Smart Tax Strategies for Retirees: Take Advantage of Key Tax Credits

Smart Tax Strategies for Retirees: Take Advantage of Key Tax Credits

As a retiree, there are a few tax credits you should be aware of which may reduce your tax bill.  Some will require action and should be reviewed annually.  Every dollar you save in tax means either more spending and/or preserving your wealth for you. KEY TAKEAWAYS: We will review which credits may take some planning or action on your part.We will review the credits your accountant will automatically apply.  WHAT IS A TAX CREDIT? A tax credit is applied directly against the amount of taxes you owe and will result in a lower amount of tax payable.  It is based on the lowest tax bracket, which is 15%.  For example, if you are eligible for a tax credit of  $4,000, you would pay $600 less in taxes. (15% of $4,000)  CREDITS THAT MAY REQUIRE SOME ACTION ON YOUR PART PENSION CREDIT You will receive a pension credit for the first $2,000 of eligible income.  If you are under the age of 65, this is income from a...
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Kicking up life lessons and fun with football

Kicking up life lessons and fun with football

Assante advisors are part of the fabric of their communities across Canada and they contribute to their local quality of life in a variety of ways. For Jack Lumsden, Senior Wealth Advisor at Assante Financial Management Ltd. in Burlington, Ontario, football is his passion and a central part of his connection with the city. He has been a volunteer football coach at Burlington’s Frank J. Hayden Secondary School since it opened in 2013 and coached with the Burlington Minor Football Association for 15 years. “While we are coaching football players, we are actually raising young adults,” Jack said of his work. “The greatest satisfaction from coaching is seeing the kids go on to be successful after high school, whether it be post-secondary education, in their careers or family life.” During his tenure at the school, he has helped coach the junior team to win the Halton Junior Football Championship in 2013 and the senior team to Tier 1 in the local Halton Region. When asked...
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Key Points for Wills and Powers of Attorney’s

Key Points for Wills and Powers of Attorney’s

Families during COVID-19 have realized that they should focus on concerns such as planning the family’s future. One of the most difficult challenges a Certified Financial Planner® has is to encourage clients to update and/or review their estate plan and documents. Often families tend to put this off, as it is not seen as urgent.However, COVID-19 has brought family planning and care issues to the forefront for many families as concerns for their loved ones and their economic well being have become top of mind.  Everyone’s life has been impacted, regardless of age. As a result, families now realize they should focus more on these concerns, but are often unsure where to start. Based on my experience of helping many families over the years, the following list from my book can be a good starting point. Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® It was still raining, and as we rode staunch­ly back home in the tin boat,...
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Smart Tax Strategies for Retirees: Tax Efficient Income Withdrawals

Smart Tax Strategies for Retirees: Tax Efficient Income Withdrawals

One of the most important decisions a retiree must make is how to create an income and cash-flow strategy from the financial assets they have accumulated over their lifetime. By Jack Lumdsen, MBA, CFP® This can be challenging as you may have numerous sources of potential cash flow such as: Old Age Security and Canada Pension Plan Company pension plans RRSPs, RRIFs, Locked in RRSPs Tax free savings accounts (TFSAs) Annuities and guaranteed income products Non-registered investment accounts HOLDCOs  Each of the above cash-flow sources can have different start dates and a retired couple could easily have to decide on how and when to start the income or cash flow from 6 to 12 sources or more. Why is this important?  Your income and cashflow strategy will affect your: income and cashflow spending today  the tax you pay today, and in the future availability of government income credits and benefits over time how long your investment assets will last success rate of your plan  our estimated estate value for the next generation Income vs Cashflow In retirement, there is a...
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Smart Tax Strategies for Retirees: Avoid the OAS Recovery Tax

Smart Tax Strategies for Retirees: Avoid the OAS Recovery Tax

 Old Age Security (OAS) is an income benefit that is paid to Canadians once they reach the age of 65.   If your individual income is over $79,845 for 2021, you will have to start to pay back your OAS at a rate of 15% for each dollar over $79,845. This tax recovery is often called the clawback. It’s smart tax planning for retirees to arrange their income to avoid this clawback if possible. Some strategies to review are:  Income split with your spouse/CLP (Common Law Partner) Tax effective non-registered investments Review the start date of your RRIF Use the younger spouse/CLP’s age for RRIF payments Use TFSAs Trigger large capital gains prior to age 65 Defer OAS How do you collect Old Age Security?  To collect Old Age Security (OAS), the criteria is: Age 65 or older Citizen of Canada Resided in Canada at least 10 years since the age of 18 To get the maximum OAS benefit you must have  resided in Canada at least 40  years after the age of 18. resided in...
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Smart Tax Strategies for Retirees: Keep Track of Health & Medical Expenses

