MARITAL STATUS DOES NOT DEFINE FINANCIAL INTELLIGENCE

Posted on December 24, 2015 by ffswpadmin

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.

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 4 of 4

Posted on December 22, 2015 by ffswpadmin

RESPONSE TO LETTERS ON UNFAIR SINGLE SENIORS TAXATION

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

(This opinion letter was originally published in a local newspaper on September 9, 2015. Since there is a space limit for number of words that can be submitted to newspapers, additional comments that do not appear in the original published article have been added here in italics). This blog post was updated on December 1, 2017 replacing 60-70% of living costs to 1.4 equivalence scale (equivalence-scales) for singles.

Here we go again. Opinion letters from last two weeks show married/coupled people cannot put themselves into singles’ financial shoes without dumbing down singles’ opinions and sticking singles’ finances into family financial boxes. Unfortunately, singles finances don’t work that way. Following is a response to both letters.

Re TFSAs (Tax Free Savings Accounts), caps must be set on TFSA amounts. Otherwise, wealth spread between married/coupled people and singles and low income people will exponentially widen with less money collected in tax systems, and ability to pay for public programs such as education disappearing. Most singles, single parent and low income families are unable to max out TFSAs at lower limit, let alone higher limit (and RRSPs-Registered Retirement Savings Plans).

Re income splitting benefits, multiple discussions show wealthy families benefit more than other families. Present format implies households with singles, single parents (don’t get to stay home to raise kids) and parents with equal incomes don’t deserve same financial equality. Re pension splitting married/coupled people already get two of everything including pensions.

You say bizarre conclusions have been reached. Let’s talk bizarre. Re Allowance Program and Credits benefits, 2009 Policy Brief, “A Stronger Foundation-Pension Reform and Old Age Security” by Canadian Centre for Policy Alternatives, page 4 policyalternatives.ca, states:

‘this program discriminates on basis of marital status as confirmed by case brought under Charter of Rights where federal court agreed program was discriminatory, and ruled it would be too expensive to extend program on basis of income regardless of marital status.’

So what is happening? Age eligibility for Allowance benefits will change from 60 to 62 beginning in 2023 with full implementation in 2029. In this democratic, civilized country let’s just ignore federal court rulings and continue a $? million discriminatory program. Article also suggests that:

‘OAS (Old Age Security) and GIS (Guaranteed Income Supplement) combined should be increased to at least bring it up to after-tax LICO (Low Income Cut Off) for single individuals.’

Why should married/coupled people get discriminatory marital status benefits where unused credits like Age Credits benefits can be transferred to spouse?

Conservatives are so proud they have initiated targeted tax relief benefit where single senior can now earn $20,360 and senior couple $40,720 before paying federal income tax. Using simple math, tax relief for single seniors is only $1,697 per month, for senior couples $3,393 per month. Rent or mortgage payment of $1,000 per month is barely covered for singles, but is amply covered for senior couple.

BMO Retirement Institute Report “Retirement for One-By Chance or Design” 2009 .bmo.com and other reports state present tax systems give huge advantages to married/coupled people with singles never married or divorced at some point throughout their entire working career usually subsidizing married/coupled people.

Russell Investments “Spending Patterns in Retirement”, February 2010, russell.com states:

‘government transfers, such as CPP and OAS are generally not sufficient to cover Essentials of Retirement. Problem is magnified for single retirees. For example, in $35,000-$60,000 income category, couples spend only about 12% more than singles on essentials, yet receive about 80% more in government transfers’.

Eighty per cent more in transfers, why can’t married/coupled people grasp this fact? Why can’t families understand that ‘ever’ singles have not used medical services for baby delivery, maternal/paternal paid LOA’s from work and many have not used any EI benefits? Instead ‘ever’ singles are financially supporting and subsidizing families.

Reader #2 letter also talks about how expensive it is to raise a disabled child. It is no different living as a disabled adult. The Assured Income for the Severely Handicapped (AISH program in Alberta) allows only $1,588 a month for an unemployed disabled person of single status.

True living costs for singles must be recognized. Using equivalence scales it is a well-established fact that living costs for singles are 1.4 to that of a couple. If married persons own their homes outright, the cost of living is even less to that of singles who rent or have a mortgage. If programs such as pension splitting and survivor benefits continue for married/coupled and widowed seniors, then at same time, singles and not widowed single seniors should get 1.4 equivalent scale enhancements through GIS and OAS relative to married/coupled persons’ baselines. Equivalence scale of 1.4 for couples to that of singles’ federal tax relief of $20,360 income should equal $28,504 ($2,375 per month) not $40,720 for couples. Why is that too much to ask?

Politicians and most families are financially illiterate in financial affairs of singles. The Conservative political parties (provincial and federal) are particularly guilty of this as many marital status benefits have been implemented under their watch.

Further advice from reader letters state singles can live with someone else when they are already living in studio, one bedroom apartments, and basement suites. Senior singles who have lived productive lives while contributing to their country want and deserve their own privacy and bathroom. Many senior assisted living dwellings have in recent years built more spaces for singles who with one income pay more for that space than married/coupled persons. Just how long should shared arrangements go on for (entire lives?) instead of correcting underlying financial issues?

