All about Retirement Planning in Canada. Learn the ins and outs and get the latest news.
Latest News
U.S. withholding tax in an RRSP for Canadians + MORE Aug 3rd
I have EPD stock in my RRSP for their dividend payments (about 7%). What a surprise I had—even when in an RRSP—I had to pay about 30% tax on these dividends. EPD is registered in Louisiana. —Wanda
How much is withholding tax on U.S. dividends?
I am going to provide a brief summary of U..... More »
How does an executor pay estate expenses during the probate process? + MORE May 4th
I’ve realized that my large RRSP would generate a very large income tax bill if I die in the near future. I don’t have a spouse, or anyone who qualifies as a beneficiary to my RRSP on a tax-deferred basis. How can my executor pay my income taxes if it takes a year to get probated?—Carol
.... More »
Canada’s income tax brackets for 2023, plus the maximum tax you’ll pay based on income + MORE Dec 7th
Taxes are an inescapable fact of life in Canada. Despite this, many of us don’t think too hard about the specific federal and provincial tax brackets that govern our taxable income. Nonetheless, understanding what bracket we fall into is key to accurately estimating the amount of tax we owe on our.... More »
Making sense of the markets this week: July 3 + MORE Jul 6th
While regular “Making sense of the markets” columnist Kyle Prevost is on vacation, Dale Roberts and I are filling in. Dale’s piece ran last week, and it’s my turn this week. Dale will return next week, after which a well-rested Kyle will resume.
Speaking of Dale, this week he wrote .... More »
Maximizing spousal RRSP contributions in your 70s + MORE Mar 23rd
Q. My wife will turn 71 in 2022. She has three spousal RRSPs that we will arrange to mature on the same day: Feb. 8, 2022. On that day, we will convert all the RRSPs into a RRIF.
Between now and then, I wish to take full advantage of my ability to continue making contributions to spousal RRSPs. I am.... More »
Are Howie and Pamela on track to retire at 55?
– moneysense.ca
Q. My wife and I are 45 years old, and we would like to stop working at age 55. Can you help us assess if that is attainable?
We owe $525,000 on our mortgage and our home is valued at $1.2 million. We currently pay a mortgage of $1,845 biweekly at an interest rate of 2.99% (30-year amortization). We hope to pay off the home within 10 years, with extra payments of $20,000 per year. We plan to live in this home and potentially sell it if we cannot live there anymore due to health issues.
Right now, we have $560,000 in Registered Retirement Savings Plans (RRSPs), $20,000 in a Locked-In Retirement Account (LIRA), $22,000 in Tax-Free Savings Accounts (TFSAs), and $10,000 in non-registered shares. We contribute $50,000 per year to our investments. We also each have a defined benefit pension plan, but will lose quite a bit if we retire at 55, which we are aiming to do. At 55, we will receive $20,000 per year each. The pension is not indexed to inflation and there is no bridge benefit. We have both worked full time in Canada since we were 22 years old and are eligible for Canada Pension Plan (CPP) and Old Age Security (OAS) benefits…
We owe $525,000 on our mortgage and our home is valued at $1.2 million. We currently pay a mortgage of $1,845 biweekly at an interest rate of 2.99% (30-year amortization). We hope to pay off the home within 10 years, with extra payments of $20,000 per year. We plan to live in this home and potentially sell it if we cannot live there anymore due to health issues.
Right now, we have $560,000 in Registered Retirement Savings Plans (RRSPs), $20,000 in a Locked-In Retirement Account (LIRA), $22,000 in Tax-Free Savings Accounts (TFSAs), and $10,000 in non-registered shares. We contribute $50,000 per year to our investments. We also each have a defined benefit pension plan, but will lose quite a bit if we retire at 55, which we are aiming to do. At 55, we will receive $20,000 per year each. The pension is not indexed to inflation and there is no bridge benefit. We have both worked full time in Canada since we were 22 years old and are eligible for Canada Pension Plan (CPP) and Old Age Security (OAS) benefits…
All this war talk might be good for your portfolio
– moneysense.ca
When the U.S. killed Iranian commander Qassim Suleimani outside of Baghdad International Airport on January 3, 2020, not surprisingly, people around the world got very nervous. Most of the concern was around whether America had just kicked off World War III and how many lives could potentially be lost; but many people were also no doubt thinking about how a protracted battle in the Middle East might impact their retirement accounts.
While war is, of course, terrible and destabilizing, it turns out that conflict can bolster portfolios. In 2013, the CFA Institute ran some numbers and found that during periods of conflict, equities rise and, in many cases, have even beaten the market’s long-term average annual return. During World War II, the Korean War and the Gulf War, U.S. large-cap stocks rose by 16.9%, 18.7% and 11.7%, respectively, outperforming the average large-cap annual return (between 1926 and 2013) of 10%. Large-caps didn’t perform as well during the Vietnam War, but they were still up, returning 6…
While war is, of course, terrible and destabilizing, it turns out that conflict can bolster portfolios. In 2013, the CFA Institute ran some numbers and found that during periods of conflict, equities rise and, in many cases, have even beaten the market’s long-term average annual return. During World War II, the Korean War and the Gulf War, U.S. large-cap stocks rose by 16.9%, 18.7% and 11.7%, respectively, outperforming the average large-cap annual return (between 1926 and 2013) of 10%. Large-caps didn’t perform as well during the Vietnam War, but they were still up, returning 6…
Q. I understand that net rental income creates RRSP contribution room—so, even as a retiree, I should be able to accumulate additional RRSP room. Does foreign net rental income add to RRSP room?
When I do my Canadian taxes using tax preparation software, the reported net foreign rental income doesn’t flow to the net rental income line of the return, but instead flows to other income and is therefore not taken into account to calculate RRSP room. Am I doing something wrong or does foreign rental income not eligible?
–Jerry
A. Canadian residents are taxed on their worldwide income. Foreign rental income is therefore taxable in Canada—as you know, Jerry—but not everyone knows or reports this income. The income may also be taxable in the country in which it is earned, and may require filing of a foreign tax return as well. Foreign taxes paid are generally eligible to claim for a foreign tax credit in Canada, often reducing Canadian tax payable dollar for dollar to avoid double taxation of the income…
When I do my Canadian taxes using tax preparation software, the reported net foreign rental income doesn’t flow to the net rental income line of the return, but instead flows to other income and is therefore not taken into account to calculate RRSP room. Am I doing something wrong or does foreign rental income not eligible?
–Jerry
A. Canadian residents are taxed on their worldwide income. Foreign rental income is therefore taxable in Canada—as you know, Jerry—but not everyone knows or reports this income. The income may also be taxable in the country in which it is earned, and may require filing of a foreign tax return as well. Foreign taxes paid are generally eligible to claim for a foreign tax credit in Canada, often reducing Canadian tax payable dollar for dollar to avoid double taxation of the income…
Retirement planning at every life stage
– moneysense.ca
Preparing for retirement can be intimidating. You’re facing great uncertainties about how your financial future will unfold, with a lot at stake. Fortunately, a comfortable and sustainable retirement should be within your reach if you prepare for it properly.
You’ll find that a little planning can go a long way to getting you where you need to go, although that doesn’t mean it’s necessarily easy. You will need to gradually define retirement planning objectives for the kind of retirement you want and then find a way to get there. There’s no one right retirement for everybody, so you need to create your retirement plan to fit your individual situation.
Before we get into details, we should draw a distinction between what are typically the core activities of retirement planning and preparing financially for retirement in the broader sense. Retirement planning typically focuses on setting retirement objectives and then outlines a path for achieving them, whether it’s in a formal written financial plan or is more informal…
