TO RENT OR OWN AFFORDABLE HOUSING – THAT IS THE QUESTION

TO RENT OR OWN AFFORDABLE HOUSING -THAT IS THE QUESTION

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

This post will discuss whether renting or affordable housing are good housing options for single and low income persons.

  1. RENTING AS VIABLE OPTION FOR LANDLORDS AND RENTERS

Rental costs from landlord perspective:  A review of financial information shows that in order to generate a 5% annual return on  a $250,000 rental property with no mortgage costs, the expenses incurred will be  as follows:

What Landlords think they need to make renting their spaces a revenue generating business at 5 percent profit in the Calgary market:

              rent charged (2 bedrooms)            $12,500

              condo fees ($325 X 12)                 $  3,900

              PT taxes                                        $  1,500

              upkeep (paint, carpet, etc.)            $  1,200

               extra cost of wear (kids/pets)       $  1,200

          TOTAL RENT PER MONTH             $20,300 divided by 12 months  = $1,700

This does not include costs associated with loss of income when property is vacant, cost of major upkeep such as replacing appliances, cupboards every 5 to ten years, damages incurred from kids and pets, eviction costs, insurance, etc.

Arguments for and against high rental costs from perspective of landlords and renters

A review of an online article “Calgary Landlords war against the poor?” (landlords) shows pro and con comments on why landlords think they need to charge the present rental amounts and why poor are left out because they cannot afford to pay the present high rental  amounts.  Arguments are also made as to whether or not mortgage payments should be included in the rental costs; if included, then even higher rents need to be collected.

Comments on the side of the poor and low income include:

  • ‘So then I ask you, where are these people supposed to go?  No offense, but the “it’s just business, nothing personal” should have no place when talking about human lives.’

  • ‘Gouging is a very common competent of a working free-market.  The right (Conservative and like) just don’t want to admit they’re are (…..) for doing it.  It is not about right or wrong.  The difference between a renter and a landlord is that the landlord has assets.  So even if you are living in a home and renting a condo,  having to shell out money for repairs doesn’t exactly cost you as much (in the long run) as it would a long term renter.  Because eventually you can sell that property and retire in comfort.  It is very hard for a person who is just starting out with nothing to build themselves up to your level  It is not that we don’t want to be there, it is just that there may not be as much opportunity for us so called “low-lives” as one may think.  So when your entire income goes to shelter, food and clothing, there is not much left to save for any sort of down payment on anything…’

  • ‘You are already making money by charging a tenant the mortgage, the land tax and the insurance.  The mortgage part is already profit.  An accumulated investment  Beyond that, maybe a little more, is gouging.  These people can’t see that is wrong.  If they could charge a million dollars a month they would.’

One of the last reader comments submitted was the following (it is interesting to note that this comment pretty much shut up any further comments being made):

  • ‘When, by gouging people for the necessities of life such as food and shelter, you contribute to the cost of living being higher than a working person can afford.  You force me as a taxpayer in a rather high tax bracket, I might add ,to pay for the subsidization required to keep these people from starving or being out on the street or alternatively imprisonment when they steal to live, or more cops to maintain social order with a starving underclass.  I’m tired of deadbeat free-riders trying to shuffle the externalities of their greed onto me.  It is time for some controls being placed on the ability of landlords to  raise rents.  Rental increases being limited to 5% or double to rate of inflation annually, whichever is lower, seems reasonable to me.

Some comments suggested that most people should stay away from the landlord game as it is not a profitable business for the lighthearted.

Landlord profile and Financial Planner Advice

Financial profile of a married couple is as follows:  Calgary Herald, December 12, 2015 (and Edmonton Journal) Financial Post “Oil Crash Forces  Fix for Couple” (edmonton-journal)

This summary is about Gary, 60 and Wendy, 67, an Alberta couple who grew prosperous with Gary’s work as a petrochemical  engineer often earning as much as $200,000 a year doing consulting.  However, his work is now history as a casualty of collapsed oil prices.  Wendy worked as an administrative assistant earning $24,000 a year before she retired in 1990 (well before age 65, by the way).  Their income at the present time is $2,175 a month and is $3,240 less than their total monthly expenses of $5,415.  (Part of their income is $590 after expenses from their two rental properties.) They say they need to know if they can survive.  The article does mention one child is renting one of their rental properties.

  • Their net worth is $1,867,238.  Their assets include residence $550,000, rental property #1, $460,000, and rental property #2 $430,000.  Their investments include Registered Retirement Savings Plan $132,616, USA 401K in Canadian dollars $250,000, Tax Free Savings Account $39,334, non-registered savings/GICs $174,288 and two cars $17,000.  Their total  liabilities are two mortgages of $186,000 on rental properties.

The profile states the largest problem is that the couple’s income properties, which make up 60 per cent of their invested assets, produce little cash flow.  One unit is rented to the couple’s son and its $1,150 monthly rent is below market values.  Their other rental property generates $1,300 a month before expenses.

The financial planner makes the argument:  ‘When Gary generated an income of $200,000 a year or more, they could afford to ignore investments, rent properties below market value and spend freely’. The financial planner’s recommendation is get rid of money losing rental property, cut expenses and reallocate assets to cut investment costs.  It doesn’t seem to matter to the financial planner that this couple has acquired huge financial assets in their rental properties ($700,000+ value).

Conclusions about Renting

Renting income properties from landlord’s perspective is that this is a business and needs to generate a profit even when renting to singles (son in above example)and the poor (many of whom cannot afford $1,700 for rent).  In other words, the goal of financial Utopia in a land of ‘milk and honey’ (Alberta) will never be achieved by the landlord with reasonable rents and certainly not by singles and the poor who are renting.  Maslow’s Hierarchy of Needs principle for singles and the poor will also be violated when basic needs of shelter as well as food and clothing will not be realized.

