May 2025 Poll

Does the Liberal promise expected soon to cut the lowest personal income tax rate by 1% to 14%,  go far enough to help Canadians impacted by high costs?

Where should your investment advice come from? According to a recent survey by Cisco's Internet Business Solution Group, (March 30, 2011), half of those under age 50 use social networking for their investment advice. That's a staggering number. Yet using the internet to make important financial decisions and then execute them without proper assistance could be a costly solution to your investment questions. It makes no sense to take investment advice from anyone you don't know and trust especially if they don't understand your investment needs and objectives. That's the response to the question "Should I accept investment advice offered over the internet: by The Canadian Securities Administrators, who have published a booklet on the subject, entitled "Investing and the Internetî, (http://www.osc.gov.on.ca/documents/en/Investors/res_investing-internet_en.pdf)   Fraud, in fact, is an increasing problem. Stats Canada reported on a 2009 General Social Survey on Victimization. Seven percent of adult Internet users in Canada, age 18 years and older, reported that they had been a victim of cyber-bullying at some point in their life. Seventy-three percent of those people reported receiving threatening or aggressive emails or instant messages and 8% had their identity assumed by someone sending threatening emails. In addition, the survey showed that amongst those who used the Internet in the 12 months prior to the survey, 4% reported being the victim of bank fraud; that is, reporting incidents where credit or debit cards (or information from them) were used from an Internet source to make purchases or withdraw money without authorization from the cardholder. It's Your Money. Your Life. Why take a chance? When it comes to making financial transactions of any kind over the internet, it's prudent to speak to your banking representative, or in the case of your investment transactions, a registered dealer or licensed investment advisor. Evelyn Jacks is President of Knowledge Bureau, a best-selling author and one of Canada's Top 25 Women of Influence. She blogs most weeks at http://www.evelynjacks.com/

Canadian residents age 65 and older will receipt the Old Age Security pension if they have made application to receive the benefit and their income is under prescribed thresholds. The maximum pension is $537.97 for each month in the fourth quarter in 2011: October, November and December (an increase of $4.27 per month from the previous quarter). The OAS will be "clawed backî on the income tax return when an individual's net income is $110,123. This clawback is known as the OAS Recovery Tax. However, many don't realize that the recovery tax can be reduced by filing a Request to Reduce Old Age Security Recovery Tax at Source (Form T1213OAS, recently revised by CRA). This is possible if there are significant deductions from current year income, such as carrying charges, moving expenses or RRSP amounts, or significant non-refundable tax credits like the disability amount, medical expenses or charitable donations. ADDITIONAL EDUCATIONAL RESOURCES: EverGreen Explanatory Notes and the Tax Efficient Retirement Income Planning Course  

Wealth advisors looking for the ideal client to work with should develop new relationships with the self-employedóa large and vibrant market for financial services. There are 2.7 million Canadians, or 16% of the entire workforce, reporting self-employment as their main job in 2010. The self employed have twice the wealth as other households in Canada and, as a result of their higher motivation to manage that wealth, better financial literacy as well, according to a summation of data released by Statistics Canada from the Survey of Labour and Income Dynamics, the Survey of Household Spending and the Canadian Financial Capability Survey. The median net worth of the self-employed was $520,000 in 2009, 2.7 times the median of $195,000 for paid employees, according to the summation released on September 23, 2011. Yet, the median household income of the self employed amounted to 81% that of paid employees. The self employed may leave funds in their businesses for reinvestment purposes or as a reserve fund, thereby reducing income at the same time as they are increasing net worth. There are other important differences in dealing with the self employed. They tend to work longer and therefore plan to retire later than employees: about 74% of the self-employed reported that they were preparing for retirement, compared to 85% of paid employees. That could point to a greater need for critical illness, disability or life insurance to protect the business and/or family with financial support if the owner-manager becomes ill or dies. ADDITIONAL EDUCATIONAL RESOURCES: Elements of Real Wealth Management, Tax Planning for the Corporate Owner-Manager and Master Your Investment in the Family Business  

