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Federal Budget

Ways You Could Benefit from the Federal Budget

April 5, 2019

As you likely know, the most recent federal budget was announced on March 20. You may be wondering what this means for you and if there are any changes that could impact you or your lifestyle. Well you’re in luck!

There were in fact several policies that bring financial benefits to many Canadian retirees, both directly and indirectly. Here are some of the key budget policies that could help boost your retirement income.

Improved GIS for low-income retirees

Those Canadians who qualify for the Guaranteed Income Supplement (GIS) can now earn more money without having their benefits affected. The previous minimum full exemption (how much could be earned without affecting benefits) is set to increase: to $5,000 from $3,500 and now includes self-employment income. This means that, if you earn $5,000 (even if you work for yourself), that amount would have no impact on your GIS.

There will also be an additional partial exemption of 50% that would apply to a maximum of $10,000 of income beyond the new $5,000 threshold. So, for example, if you earn $15,000 in total income, the amount that would affect your GIS would only be $5,000. There would be no affect on the first $5,000 and 50% on the next $10,000. These changes are to come into effect in July 2020.

Giving you more control over your pension

A new policy will allow Canadians to spread out their retirement payments, in anticipation of living a long life. The Advanced Life Deferred Annuities (or ALDAs) will push the age at which you must start withdrawing some of your retirement funds from 71 to 85.

You’ll be able to hold on to 25% of your registered retirement savings, up to a maximum amount of $150,000, until the end of the year you turn 85. This is to account for increased life expectancy, which has been occurring over the last several decades.

Are your retirement payments enough? Find out how much tax-free cash you can get!

Automatic enrolment in CPP means no one misses out

The government estimates that around 40,000 Canadians over 70 are not enrolled for the Canada Pension Plan and so are missing out on thousands of dollars every year. 

As of 2020, Canadians aged 70 will be automatically enrolled in the CPP and will have the added benefit of enjoying the higher rate that is applied for deferring the pension past 65.

Help to bring down prescription costs

The government is establishing the Canadian Drug Agency in order to negotiate better drug prescription prices.

The Agency will work with provinces and territories to deliver the best value drugs right across the country. Also, the budget introduces a national strategy that will help make the expensive drugs needed by some Canadians with rare diseases more affordable. 

Financial assistance for retraining

For those retirees who are looking to retrain to help them find work to boost their retirement income, this budget brings some help.

The Canada Training Benefit will allow them to take time off to study and a credit of up to $250 per year to put towards training costs. It also includes a training support benefit through Employment Insurance (EI), so they can retrain knowing living expenses are covered.

Your kids or grandkids may not need your help to buy their first home

According to a 2017 survey by Leger, 37% of Canadians intend to help their kids buy their first home. This can have a considerable negative impact on your retirement savings.

Changes in the new budget could make this need less likely. Firstly, the Federal Home Buyers’ Plan will increase the amount than can be withdrawn from RRSPs for a down payment, by $10,000, up to $35,000. On top of this, the Plan will now be available to previous homeowners who are going through a relationship breakdown or divorce.

The budget also introduces the First-Time Home Buyer Incentive. It will provide an interest-free loan of up to 5% for a resale home or 10% of a new home, which only has to be repaid when the home is sold. Those taking advantage of the incentive must have at least a 5% down payment and a household income below $120,000. The maximum purchase price is $480,000.

Now you can take this wealth of knowledge and share it with your kids and grandkids who are looking to buy their first home.

How your improved retirement income can be boosted by a reverse mortgage

These changes could have a big impact on people, just like you, who were previously struggling to make ends meet with your retirement income and considering downsizing to improve your financial situation.

With the extra income from the budget, plus a cash injection from the CHIP Reverse Mortgage®, you may now be able to afford to stay in the home you love, rather than selling and being forced to move to a cheaper place.

And while the changes to help first-time homebuyers might mean that some retirees won’t have to dip into their savings to help their kids or grandchildren, that may not be the case in expensive markets like Vancouver and Toronto.

If you still need to help out your kids to buy a new home, the CHIP Reverse Mortgage could be a better option than putting a considerable dent in your retirement savings.

Call us at 1-866-758-2447 for more details and to find out how much you could qualify for.  

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