UPSIDE DOWN FINANCES RE HOUSING FOR SINGLES AND LOW INCOME – PART 3 OF 3

Posted on November 21, 2015 by ffswpadmin

UPSIDE DOWN FINANCES RE HOUSING FOR SINGLES AND LOW INCOME- PART 3 of 3 LOST DOLLAR VALUE LIST AND PSYCHOLOGICAL IMPACT

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to be used as personal or financial advice.

As stated in Part 1 and 2 of this series, one example of financial unfairness is condos presently being developed in Calgary by a developer including 1 bed, 1 bath, 1 patio micro-condo of 552 sq. ft. with starting price of $299,900. Two patio, 2 bed, 2 full bath, 2 story 1232 sq. ft. condos were already sold out so price not available. Then there are 2 patio, 3 bed, 2.5 bath, 2 and 3 story 1830 sq. ft. condos priced from $649,900 to $749,900. Apparently, ultra-deluxe model has master bedroom suite covering entire third 600 sq. ft. floor. The third floor bedroom is bigger than total square footage of $299,900 condo. When price per square foot is calculated, micro-condo is selling for $543 per sq. ft. while three bed condos are selling from $355 to $409 per sq. ft.

Average square footage of Canadian house is 1950 sq. ft. (2010) so how can a developer socially, morally and ethically justify charging $150 to $200 more per square foot for two-thirds less space? “CREB now” http://www.crebnow.com/, Aug. 28 to Sept. 3, 2015, page A5, talks about Calgary developer selling 440 sq. ft. condos in north inner city tower for $149,000 ($339 per sq. ft.) in 2012 and 440 sq. ft. condos in south inner city tower for $219,000 ($498 per sq. ft.) in 2015. Two and three hundred sq. ft. condos are now being sold in Vancouver and Toronto for around $250,000 ($1250 and $833 per sq. ft. respectively). Salaries for low income and singles has not risen to same level, nor has Canadian housing for the middle class and rich ($400,000 and up (except perhaps in Vancouver).

So who is more likely to buy micro-condos? Possibly low income couples, single parent with one child, or environmentally conscious, and probably an individual/single person. Who gets to pay $150 to $200 more per square foot for two-thirds less space? Ripple effects are owners of micro-condos have to proportionately pay more house taxes, education taxes, mortgage interest and real estate fees on less house and less take home pay for biggest lifetime expense. When it is sold, will seller recoup buying price?

To further magnify the issue, lottery in major northern Alberta city has first grand lottery prize of $2,092,000 for 6,490 sq. ft. house ($322 per sq. ft.), second grand prize of $1,636,000 for 5,103 sq. ft. house ($321 per sq. ft.), and third grand prize of $1,558,000 for 5,097 sq. ft. house ($306 per sq. ft.). First house has elevator, games/theatre area, kid’s lounge, gym, and music room. Second house has hockey arena with bleacher seating, lounge and bar. Third house has spa, gym, yoga studio, juice bar and media room. Need anything more be said about the rich? They always get more while paying less and acquiring choicest spots.

As stated in a recent real estate article, Watermark, a deluxe complex in Calgary is selling an ‘inspired’ (so stated in article) 8,644 sq. ft. estate home and its guest house for $3.45 million or $399 per square foot which is less per square feet than 600 square foot condo mentioned above. Article goes on to say that beyond homes, Watermark garners interest with both natural and man-made beauty. It has 17 cascading ponds and more than five kilometers of interconnected walking and bike trails. Then there’s the central plaza with its 1,000 sq. ft. pavilion, kitchen, barbecues, a sports field and NBA-sized basketball court. One family’s daughter is looking forward to booking the plaza and using the outdoor kitchen for her birthday party. The family goes on to state that space between homes and low density was also very important so they weren’t looking into someone’s back yard. This same complex has a show home with 17 sinks.

Another real estate article talks about another family with three children moving from 1900 sq. ft. house to a 2,837 sq. ft. house with price starting from $900,000s. They are moving because they need more room for the kids as they grow. Their new house will provide 567 sq. ft. per person at a starting price of approximately $317 per sq. ft. Yet again other articles state that owners are happy they don’t have condos in their back yard and their children can experience nature from their own bedrooms.

Further advice usually given by married people states singles can live with someone else if they can’t afford housing when they are already living in studio, one bedroom apartments, and basement suites. Senior singles who have lived productive lives while contributing to their country want and deserve their own privacy and bathroom. Many senior assisted living dwellings have in recent years built more spaces for singles who with one income pay more for that space than married/coupled persons. Just how long should shared arrangements go on for (entire lives?) instead of correcting underlying financial issues?

