Freedom 65 not true for mortgages

Survey results suggest Canadians might have unrealistic expectations of when they'll be mortgage-free.

The Royal Bank of Canada poll, released Thursday, showed 72 per cent of respondents with a mortgage expect to have it fully paid off by the time they are 65. However, it also found that 33 per cent of those 55 or older still have at least 16 years left on their mortgages.

"Canadians want to be mortgage-free as they approach retirement age and beyond, but the reality is that it takes prudent planning and the right advice to stay on track," Claude DeMone, RBC's director of strategy for home equity financing, said in a statement.

The survey showed younger respondents were even more optimistic in their plans. For those between the ages of 35 and 54, 39 per cent thought they would be mortgage-free by the time they are 55, and another 39 per cent expected it my 65.

Among those between 18 and 34, 26 per cent thought they would be mortgage-free by the age of 45.

 

© Copyright (c) The Montreal Gazette

Canadians baffled by TFSAs

It’s been almost three years since the Federal Government introduced Tax-Free Savings Accounts (TFSAs), but a new survey from ING DIRECT reveals the majority of Canadians are still unclear about them. Those surveyed indicated they have a vague idea (37%) or don’t understand how the TFSA works (14%), while 13% of Canadians said they don’t know what a TFSA is.

A similar survey conducted in 2008 found 39% of Canadians had a vague idea about the TFSA, suggesting awareness hasn’t increased that much in the last three years.

Who’s using the TFSA?

• Of the 41% of Canadians who have a TFSA, 46% earn $100K+ per year, versus 34% who earn less than $50K.f the Canadians who have a TFSA, those aged 35-54 are least represented at 36% versus older (48%) and younger (40%) age brackets.
• Older Canadians (55+) indicated they fully understand what a TFSA is, versus 28% of those 18-34 years and 31% of those 35-54 years.
• 56% of those aged 35-55+ indicated they use their TFSA for retirement savings versus 11% of those aged 18-34.
• Those aged 55+ have used more than half the contribution room available ($8,395) whereas those aged 18-34 have used less than a third of the contribution available ($4,538).
• Seventy percent of Canadians said they felt the TFSA was a long-term savings vehicle, however only 24% of respondents indicated they use the TFSA primarily for retirement savings. Almost half of Canadians (48%) say their TFSA is just another way of saving money, while 10% use their TFSAs as an emergency fund.

The survey also revealed that more Canadians are dipping into their TFSAs, with 31% of respondents admitting they’ve made a withdrawal from their account since they started saving, up from 20% last year. Those who withdrew funds said they needed the money for an emergency (54%), they used their TFSA to save for a goal and achieved it (17%) or they use their TFSA as a regular savings account (17%).

When asked what they would like the annual maximum TFSA contribution amount to be if they could choose to change it, a surprising number of Canadians (51%) indicated they would opt to increase the limit, with the largest percentage of respondents (19%) preferring to have $7,501 – $10,000 in annual contribution room. Despite wanting the option to increase their annual limits, only 1 in 10 Canadians has contributed close to the maximum contribution limit ($14,001 – $15,000). A quarter of Canadians have contributed less than half of their available TFSA contribution room.

1. Canadians baffled by TFSAs; Advisor.ca, October 3, 2011

Weekly Market Commentary - August 26, 2011

Global markets advance on the week

Global stock markets moved higher this week, driven largely by speculation over whether the U.S. Federal Reserve would announce further stimulus for the U.S. economy. Fed Chairman Ben Bernanke made a much-anticipated speech Friday, and after some initial hesitancy, markets responded well to Bernanke’s comments.

Even though no new action on the economy was announced, investors appeared optimistic that the Fed Chairman was leaving the door open to potential future stimulus. The Federal Reserve “is prepared to employ its tools as appropriate to promote a stronger recovery,” Bernanke said in his speech. His comments helped stock markets end the week on a positive note.

Earlier in the week investors bought into beaten down stocks, such as those in the U.S. financials and technology sectors, and began backing away from safe haven assets such as gold. The price of bullion, which had recently risen quickly to a series of record highs, experienced its largest one-day drop in more than three years before recovering somewhat in price.

There was some positive economic news during the week, including better-than-expected manufacturing data from China and Europe and stronger-than-expected durable goods orders in the U.S. On the other hand, U.S. second quarter GDP was revised lower, to 1% from the initial 1.3% estimate.

Canada’s financials sector attracted attention as bank earnings reported over the week were largely positive. Industrials and materials stocks benefitted from some lessening of global economic fears.

In other news this week:

•Canadian retail sales rose by 0.7% in June over May.

