Posts from the ‘Tax’ Category

May 26

The OAS Pension Recovery Tax: What To Do if the Claw back Ain’t For You

If you really want to light a fire in belly of most middle class retirees, I strongly suggest turning the conversation to how their OAS pensions are reduced if their taxable incomes top about $71,000 as of July, 2014. More specifically, they will lose $.15 for every dollar in taxable income they receive above that point until, if they make enough, their entire OAS pension of $6,618.48 (what most long-time Canadians receive if they take their pension as soon as possible as of May, 2014) is a thing of the past. I plan to use this and a subsequent article or two to explain how the claw back works and some steps you can take to minimize the impact. Today’s offering will set the stage and explain why dividends may not be as good as advertised when the claw back comes calling.

Feb 7

Participating Life Insurance – The Third and Final Chapter

For those of you waiting with bated breath, here is the third and final installment in my series on Participating Whole Life Insurance aka "Par Policies." The first and second chapters of this exciting story describe what these things are and how they work, including some information on what the insurer considers when determining what to pay you in policy dividends each year, and exploring your different choices for what to do with these things, along with the tax consequences. Today, we get practical. I'll talk about some of the different types of Par Policies currently available, how you can use them to help fund your retirement and, perhaps most importantly, what to consider when you're looking to buy a policy. With no further ado, here goes . . .

Jan 27

More on Par Policies a.k.a. “Participating Whole Life Insurance”

Introduction

This article continues the conversation begun in my last article on Par Policies. For those of you who haven't read it or have quickly repressed the details from your memory, here's a brief recap. Par Policies are a type of permanent life insurance that allows policyholders to reap some of the insurance company's rewards in exchange for taking on some of its risks. You take on these risks by paying a higher initial premium. The insurer doesn't expect its costs each year to be as high as it assumed when calculating your premium, so policyholders typically get some of their extra premium dollars back each year through something called a "policy dividend." How much do you get back? This is stated as a percentage and is called the "dividend scale." I'll now talk a bit more about this delightful thing and will see where the conversation goes from there.

Jan 21

Doing the Perm / Term Squirm – Part 3 Participating Whole Life Policies

Introduction

In some ways, life insurance is like fashion: today’s trend is next year’s embarrassment and next decade’s craze. Participating whole life (“par”) policies are a great example of this phenomenon. They have been around a long, long time but fell out of favour when universal life (a.k.a. “UL”) policies came into vogue. In fact, many of the larger companies even stopped issuing new Par Policies for several years until low interest rates, high investment management fees and rocky stock market returns made UL Policies a touchy subject in some circles and Par Policies an exciting “new” way to leave behind more for your heirs or to supplement your own retirement.

In order to spare you from having to endure 8 pages of info on this subject simultaneously, I'm going to break down my original article into small chunks so I can parcel it out to you in smaller doses. Here's the first installment.