Author: kiara

Eligible Canadians can contribute up to $8,000 each year to an FHSA up to a lifetime contribution limit of $40,000 to help them buy their first home.

Purchasing a home is an important decision that requires careful financial planning. Fortunately, there is a specialized tool designed to help Canadians save tax-free towards their goal of buying a first home – the new Tax-Free First Home Savings Account (FHSA).

The FHSA is a game-changer for aspiring homeowners. This unique type of savings account allows eligible Canadians to contribute up to $8,000 a year with a lifetime maximum contribution limit of $40,000 towards the purchase of their first home. This can help you break down the cost of buying your first home into tangible yearly savings goals.

Once funds are deposited in an FHSA, you can watch them grow tax-free. This means that any interest earned, or investment gains made within the account are also free from taxes, allowing for potential compounding and greater returns. Most importantly, any qualifying withdrawals are tax-free. You also have the option to transfer existing RRSP amounts into the FHSA.

Adding to its appeal, contributions made to the FHSA are tax deductible, meaning you can claim them on your personal income tax return filing to lower your taxable income and potentially save more money in taxes. In this way, an FHSA is similar to an RRSP.

To be eligible to open an FHSA, you must meet certain criteria set by the government. These eligibility requirements are designed to ensure that the FHSA is accessible to those who genuinely need it and are committed to buying their first home.

Once you’re ready to purchase your first home and have a written agreement to buy or build your home, you can use the money in the FHSA towards a qualified home purchase, which can include a down payment, closing costs, and other related qualifying first home expenses.

You can even use an FHSA in conjunction with the Home Buyer’s Plan (HBP) to have an even greater amount to use for the purchase of your first home. It’s important to note, however, that the money in an FHSA can only be withdrawn for the purpose of buying your first home but you won’t need to pay it back like you do with the HBP.

If you already own a home, unfortunately, you cannot use the funds for a second home or investment property. You may also incur penalties and tax consequences if you withdraw funds from an FHSA for a non-qualified purpose.

But should you decide to forego your first home purchase and use your funds for something else, you can always transfer the money to your RRSP or RRIF on non-taxable basis until December 31 of the year following the year of your first qualifying withdrawal, without affecting your RRSP contribution room.

For complete details, please review the FHSA resources available on the CRA website. You can also find all applicable definitions for FHSAs here.

Starting on November 20, 2023, Rothenberg Wealth Management is offering clients the option to open their FHSA.

Contact a Rothenberg Wealth Management Advisor to discuss your goals and get advice on how to customize your investment portfolio in your FHSA to maximize your future savings potential. If you are not eligible (or are unsure you are eligible) for the FHSA, a Rothenberg Advisor can assess your situation and help you explore other savings options to meet your financial goals.

Learn the signs to look out for in email phishing scams so you can safeguard your confidential financial and personal information.

Phishing emails are a regular tactic used by cyber criminals to steal your personal information, such as your online banking login credentials.

Some red flags are easy to spot and will quickly alert you to the fact that you are the victim of a phishing attempt. In other cases, phishing is harder to discern.

As cyber criminals become more and more creative in their attempts to steal users’ personal information via email, awareness and understanding what to watch out for become the best defense against cybercriminals and their schemes.

But first, what is Email Phishing?

In this form of online scam, cyber criminals impersonate someone you know or a legitimate organization, like the CRA or your banking institution.

Typically, phishing emails contain an urgent call to action and link that, once clicked, will direct you to a website to confirm your personal data, account information, etc. These links which lead to fake websites are designed to steal your personal information or infect your device with malware.

Phishing emails can also contain unexpected or suspicious email attachments, that when downloaded, may cause your computer to become infected with a virus, which compromises the security of your computer.

How do I know an email is a phishing scam?

Many phishing email attempts end up in your spam folder, but spam filters aren’t enough to keep out phishing scams from your inbox.