•Warren Buffet announced a US$5 billion investment in Bank of America through Berkshire Hathaway Inc. The move is intended to shore up confidence in the largest U.S. bank.

•Moody's Investors Service cut its rating of Japan's government debt.

•Short-selling bans on select European bank stocks were extended until the end of September in an attempt to stem excessive volatility.

•New U.S. single-family home sales fell to a five-month low in July.

•U.S. markets awaited the possible impact of Hurricane Irene as it threatened the east coast of North America. Airline stocks fell as companies prepared to cancel flights.

For a look at what’s ahead for next week:

http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary - July 15, 2011

North American stocks edge up on final day of down week

The volatility that has characterized financial markets lately was back in full force this week. Markets around the world sold off steeply on concerns over the sovereign debt crisis in Europe, which expanded to send borrowing costs for Italy and Spain soaring. Nervousness in advance of bank “stress test” results also held European stocks back.

Things improved briefly during the week when Canadian stocks received a bit of a boost from improving optimism over the commodities outlook, particularly as a result of China’s 9.5% y-o-y economic growth in the second quarter. This growth points to a continued healthy appetite for commodities by the world’s largest consumer. This helped Canada’s stock market outperform most of its global counterparts during the week, posting a relatively small loss.

Comments mid-week by U.S. Federal Reserve Chairman Ben Bernanke also helped temporarily boost equities. He appeared to leave the door open to further Fed economic stimulus as he presented the central bank’s semi-annual report on the state of the economy. However, Bernanke later made it clear no immediate action was planned, which ended a brief rally.

Among negative economic developments, a political impasse over whether the U.S. federal borrowing limit should be raised, and fears that debt rating agencies could downgrade U.S. debt, hurt stocks. This overshadowed positive U.S. economic developments, including an unexpected small rise in June retail sales and a larger-than-expected decline in weekly jobless claims.

In Canada, the economic outlook remains largely positive. Businesses are maintaining their faith in the country’s economy and plan to hire more workers to support growth in the coming year, the Bank of Canada said in its latest business outlook survey. However, Canadian manufacturing sales fell by 0.8% in May over April, more than expected.

The second-quarter earnings season got underway in the U.S., with early positive results as 11of 13 companies beat expectations. Healthy earnings reports helped North American stocks edge up on the final day of a down week.

In other news this week:

•Gold prices hit record highs as investors sought refuge from economic concerns.

•Canadian housing starts were unexpectedly strong in June, rising by 1.7% over May. Sales of existing homes rose 2.6%. The average resale price was up 8.7% y-o-y but was skewed by expensive homes in Vancouver.

•Canada’s trade deficit narrowed marginally in May. Exports rose more than imports during the month.

•Overall inflation in the U.S. fell in June. Core inflation—which excludes volatile food and energy prices—rose.

•U.S. consumer confidence fell to its lowest level in more than two years in July.

•The U.S. notched its widest trade deficit in more than 2½ years in May. Exports fell as imports rose.

For a look at what's ahead for this week:

http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

Equity markets bounce back
Equity markets bounced back this week as investors took a break from concerns about recent global developments to focus on expectations of an improving economy.

Stock markets around the world rose despite Japan’s continuing struggle to deal with the aftermath of the earthquake and tsunami and military action against Libya.

The fact that Japan’s nuclear reactor crisis hadn’t worsened eased investor worries. Hopes that the Libyan crisis might be shortened by Western military action also contributed to a more upbeat mood.

The MSCI World Index, which measures markets in 24 developed nations, experienced its longest rally since September. Emerging markets also gained—particularly those with a high resource component—as investors’ recent risk-aversion faded somewhat. Asian stock markets rallied on optimism about Japan rebuilding efforts.

One sign that investors are again becoming more comfortable with stocks after they hit 2011 lows last week is a steep fall in the Chicago Board Options Exchange Volatility Index (VIX)—dubbed the fear index—over just a few days.

Canadian stocks benefitted from the improved mood of investors. Base metals stocks gained as prices of metals such as copper started climbing on expectations of increased demand as a result of Japan rebuilding. Gold stocks rose as bullion hit new records.

Wall Street was boosted by a giant merger in the telecommunications sector and by strong corporate earnings reports, especially in the technology sector. The materials sector rose on strong metals prices. Economic news also helped U.S. share prices.

Revisions to fourth-quarter GDP figures showed the U.S. economy grew more than originally thought, at a 3.1% annual rate. A decline in jobless claims fuelled optimism over the growing strength of the U.S. economic recovery.

For a look at what's ahead for this week:

http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

Economic worries a drag on share prices
Unrest in Libya, high oil prices, resurfacing concerns over the euro zone’s fiscal health and weak economic data hurt global equity markets this week.

