RWRDS Daily Update – September 12, 2023 + MORE Sep 12th

It feels like we’re living in the end times. There was (ahem, is) the pandemic, the country is “on fire” if you read comments on news articles or bring it up in social situations. Then there are the high interest and inflation rates, making housing and grocery costs unaffordable for many Canadians. 

To no one’s surprise, money remains the top stressor for Canadians at 40%, for the sixth year in a row, according to FP Canada’s 2023 Financial Stress Index. With everything that’s going on, budgeting and planning for retirement feels pointless. Why is it so hard to make financial planning and investing decisions when you’re overwhelmed? Glad you asked.

The best credit cards in Canada for those with bad credit
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Stress and finances: How to make smart decisions with your money by getting started

According to Samantha Sykes, a senior investment advisor with Raymond James, one of the reasons people have a lot of big decisions to make is that they don’t know where to start…

Debt seems to be a normal thing for Canadians these days. After a brief decline during the pandemic, the Canadian household debt-to-income ratio soared to 184.5% in the first quarter of 2023. That means Canadians owe nearly $1.85 for every dollar of disposable income. And an RBC poll found that the Canadians between the ages of 35 and 44 carrying debt had a total debt-to-disposable income ratio of 250% in 2019. And indebted Canadian millennials (under age 35) had debt loads worth 165% of their disposable income.

The ballooning debt has been mainly driven by rising mortgage balances as demand pushed home prices to record levels across the country.

Does this mean the average Canadian is up to their eyeballs in debt? Not necessarily.

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What is the average debt for Canadians?

Let’s start by looking at the average consumer balance held across different credit products. This information comes from TransUnion’s Q1 2023 Credit Industry Insights report…

Ask MoneySense
I retired last year, age 66. Single, no dependents. I found out my pension wasn’t withholding enough tax from source (5%), so I asked for an additional 15.05% to be withheld, to meet my combined federal and Ontario tax bracket (20.05% total).

I got a whopping refund of $5,000 after all deductions were made on the tax forms (basic personal amount, pension credit, age amount). But I could sure use that money during the year. Should I request less additional tax to be withheld from my pension in future?

—LT

Withholding tax in retirement

When you are a salaried employee, unless you start a job mid-year or have other extraordinary income, tax deductions or tax credits, you should be pretty close to even when you file your tax return—that is, most people have no tax owing or refund payable.

Retirement is different. In retirement, you tend to have income from multiple sources, and some do not require any withholding tax at all. For example, the Canada Pension Plan (CPP) and Old Age Security (OAS) generally have no tax withheld unless you elect to have it withheld optionally…

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