UNAFFORDABLE RENT = VIOLATION OF “MASLOW’S HIERARCHY OF NEEDS” PRINCIPLE

For landlords and families who think singles and low income persons deserve only a single room‘ or ‘should live with someone’ they should read the January, 2009 study “Social Housing Waitlists and the One Person Households in Ontario” (cprn.org) on what it is like to live in these housing circumstances.  An excerpt from this study reads as follows:

‘many households turn to shelters or make do with what they are able to find in the private market, often spending more than 50% of their income on rent. The focus of this study is one-person households under the age of 65 who make up approximately 40% of the applicants on Ontario social housing wait lists. This cohort has the longest wait times. How does this demographic cope during these waiting periods? What are their housing experiences? ‘

 

  1.  AFFORDABLE HOUSING AS VIABLE OPTION FOR SINGLES AND LOW-INCOME

From “Upside-Down Finances re Housing for Singles and Low Income – Part 1 of 3”, November 13, 2015 post (upside-down-affordable-housing), one example of housing shows condos presently being sold as follows:  1 bed, 1 bath, 1 patio micro-condo of 552 sq. ft. with starting price of $299,900 and $543 per square foot..   Two patio, 3 bed, 2.5 bath, 2 and 3 story 1830 sq. ft. condos priced from $649,900 to $749,900.start at $355 per square foot.

Singles and single parent with children are more likely to buy one bedroom housing.  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 since these fees are based on price of property, not square footage of the property.  When it is sold, will seller recoup buying price?

Financial  world for singles and low income continues to be completely flipped upside-down and turned topsy-turvy for housing while the rich and middle-income families  pay less and get more.

COMBINATION SINK AND TOILET IN TINY SPACE

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 without 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 (as only new purchasers will be participating) and neighbors continue to have a “not in my backyard” mentality (NIMBY).  Tiny house NIMBY mentality also extends to homeowners who don’t want tiny houses near their properties.

Calgary Herald “‘Nothing new’ from housing collective” article, December 16, 2015 (calgaryherald) is a 46 – page document – 18 months in the making – and calls on homeless and housing organizations, the development industry and governments to ‘work  together differently’ for at least two years, developing ‘Calgary-based solutions with blueprints for action’ and providing support as required.  The mayor, in addition to other parties, is disappointed at how long study has taken and states that ‘time for talk’ is over.

Conclusions about Affordable Housing

There is no affordable housing for singles and low income persons when they are forced to pay more for less space with less income than the rich and middle-class families.  Inaction and NIMBY continues to be prevailing principle for Affordable Housing.

Conclusion overall for Renting and Affordable Housing for Singles and Low Income

Options for both renting and affordable housing continues to become more and more out of reach for singles and low income.  

 

rent-buy1

So, when both renting and affordable housing are out of reach for singles and low income persons, just what are they to do?

“Eggleton: Canada needs more affordable housing” September 20, 2015  (eggleton) article in the Ottawa Citizen states:

‘I think we all understand intuitively the importance of having decent shelter. A home anchors a person, anchors a family. It provides a foundation for people to move forward toward greater stability in the workplace or higher educational attainment. Health experts also tell us that adequate housing is a key determinant of health and long-term health outcomes’.

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

COUNTRY SHOCKED BY VETERANS HOMELESSNESS

 

COUNTRY SHOCKED BY VETERANS HOMELESSNESS

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

March, 2015 study has revealed that approximately 2,250 veterans are homeless.or about 2.7 per cent of the total homeless population (homeless-veterans).  There is shock that there are homeless veterans and it took five years to track the data.  Average age of homeless veterans is 52 years of age compared to 37 years of age for general homeless population.  Review of online information reveals that many veterans joined armed forces because of lack of jobs as in Atlantic Canada, and then come back to again no jobs.  Age in fifties also makes it more difficult to integrate back into civilian life. Many of these homeless are single or if married/ partnered suffer broken marriages/partnerships because of the mental stresses of service.

Why should this be shocking when 300,000 Canadian persons or families are waiting for affordable housing ?  In addition immigrants are brought into country, given temporary free housing and jobs adding further insult to injury.  (In recent news immigrant family,while travelling to Jamaica, found their Canadian-born child is on a ‘no fly’ list – so what is this, immigrant family wealthy enough to have a nice little vacation while Canadian-born persons are homeless or waiting affordable housing?)

The mentality of government, decision makers, businesses and families in this country is to serve only the rich and middle class families while ignoring singles, low income and no income individuals and families.   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 entertaining and maintaining close ties to friends and families.  They talk about how their ‘hearts are eternally and inexplicably changed’ when bearing their children, but same hearts appear to become ‘hearts of stone’ when these same children become adult singles, low income or no income persons and families.  The greed of business decisions takes over from family values and these disadvantaged persons are tossed out or are considered less important or non-existant in financial  formulas and decision-making processes.

Housing is just one example.  Those with the money and decision making powers continue the NIMBY mentality where they do not want to see tiny houses or condos in their precious spaces.  When tiny condos are built, for example 200 square feet, the purchasers of these spaces are often forced to pay more on less square foot living space and less take-home income than families paying for houses (thus violating Maslow’s Hierarchy of Needs (Maslow%27s_hierarchy_of_needs).  One example is a complex in Calgary where the 532 square foot condo is $299,900 or $543 per square foot, and the 1830 square foot condo begins at $649,900 or $355 per square foot.  The higher cost per square foot means that tiny space purchasers also will pay proportionately more real estate fees, education fees, house taxes and mortgage interest payments because all these fees are based on the cost of the housing, not square footage.  (See November 13,2015 post “Upside Down Finances re Housing for Singles and Low Income” – how is this any different than loan sharking or payday loans?)

