CONTINUED FINANCIAL ILLITERACY OF FINANCIAL GURUS EQUALS FINANCIAL DISCRIMINATION OF SENIOR SINGLES (Part 2 of 2)

CONTINUED FINANCIAL ILLITERACY OF FINANCIAL GURUS EQUALS FINANCIAL DISCRIMINATION OF SENIOR SINGLES (Part 2 of 2)

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.)

This blog post is a comment on the Broadbent Institute Report on the economic circumstances of Canadian seniors.  The Broadbent Institute is a left-leaning social democratic think tank founded by Ed Broadbent who was a past leader of the New Democratic Party .  It describes itself as an independent, non-partisan organization championing progressive change through the promotion of democracy, equality, and sustainability and the training of a new generation of leaders.  Its mission is to “Support, develop, and promote social democratic principles for the 21st century”, “Propose new solutions for a more equal society”, and “Equip a new generation of progressive campaigners & thinkers with the tools they need to build a social democratic society through training and education”.

This post addresses excerpts from the report first (Part 1), and then is followed by comments on the report (Part 2).

COMMENTS ON  REPORT – PART 2 OF 2

In February, 2016 the Broadbent Institute in Canada and Richard Shillington of Tristat Resources published the report:  “An Analysis of the Economic Circumstances of Canadian Seniors”.       (analysis_of_the_economic_circumstances_of_canadian_seniors)

The report information is mainly directed towards poverty of seniors without an employer pension plan (roughly 47 per cent) and therefore, many of these seniors have wholly inadequate retirement savings.

(It should be noted in the report that single seniors does not refer to marital status, but the fact that they live alone.  Therefore, single seniors includes ‘ever’-never married, no kids-singles, divorced/separated, and widowed seniors living alone).

Review of the report reveals some points that are very disconcerting.

  • The true facts of what it costs singles to live is under-reported.  Married/coupled persons and, indeed, the author of the Broadbent report do not seem to realize that the widowed (married/coupled persons whose spouses are deceased) are a part of the singles population.  It is a well known fact that it costs singles approximately 70 per cent of what it costs married/coupled persons to live as a single unit.  This fact is never addressed in the report. (Using LIM 11.1 percent of seniors live in poverty–719,000 seniors:  419,000 singles and 250,000 living in an economic family.  The poverty is astonishingly high at almost 30 per cent for senior singles without employer pension plans).  (Widowed persons and the extra benefits they get are discussed later in this post).
  • All the extra benefits that have been given to married/coupled persons are never addressed.  Governments continue to create financial silos where more and more benefits are given to married/coupled persons even though they are able to live with less because of economies of scale, but not to singles resulting in financial inequality.  (Following table was updated on March 8, 2016 with additional information).

financial silos6

  • It is ludicrous that this report does not treat home equity as a retirement asset.  Those who have to rent are at a much greater financial disadvantage than those who own their own home.  Quote from report : “ …..Many of those who argue that there is no looming pension crisis have included home equity as a liquid asset.  This analysis has not treated home equity as a retirement asset because the replacement rate analysis has as its objective an income that allows one to enjoy a lifestyle comparable to that which existed pre-retirement.  We do not include home equity here because we accept that the pre-retirement lifestyle for many middle- and moderate-income Canadians include continued homeownership”, (Page 19).

According to Statistics Canada 2011 articles “Living Arrangements of Seniors” and “Homeownership and Shelter Costs in Canada”:      (statcan.gc.ca) and (statcan)

  • The average household total income for couple-family households was about twice that of non-family households (which were primarily one-person households) and lone-parent households ($101,000 per year versus $43,000 per year and $55,000 per year respectively).  Thus, while lone-parent households and non-family households had a lower cost than couple-family households, the lower household total income results in a higher proportion exceeding the affordability threshold”.
  • Approximately 69 per cent of Canadians own their own home.  About  four out of five (82.4%) married/coupled people own their own home, while less than half (48.5%) of non-family households (singles) own their dwellings.  Just over half (55.6%) of lone-parent households own their dwelling.  (It stands to reason that more senior married/coupled and widowed persons will own their own homes, while senior singles–‘ever’ single and early divorced)–are more likely to have to rent placing them in greater income inequality and a lower standard of living and quality of life). Regardless of housing tenure, the proportion of non-family households and lone-parent households that paid 30% or more of total income towards shelter costs was about twice the proportion of the couple-family households.
  • Quote “approximately 56.4 per cent of the senior population (5 million total seniors in 2011) live as part of a couple and about 24.6 per cent of the senior population live alone (excludes those living with someone else, in senior citizen facilities and collective housing).