Some telltale signs of email phishing include:

• Unknown sender or email recipients that you don’t recognize
• Misspelled or incorrect sender name and/or email address
• Mismatched sender name and email address (e.g. – The email comes from “Microsoft” but the sender’s email address uses a Google domain like example@gmail.com)
• Generalized or missing salutation (e.g. – “Dear Canadian Taxpayer”)
• Typos and other spelling and grammatical errors in the subject and body of the email
• The tone is not consistent with that of the sender
• The language used is urgent or menacing and there is an impending deadline mentioned (e.g. – “this attachment will expire in 24 hours,” “you have an unpaid invoice,” you need to “verify” personal information”)
• Strange, unusual, or unsolicited request or the content just doesn’t make sense and asserts something ridiculous
• You did not subscribe or consent to receiving the email communication from the sender
• Odd layout and bad quality images
• The link in the email doesn’t match the URL when you hover on it with your mouse
• The included attachment has a strange name or file extension
• The email went directly to your junk or spam folder

It’s important to note that the above isn’t an exhaustive list of all the warning signs of phishing emails. Phishing emails can be so sophisticated that only contain one or a few signs listed above.

Be proactive, not reactive!

Cybercriminals are always looking to innovative and more sophisticated ways of impersonation and duping unsuspecting victims to give up their financial information.

When you’re evaluating whether an email is a phishing attempt, some questions you can ask yourself include:

• Do I recognize the sender’s name and “From” email address?
• Does the email’s subject line or body include typos or grammar mistakes?
• Does the sender’s email address match the name in the “From” field?
• Do I recognize the recipients included on this email?
• Does the email have a call-to-action such as clicking a link or downloading an attachment?
• Is the email asking me for personal information, such as my SIN number or bank account login?
• Did I sign up to receive this communication from this sender?
• Is the layout or image quality odd?

As a general rule of thumb, be suspicious of all links and attachments and think first before clicking.

If you ever get a suspicious email from someone claiming to be a reputable company, friend, or acquaintance, it’s always best to contact the organization or individual in question immediately to confirm whether the email is legitimate before proceeding.

One thing to keep in mind is that just because you receive a phishing email doesn’t mean your personal information has been compromised. Email phishing scams are only successful when their targets click on malicious links or download harmful attachments.

Between tuition and other-related expenses, post-secondary education, especially during these times of high inflation, can be a significant financial burden on families with multiple children. What are some smart strategies to manage these costs? Our experts suggest some options.

The rising expense of post-secondary education, at a time when inflation is skyrocketing and other areas of life are becoming more expensive, may prompt you to worry about how you will be able to provide this opportunity for your children. The cost of tuition, coupled with other university-related expenses like textbooks, electronics, and living accommodations can be a significant financial burden on families, especially those with multiple children.

You may deem the costs of your child’s post-secondary education as necessary, but also consider them to be quite expensive. The good news is that you don’t have to foot the bill all at once and there are a few things you can do as parent to manage and ultimately reduce these expenses when you have several children. There are even a few things you can encourage your child to do as they pursue their university education in order to manage their school-related expenses.

1. Consider opening a family RESP plan.

Many families opt to open one RESP account per child but managing multiple accounts can be difficult. That’s why a family RESP is a great option for families with multiple children. While you may be investing in a single account, RESP contributions are tied to your child’s SIN, so your financial institution knows which child receives the contribution. In turn, investment earnings can be shared among your children. You also have the flexibility to allocate funds to other qualifying beneficiaries if one beneficiary does not pursue higher education or if education costs differ among them.

2. Take advantage of the Canada Education Savings Grant (CESG).

The CESG program, which is available to everyone, provides an excellent incentive for families to begin saving for their child’s education as soon as they can. This RESP grant matches 20% of the first $2,500 contributed each year to a RESP of an eligible child under 18 up to a yearly maximum of $500 and a lifetime maximum of $7,200. If you contribute annually from when your child is born, the grant will max out in 14 years. Quebec residents can receive an added incentive in the form of an additional 10% grant called the Quebec Education Savings Incentive (QESI). While many believe the age-old adage “There’s no such thing as free money,” the Canadian government is essentially giving you “free money” to put towards your child’s education. You can find out more about the CESG grant here and the QESI here.