Following examples show dignity and respect for singles (and low income families). Attainable Housing http://www.attainyourhome.com/, Calgary, allows maximum household income of $90,000 for single and dual/parent families with dependent children living in the home and maximum household income of $80,000 for singles and couples with no dependent children living in the home. Living Wage for Guelph and Wellington livingwagecanada allows singles dignity of one bedroom apartment and a living wage income that is 44% of a family of 4 income and 62% of a family of two (parent and child).

While singles are living in their small spaces (average size of new studio, one bed and one bed/den new condo combined being built in Toronto is 697 sq. feet), majority of Canadian married/coupled people and families are living in average 1950 sq. foot houses (2010) with large gourmet kitchens, multiple bathrooms, bedrooms for each child and guests, basement, garage, yard, and nice patio with barbecue, etc.

LOST DOLLARS VALUE LIST

For a 700 square foot condo where price is $50 more per square foot than lowest price of largest condo in complex, it can be assumed that the purchaser will be paying $35,000 more than purchaser’s base price of largest condo, if the price per square foot is $100 more per square foot then purchaser will be paying be paying $70,000 more, if the price per square foot is $150 more per square foot then purchaser will be paying $105,000 more and so on. The amount of house and education taxes, real estate fees and mortgage interest will also incrementally increase.

Our Lost Dollar Value List is still a work in progress, but when lost dollar value for real estate is added to the list, $50 will be used as the example as well as gestimate loss for taxes and real estate fees, interest charges based on $50.00 per sq. ft.

PSYCHOLOGICAL IMPACT

There seems to be very little understanding of the psychological impact that decision makers and policy makers have on singles regarding housing.

Many families live in houses where their young children have separate bedrooms, and likewise, there is a trend towards ‘man caves’ and ‘she sheds’ so family members can have ‘alone’ time, but when children become single adults, singles are consistently told that they can live with someone if they have financial problems with housing while paying more.

And, of course, singles never have claustrophobia, so it is okay to stick them in small spaces for which they have to pay more. And singles never have problems with noise, so it is okay for them to live in small units in less desirable areas close to airports and railway tracks, etc. (As one single person moving from one unit to another stated in a real estate article “I was very impressed with the pricing and the fact that they’re doing concrete floors and walls “. Concrete is said to restrict noise. “I work on Saturday mornings and a lot of people like to stay up a little later on Friday and Saturday nights”. With thinner walls, he adds, it is easier to hear “people in the hallways coming and going. It is not the end of the end of the world, by any means, but I am looking forward to something quieter above and below”. But for this person, the decision was less about sound and more about getting something larger, with better specifications and closer to work-moving from 615 sq. ft. two bedroom condo to 715 sq. ft. two bedroom condo. “The bedrooms are a little bit bigger with an ensuite. I really liked that and I liked the fact that it has a washer and dryer so I don’t have to go to the laundromat.”

Singles deserve same standard of living as married/coupled persons, i.e. having washer and dryer in their own home instead of having to go down a dark hall or to basement to do laundry or paying per load at a laundromat.

When reading or listening to articles on housing for families, families will always talk about how important their housing is for them in regards to creating memories for their children, entertaining and maintaining close ties to friends and families, but apparently adult singles don’t have friends and families, so it is okay for them to live in micro condos, some as small as 200 square feet, where it is pretty much impossible to entertain or have friends and families stay with them.

SOLUTION

Singles and low income persons need to become more aware of financial unfairness by taking pricing down to the lowest common denominator, i.e. price per square foot and speak out about the financial atrocities being directed towards them. They need to start questioning why they are being targeted to pay more while getting less. (While it is recognized that it is expensive to raise children, adult to adult it is also unfair to make one segment of the population like singles and the disadvantaged pay more than another segment).

The blog posted here is of a general nature about financial discrimination of singles. It is not intended to provide personal or financial advice.

UPSIDE DOWN FINANCES RE HOUSING FOR SINGLES AND LOW INCOME – PART 2 OF 3

Posted on November 19, 2015 by ffswpadmin

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to be used as personal or financial advice.

UPSIDE DOWN FINANCES RE HOUSING FOR SINGLES AND LOW INCOME-PART 2 OUTSIDE THE BOX SOLUTIONS FOR PRICING OF HOUSING

Part 1 of this series of three articles showed how singles and low income families buying the smallest units in the housing market are forced to pay more for less space while the rich are getting much more while paying less.

