Yup, for first-time home buyers, Budget 2019 was a sweet deal. The Canadian Federal Budget 2019 served up several measures to help first-time home buyers. Off the top some cold hard cash to the tune of tens of thousands of dollars. The monies will be made available by the CMHC, the Canadian Mortgage and Housing Corporation. That insurance body will now be taking on shared equity in the homes purchased with the help of those loans at up to 10% of the home purchase price. While not all of the details are clear on the new measures the loans will be interest free; though it’s not clear when those monies will have to be paid back.
From this CBC article …
Functionally, it’s more like an almost interest-free loan — one where the repayment plan doesn’t require any payback until years in the future. In order to qualify, an applicant must have a household income of less than $120,000 per year and be able to come up with a five per cent down payment — the minimum requirement for an insured mortgage with the Canada Mortgage and Housing Corporation (CMHC).
That article goes on to suggest that the loans will not have to be paid back until the home is sold. The CMHC might be a perpetual partner in that home ownership arrangement. And in the example given in the article the CMHC had a greater percentage initial ownership stake compared to the new homeowners.
The home buyer’s plan limit has also been increased to $35,000 per year. That means a couple could give themselves a $70,000 tax-free loan from their RRSPs. That is certainly a healthy down payment. Of course you still have 15 years to pay yourself back to keep those monies in that tax free camp.
Budget considerations for retirees.
Retirees will be able to take advantage of a tax deferral strategy beginning in 2020 by way of an ALDA, an Advanced Life Deferred Annuity. For a backgrounder of Life Annuities please have a read of my review of Pensionize Your Nest Egg. Annuities and different types of annuities might play a role in your retirement planning.
An ALDA will allow a retiree to defer taxes on RRIF amounts. As you may know, with RRIF accounts we are mandated to take out (and pay tax on) a certain percentage of portfolio assets each year. The tax man wants to get his due. The ALDA allows us to keep a certain percentage in the registered RRIF account that is not mandated to be withdrawn and taxed. Here’s a more than useful overview from Jason Heath, please have a read of Meet The Budget’s New RRSP Strategy That Every Retiree Should Know About.
An ALDA would permit up to 25 per cent of an individual’s registered investment accounts to be used to purchase an annuity that begins payments at the latest by the end of the year that they turn 85. There would be a lifetime maximum of $150,000 that would be indexed to inflation and rounded to the nearest $10,000.
ALDAs might be useful for self-directed investors, those with real estate income and those with corporate assets or defined benefit pensions. It’s one more option, one more tool for retirees. Whether it’s beneficial or not will be up to you and your (fee-for-service) advisor.
No help for typical Canadian investors.
I already chimed in on a budget issue with Instead of helping typical investors ravaged by fees, the budget plays gotcha with total returns for ‘the rich’. In place of doing something about mutual fund fee fairness and transparency the budget targeted some very low fee ETFs offered by Horizons and others. Leave the 2.5% crap alone, target the .03% fund. Hmmm?
More weekend reads from around the blogosphere.
Clare O’Hara reported on a new iShares RBC ETF suite; a help-the planet offering. Introducing the sustainable core ESG funds.
In 2018, Canadian ETFs saw in-flows of $334-million for socially responsible funds.
I finally quoted OZZY Osbourne in this overview on how to invest in the incredible potential of the cannabis sector. The findependencehub had two hits on the pot sector this week with this post on insurance considerations and this post on the investment approach.
Robb Engen answers a reader question on Boomer and Echo and offers up on the best credit cards for general spending. On that I love my Tangerine Cash Back Credit Card.
Here’s the Weekend Reads on myownadvisor.ca.
And here’s the video of the week from The Dividend Guy.
Ellen Roseman chats with Bruce Sellery on The MoneySaver Podcast.
And last but not least (I hope) this article was one of my biggest hits ever on Seeking Alpha with over 250 comments. Here’s Why We Don’t Use The 4% Rule In Retirement.
Questions to Dale firstname.lastname@example.org or better yet leave a comment on this post.
Thanks for reading.