3. Co-sign your child’s student line of credit application.

A student line of credit is a flexible financing option for students that helps them pay for post-secondary education expenses such as tuition or books and can also be used to fund day-to-day expenses such as food and transportation. Much like a credit card, the money borrowed must be repaid with interest. However, a student line of credit tends to have more favorable interest rates than your standard credit card and the interest charged is only on the money borrowed. Oftentimes, a financial institution will require a co-signer who will be responsible for the debt should the student be unable to pay. This is where you as the parent can step in. Co-signing your child’s student line of credit may be a good way to help them establish credit, for instance. You can find more information about student lines of credit on the Government of Canada website here.

4. Explore additional ways to pay for your child’s post-secondary education.

Savings plans like a RESP may not be enough to cover the costs of your child’s university education so you may consider financial assistance. Financial assistance can be anything from the CESG mentioned above to student loans to scholarships, grants, and bursaries, which provide tuition assistance that does not need to be repaid. One misconception is that you need to be low income to benefit from any of these options, but that is simply not the case. Scholarships, for example, can reward academic achievement regardless of income level.

5. Give your children a primer on good money habits.

Along with the above strategies, financial education and being money-savvy goes a long way in helping to manage any large expenses like post-secondary education. You may have instilled good money habits in your children as they grew up, but it’s never a bad idea to go over the bases as a reminder. While tuition costs tend to be foreseeable, many other university-related expenses are variable costs and there are usually ways to reduce those costs. For example, for food, you may encourage your child to take a college meal plan or cook at home rather than order out as ordering out can be quite expensive. Of course, there are many other ways to reduce costs and save money that you should educate your children about, such as keeping an eye out for student discounts, avoiding out-of-network ATMs, and using a credit card in the most efficient manner. These money habits can add up over time and can make a noticeable difference.

Advisors like us help clients all the time work towards their financial goals and over the years, we’ve helped countless families with choosing the right investments to build savings for their children’s education. For more information on how we can help, email us at inforequest@rothenbergwstg.wpenginepowered.com.

With inflation at a nearly 40-year high, you might be worried about what it means for you retirement. In this article, we go over some things you can expect, whether you’re in the process of planning for retirement or are already retired.

You may have noticed a spike in certain expenses recently, such as your groceries, rent and gas bills and you may be wondering why this is happening. The reason is inflation. Inflation occurs when there is a broad increase in the prices of goods and services. But inflation doesn’t only impact your spending habits. It also affects your ability to save for big life goals like retirement and enjoy your golden years as you should.

I’m saving for retirement. How does inflation impact me?

As your expenses go up with inflation, your financial priorities will most likely shift, and saving for retirement may move down the list. You may even find it difficult to put aside funds on a regular basis since you first must pay for things like food and gas. In extreme situations, you might even have to dip into your savings to compensate for overspending. When your income remains the same, but the cost of living keeps going up this is certainly a possibility.

Your first instinct may be to reduce or cut back entirely on otherwise regular contributions to your retirement accounts until things subside and prices return to something-like-normal. However, you should avoid giving in to this urge. Even if you’re only considering reducing or ceasing your contributions for a short period of time, this can have drastic effects on your nest egg.

Compound interest earned on the funds you save and invest for your retirement on a consistent basis will help your savings increase more quickly over time. Imagine the size of a snowball increasing as it tumbles down a slope and gains momentum. Compound interest works in a similar way.

By continuing to make regular contributions to your retirement accounts, you ensure that you enjoy the full power of compound interest. On the other hand, when you reduce or stop your contributions to your retirement savings, this could result in thousands of dollars less in retirement savings over the long term.

Consider the following example. Let’s say Bob starts with $2,000 in his RRSP and invests an additional $2,000 per year towards his retirement for the next 30 years. We’ll assume a 7 percent return every year to keep things simple. Bob’s RRSP would be worth $202,146. Now if Bob decides to stop contributing to his RRSP in year six and seven due to inflation, he will end up with $181,146 in total savings, which creates a $21,000 difference by the end of year 30.

While we do not recommend reducing your spending on necessities such as food, if you fear you may have to lower the amount or frequency of your contributions, you can free up some funds by eliminating non-essential expenses, such as dining out or subscription services.

Budget cutbacks can only go so far in any event, so you should definitely have a conversation about this matter with your wealth management advisor. Your advisor will be able to guide you through the process of adjusting your retirement planning strategy and investment portfolio in a way that has the least amount of impact on the quality of your life at the current moment and the best possible outcome for your retirement.

