Find out what Canadians are saying about debt…

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Homeowners indicate they are more comfortable with debt than their parents were, Manulife Bank of Canada survey shows

Waterloo – Four in ten homeowners (39 per cent) indicate they’re more comfortable with debt compared to their parents, versus just one in eight (13 per cent) who feel they’re less comfortable. The perceived gap in comfort level was greatest among homeowners in their fifties, who were five times more likely to indicate a greater degree of comfort than their parents, compared to those in their twenties and thirties, who were only twice as likely. Read more

Homeowner Debt Report

About Manulife Bank’s Debt Research

Manulife Bank believes that, by managing debt more effectively, many people could save money, become debt-free sooner and achieve more of their financial goals.

Effective debt management is a key contributor to financial health and, by conducting surveys and research into debt management, we’d like to:

  • Inform and encourage a public discussion of consumer debt, in a way that helps people understand the role that debt plays in their financial health.
  • Educate Canadian consumers on effective debt management by providing information and insights.
  • Encourage Canadians to discuss debt management with their families and financial advisors and look for ways to manage their debt more effectively.

Infographic

Manulife Bank – Manulife One is simple and sensible

Today’s banking: complicated and expensive
The traditional approach to money management means that each month, millions of people across Canada go through financial hoops to meet all their expenses, pay their bills, cover borrowing costs and (try to) put something away into savings accounts and investments.

Does your month look something like this?
Traditional banking has you managing daily finances by depositing your income into chequing and savings accounts while  borrowing through mortgages, lines of credit, loans and credit cards. Unfortunately, you usually receive little or no interest on the money you deposit and pay higher interest on the money you borrow.

Manulife One: simple and sensible

With a non-traditional flexible account like Manulife One, things are different. You have an all-in-one borrowing and chequing
account with a borrowing limit that is based on the value of your home.

All of your debt, or as much as possible, is consolidated into this account at a competitive low rate(s). Your income and savings are deposited into your account. When that happens, your balance immediately drops – and you pay interest on that lower amount until you spend your money. Live out of the account. Pay your living expenses with cheques, a debit card, through Interac® e-Transfer, or via Internet and telephone banking. Make your investment deposits through cheques, through Interac e-Transfer or pre-authorized withdrawals. Your account is a consolidation of your debts so there are no multiple loan payments. No “tight” times in the month. You can access the money in your account at any time (up to your borrowing limit). Interest is calculated daily. At the end of each month,
you are charged the accumulated interest for the month – you only pay interest on what you owe on any given day. That’s it.  Manulife One saves you thousands by putting your money to work…for you. Can it get any simpler? Ask your financial advisor for a Manulife One referral today.

Manulife – Reduce your taxes and keep more of your money

There are a variety of ways to reduce the amount of income tax you pay and keep more of your money at tax time. By taking advantage of all possible tax deductions and credits, you’ll free up more money to put towards your investments, your emergency savings, or other important goals.

Federal income tax rules provide you with a number of potential tax credits and deductions. You must claim them when filing a tax return. Note that the Canada Revenue Agency (CRA) will not inform you if you miss a deduction that you could be eligible for.

Benefit from tax deductions and tax creditsTaxes-image-re-sized

Tax deductions will reduce your taxable income so the reduction will be reflected at your marginal tax rate. Non-refundable tax credits can also reduce your tax owing, but are generally calculated at the lowest tax rate.  Each year’s federal budget introduces at least a few new deductions as well as tax credits for taxpayers. Familiarize yourself with these so that you can claim any that are applicable to your situation.

Filing your tax return

We all have to pay income tax, but there are ways to minimize the taxes we pay. Here are a few of the things to keep in mind when preparing to file your annual income tax return:

  1. Any income earned in a Registered Retirement Savings Plan (RRSP) is exempt from tax as long as the funds remain in the plan.
  2. RRSP contributions have to be reported on your tax return, but do not have to be deducted in the year they are made. You can carry forward your contribution indefinitely and use it when you like – for example, when you’re in a higher income bracket and need the deduction.
  3. Don’t skip filing a tax return, even if your income is low. Filing assists CRA in tracking your RRSP contribution room, which can be carried forward indefinitely and used in the future when needed.
  4. The income earned in a Tax Free Savings Account (TFSA) is tax exempt. However, over contributions in a year will be subject to tax consequences assessed by the CRA.
  5. Capital losses from selling shares in a non-registered investment (except your TFSA) can be applied to any of the previous three years or carried forward indefinitely. These can be applied against any capital gains, reducing your total income.
  6. Carrying costs incurred to earn income on your investments can be deducted from your income. Fees paid for managing your investments, other than commissions, are also eligible.
  7. Single parents receiving child care benefits could be eligible for additional tax benefits.
  8. Do you regularly travel to work by bus, train, subway or ferry? You or your spouse1 may be able to claim the cost of your transit passes to take advantage of the public transit tax credit.
  9. Are you self-employed? You could benefit from a number of tax deductions.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

Are you missing out on tax deductions and tax credits?

