As you know, Finance Minister Jim Flaherty delivered his federal budget on Tuesday in Ottawa. The budget is aimed at stimulating the Canadian economy in reaction to a deepending global recession and the lack of availability of credit in many parts of the world (though much less so in Canada)
This budget has a few items that could affect your financial plan and present additional opportunities. In case you haven't had a chance to review the media coverage, I thought you would appreciate a quick overview of the federal budget.
For small business owners: The government plans to increase the amount of small business income eligible for a reduced 11% federal tax rate from the current $400,000 to $500,000 retroactive to January 1, 2009.
RRSPs, RRIFs and estate planning: There will income tax provisions to recognize a decrease in the value of RRSP or RRIF investments that occur after the annuitant's death and before they are distributed to beneficiaries.
RRIF withdrawal reductions: There will be a one-time 25% reduction in the mandatory withdrawals of RRIFs for the 2008 taxation year.
Senior age credit increase: The government increased the age credit amount by $1,000 for a total of $6,408.
Home renovation tax credit: Planning to upgrade or retrofit your home? This new credit, effective between January 28, 2009 and February 1, 2010, allows you to claim 15% on the portion of eligible expenditures exceeding $1,000, but not more than $10,000, for a maximum tax credit of $1,350. To encourage home ownership and home construction, the finance minister proposes to increase the amount first-time homebuyers can withdraw from their RRSPs to purchase or build a home — from $20,000 to $25,000. It also proposes to establish a first-time homebuyer's tax credit which could amount to $750 worth of savings on closing costs.
Tax Bracket Changes: Changes to the personal income tax brackets are among the more notable developments announced in Budget 2009. As of January 1, 2009, the two lowest income tax brackets will be raised 7.5% above 2008 limits to $40,726 and $81,452 respectively. The basic personal amount will also be increased to $10,320 in 2009, up from $9,600 in 2008.
I hope you find these highlights useful. I will be posting a more detailed budget summary on my website in the next few days, http://www.assante.com/advisors/cball/ If you'd like to discuss these and other federal budget initiatives and how they affect your financial plan, please don't hesitate to contact me.
Chris
Source: United Financial Corporation, Government of Canada
Wednesday, January 28, 2009
Tuesday, January 13, 2009
2008 Review
As you know, 2008 was a very difficult year for investors. Global equity markets declined sharply, following wave after wave of negative business and economic news.
Most global stock markets were down by more than 30% for the year. The U.S. stock market, represented by the S&P 500 Index, had its worst year since 1937. In Canada, it’s difficult to believe that our stock market hit a record high of 15,073 points on June 18, 2008, thanks to strong commodity prices pushing up the shares of Canadian resource companies. From that point to the end of the year, the index slipped by more than 6,000 points or 40%, resulting in a decline of 33% for the year as a whole.
Virtually all market watchers were stunned by the extent of these market declines and by how quickly they occurred. The problems began over a year ago as the U.S. housing market began to turn down and homeowners began to default on their mortgages – especially “sub-prime” mortgages. These mortgages were used to back billions of dollars’ worth of securities held by banks, hedge funds and a multitude of other financial institutions and investors.
The crisis gradually deepened throughout 2008, reaching a climax in September, as the losses led to the failure of a number of major U.S. and European financial institutions. The failures created a new crisis of confidence in the financial system, freezing credit markets and compounding concerns about the impact on the broader economy. This set the stage for the dramatic drop in commodity prices and global stock markets from September to November.
Certainly, this has been a painful period. So, where do we go from here?
In spite of all the bad news, there are many reasons to remain optimistic about the future. Here are just a few. Governments and central banks have taken co-ordinated and substantive action to support the financial system, increase the flow of credit and stimulate the economy. Inflation remains low. Technological innovation and development continue to drive productivity gains. And, we are seeing continued growth in emerging markets such as China and India, as these countries become more integrated into the world economy and millions of their citizens advance to the middle class.