From Part 1, information restated here is one example, condos presently being developed in Calgary by a developer in one housing complex includes 1 bed, 1 bath, 1 patio micro-condo of 552 sq. ft. with starting price of $299,900. Two patio, 2 bed, 2 full bath, 2 story 1232 sq. ft. condos were already sold out so price not available. Then there are 2 patio, 3 bed, 2.5 bath, 2 and 3 story 1830 sq. ft. condos priced from $649,900 to $749,900. Apparently, ultra-deluxe model has master bedroom suite covering entire third 600 sq. ft. floor. The third floor bedroom is bigger than total square footage of $299,900 condo. When price per square foot is calculated for units in the complex, micro-condo is selling for $543 per sq. ft. while three bed condos are selling from $355 to $409 per sq. ft.

So who is more likely to buy micro-condos? Possibly low income couples, single parent with one child, or environmentally conscious, and probably an individual/single or divorced/separated person. Who gets to pay $150 to $200 more per square foot for two-thirds less space? Ripple effects are owners of micro-condos have to proportionately pay more house taxes, education taxes, mortgage interest and real estate fees on less house and less take home pay for biggest lifetime expense. When it is sold, will seller recoup buying price?

One could question how this is any different than gouging like loan-sharking, and pay-day loans rather than the welfare of singles and low income.

As in many parts of the world, parts of Canada are heading for a crisis in affordable housing. Different solutions have been proposed to avert this crisis. One is Attainable Housing (attainyourhome), for example in Calgary, which allows maximum household income of $90,000 for single and dual/parent families with dependent children living in the home and maximum household income of $80,000 for singles and couples with no dependent children living in the home. While this method allows singles and low income to enter the housing market with a low down payment, it does not alleviate the problem of insane upside-down pricing of housing as outlined in the example shown above. Another solution that has been proposed is an affordable housing action plan of inclusionary zoning where a certain percentage of new housing units built would be social and community housing partly funded by government programs, and a certain percentage of new housing units would be affordable rental or ownership housing units built by the private sector. However, developers and the housing associations will argue this will not work and neighbors continue to have a “not in my backyard” mentality.

Regardless of the above proposed solutions, outside the box thinking is required for affordable housing. How about the following suggestions?

OUTSIDE THE BOX SOLUTIONS FOR PRICING OF AFFORDABLE HOUSING

Solution 1 – for a housing complex as identified in the above outrageous pricing example, prices should be set where the base price of the unit with the smallest square footage cannot be more than the base price of the unit with largest square footage within the complex. Any changes and upgrades by the buyer would be added to the base price. (In the above example the base price of the 552 square foot condo could only be $355 per square foot to match the cheapest price of the biggest per square foot unit in the complex.

Solution 2 – Charges for house taxes, education taxes, and real estate fees should be based on square footage, not the price of the housing unit. This would provide fairness where fees are based on largest unit and become proportionately less on smaller units. (Added January 7, 2016)

Solution 3– charge a fee such as a carbon tax fee for units greater than a certain number of square feet. For example, allow a maximum size of 2500 square ft. for a housing unit (assumption is that there is no need for excessive amounts of square footage in housing). For anything greater than 2500 square feet, charge an extra fee to the buyer with an incremental increase in the fee for every additional 500 square feet of space. (The rich have been paying less and getting more square footage while using non-renewable resources plus water at an alarming rate, i.e. 5000 square foot log cabin using twelve logging trucks filled with harvested logs and a showhome that has seventeen sinks). The monies collected from these fees could be used to build more affordable housing.

The following are excerpts from two published articles:

MoneySense, Sept./Oct., 2015, page 17 ‘Two ways to cool white-hot home prices’ (ABBREVIATED VERSION) (moneysense.ca)

“Concern should not be for how much houses cost, but how out of reach home ownership has become for Canadians….Developers motivated by profit have built mostly smaller one and two bedroom condo units…There is also rapidly increasing rental rates due to a scarcity of new rental units….One solution-taxing housing, not income. We don’t currently pay tax on the profit earned from the sale of our primary residence. We do, however, pay progressive tax on the income we earn. Thomas Davidoff, economics professor at Sauder University, uses himself as an example and selling a house in Vancouver for a large profit. ‘I was wrong about the prices, wrong about the future value, and I was still rewarded for my dumb luck’. He compares this to his professional life, where he spent the better part of 10 years completing a bachelor, master’s degree and PhD. Today, he pays the government $0.42 in tax for every dollar he earns. ‘Getting my PhD damn near killed me. Why is my dumb luck rewarded but my hard work penalized?’….He suggests the federal government tax capital gains made on the sale of a property. The tax could also be progressive. More important is what a new tax structure would do to affordability. By taxing property profits, you reduce the number of speculators and real estate investors who help to inflate housing profits. This would be politically challenging, since homeowners are a politician’s biggest voting block….Still, those elected to political office need to take initiative—and put housing affordability for the many before the political aspirations of a few. To do nothing would mean we accept that $1 million for an average home is the new norm in Canada”.