As the week progressed other developments cast a pall over markets. China’s worst trade deficit in seven years sparked worries that its economy might be slowing. China’s export growth was far slower than expected in February. The health of the euro zone was back in the forefront as Spain’s sovereign debt was downgraded by Moody’s credit rating agency. Meanwhile, in the U.S. higher-than-expected weekly unemployment claims helped send shares downward as investors fretted over the health of the jobs recovery. However, there was good news late in the week as U.S. retail sales climbed in February by the largest amount in four months.

The Japanese earthquake and ensuing tsunami had a relatively muted impact on markets outside of Asia. While Asian markets reacted negatively as events in Japan unfolded Friday, markets elsewhere awaited news of the full outcome.

The week’s developments had a considerable impact on Canadian stocks. Shares of resource producers, in particular, were hurt by fears that commodities demand could slacken. Energy stocks were hit as the price of oil eased toward week’s end. The S&P/TSX Composite Index lost ground in the first four days of the week, but advanced slightly Friday.

The exodus from emerging markets continued as investors shunned risk. However, bonds benefited as investors sold off stocks and looked toward perceived safer havens.

Market declines overshadowed the second anniversary of the current bull market for North American equities. In the two years since hitting lows on March 9, 2009, the S&P/TSX advanced by 83%. On Wall Street the S&P 500 gained 95%, the Dow Jones Industrial Average 87% and the NASDAQ Composite 118% as of March 9, 2011.

For a look at the week ahead go to :

http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

Geopolitical tension overshadows positive economic news 
Developments in the Arab world contributed to a rocky ride for share prices this week. Early in the week, the crisis in Libya resulted in declines for most global equity markets. Mid-week, crude reached its highest level in two and a half years as a result of fears that Libya tensions would threaten supplies, and share prices declined on concerns about how businesses and the economy would cope with surging oil prices. Wall Street’s S&P 500 Index experienced its worst one-day fall since August.

However, as the week progressed, the issues were not as pronounced as market participants feared. Oil prices then moved lower, and major global markets saw solid gains on Friday.

There was also good news, particularly for the U.S. economic recovery. Two separate surveys indicated that American consumers are more confident than at any time in the last three years. There were signs of job market improvement as unemployment claims fell.

The strength of Canadian corporate earnings was confirmed by Statistics Canada. The agency reported that operating profits advanced 7.9% in the fourth quarter of 2010 compared with the previous quarter, and by 9% y-o-y. That strength continued this week, as banks reported better than expected profits.

“Safe haven” investments attracted funds amid geopolitical turmoil. Government bonds, particularly U.S. Treasuries, and gold benefitted from a continued flight from riskier assets.

For a look at the week ahead go to :

http://investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

New milestones for equity markets
Stock markets reached important milestones this week, as the global equity rally continued.

The S&P/TSX Composite Index topped 14,000 for the first time since mid-2008. On Wall Street, the S&P 500 has doubled since its pre-crisis low in March 2009. The technology-heavy NASDAQ Composite Index rose to its highest point since October 2007. The MSCI All Country World stock index has surged more than 100% from its March 2009 lows.

Canadian stocks were strong performers over the week, propelled by the energy sector. Many emerging markets recouped losses from the previous week on a more optimistic U.S. economic outlook.

Despite worries over developments in the Arab world, cash continues to flow into stocks. There is increasing evidence that once-reluctant individual investors are now embracing equities. A key factor pushing prices upward is rotation out of other asset classes, such as fixed income investments.

Other factors buoying stocks include a steady stream of strong corporate profits and increasing corporate merger and acquisition activity. This week saw another huge buyout – a US$20 billion deal in the global pharmaceutical sector.

On the U.S. economic front, U.S Federal Reserve members raised their forecasts for 2011 growth to 3.4% to 3.9%, up from 3% to 3.6%. And economists surveyed by the Wall Street Journal indicated they expect the fastest growth in the U.S. since 2003.

In Canada, many forecasters are also raising growth estimates after last week’s report of considerable strength in Canadian exports. Exports surged 9.7% in December over November, the largest jump since February 1982.

For a look at the week ahead go to :

http://investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Your spouse can save you tax

With the introduction of the Tax-Free Savings Account (TFSA) and other federal tax changes in recent years, many people are wondering about the value of one of the most basic tax-saving strategies for couples: Income-splitting through a spousal Registered Retirement Savings Plan (RRSP).

A spousal RRSP can still be a worthwhile way to reduce your family tax bite in certain situations. Here’s how incomesplitting can work for you:

It provides a means of reducing a family’s overall tax bill by shifting income from a higher earner to the lower-income earner so that family income is taxed at a lower rate.