Calgary Herald December 16, 2015 article “Nothing New from housing collective” (housing-affordability) (a study going on for 14 months) states:

’Mayor Naheed Nenshi says he’s unhappy with the city’s Community Housing Affordability Collective strategy, but hopeful  it’s members now understand the ‘time for talk is over.’

Talk, talk, talk, and study after study without action is just meaningless rhetoric.  In this so called democratic, civilized country all persons, whether they are immigrants or Canadian-born, single or married, male or female, low income or no income deserve the same financial dignity and respect such as being included in financial formulas.  All individuals deserve a living wage job and a place to  live in just like the rich and middle class families.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

 

NEW YEAR’S RESOLUTIONS (FINANCIAL) FOR SINGLES

stock-vector-creative-happy-new-year-design-vector-illustration-334950749

 

NEW YEAR’S RESOLUTIONS (FINANCIAL) FOR SINGLES

  1. I resolve to contact my members of government, policy and decision makers and educate them about the financial discrimination of singles.
  2. I resolve to question fees when married/coupled persons (adult to adult) are paying less person to person for two adults than for one adult. (Example:  gym memberships when married/coupled persons pay less per person than single persons.   It is recognized that children are expensive to raise and, therefore, fees for the children may be free.  However, it is financially discriminatory to charge a single adult and a divorced/separated adult with and without children more, adult to adult, than married/coupled adults.)
  3. I resolve to contact my members of government, policy and decision makers and insist that singles (ever) and divorced/separated individuals need to be included in financial formulas, not just married/coupled persons and widowers.

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Name                                                                                                      Date

INHERITANCES-LOST DOLLARS FOR SINGLES

INHERITANCES – LOST DOLLARS FOR SINGLES

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

In the featured post of this blog ‘Six Reasons why Married/Coupled People are able to Achieve More Wealth than Singles’ (six-reasons),  the sixth reason states that married/coupled persons are able to achieve more wealth because they receive two inheritances, while singles receive only one.  (All  things being equal it is assumed that spouses will receive an inheritance from each side of the family).

Research suggests that the average Canadian inheritance is $100,000.  This does seem somewhat understated, especially since the average Canadian house is now worth $400,000 plus.

Thomas Piketty’s book “Capital in the Twenty-First Century” (Capital_in_the_Twenty-First_Century) describes how inherited wealth is growing at a much faster pace than economic growth leading to not just a highly unequal society, but to a society of oligarchy, to a society where inherited wealth will dominate, and patrimonial capitalism.

At the present time inherited wealth is outpacing economic growth because capital is tending to produce real returns of 4 to 5 percent while economic growth is much slower at a rate of 2 to 3 percent.

Inherited wealth for married/coupled persons will develop at a much faster pace than inherited wealth for single persons not only because of two inheritances, but also because the rate of return (rule of 72) (Rule_of_72) will also increase the total net worth for the two inheritances. The result is that low income and middle class singles will more likely have difficulty maintaining a decent income level throughout their working lives and into their retirement years in comparison to married/partnered persons.

Outside the Box Thinking

All things being equal, since singles are at a financial disadvantage (investment potential, costs more for singles to live, married/coupled persons receive more in benefits,etc.) in comparison to their married/coupled siblings, parents should think about dividing inheritance between their children so that the single child receives an additional 20%-25% of his/her share of the inheritance.  (added January 14, 2016)

LOST DOLLAR VALUE LIST

A value of $100,000 lost will be added to the list.  This is probably grossly understated since, first, inheritances are likely higher than $100,000, and second, the rule of 72 growth has not been added since it is not possible to calculate.  (However, using rule of 72, a rate of return of 3.5 per cent would double the original $100,000 in twenty years.)

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advicel)

 

MARITAL STATUS DOES NOT DEFINE FINANCIAL INTELLIGENCE

MARITAL STATUS DOES NOT DEFINE FINANCIAL INTELLIGENCE

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

In the last four posts, financial discrimination of senior singles was discussed.  In addition, two reader letters and response to letters addressing assumptions of married people that singles can live with someone if they lack financial resources, and that financial problems of singles are because their lifestyles are too extravagant was discussed.

It is mind boggling as to why married/coupled people always seem to think that because they are married/coupled they have more financial intelligence and are able to manage their money better than single and divorced/separated persons.  They also almost can never put themselves into the financial shoes of single and divorced /separated persons.

Singles are one the fastest growing demographics in the country, yet they are left out of financial formulas and discussions.

leave it to beaver

WHEN OUR POLITICAL LEADERS MAKE IT SOUND LIKE THE FAMILY FROM ‘LEAVE IT TO BEAVER’ IS STILL THE CANADIAN NORM, THERE ARE CONSEQUENCES FOR THE REST OF THE COUNTRY, SAY SINGLE VOTERS (quote from example #3 article).

 

In this post, the issue of marital status not defining financial intelligence will be discussed by reviewing three examples.

Example #1 and #2 show married/coupled persons are not any better at managing money than single and divorced/separated persons.  Example #3 talks about financial misconceptions about singles.

(Financial profiles from the Financial Post are an interesting study in how persons perceive wealth.  Anyone can submit an email requesting a free family finance analysis.  It is interesting to note that most of the married/coupled requests for financial analysis are from relatively wealthy persons.  These same requests always are requesting financial help because of worry that they will not have enough money to live and retire.)