Calgary Herald, September 12, 2015, page F3, ‘Builders frame up the coming year’ (calgaryherald):

“Canadian Home Builder’s Association- Tally Hutchinson, president ‘Our message on affordability is being heard. We still believe there are some large issues on the table that need to be ironed out. One being inclusionary zoning’….This zoning would require the private sector to construct and sell a percentage of units within a development at a pre-determined percentage, below market price….’The issue we have with inclusionary zoning is that it transfers that broader societal obligation of subsidized housing onto a small group of homeowners. We believe these costs should be shared by all members of a community, not just those who are buying new homes for condos. It still is a large issue on the table that needs to be ironed out’.”

The blog posted here is of a general nature about financial discrimination of individuals/singles. It is not intended to provide personal or financial advice.

UPSIDE-DOWN FINANCES RE HOUSING FOR SINGLES AND LOW-INCOME-PART 1 OF 3

Posted on November 13, 2015 by ffswpadmin

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to be used as personal or financial advice.

UPSIDE DOWN FINANCES OF AFFORDABLE HOUSING SINGLES AND LOW INCOME-PART 1 of 3

Why does it seem more difficult for individuals/singles and low income persons to purchase affordable housing? For possible reasons why, consider the following scenarios.

One example, condos presently being developed in Calgary by a developer in one housing complex includes 1 bed, 1 bath, 1 patio micro-condos of 552 sq. ft. with starting price of $299,900. Two patio, 2 bed, 2 full bath, 2 story 1232 sq. ft. condos were already sold out so price not available. Then there are 2 patio, 3 bed, 2.5 bath, 2 and 3 story 1830 sq. ft. condos priced from $649,900 to $749,900. Apparently, ultra-deluxe model has master bedroom suite covering entire third 600 sq. ft. floor. The third floor bedroom is bigger than total square footage of $299,900 condo. When price per square foot is calculated, micro-condo is selling for $543 per sq. ft. while three bed condos are selling from $355 to $409 per sq. ft.

To further magnify the issue, lottery in major northern Alberta city has first grand lottery prize of $2,092,000 for 6,490 sq. ft. house ($322 per sq. ft.), second grand prize of $1,636,000 for 5,103 sq. ft. house ($321 per sq. ft.), and third grand prize of $1,558,000 for 5,097 sq. ft. house ($306 per sq. ft.). First house has elevator, games/theatre area, kid’s lounge, gym, and music room. Second house has hockey arena with bleacher seating, lounge and bar. Third house has spa, gym, yoga studio, juice bar and media room. Need anything more be said about the rich? They usually get more while paying less and acquiring choicest spots.

Average square footage of Canadian house is 1950 sq. ft. (2010) so how can a developer socially, morally and ethically justify charging $150 to $200 more per square foot for two-thirds less space? “CREB now”, Aug. 28 to Sept. 3, 2015, page A5, talks about Calgary developer selling 440 sq. ft. condos in north inner city tower for $149,000 ($339 per sq. ft.) in 2012 and 440 sq. ft. condos in south inner city tower for $219,000 ($498 per sq. ft.) in 2015. Two and three hundred sq. ft. condos are now being sold in Vancouver and Toronto for around $250,000 ($1250 and $833 per sq. ft. respectively). In many cases salaries for low income and singles has not risen to same level, nor has Canadian housing for the middle class and rich ($400,000 and up).

How is any of this different than loan-sharking or pay day loans where targeting of the most vulnerable occurs?

Article, “The Micro Units Movement” May 27, 2015 (smartergrowth) states

‘although micro units are cheaper on an absolute scale for buyers, they tend to be more valuable for developer on a per square foot basis. Shawn Hildebrand, vice president of condo research firm Urbanation, says condos under 500 square feet can bring in well over $3 per square foot, while the rest of the market averages around $2.50 or $2.60′.

(Lies, lies and more lies-Mark Twain quote ‘there are three kinds of lies: lies, damned lies and statistics’-it is more than $3). Cheaper on absolute scale? (These tiny spaces are not cheaper for economies of scale.) Why is it okay on any scale to financially rob the poor, low income, young people and singles in what will likely be most expensive purchase of their lives and affecting one of most basic principles of Maslow’s Hierarchy of Needs, that is shelter?

MoneySense, September/October, 2015, (moneysense) ‘Two ways to cool white-hot home prices’ says as much by stating developers, motivated by profit, have built mostly smaller one and two bedroom units. This article also talks about how concern should not be how much houses cost, but how out of reach home ownership for Canadians has become.