I’m already retired. What does inflation mean for me?

With so much time and effort involved in planning and saving for your retirement, as a retiree, you are certainly wondering if you’ve saved enough, how long your money will last and if you will need to adjust some of your highly anticipated plans as inflation rises. The answer depends on a few factors. Among them, your cash flow, your expenses and how willing you are to compromise on things if need be.

Since you are no longer working as a retiree, your income tends to be more predictable, and your expenses tend to become more stable as well. Your personal savings and your investment portfolio are most likely your main source of cash flow during this period in your life. You may also rely on government pensions, such as CPP, Old Age Security (OAS), and GIS for retirement income.

While your personal savings and ongoing investments will likely be the most affected by rising inflation, as your purchasing power decreases and the markets respond, the federal retirement benefits you’re receiving will see less of a negative impact.

Government-funded programs like CPP, OAS and GIS are indexed for inflation, which means that they are adjusted to keep pace with inflation, although using different formulas. So, you will likely receive an increase in the payout amounts as the government tries to account for the rapidly rising cost of living.

However, it remains important to note that if the rate of inflation outpaces the adjustment rate, it will not entirely offset inflation. So, you may find, after you spend on your basic expenses, like rent, utilities and groceries, that you have less left over for the really exciting activities on your bucket list. It then becomes a balancing act between carrying on as planned with your retirement and making concessions, especially when your expenses exceed your income. This can be the case if you have goals or hobbies you’re determined to hang on to.

If you’re healthy, travelling is probably one of the top items on your retirement bucket list. You’ve most likely saved up for this lofty goal as it can be costly. Unfortunately, when inflation is up, it can be more expensive to travel than you anticipated.

But there are also some silver linings to inflation, such as interest rates rising. You’ll find that rates for annuities like GICs, as an example, should go up during periods of inflation.

Another advantage is in real estate. For those who still own their home and are looking for the best time to sell it, during periods of inflation, real estate prices tend to go up. What this means is that it might actually be the best time to sell your home when inflation rising.

Of course, like any situation, there are both positives and negatives and these must be weighed against each other. If you are to draw any conclusions, the bottom line is this: If your expenses exceed your income, which is entirely possible, as the cost of living rises with inflation, you may be forced to choose between delaying your retirement or moving forward as planned but making some concessions.

If you are just transitioning into retirement, you may decide to work longer to generate more income to do the things you initially planned and cope with rising expenses. If you are in retirement and do not plan on returning to the workforce, you may opt for lower-cost alternatives to everyday products to offset inflation costs.

It’s understandable to be concerned about how inflation will affect your freedom and flexibility during retirement. The strategies to mitigate the effects of inflation on your retirement savings and plans will differ from person-to-person depending on your unique situation. It’s always best to touch base with your wealth management advisor if you feel even slightly concerned about how inflation will impact your retirement.

While this article been carefully checked, we cannot and do not guarantee that the information provided is correct, accurate or current. Please speak to your Rothenberg Wealth Management advisor for advice based on your unique circumstances. 

Are you one of the millions of Canadians set to receive a tax refund this year? Here are some ideas of what to do with those funds.

The good news is that you’ve prepared your tax return and realize that you’re entitled to a refund. This certainly beats the alternative of owing the government money. If you do find yourself in the position of receiving a tax refund, here are six things to consider doing with that money.

1. Splurge

In general, the suggestion to treat yourself comes last on the list of things to do with your refund, if it shows up on the list at all. But if your refund is relatively small, consider treating yourself to something you’ve been eyeing or doing something special, such as going out for a nice meal. Even if you receive a larger return, it is acceptable to take a percentage of it and use it to enjoy yourself.

2. Contribute to your RRSP                                                                                                                          

You might consider a contribution to your RRSP to build up your retirement nest egg. If you have an RRSP, you may have carryover contributions from previous years when you didn’t fully fund your account up to your yearly limit. Taking all or part of your refund and contributing it to your RRSP can help use up some or all your available contribution room and get you one step closer to your retirement savings goals.

You may also receive a potential tax break for the 2022-2023 year since these contributions are made on a pre-tax basis and the funds are only taxed upon withdrawal.