Singles are constantly told to ‘go live with someone’ when they have difficulties paying for housing; meanwhile married/coupled and widowed persons may be living in their big houses (enjoying the same lifestyle they had before pre-retirement) and seeking help with paying their taxes while refusing to move to a less expensive dwelling.  (senior-singles-pay-more-part-3-of-4)

  • It is ludicrous for this report to state that seventy per cent  income replacement should be a benchmark in the formulas.  Seventy per cent income replacement is entirely different for those who own their own home versus those who rent.  It is selfish to think that the rich and married/coupled persons should be able to live same lifestyle post-retirement as pre-retirement when singles and early divorced generally will have a poorer lifestyle throughout their entire lives.

An example is the Financial Post financial evaluation “Bright Future Despite Big Debt, Small Income” published in Calgary Herald on February 20, 2016 where Ontario young couple’s after tax income is $4,800 per month and their food budget is $800 and entertainment $160 per month for two people.  Just these two items are 20 per cent of their budget.  Either they live in an area with very high food costs or they are living the high life for one of the necessities of life in Maslow’s Hierarchy of need.  Seventy per cent replacement at retirement would give this couple an unreasonably high style of life for food in comparison to singles.   Reader letter mentioned above in ‘senior-singles-pay-more-part 3-of-4’ link suggested singles should be able to live on just $200 per month for food.

  • It is ludicrous to suggest that persons without employer pension plans cannot save, especially those with incomes over $100,000.

Quote from report:  “For those with incomes in $50,000-$100,000 range, the median value (savings) is only $21,000” (Page 3).

If those with pension plans have forced saving, it it is ridiculous to say that those without pension plans are not able to save.  For example, a $75,000 before-tax income may result in $600-$700 per month being deducted from pay cheque (employer deductions are excluded in this discussion).   It is also ridiculous to say that in this First World country persons with $100,000 plus incomes cannot save.  One of the principles of good finances is to save 10 per cent.  Whole report promotes greed of looking for more benefits and not planning for the future if there is no plan for saving during working years.

  • Reporting false information on marital status is a crime.  Quote from report states:  “Table 7 represents the results of increasing the single and married GIS amounts by the same percentage.  One should keep in mind that there is an incentive for seniors to appear as singles to governments even if they are living as a couple.  This is because the GIS for senior couples is less than twice the amount for singles.  An increase in the GIS for singles only (with no increase for couples) would increase this so-called ‘tax on marriage’ and associated incentives.  This would encourage couples to hide their cohabitation from the authorities for financial reasons”, (Page 21).

GIS for senior couples should, repeat, should be less than twice the amount for singles.  Singles (particularly ‘ever’ and early divorced singles including the author of this blog) have worked very hard to have financial formulas include singles at 70 per cent of married/coupled persons living as a single unit.  The GIS for senior singles is more than married/coupled persons because it costs more for singles (including widowed persons)  to live than it does for married/coupled persons living as a single unit.  Why can’t married/coupled persons understand this?  When married/widowed persons become widowed their living costs will go up.

The statement  “An increase in the GIS for singles only (with no increase for couples) would increase this so-called ‘tax on marriage’ and associated incentives. This would encourage couples to hide their cohabitation from the authorities for financial reasons” is absurd and selfish.  Tax on marriage, why can’t married/coupled persons realize all the extra benefits they receive as outlined in table above???  When is ‘enough’ ever going to be ‘enough’ for them???

The notation (# 28) at the bottom of page 21 states:  “While legislation treats those cohabiting the same regardless of their marital status, it is easier to deceive the government if you are not married”.  This statement is false and backwards.  If it is anyone being deceitful, it is the married/coupled persons.  Can someone explain why it would be easier to deceive the government if you are not married (‘ever’ single)?  The issue with false reporting lies with those who are married/coupled, divorced or separated.  They are trying to ‘milk’ the system by falsely reporting their marital status even though the Canada Revenue income tax rules clearly define the parameters of marital status.

False reporting is a crime.  It would be very easy to track deceit by following income tax declaration of marital status and address of residence over several years.  Deceit of married/coupled persons would incrementally increase the monetary value they would receive from the deceit as it costs them less to live as a couple than it does single persons.

It seems married/coupled persons want it all even if they have to lie about it.  So what will they do when their spouse goes to a nursing home or is deceased?  In order to collect the benefits they are entitled to as one spouse living at home and the the other in a nursing home and widowers, they will need to lie again and change their marital status from single to married/coupled or widowed when filing their income taxes.