Further financial unfairness occurs when individual/single homeowners without children are forced to pay education taxes, but parents pay only fixed rate based on value of their home regardless of number of children. For ‘nineteen kids and counting’ it is possible parents are only paying a few cents a day for their children’s education. Some married/partnered seniors with kids are looking to have education tax payments eliminated from their house taxes. For families with children, logic implies parents should pay education tax throughout their entire lifetime, or individuals/singles without kids should not have to pay education tax ever. However, families don’t seem to be able to apply financial logic of their own finances equally to the financial realities of their single children.

There are many more examples of financial unfairness, but just the above few show how financial world for low-income families and individuals/singles has been completely flipped upside down and topsy-turvy. Have governments, society, and our publicly and privately funded education systems failed us so miserably and family/corporate greed taken over with critical thinking, social/ethical responsible thinking sinking to all-time lows? Since when is it okay under present financial system for families to accumulate wealth and huge inheritances while their low income and single children are not able to support themselves on a day to day basis?

Young individuals/singles not yet married are facing huge financial hurdles because of low incomes, less full time jobs, enormous education debt, and out of control housing costs. Families (parents), governments, society, corporations, businesses to date have failed to provide support and responsibility that is needed to ensure all Canadian citizens are able to financially take care of themselves without financial parental aid, inheritances of parents and without bias of gender, race or marital status.

In this so called civilized, enlightened country of ours, it appears that citizens of value are only middle-income families and the rich while individuals/singles with and without children are being annihilated from financial, political, and everyday living scenes. (Examples are present day TV home buying/renovation programs and married/coupled persons getting free homes in “Home Free” program. Individuals/singles without children have been eliminated from these programs. Why is this so-probably because they no longer have financial wherewithal to be part of this programming, just blatant discrimination or both?)

If families have such high family values, shouldn’t family values and moral social values take precedence instead of being trumped by almighty dollar greed and philosophy of charging what the market can bear and more?

Low income families, individuals/singles and young adults not yet married who can apply simple math and critical thinking skills are in financial despair and angst knowing that they, as the most vulnerable citizens of this country, have been targeted and pawned to pay more for housing than middle class families and the rich.

It is the duty of politicians elected by the people, for the people to represent all Canadian citizens, not just vote getting middle class families. (MoneySense article-‘housing affordability for the many should take precedence over the political aspirations of a few’). To stop gross financial discrimination of low-income families and individuals/singles, talk to your Member of Parliament and mayors about financial unfairness and the upside/down financial world you are being forced into particularly in the housing market.

The blog posted here is of a general nature about financial discrimination of individuals/singles. It is not intended to provide personal or financial advice.

TFSA BOONDOGGLE FOR SINGLES AND LOW-INCOME CANADIANS

Posted on November 8, 2015 by ffswpadmin

TFSA BOONDOGGLE FOR SINGLES AND LOW -INCOME CANADIANS

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to be used as personal or financial advice.

Comment: This article was previously published in a local newspaper and is available on the internet. There were 51 recommends for this article. The final outcome (dependent on the results of the October 2015 Canadian Election) was that proposed changes to increase the TFSA to $10,000 by the Conservative party election promises was reverted back to $5,500 by the successful Liberal Party under Prime Minister Justin Trudeau . Regardless of what the TFSA limit is, with no cap on the contribution amounts, individuals/singles will still be at a significant financial disadvantage to married/coupled persons. Wording has been slightly changed from the original publication but does not change the thought content of the original publication (changes and additions to wording have been italicized).

The Federal Progressive Conservatives had in their infinite wisdom proposed in an election promise that the Tax Free Savings Account (TFSA) limits be changed from $5,500 to $10,000 per year.

To show the effects of having just $5,500 as a contribution amount for married/partnered versus individual/single Canadians, everybody sharpen your financial pencils and dare to do this simple math exercise-calculator not required.

Step 1 – Create two columns, one labelled married/partnered, the other individual/single. In each column for year 1 enter $11,000 for highest possible contribution for both spouses, and $5,500 for a single. Continue up to year 5 or up to year 40 (suggested number of income producing years). Then total the amounts in each column. At year 5 married/partnered total will be $55,000, single amount will be $27,500.

Step 2 – Now using the ‘Rule of 72’ https://en.wikipedia.org/wiki/Rule_of_72 -calculate the amount of possible compounding interest, investment income that can be generated from amounts in each column. Rate of return of 7 per cent will double the bottom line amount in 10 years and double again in 20 years and so on. Okay, you can use a calculator for this step!