It may allow a couple to avoid a clawback of Old Age Security (OAS) benefits by keeping each partner’s income below the prescribed threshold.

Recent tax changes now allow Canadian retirees to split up to half of their eligible pension income (i.e. income that qualifies for the federal Pension Income Tax Credit) with their spouses or common-law partners. In addition, income-splitting with non-spousal RRSPs is also permitted, but only after the contributor reaches age 65.

Here’s when a spousal RRSP can be a valuable addition to your personal financial plan:

If you and your spouse intend to retire before age 65, the higher-earning spouse can contribute to a spousal RRSP but stop making those contributions three years before retirement. After retirement, the lower-earning spouse makes withdrawals from the spousal RRSP. Because no contributions had been made to the spousal RRSP during the previous three calendar years, none of the spousal RRSP income paid to the lower earning spouse is attributed to the higher earning spouse for taxation purposes.

If a lower-earning spouse exits the workforce to take a parental leave or an educational leave, he or she can receive a payment from a spousal RRSP. In a year of little or no additional income, that person will pay little or no taxes.

If one of you continues to work after age 71 and generates “earned income” for RRSP purposes, that person can no longer contribute to their RRSP but can contribute to a spousal RRSP until the end of the year that the spouse attains age 71.

If a person dies and has unused RRSP contribution room, no contribution can be made to the deceased’s RRSP. However, a final RRSP contribution that is made to a new or existing spousal RRSP within 60 days following the end of the year of death is deductible on the deceased’s final tax return.

Is a spousal RRSP a worthwhile incomesplitting strategy for you? Ask about income-splitting and other tax planning and retirement savings strategies that may benefit you and your family.

Mortgages: 'If you're going fixed, do it now'

Image via Wikipedia

Today RBC and TD raised 5 year fixed mortgage rates by .25 % joining BMO and CIBC who raised their rates yesterday. Jim Flaherty, the Canadian Minister of Finance,  warned that mortgage rates will continue to rise, which added to a chorus line of simliar warnings including those by the Bank of Canada Governor Mark Carney.

If you were listening to the evening news bank economists are saying they’re not sure where rates will end up. But you can believe Mr. Flaherty and Mr. Carney – rates have only one way to go - up!

The reason fixed rates mortgages are rising now is because swap rates – the rate lenders pay to borrow from each other – have been rising since the start of the year. So lenders are passing on this cost to borrowers by raising their fixed rates.

The reason behind the increase in swaps is that the markets are factoring in an interest rate rise sooner rather than later.

Therefore borrowers considering switching to a fixed rate should do so as soon as possible as there is every likelihood fixed rates will rise further in the coming days.

If you're carrying debt on high rate credit cards, department store cards, car loans, etc... now could be a good time to consolidate, particularly for those with large amounts of equity in their homes. Roll that credit card debt over into your mortgage or into fixed rate LOC and for some, it will mean thousands of dollars in annual savings, freeing up cash flow for other uses including paying down your mortgage faster.

Weekly Market Commentary

Markets advance in the face of Egypt concerns
Equity markets around the world advanced this week, as economic optimism and strong corporate profits outweighed concerns over developments in the Middle East.

While civil unrest in Egypt led to volatility, most markets came out ahead. However, investors continued to ponder the potential for disruption of oil supplies owing to the Egypt crisis. This sent Brent crude—the Asian and European oil price benchmark—above US$100, its highest level since the final quarter of 2008.

North American markets were the strongest performers, with European and Asian markets also recording healthy gains. On Wall Street, indexes registered their biggest weekly advances in two months. The Dow Jones Industrial Average closed above 12,000 for the first time since June 2008. The S&P 500 closed above 1,300 for the first time since August 2008.

With more than half of S&P 500 companies already reporting fourth-quarter 2010 earnings, 70% have beaten expectations. The Canadian earnings season, which started later than in the U.S., appears on track for strong results.

The consumer recovery continues. Rising automobile sales point to a rebound in spending. January sales in the U.S. surged 17.3% year over year, while in Canada they climbed 3.6%.

Signs of growing momentum in the U.S. economy surfaced. That’s good news for Canadian companies, since more than 70% of Canadian exports go to the U.S. New claims for unemployment benefits fell, productivity rose and activity in the manufacturing and service sectors increased.

However, U.S. Federal Reserve Chairman Ben Bernanke said Thursday that despite signs of improvement, the economy faces an extended period of high unemployment and low inflation. He also expressed concerns about the country’s large deficit.