Example #1, a financial profile of a married couple is as follows:

Calgary Herald, December 12, 2015 Financial Post “Oil Crash Forces  Fix for Couple” – (this profile can be viewed in full online)

This summary is about Gary, 60 and Wendy, 67, an Alberta couple who grew prosperous with Gary’s work as a petrochemical  engineer often earning as much as $200,000 a year doing consulting.  However, his work is now history as a casualty of collapsed oil prices.  Wendy worked as an administrative assistant earning $24,000 a year before she retired in 1990.  Their income at the present time is $2,175 a month and is $3,240 less than their total monthly expenses of $5,415.  They say they need to know if they can survive.  The article does mention one child who is renting one of their rental properties.

Their net worth is $1,867,238.  Their assets include residence $550,000, rental property #1, $460,000, and rental property #2 $430,000.  Their investments include Registered Retirement Savings Plan $132,616, USA 401K in Canadian dollars $250,000, Tax Free Savings Account $39,334, non-registered savings/GICs $174,288 and two cars $17,000.  Their total  liabilities are two mortgages of $186,000 on rental properties.

The financial planner makes the statement:

“When Gary generated an income of $200,000 a year or more, they could afford to ignore investments, rent properties below market value and spend freely”.

The financial planner’s recommendation is get rid of money losing rental property, cut expenses and reallocate assets to cut investment costs.  If they follow the planner’s advice, they should have a before tax income of about $74,000 per year.  With splits of pension income and application of age and pension income splitting credits, they would pay 13 percent tax and have $5,345 a month or $64,140 annual income to spend.  Compare that to reader letter#2, December 12, 215 post that suggested singles with rent or mortgage expenses can live comfortably on a middle class income of $27,000 a year.

It is interesting to note  that their food budget for two people is $1,120 per month and expenses for entertainment are $220 per month.  The financial planner suggests they cut their food budget by $400 and their entertainment budget by $100 per month.

Simple logic without seeking financial planner advice would imply that in order to increase their income they could sell one rental property,  live on the proceeds, then sell the next rental property and live on those proceeds, and finally start taking income from their investments.  They would still have their residence as collateral.  With all their wealth this couple still feel they need to seek financial advice.

If one compares this example to the suggestion from the recent posts that singles can live on $27,000 per year and $200 a month for food, one wonders why this couple would have any financial worries with the wealth that they  have.  Also, reducing their food budget by $400 still allows them to  have a food budget of $350 per person.

Example #2 is taken from a published article “Beyond the Blue Line” by the Canadian Scholarship Trust (CST).

The report showed that approximately 66 per cent of Canadian parents have, or know someone who has, borrowed money or used retirement savings to put their children through extracurricular activities.

In contrast, 48 percent of parents have invested in a Canadian RESP (Registered Education Savings Plan).

CST reported that 43 per cent of parents said they’d borrowed money on a credit card, line of credit, personal or family loan for extracurriculars like hockey. The remaining 23 per cent deferred their retirement or used their retirement savings for extracurriculars.

More than half of Canadian parents (57 percent) said they feel every child should have the chance to play hockey if they want to, ‘because it’s part of growing up in Canada,’ CST said. The percentage represents a drop of more than 10 per cent from last year, when 69 percent said all children should be able to play hockey.

Despite the high rate of borrowing for extracurriculars, nearly half of parents said they knew someone pulling their kids out due to the cost. Thirty per cent said they, or someone they knew, regret the amount of money spent on activities like sports.”

Parents will play financial roulette with their money even though there is less than one per cent chance of their children becoming professional hockey players.

Example #3

This example is taken from the National Post June 12, 2015, : “ They are one of Canada’s fastest growing demographics, so why are politicians ignoring the single voter?” by Claire Brownell,  (article is available online).

This article first talks about:

“Marcel Watier, a single 39 year old, who lives on his own in a rented basement apartment.  He earns a good salary, thanks to a full time job and a part-time job on the side.  He says people think he must be spending his money on stereotypical urban luxuries – dinners out, craft cocktails, a condominium with a pool and a rock-climbing wall – since he doesn’t have a partner or children.  ‘They just see a single guy working two jobs and think I must be rolling in money.  If I was rolling in money, would I be working two jobs?’

In addition to supporting himself, he helps his two sisters, who have eight children between them and a ninth on the way. (The article does not state why he has to do this.)

If those were his children and Walter were married, he would be eligible for a long list of tax breaks, benefits and programs.  As a single person, he’s on his own.  He states: It drives me up the wall to hear the whole ‘selfish single’ term.”

The word single is hardly ever used by politicians.

“The phrase ‘Canadian families’ has been spoken 5,669 times in the House of Commons since 1994″, according to OpenParliament.ca, with Conservatives (Party) accounting for almost half of those mentions.

If Canada’s singles were to get up tomorrow and decide it’s high time they stood up for themselves, they would form a formidable voting bloc.  Maybe it’s time to try.”

Conclusion

The above examples show that marital status does not define financial intelligence; rather it is the belief systems, moral values, and financial values instilled throughout lifetime that define how money will be spent and saved.

It is time that singles be included in financial formulas, not just families.  Instead of politicians promising things to only certain groups of citizens, they should be thinking about how to improve society as a whole.

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

SENIOR SINGLES PAY MORE – PART 2 OF 4

FINANCIAL FAIRNESS FOR SENIOR SINGLES NOT PART OF PLAN

(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).

This article was published in a local newspaper on August 19, 2015. The Conservative Party was in power federally at the time. In the October, 2015 federal elections the Conservatives were ousted by the Liberal Party. Proper names have been removed.)

In the midst of a Federal Election the financial rhetoric continues. The Conservative Member of Parliament, Wildrose, in his latest mailbox flyer, states that Conservatives have been committed to helping provide Canadian seniors with a secure and dignified retirement. The reality is that married/partnered people stand to gain much more from the Conservative Action Plan 2015 and other Conservative financial initiatives than individual/single seniors.