Step 3 – Create a graph for amounts in each column, one for married/partnered totals, another line for individual/single totals. Each step in the graph could be shown for every five years up to forty years.

Results for $5,500 contribution (not including investment or interest amounts) amounts are shown in table below:

TFSA MAXIMUM CONTRIBUTIONS PER YEAR FOR MARRIED/PARTNERED VERSUS SINGLES

NOTE: Does not include potential compounded interest/investment income

TFSA TOTAL Married/Partnered Individual/Single

Year 5 $ 55,000 $ 27,500

Year 10 $110,000 $ 55,000

Year 15 $165,000 $ 82,500

Year 20 $220,000 $110,000

Year 25 $275,000 $137,500

Year 30 $330,000 $165,000

Year 35 $385,000 $192,500

Year 40 $440,000 $220,000

This simple math exercise, which takes TFSA financial amounts down to the lowest common denominator, shows the proposed $10,000 yearly TFSA (all tax free!) would exponentially increase the wealth of married/partnered and high-income Canadians, while flat-lining the wealth of singles and low-income Canadians.

Add in Registered Retirement Savings account (RRSP) amounts with potential investment growth and wealth spread becomes even wider.

Thank you, Progressive Conservative Party for failing this simple math exercise, lining your own pockets just because you are married/partnered and wealthy, lining the pockets of married/partnered and high-income Canadians to levels of untold wealth while kicking off the financial bus individuals/singles and low-income Canadians who are unable to max out TFSA and RRSP contributions or make contributions to both programs.

Shame on Finn Poschmann, V.P. and Director of Research, C.D. Howe Institute for also failing this simple math exercise. In the Calgary Herald, “Popularity of TFSAs could mean lifetime cap in the future”, April 23, 2015, page D3 and business.financialpost.com/personal-finance he states:

“That is absolutely fantastic, when you picture a world where a huge share of Canadians are retiring and living for a very long time, knowing that they have significant savings on hand. And there will less draw on public support programs which is also great….” He further goes on to state: “When TFSAs do become big, they may be a political target, and a financial target for government. However, it would be morally wrong for government to turn course, then, and go back on the commitment made to savers when they are doing their saving. So changing the tax rules retroactively would be very, very bad”.

Who are your financial advisors that would lead you to such an off-balanced decision and statement? Why would think tank persons, who are supposedly critical thinkers, and politicians make such a morally unfair decision to increase TFSA amounts without a cap in the first place and then think it is morally wrong for government to change course after the morally unfair decision has been made? This decision does nothing to erase the use of public support programs as only the wealthy will benefit from raising the TFSA amount.

It is no wonder that Canadian individuals/singles with and without children and low-income persons are in financial despair, repeat, financial despair. With governments, businesses, society and families giving financial preference and perks to married/coupled people and full complement families with two heads of households, individuals/singles are repeatedly having to pay more and get less and can’t even remotely begin to ever ‘catch up’ or be on an equal playing field with married/coupled Canadians.

Financial discrimination and violation of the human rights of individuals/singles and low income people must stop. There must be a cap on TSFA amounts and the cap must be put in place right now rather than later. It is socially, morally and ethically reprehensible, irresponsible and shameful to consciously make the already wealthy even wealthier at the expense of the poor.

Political parties who fail to use simple math formulations to avoid financial discriminatory policies and promises don’t deserve to be in power. Get out and vote! Individuals/singles and low income Canadians, contact your Members of Parliament regarding the financial discrimination of singles and low income persons! (Election took place in October, 2015 with the Liberal party winning a majority and TFSA amount remaining at $5,500).

Lost Dollars Value List

Stay tuned, this is a work in progress and will hopefully appear in future blog entries.

(This paragraph on lost dollar value for TFSA was added April 10, 2016 – If age 25 to age 65 or forty years and annual contribution of $5,000 is calculated for maximum contribution of TFSA that can be used by spouse number two, then calculated lost dollar value equals $200,000 – $5,000 times 40 years. This does not include amounts lost through compound interest and investment potential.)

The blog posted here is of a general nature about financial discrimination of individuals/singles. It is not intended to provide personal or financial advice.

SIX REASONS WHY MARRIED/COUPLED PEOPLE ABLE TO ACHIEVE MORE FINANCIAL POWER (WEALTH) THAN SINGLES

Posted on November 2, 2015 by ffswpadmin

SIX REASONS WHY MARRIED/COUPLED PEOPLE ARE ABLE TO ACHIEVE MORE FINANCIAL POWER (WEALTH) THAN SINGLES (Revised December 1, 2017)

These thoughts are purely the blunt, personal opinions of the author and are not intended to be used as personal or financial advice.