When government have large debt, investors must be particularly vigilant about future inflationary spikes when lending money. In this excerpt from Financial Recovery in a Fragile World, a soon-to-be-published book from Knowledge Bureau, co-author Robert Ironside explains why below: Any form of taxation is a transfer of purchasing power from Party A to Party B. With the ëinflation tax', the transfer of purchasing power is from creditors to debtors. In Canada and the U.S., as in most other countries, the largest debtor is the Government. The inflation tax works like this: The Government issues a fixed coupon, long-term bond. Let's assume that the bond in question has a $1,000 face value, a 4% coupon and ten years to maturity. The bond sells in the market at par, based on current inflation expectations of 2%. The bond investor is thus expecting a 2% real return as compensation for deferring consumption. After the bond is issued, the Central Bank allows several years of 6% inflation. At the bond's maturity date, the bond investor receives a payment of $1,000 in exchange for her bond, but due to inflation, the $1,000 received will purchase a much smaller basket of goods and services than the $1,000 that was initially used to purchase the bond. There has been an effective transfer of wealth from the bond investor to the bond issuer. Although the bond's coupon of 4% compensated for a portion of the loss in purchasing power, it is not sufficient to totally offset the loss of purchasing power due to the unexpected inflation. The unexpected inflation has led to a confiscation of wealth that is every bit as real as an income tax, but most investors are never aware that a portion of their wealth has been expropriated. It is for this reason that inflation has always been used by weak governments that have become over-indebted. As long as the government's debt is held by the domestic population and denominated in the domestic currency, any government can inflate its way back to fiscal solvency. The holders of long-term government bonds become the unwilling (and often unwitting) taxpayers who make it possible. A Government that can print its own currency and that issues debt denominated in its own currency which will never default. It will simply redeem its debt with a depreciated currency that will purchase fewer goods and services than it formerly did. The U.S. government, for example, would only default on its debt if it were not allowed to issue more debt (as occurred during the summer of 2011) or if the Central Bank refused to purchase debt issued by the government. As long as the government has the ability to create new debt and as long as the Central Bank is willing to monetize the debt of the government, the U.S. government will never default on its debt, although the holders of that debt may suffer significant losses in wealth. This does not mean that the purchase of long Government bonds is a bad idea. It just means that a bond investor must always remain vigilant to possible changes in inflation that might erode the real (or purchasing power) value of the bond's face value. ADDITIONAL EDUCATIONAL RESOURCES: Financial Recovery and Elements of Real Wealth Management    

An Excerpt from Financial Recovery in a Fragile World The Greek financial crisis has been dominating the news and it has had significant effect on the confidence of investors, who are looking for a safe place to park their money. Inflation has a lot to do with both issues, as explained in this soon-to-be-published book from Knowledge Bureau, by co-author Robert Ironside below: In simple terms, inflation erodes the value of money. More money is required to purchase the same basket of goods and services. When it comes to investing, a lender wants to be compensated for the loss of purchasing power that might occur over the period of the loan. If lenders don't obtain sufficient compensation for inflation, as often happens during periods of rising inflation, the real yield earned on their money is negative. During a period of high and rising inflation, bond investors of the past have consistently under estimated the impact of inflation on their securities. For example, from 1966 to 1981, bond investors had a negative, real annually compounded rate of return of -4.2% in the United States[1]. To be successful over time, a bond investor wants to obtain a realized yield that compensates for both the deferral of consumption (the real interest rate), as well as compensation for the loss of future purchasing power that occurs due to inflation. The problem arises when inflation unexpectedly spikes upward, after a bond has been purchased. In this case, the yield-to-maturity that the bond was purchased to provide is not sufficient to compensate for the unexpected loss of purchasing power. It is for this reason that inflation is sometimes described as just another form of taxation and it is a form of taxation that is likely to be widely deployed as governments in all developed nations attempt to work their way out of their massive debt problems. Next time, we'll explain why. Part 2: Understanding the Impact of Inflation on Debt Reduction next week.   ADDITIONAL EDUCATIONAL RESOURCES: FINANCIAL RECOVERY AND ELEMENTS OF REAL WEALTH MANAGEMENT [1] Data is from Professor Jeremy Siegel.

New divorcees are often unaware that spousal support is taxable, and that can wrack up costly fines with CRA over time. It is important to review the rules before divorce papers are signed to understand the real value of the resulting payments. The payor will, of course, want to get the tax benefits of a deduction, however, if any portion of the spousal support payments are considered instead to be for child support, the payments will not be deductible. That can happen if child support is in arrears. The following checklist can help sort it out: ELIGIBILITY: Spousal support is taxable to the recipient and deductible to the payor, if certain conditions are met: The amounts paid are pursuant to a written separation agreement, judgment, order or decree The parties were separated and living apart when the payments were made The parties continued to live apart for the remainder of the year The payments were made to the former spouse or a third party for the maintenance of the spouse  The payments were made on a periodic basis (lump sum payments are not deductible).  The amount deductible by the payor and taxable by the recipient is the least of  The amount required to be paid under the agreement, judgment or order  The amount actually paid TRAPS: If child support payments are in arrears, all payments are deemed to be child support payments (not taxable) until all child support payments are brought up to date. Once child support payments are up-to-date, additional payments required are considered to be for spousal support, which is taxable. It's important too that agreements define the support payments carefully. For example child support is defined as any support amount that is not identified in the agreement or court order as spousal support. Child support payments made under agreements or court orders entered into after April 30, 1997 will not be taxable to the recipient or deductible to the payor. Court orders or written agreements should be registered with CRA using Form T1158 Registration of Family Support Payments under the following circumstances: The order or agreement was made after April 1997 and it specifies support payments for a spouse or common-law partner. The order or agreement was made before May 1997, it specifies support payments for a spouse or for a spouse and a child, and  Form T1157 Election For Child Support Payments has been filed; or The order or agreement was changed after April 1997 to increase or decrease the amount of child support payable. ADDITIONAL EDUCATIONAL RESOURCES: DISTINGUISHED ADVISOR WORKSHOPS, November 2 in Winnipeg, November 3 in Ottawa, November 4 in Toronto, November 9 in Vancouver, and November 10 in Calgary.