Smart Tax Strategies for Retirees: Keep Track of Health & Medical Expenses

Unfortunately, as you age, you may have increased health care and medical costs that are not paid for by the government.   A smart tax strategy during retirement is to keep track of your medical expenses and take advantage of any credits that may be available.   Common expenses that may be tax-deductible are personal health care plans, prescription drugs, hearing aids, mobility aids, and some of the costs if you live in a nursing or retirement home.  Some of the credits you may be entitled to are: Medical Expenses Tax Credit Disability Tax CreditCanadian Caregiver AmountHome Accessibility ExpensesSeniors' Home Safety Tax Credit What is a tax credit?  A tax credit is a non-refundable item that reduces the amount of tax that is owed, whereas a tax deduction reduces your taxable income. Key Tax Credits to Review Medical Expenses – Tax Credit Some of the medical expenses that you may be able to claim include: Prescription drugsPersonal health plansCare Facilities, expenses for attendant care and care in a facility such as a nursing...
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Smart Tax Strategies for Retirees: Income Splitting

Smart Tax Strategies for Retirees: Income Splitting

Income tax is one of the largest expenses any retiree has. The Fraser Institute Report indicated that Canadians paid 45% of income as taxes in 2019.  Your goal in retirement should be to organize your income stream to: reduce the amount of tax you may have to pay  preserve any government tax credits preserve government income plans such as Old Age Security  The result will be greater spending for you today, and potentially greater wealth for the next generation. A smart tax strategy to reduce a family’s overall tax burden is to split the income. This means to shift income from a spouse or common-law partner (CLP) who is in a higher tax bracket to one who is in a lower tax bracket. The result is lower overall income tax paid, resulting in increased spending and/or preserving your wealth. The various income splitting strategies to review are: Pension Splitting CPP Sharing Spousal Loans Spousal RRIFs Base the RRIF minimum on the younger spouse’s age TFSAs Pension Splitting  This is a strategy for a spouse/CLP to...
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Should we take Advantage of our unused RRSP contribution limits?

Should we take Advantage of our unused RRSP contribution limits?

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® A common question that we receive every year prior to the RRSP deadline is should we take advantage of our unused RRSP contribution limits? Your RRSP deduction limit is how much you can contribute to your RRSP based on your prior years income, and includes any unused contribution limits from prior years. The following excerpt describes this. Uncle Wayne started off by saying this wouldn’t take any more than forty-five minutes, because he really had to get back to Aunt Jen. Then he told us to pull out our binders or go online to our secure cloud service and look at a tax-related form called a Notice of Assessment. Everyone who files a tax return gets one of these from the Canada Revenue Agency (CRA) every year, but sur­prise, surprise … Sally couldn’t find hers! Anyway, the point of checking out this form was to determine our limits for RRSP contributions...
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Rebalancing Your Portfolio

Rebalancing Your Portfolio

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® Today we are going to be reviewing portfolio rebalancing, and how it can be used to your advantage. Sometimes it is hard to know when to make adjustments and when to leave your portfolio alone. By creating a systematic plan, you are able take advantage of global market fluctuations. The following excerpt reviews this. “Exactly,” Uncle Wayne agreed. “But people will bail out of their investments when they see a decline in value, and then they’ll buy when prices start going back up. They’re doing exactly the opposite of what they should. It’s obvious that these people don’t have a long-term plan or a wise old uncle!” “How do we buy low and sell high?” I asked. “Isn’t that what the experts call market-timing?” “I’ve got an answer for you that will be easier in the long run. We’ve already reviewed the various asset allocations based on risk level and goals....
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The Four Essential Family Conversations

The Four Essential Family Conversations

Excerpts from the Book - Preserving Wealth - written by Jack Lumsden, MBA, CFP® Based on my experience of helping many families over the years, I have found that there are four essential conversations that families should be having concerning their financial and estate plans.  They are: The Estate Documents Conversation.The Eldercare Conversation.The Legacy Conversation, andThe Next Gen Financial Education Conversation. The Estate Documents Conversation The estate documents conversation is a conversation you should have with your parents, children, executors, and powers of attorney to review and discuss the following key issues: With your parents: Find out who their powers of attorney and executors are.Obtain copies of their wills and powers of attorney (or the location of the documents).Meet your parents’ financial advisor(s).Obtain the listing of the location of their financial assets and contacts for their bank, accountant, and lawyer (see Appendix C). Have a frank discussion on what they would want to happen if they were unable to make financial decisions for themselves. Have a frank discussion...
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