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Federal budget 2018: Just what you’d expect from a Liberal government well into its mandate

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The Liberals’ 2018 federal budget that descended on us on Tuesday afternoon is pretty much what you’d expect from the Justin Trudeau administration at this slightly-past-the-midway point of its mandate: lots of spending on things like gender pay equity, parental leave, native rights. Another stab at sin taxes, with a carton of 200 cigarettes going up by $1 and a proposal for excise duties on cannabis if and when marijuana becomes legal in July. A bit of business tax reform scaled down from the measures that so incensed small business last fall. As for balancing Ottawa’s books? Not so much.

The CBC’s web site provides this overview: Liberals spend billions to close gaps for working women, indigenous families. If you want to do straight to the source, click on the Finance Canada site here.

Here’s the Globe & Mail’s overview that went up soon after 4 pm:  Federal budget highlights: 12 things you need to know. In case you’ve met the paywall limit on free views, it reports that the budget is in line with previous estimates from Finance Canada, which means deficits for the “foreseeable future.”  Pay equity legislation is proposed for federal government employees and federal regulated sectors. And $447 million will be spent over 5 years to create a new indigenous Skills and Employment Training Program (replacing the Aboriginal Skills and Employment Training Strategy).  And another $1.4 billion or more over 6 years is proposed for First Nations child and family services.

A National Pharmacare program is being “consulted” on. More detail on passive income and private corporations: companies with more than $150,000 in passive income will no longer be eligible for the small business tax rate, while those with under $50,000 oil passive income will not be affected. In between is a formula. Also more than half a billion will go to Cybersecurity, and $3.8 billion over 5 years will go to “support science.”  And journalism has not been forgotten: the budget proposes $50 million over 5 years to support journalism in “underserved communities.”

At the National Post, this piece looks at 5 ways average Canadians could be impacted by the federal budget. MoneySense‘s Julie Cazzin totes up 15 ways Budget 2015 will impact your wallet. There’s something for everyone, Cazzin writes, but no real showstoppers. Julie also looks at 5 measures that directly impact Canadian families. Another MoneySense writer looks at the implications for small business owners.

Carrick sees 7 changes affecting personal finances

Here’s Rob Carrick’s piece on 7 changes that could affect your finances. Carrick writes in the Globe that Ottawa will be modernizing deposit insurance, replace the Canada Working Income Tax Benefit with the introduction of a Canada Workers Benefit, which raises benefits by up to  $170 a year in 2019 for single parents and couples, while raising the level at which the benefit is phase out from $32,339 to $36,483. The Sears bankruptcy appears to have stimulated consultation on pension security, while as of June 2018 an extra five weeks of parental benefits will be available when parents share parental leave. (Yes, Justin Trudeau’s government wishes to encourage more men to take pat leave!) There is also an expansion of the medical expense tax credit and a move to strengthen the oversight of bank sales practices by the federal Financial Consumer Agency of Canada.

Coyne: Budget has nothing to do with budgeting; Ivison: Liberals show their cunning

Back at the National Post, you can get useful video insights from columnists Andrew Coyne, John Ivison and William Watson here. Coyne’s column is titled Liberals deliver a federal budget that has nothing to do with budgeting, or the economy.  In it, he wryly observes that the Liberals are pandering “to every conceivable Liberal client group and policy cult: environmentalists, seasonal EI recipients, multiculturalism, official language groups, regional development, all the way to the media … And, of course, feminists.”

John Ivison’s column is headlined “In their third federal budget, Trudeau’s Liberals show their cunning.”

Finally, for a sober look from the tax and accounting pros at KPMG, read this overview.

My take? How about addressing pension inequity between public and private sectors?, not just gender pay inequity?

Continue Reading…

Where did the Retirement idea come from?

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I was reading an article on retirement in The Atlantic. The article discussed the earliest concept of retirement, dating back to Otto von Bismarck of Prussia in 1881.

The concept was to provide financial support to “older members” of society. The idea was radical because people did not retire: if you were alive you worked. At the time the majority of people were employed in agriculture to feed the masses.

