Building Wealth

For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).

Thinking of making a $4,500 TFSA contribution right now? Read this first

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By Jonathan Chevreau,

Financial Independence Hub

Preamble: This is an expanded version of a blog originally posted late Wednesday. I’ve retained the original beginning after this preamble, since it concerns action we can now take with our expanded TFSAs. Or can we? As the second half of the revised blog recounts, the newspapers today are full of accounts about super sized TFSAs becoming a real political issue.

According to Tuesday’s federal budget, Canadians can now put an additional $4,500 into their Tax Free Savings Accounts (TFSAs), effective immediately. However, when I made inquiries at my friendly local financial institution, I was dissuaded from this course. You can  try if you want but it’s basically at your own risk until the proposal is formally enshrined in legislation later this summer.

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Jamie Golombek, CIBC Wealth

I checked with CIBC Wealth’s in-house tax guru, Jamie Golombek, who issued the following statement:

“We are awaiting a response from Finance and CRA — here is my official comment: The Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to a total of $10,000, up from $5500, the current 2015 TFSA dollar amount. On the expectation that this legislation will pass, clients may wish to contribute this additional amount to their TFSAs. In the event the legislation is not ultimately finalized, in my view, it is unlikely that the CRA would penalize taxpayers for acting on draft legislation: however, we expect CRA to comment on this over the next few days.”

Consider transfers in kind and taking a one-time tax hit

I might add that coming up with $4,500 may or may not be an issue right now, depending on whether you expect a tax refund or have to pay taxes for the looming tax filing deadline. Keep in mind that you don’t have to fund TFSAs with new cash: if you have significant non-registered investments you can “transfer them in kind” into the TFSA. Continue Reading…

Budget 2015: The Findependence Trifecta comes home!

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Horse racingHere’s my latest MoneySense blog, covering Tuesday’s federal budget: Seniors Hit Jackpot with Budget 2015.

As you will note from the adjacent illustration of a horse race, we have focused on the big three measures we called earlier today the Findependence Trifecta.

As we noted on the Hub shortly after 4 pm, all three measures came through as telegraphed in the major media in recent days, including MoneySense. That is, almost-doubled TFSA annual contribution amounts ($10,000), reduced RRIF withdrawal rates and reduced tax on small businesses.

Now what’s all this about trifectas? Back in February, we ran a blog both at the Hub and at MoneySense about my reflections on harness racing in Florida, and its (somewhat remote) application to asset allocation. For those not familiar with the term trifecta, here is Wikipedia’s definition.

In a nutshell, horse-racing enthusiasts (“gambling” is such a harsh term!) make a bet on three specific horses placing one-two-three in a particular race. As you can imagine, this is not too likely: it’s a lot easier to bet on a single horse to “show” by coming in either first, second or third. But to  correctly identify the first-, second- and third-place winners in exact order involves considerably longer odds. So it’s a big deal if you actually get it right and win a massive bet called the trifecta.

Of course, when it comes to financial independence, the analogy breaks down a little. But as I note in the MoneySense piece linked above, I think we should all be happy with the budget. Enjoy your potential future winnings from the Findependence Trifecta! 

For convenience and archival purposes, we’ve also republished a version of the blog below: Continue Reading…

Budget 2015: Savers, retirees hope for more TFSA room, lower RRIF minimum withdrawals

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Finance Minister Joe Oliver (Department of Finance/Flickr)

By Jonathan Chevreau

Journalists and financial experts will be entering a “Lock-up” this morning in Ottawa, getting roughly a six-hour head start on the rest of us on the contents of the 2015 federal budget.

Even so, a combination of leaks and informed speculation give us a pretty good idea about the contents, which will gush forth within seconds of 4 pm, when the embargo is lifted.

Here at the Financial Independence Hub, we will be focusing on three main measures that if announced will do much to speed or improve our collective “Findependence.” Our hoped-for “trifecta” from Finance Minister Joe Oliver (pictured above) includes the much-delayed promise of a doubling of annual TFSA limits, a lowering of minimum withdrawal limits for RRIFs, and lower tax rates  for small business. Continue Reading…

Weekly wrap: fingers crossed for TFSA doubling, how to spend your tax refund, looking under the Robo hood

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Gordon Pape (www.everythingzoomer.com)

Gordon Pape, author of the definitive TFSA book, Tax-Free Savings Accounts,  wrote a couple of good pieces this week for the Globe & Mail on what next Tuesday’s federal budget may have in store for the TFSA. In TFSAs benefit more than the rich, Pape listed various groups that can benefit from TFSAs, including seniors, savers, young people, income splitters and low-income Canadians. Or as I’ve said, pretty much every Canadian 18 years of age or more.

An earlier Pape column on Monday titled Oliver’s plan to raise TFSA limits raises many questions, looked at whether the promised “doubling” of an annual TFSA contribution limits would be double the original $5,000 limit, for a total of $10,000, or double the current $$5,500 limit for a total of $11,000. Hey, we’d be happy with either event! The other main question is how inflation indexing would be handled.

Over at Retirement Redux, Sheryl Smolkin looks at What Seniors Want in the federal budget. Continue Reading…

The Apple Watch and Findependence

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Smart watch isolated with icons on white background. Vector illustration.My friend the inimitable Norman Rothery posted a blog at MoneySense.ca Thursday that was inspired by a Twitter exchange last weekend: the post is titled Apple Watch Delays Findependence.

On Twitter, I had publicly disclosed that I had pre-ordered the new Apple Watch, even though delivery is several weeks away. Norm made a query about the possible impact on Findependence, then followed up in his blog by suggesting that young people buying these gadgets might seriously be delaying the arrival of their Findependence Day (that is, the day they reach Financial Independence) by 17 days for the cheapest model and for as much as two years for the expensive glitzy gold model.

I have no great problem with the blog, a typically contrarian piece by a great value investor: it’s all grist for the mill, as they say and I’m happy to see an influential writer like Norm use the term Findependence. Even so, let me assure readers out there who may have fancied me to be a frugal kind of guy that I quite definitely did NOT purchase the expensive gold-banded version. For the curious, I picked one of the simple entry-level models with a black band and the smaller watch-face, roughly the model illustrated above.

I entirely agree with Norman that the first generation of technology tends to have kinks and it’s never a bad idea to wait for a few releases and let the pioneers suffer the slings and arrows of outrageous technology fortune.

My three reasons for pre-ordering Continue Reading…