Statistics released Friday sent mixed signals about the U.S. job market. The unemployment rate unexpectedly fell to its lowest level since April 2009. However, fewer new workers were hired than expected which can be partially explained by the severe winter weather that occurred in the week the data was collected. In Canada employment growth was higher than anticipated, although the unemployment rate rose marginally.

In other news this week:

Despite the fastest acceleration in euro-zone inflation since late 2008, the European Central Bank held the line on interest rates. The euro fell against the U.S. dollar on concerns about the ECB’s inflation stance.

Along with oil, other commodities rose. Copper prices hit record levels.

U.S. Treasury debt yields rose to eight-month highs on positive economic data. Meanwhile, the Federal Reserve surpassed China as the leading holder of U.S. Treasury securities.

Canadian mergers and acquisitions in January soared to a monthly value of $16.4 billion, according to Bloomberg data.

For a look at the week ahead go to :
http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

Economic growth continues to gain traction
Newly released figures showed U.S. domestic product grew at an annual rate of 3.2% in the final quarter of 2010 and by 2.9% over the year. It was the largest yearly increase since 2005. The International Monetary Fund raised its forecast for 2011 global growth slightly to 4.3% and for U.S. growth to 3% from 2.3%.

Heightened consumer spending was the big driver of U.S. growth in the final quarter. And there was more good news as consumer confidence rose in both the U.S. and Canada. This is generally positive for equities because consumers are more likely to loosen their wallets, driving business sales and profits.

Many of the world’s stock markets declined as what appeared to be shaping up to be a good week was stalled on Friday. Positive reaction to economic news and corporate earnings gave way to nervousness over developments in the Arab world. However, Canada’s benchmark index posted a five-day gain.

Emerging markets were particularly hard hit at week’s end as investors fled riskier securities amid social unrest in Egypt and other Arab states.
Wall Street lost ground, but crossed a couple of psychological barriers during the week. The Dow Jones Industrial Average rose above 12000 and the S&P 500 crossed 1300 for the first time since mid-2008, but only in intra-day trading. Both indexes failed to close above those levels, and a weekly loss brought the Dow’s eight-week winning streak to an end. The Canadian market didn’t break through any barriers, but its advance for the week included the best one-day percentage gain in two months.

Corporate profits continue to impress as the earnings season got into full swing in the U.S. About 70% of companies are beating estimates so far. Canadian companies also reported strong earnings. However, companies that disappointed, such as Ford Motor and Amazon.com, were punished by investors.

As expected, the U.S. Federal Reserve held the line on interest rates, indicating rates would likely remain low for some time. The Fed said it would go ahead with the second round of quantitative easing (“QE2”), the economic stimulus program to buy back massive amounts of U.S. treasury assets. Markets welcomed the news that stimulus would continue.

For other news of the week:
http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Weekly Market Commentary

Global concerns overshadow positive economic news

Financial markets were mixed over the week as encouraging economic news from the U.S. and Europe conflicted with fears that China would take action to rein in its economy.

News that China’s economy grew at a faster-than-expected y-o-y rate of 9.8% in the fourth quarter (and 10.3% in 2010) led to fears of further moves by China to curb growth and stem inflation. Materials stocks were among the most affected as concerns surfaced that China’s commodities appetite would wane.

Good news for two key U.S. economic trouble spots helped counter China concerns and could support financial markets going forward. Existing home sales surged 12.3% in December, spurring optimism that the worst could be over for the housing market. Meanwhile, new applications for jobless benefits posted their biggest decline in nearly a year, providing some good news on the employment front.

There was also good news in Europe as the outlook for Germany’s economy brightened, helping send the euro to a two-month high against the U.S. dollar.

Corporate earnings continued to send positive signals, with three-quarters of U.S. companies reporting so far exceeding expectations, according to Bloomberg data. The technology sector saw big earnings gains from companies such as Apple and Google, although tech stocks were mixed over the week. Blue-chip stocks outperformed, supported by strong earnings from companies such as General Electric.

The Bank of Canada announced it would leave its key borrowing rate unchanged at 1%. It continues to predict modest economic growth for Canada in its latest quarterly forecast: 2.4% in 2011 and 2.8% in 2012. This was a slight uptick from earlier forecasts. It raised its forecast for U.S. growth in 2011 to 3.3%, up from 2.3%. central bank warned a high Canadian dollar and poor productivity are preventing Canada from making the most of the global economic recovery.

However, later in the week, Canadian November retail sales showed surprising strength. The 1.3% rise was the biggest since March 2010.

For other news this week go to ... 
http://www.investorsgroup.com/consult/terry.pitz/english/cnf_frameset.asp?pg=/English/prodServices/marketCom/default.shtml

Cheers!