First, increases in the contribution limits of the TFSA account favors married/partnered people as the contribution limit per person is doubled. (The doubling of the TFSA was rescinded by the Liberals when they came into power in the October, 2015 federal election).

Second, pension splitting benefits applies only to married/couple people, not singles.

Third, the Age Credit benefits initiative increased by an amount of approximately $1,000. This benefit is incrementally reduced by 15% of net income exceeding approximately $35,000 and is eliminated when net income exceeds approximately $80,000. Any unused portion of the Age Credit can be transferred to the individual’s spouse or common-law partner. Comparable benefit of unused portion to individuals/singles without a spouse/common-law partner is zero.

Fourth, in the targeted tax relief benefits a senior couple can earn $40,720 without paying income tax (marital manna benefit), while a single senior can only earn $20,360 before paying income tax.

Fifth, Allowance for people ages 60 to 64 benefits are available to the spouses or common-law partners of GIS recipients. The spouse, age 60 to 64, of a senior with a single income of less than $31,584 may receive an allowance of $1,070.60 per month. This is an additional $12,000 per year. Furthermore, this benefit may also be available to immigrant married/coupled people who have been in the country for only ten years. Canadian-born and immigrant individuals/singles have nothing comparable to this benefit.

These are just a few of many more examples.

The following tables showing the income and net worth/wealth of unattached individuals versus families of two or more have been taken from MoneySense, The All-Canadian Wealth Test, January 2015 (moneysense) (based on Statistics Canada 2011 data)

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INCOME TABLE

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INCOME

HOW DOES YOUR PAY STACK UP

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Quintiles                    Unattached Individuals        Families of Two or More

Bottom 20%                 $0 to $18,717                         $0 to $38,754

Lower-Middle 20%        $18,718 to $23,356                 $38,755 to $61,928

Middle 20%                  $23,357 to $36,859                 $61,929 to $88,074

Upper-Middle 20%         $36,860 to $55,498                $88,075 to $125,009

Highest 20%                 $55,499 and up                      $125,010 and up

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NET WORTH TABLE

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NET WORTH

ARE YOU RICH?

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Quintiles                     Unattached Individuals        Families of Two or More

Bottom 20%                 Negative to $2,468                  Negative to $67,970

Lower-Middle 20%         $2,469 to $19,264                   $67,971 to $263,656

Middle 20%                   $19,265 to $128,087                $263,657 to $589,686

Upper-Middle 20%         $128,088 to $455,876              $589,687 to $1,139,488

Highest 20%                 $455,877 and over                   $1,139,489 and up

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An individual/single person who has an income of more than $55,000 is considered to be in the top 20% ‘wealthy’ category, but has great difficulty living a ‘wealthy’ lifestyle on $55,000 especially if they have a mortgage or need to pay rent in their senior years (meanwhile wealthy family income is $125,000 and up). Women between ages 45 and 64 earn on average $23,000 less than men.

What is even more revealing is the net worth of unattached individuals compared to families of two or more. The MoneySense article makes the following comments:

“The collective net worth of the lowest 40% of individuals wouldn’t match the poorest 20% of families. Families can build wealth faster than individuals because they can pool resources, which enables them to pay down debts faster and make larger purchases. And what a difference it makes: between ages 55 and 65, families are worth, on average, a whopping $670,000 more than unattached individuals in the same age group”.

 

(It should be noted that the net worth is probably even higher for families of two or more, since it appears that single parents with children are included in families of two or more statistics.  Single and divorced/separated parents of children, especially if younger in age, should excluded from families of two or more and placed into  their own category for more accurate statistics -added January 20, 2016).

It is always prudent to have more than one source for verification of facts, so here are another two.

The “Current State of Canadian Family Finances 2013-2014” report by the Vanier Institute of the Family vanierinstitute.ca states that

“between 1999 and 2012 the net worth of families advanced more than it did for unattached individuals”.

The 2009 “Report of the National Seniors Council on Low Income Among Seniors” (seniorscouncil) states that:

“between 1980 and 2006, the unattached have the highest incidence of low income of any group, with 15.5 percent of unattached seniors living below LICO in 2006, a rate 11 times higher than that of senior couples (1.4 per cent)”.

So how can married/coupled people continue to demand more financial benefits? How can governments continue to increase the financial means of married/coupled people at the expense of unattached individuals/singles? And, how expensive is it really to raise children when families can achieve so much more net worth than singles? Financial fairness requires balance and elimination of unfair benefits such as income/pension splitting and ability to transfer credits from one spouse to another.

The Conservative MP claims to “stand up for Canada’s seniors who have helped make Canada the strong and prosperous country it is today”. However, this holds true more for married/coupled people in Canada than it does for individuals/singles. In his flyer, the Conservative MP wants feedback on the question “Am I on the right track to deliver support to seniors?” For senior individuals/singles the answer is a resounding and unequivocal “NO”.

Individuals/singles need to stand up, speak out and make facts such as the above known to their members of Parliament, those with decision-making power, and families. Individuals/singles need to decide which political parties are detrimental to their financial health and vote for the party which best meets their financial needs in the Federal election. They need to demand financial sensibility and equality. Financial discrimination of one segment of the population over another is a blatant violation of human rights and civil rights.

(This blog is of a general nature about financial discrimination of individuals/singles  It is not intended to provide personal or financial advice.)

SENIOR SINGLES PAY MORE -Part 1 of 4

SENIOR SINGLES PAY MORE – Part 1 of 4

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.

(The next four posts will consist of four parts. Parts 1 and 2 will be two published Opinion letters, Part 3 will be two Opinion letters published by readers in response to letter in Part 2. Part 4 will be author’s response to the two reader letters in Part 3.)