The struggle for payment continued for 8 years and finally with pressure from the socialists, legislation was introduced for the state to take care of those disabled from work. Social security was later introduced for those over 70 years old; however, 70 was well above life expectancy at the time.

Soldiers were paid pensions for years prior to social security; however, virtually all worked after their military service. In the late 1800s pensions were paid to many public servants in major US cities  and in 1875 American Express started to offer pensions,  followed by major industrial companies that started paying pensions in the early 1900s.

US Social Security in 1935

All this culminated with the Social Security Act of 1935, with a retirement age of 65 and a life expectancy of 58. Research at the time suggested mental capacity started to decline at age 60 and it was time to pass work onto the younger generation. In Canada, the Old Age Security Act was passed in 1927.

It is interesting to see the history of retirement,which was designed to not pay or pay very little since no one was supposed to live past the age of qualification. In the 1960s people started to live past Social Security age and had the money/savings to actually retire. This led to the problem we see today, which is the strain to fund payouts from government pension plans.

This problem will need to be addressed before it becomes a problem for our children, but that is a discussion for another day. You might have seen this before on this blog, so here again financial and lifestyle planning are critical to ensuring that you enjoy retirement on your terms: expecting anyone else to take care of you, even the government, is not wise.

People are living longer and want to work longer

Our current reality is that people are living longer and want to work longer. You might say we are going back in time. Continue Reading…

In wealth transfer, communication is as important as inheritance

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By Jim Greenwood, CFP

Special to the Financial Independence Hub

What’s the most difficult thing to talk about with your children? For many of us, discussing plans for our estate is pretty high on the list. Talking about your will and your own passing can be uncomfortable. According to a recent IPC Private Wealth survey of Canadians with at least $500,000 in investable assets, 58 per cent have not talked to their heirs about instructions for their estate, both financial and personal.

Having the inheritance discussion is very important, largely because of the consequences after your passing if you don’t have the talk. Perhaps one child wants to keep the vacation property while the other wants to sell, creating financial discord among siblings. Or there is a dispute about one’s final wishes upon death. The consequences are many and varied, and can be different for each family but equally devastating.

Holding the family meeting

As a financial planner myself, I can tell you that I am very happy to host or attend a family meeting, which should include the executor. It takes the pressure off you. Just let your children know that your advisor recommends having beneficiaries present during part of your estate planning process.

Or say you want to hold a meeting on your own. Beforehand, ask your advisor for coaching on approach and content. You’ll feel a lot more comfortable during the family meeting.

At my firm, we believe there are two main themes to a wealth transfer meeting. The first is about values. Share your views of money and wealth, ask your children what money means to them, and have a discussion. Tell your children what it took to create your wealth. Talk about the idea of a legacy – helping out your children and grandchildren with the hope that your children will do the same. Why discuss these ideas? You want to guide your children to a place where they feel appreciative, not entitled. Where they are trustworthy, not irresponsible.

The second theme is all about your will. Talk about how you’d like your legacy to be managed, and go through the distribution of assets, explaining the reasons for your decisions. This is where you discover if any of your bequests could unintentionally lead to conflicts between children, delays in estate administration, or your will being contested. If any problems arise, you’ll have the opportunity to resolve them — and you’ll be thankful you uncovered the issues now.

Wealth transfer for blended families

If you’re in a blended family, you have an additional layer of estate planning. Take the case of an individual in a second marriage who has children from the first marriage, and needs to provide for both the spouse and children. Continue Reading…

5 small steps to improve your physical health & 5 for your financial health

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Duke University conducted a two-year study of 218 healthy adults of normal weight to determine if a modest, sustained calorie reduction would show appreciable benefits. The plan was to reduce calories consumed by 25 per cent, but participants were unable to achieve that much.

(Author’s note: I sure couldn’t do it! A 25% reduction in my 2,000 daily calories would leave me staggering around at only 1,500 per day.)