If appropriate for your situation, you might also consider contributing to a spousal RRSP account. This is an income-splitting strategy for couples that can help decrease their collective tax burden.

3. Contribute to your TFSA

Placing your tax refund money into your TFSA to save for a major purchase can be another option to consider.

Contributions to a TFSA do not provide an upfront tax deduction. However, your refund can be placed in a range of income-generating investments, which will grow tax-free inside your account. The advantage is that you can save towards a big goal, such as your first home or a long vacation, and any funds withdrawn are not subject to taxes.

This can offer an advantage in your tax planning in retirement. It is also a way to diversify the taxation of your retirement income sources if you also have an RRSP and have already maxed out your available contribution room.

4. Invest via a taxable account

While the tax advantages of an RRSP or a TFSA are very tempting, investing in a taxable brokerage account also has its advantages. Capital gains are taxed at a favorable rate, so it can make sense to hold investments that are likely to generate sizable capital gains in these accounts while holding income generating investments in an RRSP or TFSA.

Dividends collected on stocks in a taxable brokerage account are also taxed preferentially as opposed to some other income sources. This is because the company has already paid tax on these dividends, and the government does not tax this income again.

Another thing to keep in mind is that funds in a taxable account like an RRSP can be more readily accessible over time than funds held in a tax-sheltered account since they are not subject to the same rules.

5. Pay down debt

If you have outstanding debt such as high interest credit card payments, a personal loan or a mortgage you can consider putting some or all your tax refund towards reducing this debt. You can eliminate or at least reduce the overall amount of the payments on this debt, saving the compounded interest cost over time.

In the case of a mortgage, if the refund is sizable, you could consider making a substantial payment to reduce or eliminate this debt entirely.

There is currently a suspension on the accumulation of interest on student loan debt by the Government of Canada until March 31, 2023. This can be an excellent time to pay off some or all of this debt with your tax refund. Besides reducing your debt, making a payment now can help eliminate additional interest once things return to normal and this suspension is removed.

6. Contribute to an emergency fund

Your refund money can be used to start or add to an existing emergency fund. This is money that is generally held in a liquid, interest-bearing account to be available for an emergency. This might be the loss of a job or a large, unexpected repair that is needed on your home or car.

A rule of thumb says that you should have at least six months worth of your required and necessary expenses in this fund. This should include money to cover payments such as rent or a mortgage, food, a car payment and other expenses that are essential to maintain your regular standard of living. This could also include extras like entertainment, dining out or other discretionary spending although it remains important to prioritize your necessities and those of your dependents.

Review your withholding tax

While not something you would do with the funds from a tax refund, this is a good time to review your withholding tax for the current year to see if it best reflects your situation. Has your income level changed? If so, are you having enough withheld?

Withholding tax refers to the amount of income tax your employer withholds from your paycheck and typically does not consider various deductions normally claimed, such as RRSP contributions, which reduce your taxes payable. If you find yourself getting a sizable refund each year you might consider reducing your withholding tax, so you receive more money with each paycheck.

The takeaway… Prioritize what’s important to you

Getting a hefty refund can be a form of forced saving, but you are not receiving any interest on this money. You could be putting it to better use during the year by investing it. However, it really depends on your current situation and your needs.

Give us a call at 514-934-0586 (Montreal) or 403-228-2378 (Calgary) to discuss the best way to put your tax refund to use and to do a review of your withholding tax to ensure that it is optimal for your situation.

While this article been carefully checked, we cannot and do not guarantee that the information provided is correct, accurate or current. Please speak to your Rothenberg Wealth Management advisor for advice based on your unique circumstances.

Using home equity as retirement income can be an interesting option for retiring Canadian baby boomers who have benefited from strong real estate markets over the past two decades.

The options for funding one’s retirement are varied and wide-ranging. The most typical sources of income in retirement include pensions and financial savings, which typically take the form of Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs) and non-registered savings accounts.

Another option that retirees can consider is their home equity. One method for accessing home equity is through a reverse mortgage. A reverse mortgage is a loan that allows you to get money from your home equity without having to give up your home. Depending on several factors, including you and your spouse’s age (both must be at least 55 years old) and the appraised value of your residence, you can borrow up to 55% of the current value of your home. However, reverse mortgages are usually issued for much less than this.