(This Opinion letter was published in a local newspaper on June 24, 2015. The Conservative party was ousted by the Liberal party in the October, 2015 election. Proper names have been removed. Since published letters are restricted to number of words that can be published, some additional information is added in italics to this article.)

In the June 17, 2015 edition of a local newspaper, a Conservative Member of Parliament states that the Conservatives remain committed to seniors through various measures they have implemented since 2006. This includes targeted tax relief where a single senior can now earn $20,360 and a senior couple $40,720 before paying federal income tax. He states that approximately 400,000 seniors (or 7 to 8% of total Canadian seniors) have been removed from the tax rolls altogether, (he neglects to state federal tax rolls only). This year, he says there is more good news for seniors by reducing the minimum withdrawal for RRIFs (Registered Retirement Income Funds) and introducing a new Home Accessibility Tax Credit (this neglects to recognize that not all seniors own homes).

The above so called tax relief benefit for seniors allows federal tax relief for senior 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.

The BMO Retirement Institute Report-Retirement for One-By Chance or Design 2009 bmo.com/pdf and cifps.ca/Public/Media/PDF states the following:

‘the present tax system is set up to give a huge advantage to married/coupled people with singles who were never married or were divorced at some point throughout their entire working career usually subsidizing married/coupled people’. (It is interesting to note that this statement in the original article appears to have been removed and is no longer present in URL shown above).

From Russell Investments ‘Spending Patterns in Retirement’, February 2010 russell.com it is stated that:

‘government transfers, such as CPP and OAS are generally not sufficient to cover the Essentials of Retirement-less than 70% coverage for the average retiree, and as a little as 30% for higher-income retirees. This problem is magnified for single retirees. For example, in the $35,000-$60,000 income category, couples spend only about 12% more than singles on essentials (i.e. food, housing, and clothing), yet receive about 80% more in government transfers’.

The senior population includes about 13% of ‘ever’ single seniors (never married, divorced or widowed) and divorced single seniors (the younger persons are when divorced, the more likely they are to be poor as seniors) and about 43% widowers, (who receive marital manna benefits like pension splitting while married and survivor pension benefits). It is a well-documented fact that singles require 60 to 70% income of married/coupled people depending on whether they rent or own a home with 70% likely being the more accurate figure (Moneysense, BMO Retirement Institute Report-Retirement for One-By Chance or Design, etc.).

So how does the Conservative tax relief program for seniors help ever-single seniors? It doesn’t. Instead, with the addition of marital manna benefits such as pension splitting and survivor benefits, individuals/singles are financially made to be not even 50% worthy of total married/coupled tax relief, but rather less than 50% of married/coupled tax relief. And immigrant families are also financially made to be more income worthy than Canadian-born and immigrant senior individuals/singles.

Governments, businesses and society all talk about ‘family, family, family’, but singles continue to be ‘kicked out’ or deemed ‘less worthy’ than married/coupled people in the ‘family’. The Conservative Prime Minister, Finance Minister, and Members of Parliament remain financially illiterate in individual/singles financial affairs.

The continued financial discrimination of singles must be eliminated by recognizing what it truly costs for ever-singles and divorced/separated senior singles to live in this country. If programs such as pension splitting for married/coupled seniors and survivor benefits for widows continue to be added, then at the same time, ever-single and divorced single seniors must be given equal financial status through enhanced programs such as GIS and 60-70% enhancement of singles’ income baselines over married/coupled person’s and widow baselines. Sixty per cent of couples’ tax relief $40,720 income equals $24,432 ($2,036 per month) and 70% of $40,720 equals $28,504 ($2,375 per month).

The Conservative Member of Parliament’s article is titled ‘Seniors play an increasingly important role in our society’. Unfortunately, married/coupled and widowed seniors are deemed to play a more financially important role than ever-singles or divorced/separated early in life singles even though singles have supported married/coupled and widowed persons throughout their lifetime through contributions by paying more taxes and getting less in benefits.

The senior population of Canada includes only about 13% of singles and divorced/separated persons, while widows comprise 43% of the senior population. If the marital manna benefits were taken away from the widowed persons (who by the way could now be considered to be living a ‘single’ lifestyle since they are now technically ‘single’) they would be on a more equal instead of a greater financial footing to ever singles and divorced/separated persons. Or, if looked at from another perspective since ever singles and divorced/separated persons comprise only 13% of the senior population, would it really cost that much more to give them the same financial benefits as widows? As citizens of this country senior ever singles and divorced/separated persons deserve and should be treated with same financial respect as widowed seniors.

To continue the common sense and critical thinking of this article, a simple rephrasing of the information is as follows:  Governments need to top up tax free amount for ‘ever’ singles and early divorced/separated senior persons to from $20,0000 to $28,000 (70% of $40,000) plus give to ‘ever’ singles and early divorced/separated persons 70% of whatever benefits are given to widowed persons.  To do nothing or less than this only continues the financial discrimination already been committed against ‘ever’ singles and divorced/separated persons.

LOST DOLLARS LIST’

Since it costs ‘ever’ single and divorced/separated seniors with rent or mortgage about 70% – 75% of married/couple seniors’ income, lost dollars of 70% for $20,000 extra that married/coupled seniors get tax free or $6,000 per year (age 65 to 90) will be added to the list.  Total value of dollars lost will be $150,000 ($6,000 times 25 for years age 65 to 90).

 

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.

    

FALSE ASSUMPTIONS- ‘FOUR WAYS SINGLE SENIORS LOSE OUT’

FALSE ASSUMPTIONS OF ARTICLE ‘FOUR WAYS SINGLE SENIORS LOSE OUT’

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.

(On searching internet a few days ago this article was found – ‘Four ways single seniors lose out’ by Ted Rechtshaffen, Financial Post October 13, 2012. While the intentions of the article are great, the assumptions and categorization of singles is false.)