You and I made a decision to invest a portion of your portfolio in equities to share in the growth achieved by companies and the economy. Over the long term, equities have provided superior returns when compared to bonds and cash – though not without short-term volatility. It’s important to remember that the rationale for investing in equities has not changed.
Despite today’s gloomy news, history has shown time and again that the recession will end, corporate profits will grow, employment will increase, and the stock market will recover and go on to new highs. Though no one can say for certain when the bottom will be reached, it makes sense to stay invested.
In fact, some of the world’s best-known and most successful investors, including Warren Buffet, see value in the market and are putting new money into stocks now. Investors who sell their equity holdings now not only lock in their losses, but risk missing the inevitable turnaround. In Mr. Buffet’s words, “I haven’t the faintest idea as to whether stocks will be higher or lower a month – or a year – from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”
Consider 1990, when there was a collapse in real estate prices, a severe recession, the failure of hundreds of U.S. savings and loan companies, and the threat of war looming in the Persian Gulf. However, the stock market turned around months before the recession ended and went on to post an increase of over 400% in the following bull market.
At difficult times like these, it is only natural to ask questions about your investments. I would be pleased to meet with you to discuss your portfolio and whether any adjustments are required for your investment plan.
Source: United Financial Corporation
Most global stock markets were down by more than 30% for the year. The U.S. stock market, represented by the S&P 500 Index, had its worst year since 1937. In Canada, it’s difficult to believe that our stock market hit a record high of 15,073 points on June 18, 2008, thanks to strong commodity prices pushing up the shares of Canadian resource companies. From that point to the end of the year, the index slipped by more than 6,000 points or 40%, resulting in a decline of 33% for the year as a whole.
Virtually all market watchers were stunned by the extent of these market declines and by how quickly they occurred. The problems began over a year ago as the U.S. housing market began to turn down and homeowners began to default on their mortgages – especially “sub-prime” mortgages. These mortgages were used to back billions of dollars’ worth of securities held by banks, hedge funds and a multitude of other financial institutions and investors.
The crisis gradually deepened throughout 2008, reaching a climax in September, as the losses led to the failure of a number of major U.S. and European financial institutions. The failures created a new crisis of confidence in the financial system, freezing credit markets and compounding concerns about the impact on the broader economy. This set the stage for the dramatic drop in commodity prices and global stock markets from September to November.
Certainly, this has been a painful period. So, where do we go from here?
In spite of all the bad news, there are many reasons to remain optimistic about the future. Here are just a few. Governments and central banks have taken co-ordinated and substantive action to support the financial system, increase the flow of credit and stimulate the economy. Inflation remains low. Technological innovation and development continue to drive productivity gains. And, we are seeing continued growth in emerging markets such as China and India, as these countries become more integrated into the world economy and millions of their citizens advance to the middle class.
You and I made a decision to invest a portion of your portfolio in equities to share in the growth achieved by companies and the economy. Over the long term, equities have provided superior returns when compared to bonds and cash – though not without short-term volatility. It’s important to remember that the rationale for investing in equities has not changed.
Despite today’s gloomy news, history has shown time and again that the recession will end, corporate profits will grow, employment will increase, and the stock market will recover and go on to new highs. Though no one can say for certain when the bottom will be reached, it makes sense to stay invested.
In fact, some of the world’s best-known and most successful investors, including Warren Buffet, see value in the market and are putting new money into stocks now. Investors who sell their equity holdings now not only lock in their losses, but risk missing the inevitable turnaround. In Mr. Buffet’s words, “I haven’t the faintest idea as to whether stocks will be higher or lower a month – or a year – from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.”
Consider 1990, when there was a collapse in real estate prices, a severe recession, the failure of hundreds of U.S. savings and loan companies, and the threat of war looming in the Persian Gulf. However, the stock market turned around months before the recession ended and went on to post an increase of over 400% in the following bull market.
At difficult times like these, it is only natural to ask questions about your investments. I would be pleased to meet with you to discuss your portfolio and whether any adjustments are required for your investment plan.
Source: United Financial Corporation
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