There are many examples of financial discrimination of singles throughout the world. Canada is no exception. Six possible reasons as to why married/coupled people have so much more financial power and are able to achieve more wealth than singles are as follows:

(NOTE: Most of following reasons can be applied to income and tax rules of any country. Canada Revenue Agency is equivalent to IRS in the USA and RRSP/TFSA are equivalent to Roth IRAs, 401(k) and other savings plans in the USA.)

Marital Manna Benefits and Marital Privileging – From beginning of marriage/cohabitation until death of spouse/partner, married/coupled people are able to use benefits to their advantage. (One example is Canadian pension splitting (cra), a method for reducing the taxable income of one spouse by allocating pension income on the tax return to the other spouse. One spouse can give up to 50% of their eligible pension income to their spouse so that they can reduce their combined payable income taxes. Another example is income sprinkling (added October 30, 2017). For example, dividends that would have been received by the primary owner of the private corporation, would instead be paid to the spouse, partner or kids of the primary shareholder, who are often in lower tax brackets, therefore, the family’s total tax bill would be reduced. Since singles in their financial circle are basically financially responsible to themselves,‘Income sprinkling’ is of no benefit to single marital status entrepreneurs so they will pay more tax.) Singles get nothing that is comparable.

Married/coupled people have possibility of multiplying their wealth times 2, all things being equal for both parties. (Examples: Registered Retirement Savings Plan (RRSP) and Tax Free Savings Account (TFSA) times two for the spouses; RRSP/TFSA times one for the single person. (RRSPs are savings plans using before tax income – interest/investment revenue earned is taxable on withdrawal from the account. TFSAs are savings plans using post tax income – interest/investment revenue earned is completely tax free). TFSAs, because they are tax free, are never counted as part of total income; therefore, it is possible to have huge TFSA accounts and still receive full Old Age Security (OAS) supplements and without OAS clawbacks. OAS is supposed to support those with low incomes, not the wealthy (added Dec. 15/17). Singles can never catch up to married/coupled contribution amounts.

(December 1, 2017-more graphs showing TFSA potential have been added at the end of this post).

‘Rule of 72’ (compound interest) times 2-In finance, the ‘Rule of 72’ (Rule_of_72)is a method for estimating an investment’s doubling time. For example, assets invested at a certain percentage should double/triple over a period of time, thus increasing wealth for the total income asset.

Since married/coupled people are potentially able to contribute more to factor times two without single people ever being able to catch up, married/coupled people are also potentially able to exponentially multiply their wealth (i.e. interest from investments) by rule of 72 to a greater advantage than single people. (If money is invested at 7% for 10 years, it should double in ten years, or inversely if it is invested at 10%, it should double in seven years).

Manipulation of finances-married-coupled people are able to manipulate finances (all within legal limits of the financial laws of Canada Revenue Agency). Wealth generated from the manipulations can be likened to a gourmet ice cream cone. Ability to put monies into RRSP/TFSA are equivalent to ice cream cone for married/coupled persons and singles. The ability to gift money to spouse or to have only a 1% rate for loan of monies to spouse/partner can be likened to chocolate dip, maybe even two or three dips, on ice cream cone for married/partnered persons, but not for singles. The interest/investment monies earned from the manipulation can be likened to the gourmet sprinkles on the top of the ice cream cone for married/coupled persons, but not for singles. (Who in world gets a 1% loan rate except married/coupled persons?)

Examples: manipulation for tax purposes:

Spousal RRSPs Gift – If a spouse’s income from part time work will be low for a certain year (withholding amount is equal to amount tax owed for the year), the entire balance of the spouse’s regular Registered Retirement Savings Plan (RRSP) can be cashed out in increments of less than $15,000 per day. The net amount can be contributed to a new spousal RRSP via a gift of money to the other spouse, who then contributes to the spousal plan for the spouse cashing in the original RRSP. If this isn’t double dipping/triple dipping all within legal limits of the law, then what is?(income-splitting-strategies) Singles get nothing that is comparable.

Another example is Canada Revenue Agency’s (CRA) 1% lending rate benefit -Financial Post “How to gain from CRA’s 1% lending rate” (how-to-take-advantage-of-the-cras-1-prescribed-interest-rate). The strategy involves lending money to a spouse/partner to split investment income and to get around the attribution rules, which are designed to prevent most attempts at income splitting among family members. Basically, the rules say if you give your spouse or partner money to invest, any income, dividends or capital gains earned from the money so invested are attributed back to you and taxed in your hands. Who in world gets a 1% loan rate except married/coupled persons?