In his October 13, 2012 article Ted Rechtshaffen (four-ways-single-seniors-lose-out) talks about four ways that single seniors financially lose out. Portions of the article are outlined in part here (full article is available online):

Rechtshaffen states:

“Being part of a couple in old age has so many tax advantages that losing a spouse through divorce or death can be very costly. Given the fact that so many more single seniors are female, this unfairness is almost an added tax on women. Becoming single in old age could cost you tens of thousands of dollars through no fault of your own. The current tax and pension system in Canada is significantly tilted to benefit couples over singles once you are age 65 or more….

Here are four ways that single seniors lose out:

1. There is no one to split income with. Since the rules changed to allow for income splitting of almost all income for those aged 65 or older, it has meaningfully lowered tax rates for some…If you are single, you are stuck with the higher tax bill.

2. CPP (Canadian Pension Plan) haircut… If one passes away, the government doesn’t pay out more than the maximum for CPP to the surviving spouse. They will top up someone’s CPP if it is below the maximum, but in this case, they simply lose out almost $12,000 a year.

3. RSP/RIF (Retirement Savings Plan/Retirement Income Fund) gets folded into one account. This becomes important as you get older and a larger amount of money is withdrawn by a single person each year — and taxed on income…her tax bill will be much larger… than the combined tax bill the year before, even though they have essentially the same assets, and roughly the same income is withdrawn.

4. Old Age Security (OAS). The married couple with $50,000 of income each, both qualify for full Old Age Security —… If the husband passes away, you lose his OAS, about $6,500. On top of that, in the example in #3, the wife now has a minimum RIF income…and combined with CPP and any other income, she is now getting OAS clawed back.

The clawback starts at $69,562, and the OAS declines by 15¢ for every $1 of income beyond $69,562. If we assume that the widow now has an income of $80,000, her OAS will be cut to $414.50 a month or another $1,500 annual hit simply because she is now single. In total, almost $8,000 of Old Age Security has now disappeared. As you can see, a couple’s net after-tax income can drop as much as $25,000 after one becomes single.

On the other side, there is no question that expenses will decline being one person instead of two, but the expenses don’t drop in half. We usually see a decline of about 15% to 30%, because items like housing and utilities usually don’t change much, and many other expenses only see small declines.

In one analysis our company did comparing the ultimate estate size of a couple who both pass away at age 90, as compared to one where one of them passes away at age 70 and the other lives to 90, the estate size was over $500,000 larger when both lived to age 90 – even with higher expenses.

So the question becomes, what can you do about this?

I have three suggestions:

1. Write a letter to your MP along with this article, and demand that the tax system be made more fair for single seniors. You may also want to send a letter to Status of Women Minister…as this issue clearly affects women more than men.

2. Look at having permanent life insurance on both members of a couple to compensate for the gaps. Many people have life insurance that they drop after a certain age. The life insurance option certainly isn’t a necessity, but can be a solution that provides a better return on investment than many alternatives and covers off this gap well. If you have sufficient wealth that you will be leaving a meaningful estate anyway, this usually will grow the overall estate value as compared to not having the insurance — and not hurt your standard of living in any way.

3. Consider a common law relationship for tax purposes. I am only half joking. If two single seniors get together and write a pre-nuptial agreement to protect assets in the case of a separation or death, you can both benefit from the tax savings.

Ultimately, the status quo is simply unfair to single seniors, and that needs to change.”

Ted Rechtshaffen is president and wealth advisor at TriDelta Financial, a boutique wealth management and planning firm. www.tridelta.ca

The first thing that is so wrong with this article is the definition of single versus married/partnered in marital status. The senior persons mentioned in this article are not single. According to Statistics Canada definitions, they are widowed or divorced/separated (after age 65). Persons who are true and ever singles have none of the financial benefits/losses mentioned in this article. And if persons are divorced/separated, especially at an early stage of their marriage, they also do not have many of the benefits/losses mentioned here. (The earlier the divorce/separation in life, the greater is the loss of benefits that married/coupled persons enjoy).

  1. Being part of a couple in old age has so many tax advantages…How true!
  2. The current tax and pension system in Canada is significantly tilted to benefit couples over singles once you are age 65 or more….This statement is not completely true. The system is even more unfair for singles who are true (‘ever’) singles, not widows. Singles who are true singles have been excluded from the discussion.
  3. Benefits – Article correctly states that pension splitting, CPP, RSP/RIF and OAS are benefits to married people because the couple receives these benefits times two and is able to pension split, but widowed persons have less of these benefits. To this, true singles and early divorced/separated persons ask the question, “so what”? If widowed persons are now so called ‘single’ they should have to live same standard of living, not better than, true singles and early divorced/separated persons.
  4. Losses – Losses are correctly stated, however, true (‘ever’) singles and early divorced/separated persons have a hard time understanding why this is a hardship. Widowers are now ‘single’ so why can’t they live the same lifestyle as true singles and early divorced/separated persons?
  5. Higher tax bill – Why is this a problem? Widowed persons are now on more equal playing field to true single and early divorced/separated persons.
  6. Clawback – Again why is this a problem? True singles and early divorced/separated persons enjoy none of these benefits. Also, many true (ever) singles and early divorced/separated Canadian persons do not have the luxury of a $70,000 income.

Estate size $500,000 less
Just more proof that married/coupled persons want it all and want more, more and more from the time of marriage until the death of their spouse/partner and even after the death of their spouse/partner.  In article ‘The Added Price of Single Life?’ by Bella Depaulo (belladepaulo) talks about a A British study that showed  true singles lose equivalent of $380,000 USA over a lifetime to married persons, so what is the problem with losing $500,000? Another good article is ‘The high price of being single in America’ theatlantic.com.