Participants were able, however, to cut calories by an average of about 12 per cent.  This smaller change allowed them to stick to the plan without any adverse effect on mood (wherein lies a useful message in itself). The results? Lowered blood pressure; decreased insulin resistance; as well as a drop in several predictors of cardiovascular disease.

But the most appreciable result concerned C-reactive protein, a substance produced by the liver and a marker of inflammation in the body. The participants’ C-reactive levels plunged by almost half: a remarkable 47%!

It’s a no brainer that poor dietary habits would exacerbate internal inflammation. But very often this is an invisible menace (see my article ‘The Truth About Inflammation’, October 2015). Most of us remain blissfully unaware of any chronic inflammation cascading throughout our bodies. Yet this exposes us to chronic health risks as a result of knocking the body out of whack. In my case, I had the aforesaid silent inflammation and observable inflammation, which I felt in my poor old joints. And I am pretty convinced that chronic inflammation was one factor in my developing cancer.

An elevated C-reactive protein level can be a valid identifier of inflammation in the body. So, if just a 12% calorie restriction can reduce this marker by almost 50%, this is as good information as that available to an insider trader.

In the blindness of youth, so many of us can compromise our health in a mad dash for wealth. But from the other end of the lifespan, a good many seniors would gladly sacrifice some wealth for even a smidgen of better health. Those who don’t make time for their health early on in life more often have to make time for illness later.

5 ways to improve your physical health

So, if you are young, young at heart, worried that you are no longer young, here is some insider information. Five smart, little investments you can make, the aggregate interest of which, over time, will have compound into positive health returns. Continue Reading…

The Robo RRSP and 11 lame excuses for not maxing your RRSP contribution this year

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Can you trust your retirement to a robot? Illustration by Chloe Cushman/National Post files

With the annual RRSP season coming to a close next week (the RRSP contribution deadline is March 1st), there’s plenty of media coverage to remind investors of this fact. Two this week came from my pen (or electronic equivalent).

Earlier this week, the Financial Post published the following column you can retrieve by clicking on the highlighted text of the headline: Can you Trust your Retirement Savings to a Robot? 

By robot, we are referring of course to so-called Robo-Advisers or automated online investment “solutions” that generally package up various Exchange-traded Funds (ETFs) and handle the purchase, asset allocation and rebalancing at an annual fee that’s generally is far less than what a mutual fund or two might deliver. (that is, usually 0.5% plus underlying ETF MERs, compared to 2% or more for most retail mutual funds sold in Canada.)

The piece begins with a fond nod to a topic I used to write about periodically in the FP in the 1990s, at the height of so-called Mutual Fund Mania. It was then that I would write about a set-it-and-forget it approach we dubbed the Rip Van Winkle portfolio, which was simply two mutual funds (Trimark Income Growth, a balanced fund) and  a global equity fund (Templeton Growth) that in effect did (and still do, I suppose) everything the modern robo advisers do. The difference is that because of ETFs, the robo services are about a quarter of the price of the old “Rip” portfolio.

But speaking of undercutting, and as the piece also notes, both “Rip” and the robo services have been undercut by the three new Vanguard asset allocation ETFs that were announced on February 1st, more of which you can find in the Hub blog I wrote at the time: Gamechanger? As I noted there, the Vanguard ETFs seem to be ideal for TFSAs (especially VGRO, the 80% equities offering) but of course they are also ideally suited for a “Rip” like RRSP core offering: VBAL (60% equities) for the typical balanced investor, VCNS (40% equities) for very conservative investors and perhaps those now in the RRIF stage who are required to make forced annual (and taxable) withdrawals.

Motley Fool Canada: 11 myths equals 11 lame excuses for not maxing your RRSP

Meanwhile, Motley Fool Canada has just released a special report I wrote titled The 11 Most Common RRSP myths.  The report builds on several RRSP myths that CIBC’s Jamie Golombek published earlier this year, which you can find here, and my FP commentary on them here.  The report adds several new myths submitted from veteran advisers like Warren Baldwin.

You can also view this promotional email on the RRSP report by Motley Fool Canada Chief Investment Officer Iain Butler.