USA example is Social Security (high-price) that privileges married/coupled persons in many ways. Married woman can receive up to 50 percent of husband’s benefits while husband is alive. Spouses can also receive 100 percent of their dead spouse’s benefits, if the deceased’s benefits are higher than the recipient’s would have been. Also, when married women reach retirement age, they can claim Social Security as a spouse and then later as a worker. For example, they can sign up for spousal benefits at age 66 and then wait four years before claiming their own benefits, because by delaying they accrue credits which increase their benefits by a certain percentage (depending on their date of birth).

In many circumstances, because of economies of scale, married/coupled people are able to live more cheaply than single people. Equivalence scales are one way of proving this (equivalence-scales) – added October 3, 2016.

Married/coupled people will most likely receive two inheritances to singles’ one inheritance all things being equal. (Outside the box the box thinking, because singles are at a financial disadvantage –cannot multiply wealth same as married/coupled siblings, cannot live as cheaply as married/coupled persons, do not receive same benefits as married/coupled persons, sibling family units receive more benefits from parents than single person for things like gifts, RESP for grandchildren, etc., –parents should consider adding an additional 20 per cent to their single children’s inheritances than or married/coupled siblings. Added January 14, 2016).

FROM DECEMBER 9, 2011-FINANCIAL POST ALL-STAR PLAN (finance/all-star-plan)

This is a great example of how married/coupled people have benefited from the 2011 tax revisions for pension splitting at the expense of singles who have not been given the same tax advantages.

Analysis of the information shows:

both are age 60
both are already working part time at age 60 (singles generally cannot work part time at any time throughout their employment lifetime)
they have been able to acquire multiple properties
they are in the position of having as much as 60% more spendable income in retirement than while they were working
he is already getting income from a defined benefit pension after having only worked for 25 years
both want to retire at age 63 (how fortunate that they can do that)
in retirement, they can split pensions to keep each partner’s taxable income in the lowest tax bracket. He can split pension income with his wife and keep more of their wealth for themselves. By pension splitting he can distribute $19,500 a year to her and save 7% on taxes. Seven per cent amounts to a lot of money. (Singles are never able to achieve this amount of financial benefit).
if pension income, including RRIF distributions, is carefully split the couple is not affected by the OAS clawback (how nice, they even get to keep all of the OAS)

FROM INFORMATION RELATING TO DISCRIMINATION FROM MONEYSENSE MAGAZINE- September/October 2010, ‘Single and Secure’, it states:

‘Singles of all ages face discrimination in housing, taxes…..and even travel and entertainment. All of these things can result in disproportionately higher costs per capita for singles than married couples. For instance, a couple with two incomes generally has an easier time qualifying for a mortgage….Coupled with those higher expenses is the fact that the median income for households headed by a single person is substantially lower than for couples. According to Statistics Canada, the median family income for a household headed by a couple in 2007 was $73,000 annually, more than double that of a household headed by a single person with at least one child, at $34,500 annually. Singles on their own fare even worse. The annual median income for their households is only $22,800…

When you also take into account the fact that singles devote a larger percentage of their income to basics such as food…and utilities…it’s easy to see how singles often find they have little money at the end of the month…We hate to say it, but the sad truth is that most singles have to save a higher percentage of their income than couples (sic for retirement) to ensure a happy retirement. There are three main reasons for this. First, singles lack the economies of scale that couples have…The second reason is because singles lose out in a big way when it comes to taxes. In Canada taxes are applied to individuals, not families. That means a single person earning $100,000 a year pays far more income tax than a couple earning the same amount between them…In retirement , singles can’t take advantage of pension splitting, so they could end up paying more tax on their RRSP savings when they withdraw them as well…

’When it comes down to strictly financial and tax matters, the numbers show that everyone could benefit from being married’…The final strike against singles is that they are much less likely to own their own home…a single person with a paid-off home will need to replace about 60% of his or her working income (sic for retirement). If you don’t own your own home, that jumps closer to 75%…(sic for retirement investments, things to watch out for)…The first is that because of the higher per capita taxes for single households, plus the lower net incomes, most single households will have smaller investment portfolios that an equivalent couple. This unfortunately means that investing expenses will take a proportionately larger bite out of your portfolio….’

CONCLUSION

Careful consideration of the above should leave no doubt that married/coupled persons have a distinct advantage of achieving financial wealth over single persons.

Singles need to lobby government, decision making bodies and families about financial discrimination of singles. To affect change, it is important for singles to educate others about this discrimination and the importance of including singles equally to married/coupled persons in all financial formulas.

See next page for more graphs on TFSA potentials.

The blog posted here is of a general nature regarding financial discrimination of individuals/singles. It is not intended to provide personal or financial advice.

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