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

Assumptions that middle class singles can live on average after tax income of $27,212 is bizarre. Suggestion of $200 food budget and $110 transportation per month for singles is unrealistic. At present gas prices, $150 per month is barely adequate for 30-40 minute drive to and from work. For comparison, Living Wage for Guelph and Wellington (livingwagecanada) (2013 living wage of $15.95 per hour), a bare bones program to get low income and working poor families and singles off the street, allows a calculated living wage income for single person of $25,099 with no vehicle, food $279, transit and taxi $221 (includes one meal eating out per month). (It should be noted that men require more calories; therefore, their budget for food will be higher. Also in 2015, the living wage for Guelph and Wellington has been set at $16.50 per hour).

Reader #2 letter seems to include expenses such as utilities, insurance, and phone bill in family expenses, but excludes them from the single person expenses. Reader #2 seems to think that $500.00 after food, transportation, clothing and rent expenses per month is ample money to cover miscellaneous expenses such as laundry, recreation and eating out plus the non-mentioned utilities, insurance and phone bill. The reader #2 letter then goes on to say: ‘And, if a single person cuts out some of the recreational activities and eating out, could break even at the lower end.’ Once again there is that assumption that singles spend too much on recreation and eating out. And, of course, there is no mention of singles having to save for emergencies or retirement.

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

Families don’t take their own advice which they dish out to singles. Senior couples or widowed don’t want to give up their big houses, but ask for reduced house taxes and senior’s school property tax assistance programs (Calgary Herald, “Not Now” letter to the editor, August 26, 2015). If you can’t pay your house taxes, how about moving to smaller place or go live with someone (tit for tat)? If families with kids don’t pay school property taxes as seniors, then homeowners who have never had kids should not have to pay school taxes throughout their entire lives.

Financial discrimination of singles is accepted in mainstream and is, indeed, celebrated. Article like “Marrying for money pays off” (researchnews) implies married/coupled persons and families are more financially responsible.

In Calgary Herald article, August 7, 2012, Financial Post “Ten Events in Personal Financial Decathlon Success” (personal-financial-decathlon), the Family Status step says:

‘From a financial perspective, best scenario is a marriage for life. It provide stability for planning, full opportunities for tax planning and income splitting and ideally for sharing responsibilities that can enhance each other’s goals and careers. One or two divorces can cause significant financial damage. Being single also minimizes some of the tax and pension advantages that couples benefit from’.

How nice!

There is no need for another political party as stated in Reader #1 letter. In present political system, singles are losing financial ground. Words ‘individuals’ or ‘singles’ rarely come to the financial lips of politicians, families or media. What is needed is to bring financial issues of singles to same financial table as families and to make positive changes for both parties to financial formulas. Singles are not asking for more financial benefits than families, but equivalency to family benefits as applicable at rate of 1.4 to that of household comprised of two persons. They deserve this as citizens of this country.

So when singles are no longer able to live with financial dignity thus creating financial singles ghettos (financial bankruptcy because they are not included in financial formulas), just what will society do? Apparently, they are looking for people to go to Mars. Singles could always be involuntarily sent there. Out of sight, out of mind.

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

Posted on December 9, 2015 by ffswpadmin

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)

____________________________________________________________________

INCOME TABLE

______________________________________________________________________________

INCOME

HOW DOES YOUR PAY STACK UP

_____________________________________________________________________

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

______________________________________________________________________________

NET WORTH TABLE

____________________________________________________________________

NET WORTH

ARE YOU RICH?

______________________________________________________________________________

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

______________________________________________________________________________

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.)

TFSA BOONDOGGLE FOR SINGLES AND LOW-INCOME CANADIANS

Posted on November 8, 2015 by ffswpadmin

TFSA BOONDOGGLE FOR SINGLES AND LOW -INCOME CANADIANS

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

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

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

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

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

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

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

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

TFSA MAXIMUM CONTRIBUTIONS PER YEAR FOR MARRIED/PARTNERED VERSUS SINGLES

NOTE: Does not include potential compounded interest/investment income

TFSA TOTAL Married/Partnered Individual/Single

Year 5 $ 55,000 $ 27,500

Year 10 $110,000 $ 55,000

Year 15 $165,000 $ 82,500

Year 20 $220,000 $110,000

Year 25 $275,000 $137,500

Year 30 $330,000 $165,000

Year 35 $385,000 $192,500

Year 40 $440,000 $220,000

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

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

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

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

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

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

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

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

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

Lost Dollars Value List

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

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

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

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

Posted on November 2, 2015 by ffswpadmin

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

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

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

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

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

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

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

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

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

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

Examples: manipulation for tax purposes:

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

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

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

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

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

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

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

Analysis of the information shows:

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

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

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

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

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

CONCLUSION

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

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

See next page for more graphs on TFSA potentials.

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

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