Rich Canadians mortgage their homes by choice + MORE Jul 3rd

(Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net)
Q: I have maximized my RRSP contributions for 2013, including $1,300 paid back to my Home Buyers’ Plan (now at $13,000). I have about $12,000 in RRSP contributions to carry forward to next year. Can I apply it directly to my HBP all at once?
— Kelly Leach, Kelowna, B.C.
A: You can eat an entire chocolate cake in one sitting, but you might not want to. The same goes for using that RRSP carry-forward to eliminate what you owe under the Home Buyers’ Plan. Adrian Mastracci, a portfolio manager with KCM Wealth Management in Vancouver, says “there may be more benefit in repaying the minimum HBP and deducting the rest as a normal RRSP contribution for 2014.” The reason is that the RRSP contribution will defer income tax into the future, and give you a higher tax refund in the present. An HBP repayment doesn’t do either because you received those benefits already, when you make the RRSP contribution the first time around. In future years, if you have retired all other consumer debt, are making good progress on your mortgage, maxing out your RRSP, and still have cash on hand, you could retire your HBP early and celebrate your accomplishment with the aforementioned cake…

Sixty-seven per cent of high net worth Canadians (those with $500,000 or more in  investable assets) with a mortgage have the cash to pay off their home—in full—but don’t, according to a new survey for mortgage provider Investors Group.
Their reasons for holding on to the mortgage vary, including tax planning and income-generating rental properties. In Canada, mortgage interest on rental properties is tax deductible.

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“The notion that a mortgage is used only when funds aren’t available to pay cash for your home doesn’t ring true for many wealthy Canadians,” Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group, said in a press release Wednesday.
In all one-fifth of high net worth Canadians have a mortgage, at an average size of $157,000. More than half own a recreation property and 42% own at least one investment property.
Also noteworthy is that more than one-quarter of mortgage holders in this high net worth group has no plans to pay off the mortgage before retirement…

Ottawa is proceeding with its plan to introduce shared risk pension plans in the federally regulated sphere and will likely introduce implementing legislation early in 2015, says minister of state for finance, Kevin Sorenson.
The federal government completed two months of consultation on the proposal Wednesday and Sorenson said it would likely begin drafting a bill in the fall.
The government has been under pressure from labour groups and some provinces to enhance the Canada Pension Plan, but Finance Minister Joe Oliver said as recently as last week that Ottawa doesn’t favour the move even if Ontario opts to go it alone.
Instead, the government has backed an incremental approach, including pooled pension plans, tax free savings accounts and more recently the shared risk proposal, also referred to as target benefit plans.
Sorenson said in an interview that the target proposal is needed because many defined benefit plans have run into funding difficulties since the economic crisis and many Canadians, especially new hires, are no longer being offered defined benefits…

When you make the change in lifestyle to retired person, you will hopefully enjoy many years of active living. While it would be wonderful if we could enjoy this state throughout retirement, Mother Nature has other plans. Most of us can look forward to about 10 or 15 years of active living and then we will gradually start to slow down. Health concerns may start to become more apparent. This phase of retirement is different from active retirement living. Ideally, you want to plan for the two phases of retirement.
Plan for Two Phases of Retirement
When we are planning for retirement for these years, we need to take your needs into account and look at how much retirement savings you will really need. The amount of money you will need for a comfortable retirement will change from year to year, depending on which phase you are in.
The idea that you will need the same amount of money each year during retirement is not a reality. Your retirement plan must take each phase into account.
Let’s assume you have 10 years to take up hobbies, travel and be physically active: What will this cost you?
The first step in retirement planning is to assess all your “essential costs” or costs to keep the household afloat…