‘Ever’ singles (never married, no kids) throughout their entire working lives pay same amount of taxes as each individual (with equal income to the single person) reporting income tax in a married/coupled relationship and have supported/subsidized families who use mom/baby hospital care, EI benefits for maternal/paternal leaves, etc.  They are never recognized for their tax support and for using less resources than families.  Since singles have paid supportive taxes throughout their entire working lives, they deserve to live with the same financial dignity and respect as seniors and as married/coupled persons.  As seniors, ‘ever’ singles deserve to have their own space and their own bathroom and not be forced to cohabitate with other persons.

The real financial lives of singles is revealed when a simple math calculation is used for the targeted tax relief where a single senior can now earn $20,360 and a senior couple $40,720 before paying federal income tax.  This so called tax relief for seniors allows federal tax relief for singles equal to $1,697 per month and for senior couples $3,393 per month.  The tax relief for senior singles hardly covers a rent or mortgage payment of $1,200 and $250 for food per month (Maslow’s Hierarchy of Need), but amply covers this amount for a senior couple.  For a couple $1200 for rent or mortgage and $500 for food leaves $1693 (or 50% of $40,000) for other necessities and maybe even a nice little vacation all tax free.

CONCLUSION

It is incredible how in just a few paragraphs a think-tank can undo the hard work that singles have been trying to achieve in seeking financial equality.  Think-tanks and financial gurus continue to practice financial illiteracy on what it truly costs singles to live.   (false-assumptions-four-ways-seniors-singles-lose outand (financial-gurus-financially-illiterate-about-singles-finances)

Even though the final statement of the report states:  The GIS is the most effective federal mechanism in the short term for reducing the poverty rate and the impact of poverty on seniors, and it can be targeted at senior singles who need it the most”, there are many shortcomings to this report.

This report is encouraging irresponsible financial behavior.  It is morally, ethically and socially reprehensible in a First world country to say that one cannot save with an income over $100,000 and to promote financial inequality and discrimination of singles.

The Broadbent Institute is supposed to be about ‘a more equal society’, so where is the financial equality?

SOLUTIONS

In order to ensure financial equality between singles (including widowers) and married/coupled persons the following measures need to be taken:

    • change financial formulas so that senior singles receive 70 per cent of whatever is given to married/coupled senior persons as it costs more for singles to live than it does married/coupled persons because of economies of scale
    • financial formulas should be revised to include all senior persons regardless of marital status in one financial formula.  To eliminate financial silos that benefit married/coupled persons most, delete benefits already given to married/coupled persons such as pension splitting (benefits the rich most) so that there is a level financial playing field for all regardless of marital status. (It is understood that it is expensive to raise children and  benefits given for children should last for first twenty years of the life of the child.  However, beyond the twenty years of the children, any other benefits given to married/coupled persons should be deleted or should also be given equally to singles at rate of 70 per cent)
    • create a side-by-side list of all possible benefits under categories of married/coupled, widowed and single and analyze the total value of benefits in each category (see table above).  Financial formulas should be created equally for all categories, not just the married/coupled and widowed.
    • delete allowance benefit that has been ruled to be discriminatory by the courts
    • education, education and more education on financial literacy for singles.  Think tanks, financial gurus and married/coupled people need to educate themselves on what it really costs singles to live.

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.)

 

 

MARRYING FOR MONEY PAYS OFF

MARRYING FOR MONEY PAYS OFF

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

This Washington Associated Press article appeared in the Calgary Herald on January 19, 2006.  Since it may be difficult to find online, it is reproduced in full here, and is followed by the author’s comments.

‘Marrying for money, it turns out, works.

A study by an Ohio State University researcher shows a person who married – and stays married – accumulates nearly twice as much personal wealth as a person who is single or divorced.

And for those who divorce, it’s a bit more expensive than giving up half of everything they own.  They lose, on average, three-fourths of their personal net worth.

“Getting married for a few years and then getting divorced is clearly not the path to financial independence,” says Jay Zagorsky, whose study divided married couples’ assets so they could be compared with singles.

Zagorsky, a research scientist at OSU’S Centre for Human Resource Research, tracked the wealth and marital status of 9,055 people from 1985 to 2000.  Those people have been participating in the National Longitudinal Survey of Youth, which has repeatedly interviewed them about various aspects of their lives since 1979.  The participants are now 41 to 49 years old, making them the youngest of the baby boomers.

Zagorsky cautioned results could be different for older and younger Americans, who have faced different attitudes about marriage, divorce and living together without marriage.

Zagorsky’s study, published in the current issue of the Journal of Sociology, defines wealth as assets, such as real estate, stocks and bank accounts, minus liabilities, such as mortgages.