If any of the following situations apply to you, you could be eligible for certain tax deductions and tax credits when filing your return – consult a tax professional for advice.

  • You made RRSP contributions in the current tax year, or within the first 60 days of the following year
  • You paid union dues or payments to a professional organization
  • You had payments for childcare, including after school programs
  • You made payments for alimony or spousal support
  • You supported dependents at any time during the year
  • You or your spouse or partner1 are age 65 or older
  • You or your spouse or partner receive a pension income
  • You or your spouse or partner have dependents that are disabled
  • You paid interest on a student loan or paid tuition fees
  • You made donations to a registered charity or political party
  • You borrowed money for investment purposes and paid interest on the loan
  • You paid a professional a fee to manage your investments
  • You bought investments and sold them at a loss
  • You changed employment and moved closer to your work
  • You used your personal vehicle for your work or received an allowance from your employer for work related expenses
  • You had a home office, or paid for office supplies or other work expenses as part of your work arrangement
  • You were paid in full or in part by commissions
  • You paid legal fees to enforce payment of any support payments, or to defend an employment contract
  • You paid for medical expenses or made payments to a health plan at work or privately
  • You lived in a same sex relationship, were married, or living common law
  • You are self-employed
  • You have deductions carried forward from prior years such as RRSP contributions, charitable donations, student loan interest, home office expenses, or capital losses

Consult your tax consultant for further information and professional advice on how best to reduce your taxes by utilizing all available deductions and tax credits.

1Includes a spouse or common-law partner as defined by the Income Tax Act (Canada).

It’s a good idea to be pro-active when it comes to reducing your income taxes. A little advance planning early in the year could shave a significant amount off your annual tax bill.

Canada Life – Retirement and Investment Products

Retirement and Investment Products
Through all the stages of your life you should have one-stop access to all the investment solutions you need. We provide just that with access to:

  • Over 50 segregated funds
  • 15 different investment management companies
  • Guaranteed interest terms
  • Registered retirement savings plans (RRSPs)

We can help you create an investment portfolio that helps you:

  • Save for your child’s education
  • Plan a vacation
  • Build a nest egg for retirement, or
  • Invest in a small business

We can help you enjoy your retirement. We offer retirement income solutions from payout annuities to registered retirement income funds (RRIFs).
Make your financial life easier to manage with our help.
Segregated Fund Policies
Segregated fund policies offer wealth-building potential similar to that of a mutual fund. Fund managers invest in stocks, bonds or other assets, depending on the fund’s investment objectives. Segregated fund policies also offer valuable wealth-protection features.
Payout Annuities
Planning ahead allows you to make sure income is available when you need it. Payout annuities provide you income for specified periods of time or a lifetime.
Guaranteed Interest Terms
Guaranteed interest terms offer a fixed-interest rate for the term you select and add a level of guarantee and stability for your financial plans.
Savings Options
To help you achieve your savings goals, we offer several types of savings options with many features.
Retirement Income Options
Retirement income options provide you with retirement income payments in exchange for a lump sum.

Manulife PensionBuilder

Building guaranteed income for retirement

Manulife PensionBuilder is a straight-forward, low-risk investment that allows you to convert some of your retirement savings into a source of dependable income that you can’t outlive. Whether you’re building for your retirement or are in the retirement stage of your life, you can look to Manulife PensionBuilder to supplement existing guaranteed income sources or to create a new income source on which you can rely.
This innovative income solution is designed to provide:

  • A secure income stream that is guaranteed for life to help form the foundation of a retirement income plan
  • A higher level of retirement income the earlier you invest and the later you wait to start drawing income
  • Flexibility to choose when to begin taking income, as early as age 50
  • The option of uninterrupted income for life for your surviving spouse
  • A conservative investment with full access to your market value, should the need arise (fees may apply)

Manulife Debt Management Centre


Debt
Management
Resource Centre

When Manulife Bank asked Canadians who provides them with advice and guidance on debt and day-to-day finances:

60% of respondents said no one
21% said their financial advisor
12% said an in-branch bank representative
 5% said family and friends
 2% said an accountant, lawyer or real estate professional

So, if you’re not helping clients manage debt, it’s likely they’re doing it on their own. Demonstrate the value you can add by sharing the new infographic, debt-themed articles and client emails and tweets on Manulife Bank’s Debt Management Resource Centre.

