We all had to adapt to a new reality this year. We came together to face these difficult times both personally and professionally. We did everything in our power to maintain our service model and optimize your finances during a challenging market environment. We thank you for your patience, cooperation, and ongoing support.

With good news on the horizon thanks to a new vaccine, we are looking forward to 2021 being a year of renewal and opportunity.

In our final blog entry of 2020, we provide you with an “everything update”, a list of recent headlines in the areas of financial aid, investments, and taxation.

Please note that due to the holidays, our office will be closed on December 25 and January 1. Our team will have reduced service between December 21 and January 3, processing only urgent requests (contributions, withdrawals) during this time. We will be back to full service on Monday, January 4 to begin the new year together.

Anthony, Sandrine, Frank, & JoAnne

Financial Aid

Online application for the BC Recovery Benefit begins on December 18

Investments

From Myles Zyblock, setting the stage for 2021

Worried about investing near all time-highs?  All-time highs are not unusual

BlackRock’s current positioning: Upgrade U.S. equities

Brexit: What you need to know about the UK leaving the EU

How does Gold fit in a portfolio?

The Canada Pension Plan Investment boards commits $200M to a renewal energy projects

Taxes

It’s official: CRA allows simplified home office deduction process (max $400 deduction):

Year-end tax tips

Pandemic spending has budget watchers once again fretting about capital gains tax hikes

New York Property taxes will increase 5% next year

ICBC to drop rates by 15%

Retirement / Registered Accounts

The 2021 TFSA limit will remain $6,000

CPP premium increase to cover program enhancements will continue in 2021

Deferring CPP payments is the surest way to secure lifelong income (two articles on this topic)
Article 1
Article 2

COVID-19

Health care worker becomes first person to receive vaccine in B.C.

All Canadians who want a shot will be vaccinated by September 2021, public health agency says

Province confirms 1,215 British Columbians vaccinated so far

Canada expected to receive 168,000 doses of Moderna vaccine by month’s end, Trudeau says

The post The Everything Update appeared first on Smof Investment Manager, LLC.

Therefore, if your salary is $57,400 or higher, you will pay approximately $81 more in premiums this year.

The CPP is being enhanced over the next seven years. You will gradually pay higher premiums now in order to receive a larger benefit at retirement. The overall aim is to grow the amount you will receive to one-third of average work earnings, up from a quarter.

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

The post Reminder: Canada Pension Plan Premiums increase this year appeared first on Smof Investment Manager, LLC.

Using the age 65 benefit as the base amount, the reduction for application before your 65th birthday is 0.60% per month, or up to 36% lower if you are applying at age 60. The increase for application after your 65th birthday is 0.70%, or up to 42% higher if you apply at age 70.

In other words, if you are eligible for $1,000 a month at 65, you can choose to apply for and receive a benefit of $640 at age 60, or $1,420 at age 70.

So, what should you do?

As usual, there is no single answer for everyone. The main factor is longevity, but there are other considerations such as taxes, GIS/OAS eligibility, whether you are still working from 65-70, or whether expenses will be much higher in the earlier stage of retirement.

The illustration below looks purely at the lifetime accumulation of CPP benefits if one decides to apply at age 60, 65, or 70. It assumes that the benefits received are invested and earning 3% a year.  The chart on the left plots the break-even points and the table on the right provides lifetime totals for the three different application ages.

The break-even point for age 60 vs. 65 CPP application is age 76. In other words, the cumulative payments of a person who applies for CPP at 65 will catch up to the ones for a 60-year-old at age 76.  By age 90, the age 65 applicant will have received an additional $87,000 in benefits than the age 60 applicant.

Therefore, if you live past age 76, you will receive a larger CPP payout applying at 65 than at age 60. Again, there are other factors to consider and everyone’s situation is different, but most cases we come across argue for an age 65 application instead of age 60.

What about applying age 70 vs. 65? The break-even age for this comparison is age 86. Thus, if you live past age 86, you are better off applying at age 70 than at age 65. Age 86 is close to average life expectancy in Canada and therefore applying at 70 is a riskier bet to make.

Conclusion: Apply at 65, IF you are a healthy person with normal projected life expectancy, IF you are not in OAS/GIS clawback range, IF you are not still working (but talk to us first!)

Other sources supporting deferral of CPP application:

Unconventional Wisdom – Should I delay CPP and OAS until age 70

Financial Post – This retirement decision could be worth $72,000, but few Canadians take advantage of it

Globe & Mail – The baby boomers dilemma: When to start collecting CPP

Wealthbar – CPP Benefits – Should you take it sooner or later

CIBC Wood Gundy – Does it make sense to take CPP early

This information is provided for general information purposes only. It does not constitute professional advice. Please contact a professional about your specific needs before taking any action.

The post Canada Pension Plan (CPP): When Do I Apply? appeared first on Smof Investment Manager, LLC.