A big reason married people accumulate more wealth than others is simple economies of scale – one house is cheaper to maintain than two, he said.  Divorce reverses those benefits, Zagorsky said.

“Divorce looks like one of the fastest ways to destroy your wealth,” he said.

David Popenoe, co-director of the National Marriage Project at Rutgers University, said people become more economically productive after they marry.

“They work harder, they advance further in a job, they save more money and maybe invest more wisely,” Popenoe said.  “That’s because, one can speculate, they are now working for something larger than themselves.  They are working for a family.”

Zagorsky showed singles slowly accumulated wealth during the study.  Married people accumulated wealth much faster, accumulating 93 per cent more than single or divorced people over the life of the study, Zagorsky said.’

 

 Further discussion on this article by Ohio State University “DIVORCE DROPS A PERSON’S WEALTH BY 77 PERCENT, STUDY FINDS” states:  (researchnews.osu)

‘…The data in this study can’t say why marriage is so helpful in building wealth, and why divorce so devastating, Zagorsky said. But sociological research offers some potential clues: Married people can benefit because two people can live more cheaply than they could separately. In addition, because two spouses can share household responsibilities, they can each produce more than if they were single.

Divorced people have a variety of costs associated with the divorce, which increases how much they spend and decreases how much they can save, he said.

“We can’t tell from these data the reasons why divorced people have so much less wealth than those who are married, but the results are clear, Zagorsky said…..’

Blog Author’s Comments

No matter how the pie is sliced, families are generally wealthier than singles.  In this study after 15 years, married persons (who stay married) accumulate nearly twice as much personal financial wealth as a person who is single or divorced, even though many have had the expense of raising children.

So what does a family have in wealth after 30 years and again after 45 years – three, four and five times the wealth?  The answer is ‘yes’.  Fast forward to year 2009 and see MoneySense, October 2009 (all-canadian-wealth-test).  The table “Are You Rich Yet?” shows that if one examines the upper middle class 20% net worth quintile, the worth of unattached individuals is $81,001 to $270,000 compared to the worth of families of two or more which is $358,600 to $697,000.  The gap is even wider between unattached individuals and families of two or more because single parents with children are included in the family of two or more statistics.  (To portray a more accurate picture, single and divorced/separated, especially at a younger age, parents with children must be pulled out of the family of two or more column and put into their own column).

The All-Canadian Wealth Test, January 2015 (based on Statistics Canada 2011 data) (all-canadian-wealth-test-2015) shows for upper-middle 20% net worth quintile the wealth for unattached individuals is $128,088 to $455,876 and families of two or more $589,687 to $1,139,488.  Again, the statistics are skewed because single parents with children are included in this category).

It should also be noted that middle class family net worth is not disappearing.  Review of statistics from the All Canadian Wealth Tests show that in just two years net worth has substantially increased.  The richest of the rich net worth has increased the most, while the net worth of the poorest of the poor has proportionately the least (added January 20, 2016).

The “Marrying for money pays off” article also states that ‘…people become more economically productive after they marry.  They work harder, they advance further in their job, they sae more money and maybe invest more wisely…that’s because, one can speculate, they are now working for something larger than themselves.  They are working for a family…’

Really??? Participants at the end of the study were 41 to 49 years of age.  So what is being said is that somehow at the age of 41 to 49, married people have managed to become brilliantly smart at accumulating wealth while singles have remained brilliantly stupid at accumulating wealth.  Yet in the same article, it clearly states ‘a big reason married people accumulate more wealth than others is simple economics of scale – one household is cheaper than two.

The Ohio State University State article states: ‘The data in this study can’t say why marriage is so helpful in building wealth, and why divorce so devastating, Zagorsky said. But sociological research offers some potential clues: Married people can benefit because two people can live more cheaply than they could separately. In addition, because two spouses can share household responsibilities, they can each produce more than if they were single.’

They can’t say why marriage is so helpful in building wealth???  Reference to “Six Reasons Why Married/Coupled Persons able to Achieve more Wealth than Singles” (six-reasons) gives six clear reasons why married/coupled persons do so much better financially than singles or divorced/separated persons.

Just another study where society continues to denigrate singles, and considers them to be less financially intellectual than families.  Reasons why married/coupled persons are able to accumulate more wealth is because of marital manna benefits, not because of financial intelligence or that they are more dedicated to financial well-being because they are family.

This blog 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

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.

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 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.

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

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.)

  1. 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.

 

  1. 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.

TFSA table1

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

  1. ‘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).

  1. 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).

  1. 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.
  1. 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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