A reverse mortgage can be set up to make periodic payments to a homeowner, or it can be taken as a lump sum. In either case, there are no payments required until the homeowner moves out of the home, passes away or sells it.

There are several advantages and disadvantages to using a reverse mortgage. 

The advantages include:

1. Your net worth may be tied up in the value of your home, especially if its value has grown over the years. A reverse mortgage allows you to access your home equity without having to sell your home. Furthermore, you continue to own your home, and you will never be asked to move or sell your home. Even if the value of the home declines below the balance owing on the reverse mortgage, you can continue to live in the residence for the rest of your life.
2. You can access your home equity without the month-to-month payments you would find on a typical loan, like a Home Equity Line of Credit (HELOC) or a refinance. In fact, no payments are required at all, at least not until you move or sell your home, which is entirely your decision. Payments are thus voluntary, and, as a result, it is impossible to default on the loan.
3. You can choose how to receive your money, whether as a lump sum or at regular intervals. There are no conditions or requirements as to how you spend the money you receive. You can use a reverse mortgage for anything from paying off an existing mortgage to renovating your home or helping your family.
4. Since this source of income is technically a loan and not income, it is available on a tax-free basis. Furthermore, any payments received from a reverse mortgage are not considered when determining eligibility for Old Age Security (OAS), Guaranteed Income Supplement benefits (GIS), or Canadian Pension Plan (CPP) nor do they affect any benefits you may be receiving.
5. Unlike some other types of loans, income and credit scores are not considered for eligibility for a reverse mortgage. However, because of mortgage rules and regulations in Canada, you may be required to submit them.
6. You can never owe more than what your home is worth. If your home falls in value, the reverse mortgage lender takes the loss.

The other side of the coin… The disadvantages include:

1. One of the most significant disadvantages of reverse mortgages is the noticeably higher interest rates. In effect, the interest rates charged on reverse mortgages tend to be materially higher than the rates charged on similar types of lending products such as a traditional mortgage or a HELOC. For example, Canada’s largest reverse mortgage provider currently charges 5.49% on reverse mortgages with a 5-year term. Meanwhile, major Canadian banks are offering regular mortgages for 2.65% (as of April 2020). The percentage points difference will significantly reduce a homeowner’s equity, particularly given the effects of compounding when no payments are made before selling (like almost all mortgages in Canada, it compounds semi-annually). For this reason, it’s important to compare solutions.
2. The equity you hold on your home may go down as you accumulate interest on your loan. As a rule of thumb: The higher the interest, the more interest you’ll end up paying back to your reverse mortgage provider, and the less equity you’ll have at the end once you reimburse the amount. In a rising interest rate environment, it’s not uncommon that the interest can accumulate and take up more home equity to a point where you may have no money left.
3. If you have an existing mortgage or HELOC, the funds you receive from a reverse mortgage must first be used to pay off existing loans secured by your home. Consequently, you can’t just go and spend the money you receive however you want.
4. Staying in your home may become unfeasible at some point in retirement if things like climbing the stairs, house maintenance, snow removal and lawn care become too much of a burden. In this case, you may decide to move and sell your house. The issue here is that when you do so, you must repay the reverse mortgage in full. However, you may not have sufficient funds to do so. In this case, planning is everything.
5. If a reverse mortgage has significantly reduced the equity of your home, there may be little funding left to cover long-term care later in life.
6. A reverse mortgage reduces the size of your estate. In turn, the inheritance that you would leave for your family is smaller. It’s important to consider how a reverse mortgage can impact your legacy.

Some retirees may want to remain in their home for personal or sentimental reasons. If no other financial options allow for this preference, a reverse mortgage may be the only option. However, as with any financial product, there are many things to consider; there is no one-size-fits-all solution. Reverse mortgages certainly fulfill a need in the market, but they are not well-suited for all retirees. It’s essential to get a professional opinion on your personal situation.

Please note we do not offer reverse mortgages. However, we suggest you give us a call at (514) 934-0586 (Montreal) or (403) 228-0949 to discuss comparable options. A Rothenberg Wealth Management advisor will evaluate your unique situation and see if other options are available that might be better suited to your needs.