The article then goes on to make these enlightening points:

“There is no question that expenses will decline being one person instead of two, but the expenses don’t drop in half. We usually see a decline of about 15% to 30%, because items like housing and utilities usually don’t change much, and many other expenses only see small declines“.

It would be exceedingly wonderful if government, businesses, society and families (married/partnered) would recognize this fact for true singles and early divorced/separated persons instead of telling them “it must be their lifestyle” that is making them poor. Fifteen to 30 percent decline? Wow, singles would love these percentages to also be used for them especially since 60 to 70% income of married or partnered persons is often used (i.e. MoneySense articles). If only true singles and early divorced persons could say they should have the same benefits as widowed persons, that is, 70 to 85% income of married or partnered persons.

Unfair to single seniors?  The  most unfairness is to true singles and divorced/separated persons, not widows.

Regarding the suggestions that are made:

  1. “Write your MP and demand that tax system be made more fair for single seniors”. The article refers only to married/coupled and divorced/separated seniors after the age of 65. It dis criminates by exclusion against true singles and early divorced/separated persons.
  • “Look at having permanent life insurance on both members of a couple to compensate for the gaps”. This is a great idea. The author of this blog has long thought this would be a solution to providing benefits to survivors once spouses have died and they would actually be paying for those benefits through premiums. At the present time, survivors are getting marital manna benefits, but then are asking for more as this article suggests. They are also getting survivors benefits from pension plans and paying very little for these benefits. An example is a pension plan where only $100 is deducted each month from living spouse for pension benefits in the thousand dollar range. Deduction of $100 per month or $1200 per year does not pay for survivor pension that is two-thirds of full pension of the spouse. Life insurance plans at present time do not extend to 90 years of age without excessive premiums. To stop all the marital manna benefits that survivors get, life insurance plans need to be extended to 90 years of age, and spouses need to pay premiums for entire life. Another critical thinking, outside the box idea is to eliminate marital manna benefits and make permanent term life insurance plans compulsory, just like house and car insurance, so that married/coupled persons would actually pay for the benefits they receive. This methodology would allow true singles and early divorced/separated persons to be on more level financial playing field to married/coupled persons since generally true singles do not need life insurance. A longer term for collecting premiums should help to offset the costs of the premiums that will be paid out. Permanent life insurance would ease burden that married/partnered benefits place on government programs. There also would then be more monies to bring government programs for true singles and early divorced/separated persons to have same standard of living as married/coupled and widowed persons.
  • Consider a common law relationship for tax purposes. He says he is only half kidding. Really? According to Canada Revenue Agency rules this is not legal. Ever singles and divorced/separated persons cannot just shack up with someone for tax purposes. More true singles and early divorced/separated persons would be doing this if they could.

Lessons learned

  1. Writers who wish to write about the financial affairs of singles should use correct definitions for singles. The persons in this article were not true singles. In other words, correctly identify who your audience is.
  2. Writers of financial institutions who wish to write about the financial affair of singles should include all singles in their discussions. To do anything less is discriminatory and disrespectful to singles who truly are single.
  3. By all means vote and contact your Members of Parliament, but insist that true singles and early divorced/separated persons (senior and otherwise) be included in financial discussions and formulas equal to and at the same level as widows and middle class families. (Seventy to 85% income of married/coupled persons would be wonderful).

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.

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DISCRIMINATORY STATEMENT ‘MARRIAGE IS ANSWER TO POVERTY’

KATHLEEN PARKER’S DISCRIMINATORY STATEMENT MARRIAGE IS ANSWER TO POVERTY

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.

(In the Calgary Herald January 10, 2014 Kathleen Parker published an editorial letter called ‘Spouses are foot soldiers in war on poverty’. The following article was sent to the Calgary Herald as a response to this letter but was never published. Parker’s opinion can be viewed online at Kathleen Parker, Jewish World Review, January 15, 2014 ‘The War on Poverty’s secret weapon’. (kathleen/parker.archives.asp)

RE: Opinion by Kathleen Parker – Spouses are foot soldiers in war on poverty, Calgary Herald, January 10, 2014

It is mind bending and insulting on how governments, society and media continue to discriminate against singles and promote the marriage myth as an answer to poverty. This article is offensive to singles who are divorced, separated because of violent abusive marriages or widowed.

For the reporter who states that some fall into poverty simply because of luck and devaluation of the old idea that marriage is good for everyone, here is a completely new idea. Singles are poor because they are financially discriminated against every day of their lives.

The state of being unmarried as one of the highest single factors for poverty is only because government, society and media choose to keep singles in financial poverty while married people are given financial manna benefits from date of marriage until date of death.

One very good example among many is pension plans. Singles are told they don’t need the same financial amount to live as married people, but are forced to overpay at least three times for their pensions by paying more taxes than married people, forced to support survivor benefits because spouses have not paid extra for survivor benefits, and on pension withdrawal again pay more taxes, and cannot pension split. Survivors become ‘single’ when spouses decease, so why do they need survivor benefits?

Simple exercises taking financial information for singles versus married people (i.e. the Financial Post Personal Financial Evaluations in the Calgary Herald) further show the devastation of financial discrimination against Canadian singles. Information analysis supports the general rule that married people win every time because government and society have made it so.

‘Marrying for money pays off’  (researchnews.osu.) and ‘High Price of Being Single in America’ (high-price-of-being-single-in-america) further support the cornucopia of perks, privileges and benefits available exclusively to married people in Canada and the USA, countries that are supposedly more advanced and civilized in eliminating discrimination.

It is time to let singles as humans (and in their humanity equal to married people) rather than marital status be their qualification for basic dignities such as financial and social well-being. How about financial fairness for all regardless of marital status as a solution to poverty?

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.