Visit advisor.ca/debtmanagement today!

Three common RRSP mistakes you’ll want to avoid

Tim Cestnick is president of WaterStreet Family Offices, and author of several tax and personal finance books. 133889385-1tcestnick@waterstreet.ca

We all make mistakes. I think about Joseph O’Callaghan, who robbed the guard of an armoured car in 2011. He stole the guard’s cash box, was caught, and was sentenced to nine years in prison by a court in Belfast. As it turns out, the box contained no money because Mr. O’Callaghan stole it while the guard was on his way into the bank, not on his way out.

I’m not sure what the greater mistake was: Stealing an empty box, or getting caught. Rookie mistakes, for sure.

Canadians often make “rookie mistakes” when it comes to their registered retirement savings plans (RRSPs). Now that 2014 has arrived, many are turning their attention to RRSPs since the 2013 contribution deadline is March 1, 2014 – not far off. Because March 1 falls on a Saturday, Canadians have until March 3 to make a contribution this year.

Making mistakes can cost you thousands if you’re not careful. Today, I want to share some common mistakes to avoid when it comes to your RRSP.

Mistake No. 1

Consider Jack. Jack sold some stocks at a profit in 2013 and decided that he’d like to offset these capital gains.

So, Jack identified some investments in his portfolio that have dropped in value, and he plans to transfer those to his RRSP as a contribution in-kind.

His thinking is that this transfer will trigger the capital losses on those investments, and an RRSP deduction to boot, which would then offset all the tax on his capital gains.

The problem? If you transfer an investment directly to your RRSP, it’s considered to be a disposition at fair market value, but any losses on the transfer will be denied.

Jack should, instead, sell the losers on the open market, then contribute the cash to his RRSP. This will provide him with both capital losses he can use and an RRSP deduction.

By the way, the capital losses in this case will be realized in 2014 (not 2013), but he’ll be able to carry those losses back to 2013 when he files his 2014 tax return next year.

He’ll be able to claim an RRSP deduction in 2013, however, provided he makes a contribution within his contribution limits on or before March 3, 2014.

Mistake No. 2

Janice’s husband contributed $30,000 to a spousal RRSP for Janice in 2011 and 2012.The investments in that RRSP declined in value to just $5,000 by mid-2013.

In order to simplify her life and eliminate this smaller spousal RRSP account, Janice decided to combine this spousal RRSP with her own RRSP to which she contributes each year. Since Janice was not working in 2013, she then decided to withdraw $20,000 from her RRSP to supplement her income.

The problem? When you combine spousal RRSP dollars with regular RRSP dollars, the entire plan becomes a spousal RRSP subject to the rules around spousal plans (most notably, any withdrawals from a spousal plan can be taxed in the hands of the contributing spouse to the extent that spouse made contributions in the year of the withdrawal or the preceding two years).

The result is that the full $20,000 Janice withdrew from her RRSP will be taxed in the hands of her husband, who is in the highest tax bracket.

Oops.

Janice should have avoided combining her spousal and regular RRSPs. Then she, and not her husband, would have paid tax on withdrawals from her regular RRSP.

As an aside, you can avoid this “tainting” of your regular RRSP when combining spousal and regular RRSP assets in the case of a separation or divorce.

Mistake No. 3

Michael and his wife, Marnie, are saving for retirement. Marnie has significant unused RRSP contribution room, but has no cash to make contributions. Michael, on the other hand, does have some cash, so he plans to give Marnie $50,000 so that she can contribute to her RRSP before the March 3 deadline.

The problem is that Michael could face tax on all or part of the withdrawals that Marnie makes from her RRSP later. How so? The Canada Revenue Agency has said that an RRSP is considered to be “property” under our tax law. Therefore, any withdrawals from an RRSP are considered to be “income from property.”

The attribution rules found in subsection 74.1(1) of our tax law apply to income from property and will attribute that income back to the spouse who gave the cash to acquire the property. Michael would be better to contribute to a spousal plan for Marnie, or lend her the money at the prescribed rate (currently 1 per cent) to avoid this attribution.

The original newspaper version of this story stated that the RRSP deadline is March 1, 2014. This online story has been corrected to explain that because March 1 falls on a Saturday, Canadians have until March 3 to make a contribution this year.

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