestyle as well. From ex-CIA man Jack Byrnes’ sleek black Fleetwood RV in Meet the Fockers, to David and Linda Howard’s homier Winnebago in the movie Lost in America, RV living may represent a luxury life of leisure for many Americans.

One former co-worker of mine, shortly after his retirement, sold his home to buy a fancy new RV. While I was able to meet him at his retirement party and do a short quiz on his reasoning, the decision never quite added up for me. I decided to do some additional research to determine if RV-living was a sound and viable financial decision for my own retirement.

Full-time RVers, also known as full-timers, are people who live, work, and play in their RVs. Often they plan their lives and moves well in advance, but they’re also known to pick up and go on a whim, or to follow the weather on a seasonal basis.

However, there are a few considerations when contemplating the full-time RV life. Here’s a breakdown of points to ponder while deciding whether it’s the best lifestyle for your needs.

Finances

RVs can be purchased in a wide price range – anywhere from $3,000 to $3 million – which makes them perfect for any budget. Continue Reading…

Make the Family Cottage less Taxing this year

Posted By |

Cottage On The Carpenter Lake, Canada

By Fraser Willson

Special to the Financial Independence Hub

As the days of summer dwindle to a precious few, the last few weekends at the family seem especially poignant now. And while those thoughts may warm you up a bit, you don’t want to be left out in the cold if you’re not aware of the financial implications when you sell the family retreat or if you transfer ownership to your children this year.

Unlike with your home, transferring ownership of the family cottage to anyone other than your spouse may trigger a taxable capital gain on the appreciation in value during your ownership. You may want to consider leaving the property to your spouse. Doing this helps defer the tax bill until the property is sold or passed on to future generations.

In addition, there are a number of strategies that you can undertake to help reduce and potentially avoid the capital gains tax, including:

Selling and taking back a mortgage

If you decide to sell the cottage to your children, consider taking back a mortgage by offering your children a mortgage loan as payment for the purchase price. The capital gain can be spread over a period of up to five years. And you can forgive the mortgage in your will so your children will own the cottage without debt or paying taxes.

Transferring ownership while you’re alive

Transferring ownership of the cottage to a trust that designates your children as beneficiaries will trigger an immediate capital gain. But from that point on, your heirs are responsible for taxable gains. They won’t pay those taxes until they sell the property or transfer ownership.

Declaring the cottage as your principal residence

You can have only one principal residence for tax purposes. So if your cottage has gone up in value more than your home, consider designating the cottage as your principal residence, which isn’t subject to capital gains tax.

Buying life insurance

Family members can use the tax-free proceeds from a life insurance policy to help pay capital gains taxes on your cottage when you leave it as part of your estate.

If you plan to sell or transfer ownership of your family cottage this year, make sure your finances align with your goals. Doing so can help ensure you stay on track to reach them.

Continue Reading…

Findependence — Free at last from the corporate chains

Posted By |

businessman with handcuffsFriday July 29th will be a day that I will remember for the rest of my life. After thirty-eight years, I finally packed in my banking career. I suppose my co-author Jonathan would call this my Findependence Day!

To be honest, it will take some getting used to as my banking job played an important role in my life. It provided financial security for my family and gave me a good reason to get out of bed most mornings.

My career, like most careers, had its good and bad points. Overall though, it was a good ride and one that I will miss to some degree, but I had to leave in order to publish Victory Lap Retirement and create my blog.

Banks really don’t like it when employees write books or blogs because it might not align with the story that they are trying to convey. Banks get nervous when employees stand out and don’t fit in, when employees invent something that is outside the approved message.

Banks are very protective of their brand. They want the customer experience to be the same in every branch across the country. They want every employee to talk, walk and act the same. They desire a high degree of predictable sameness, as it’s easier to control.

Why banks still sell the old version of Retirement

Continue Reading…

What is Mortgage Insurance?

Posted By |
mortgage-insurance-cartoon
Cartoon courtesy of LSM Insurance

By Chantal Marr, LSM Insurance

Special to the Financial Independence Hub

Sounds great just lying there on paper, doesn’t it?

Really solid.

The underlying concept of mortgage insurance is that if you die or are incapacitated mortgage insurance will pay off the rest of your mortgage. But be careful: Mortgage Insurance is the most dangerous financial product out there.

Mortgage insurance is the one financial product that declines in value as you continue to pay. Therefore each year you are getting less and less value for your premium.

Why Math is Important

Renting vs. Owning

Let’s start with your house. When you take a mortgage out on your house, it’s a very bad deal to start with. You are just paying interest on the value of the house and in most cases the interest far exceeds the cost of renting the same property.

Here’s an example based on a $500,000 20-year mortgage at 6% on a $600,000 house. We’ll assume rent inflation of 4%/year:

Year 2010: Mortgage payment $3,560/month. Rent: $2,500.

You are leaving over $1,000 in your pocket per month in ready money. That’s a lot of restaurants and vacations twelve months a year.

But let’s take it ten years later: Continue Reading…

Retired Money: Why I won’t defer my OAS past age 65

Posted By |

OASMy latest MoneySense Retired Money column is about when to take Old Age Security (OAS) benefits and has been posted at MoneySense.ca. Click on the highlighted text to access the full version here: Why I’m taking Old Age Security right at 65.

As the piece goes into in more depth, the Government incentivizes those in their 60s (including Yours Truly) to defer the date for commencing receipt of benefits of the Canada Pension Plan (CPP) and Old Age Security. The longer you delay between 65 and 70 (or in the case of CPP, beyond age 60), the better the ultimate payout: wait till 70 instead of 65 and OAS will be 36% higher and CPP 42% higher.

Reasons for Deferring CPP may not also apply to OAS

However, the circumstances surrounding CPP and OAS are not identical, so in my own case I plan to take OAS as soon as it is on offer, less than two years from now, while I will endeavour to defer starting the receipt of CPP for as long as I won’t need the money.

Continue Reading…