2011 Personal Tax Levels

As we have recently started 2011, it is always good to plan how to protect your money from taxes.  The following is some tax information that you may want to review for tax planning purposes throughout the year.

The Federal Income Tax rates for 2011 are as follows:
•15% on the first $41,544 of taxable income
•22% on taxable income between $41,544 and $83,088
•26% on taxable income between $83,088 and $128,800
•29% of taxable income over $128,800
The Federal Basic Personal Amount in 2011 is $10,527

The Alberta Income Tax rate is 10% of taxable income.  The Alberta Basic Personal Amount is $16,977.

CPP Info
Maximum Pensionable Earnings:            $48,300
Basic Exemption                                     $3,500
Rate                                                             4.95%
Employee & Employer Maximum            $2,217.60
Self Employed Maximum                       $4,435.20

Good Financial Information

Over the past 2 weeks various publications across Canada have shared some great articles about retirement planning with us.  I would like to share a few of these with you below:

Is Freedom 75 boomers' new goal? - Noreen Rasbach, Globe and Mail Blog

CDNs have admirable financial goals but lack proper tools - Stefania Moretti, Money Canoe.ca

Were RRSPs a major mistake? - John Newell, Financial Post

Forget what you've been taught about retirement saving - Gail Vaz-Oxlade, Globe and Mail

The key to a happy retirement - Patricia Lovett-Reid, MSN.ca Money

Taking baby steps into financial adulthood - Jodi Lai-Reichman, Financial Post

TFSA vs. RRSP – Best Retirement Vehicle? - Ed Rempel, Milliondollarjourney.com

The last article helps answer a questions that has been asked a lot over the past two and a half years that the TFSA has been around.  I hope these articles help you, and if you have seen an article that you think is useful, please post a link in the comments below.  Jerry

OAS & CPP Facts and Myths

I've heard from dozens of people planning for retirement that they don't want to earn money in retirement because the government will claw back their Old Age Security and Canada Pension Plan payments.  I have to say that this course of thinking is based on some myths that actually encourage people to make less money when they probably need it most.  Below are the numbers that hopefully help those who have questions about OAS and CPP get the maximum benefit during their retirement.

Old Age Security (OAS) Facts:
2011  Maximum Monthly Benefit                                     $524.23 ($6,506.23 annually)
2011 Average Monthly Benefit to be paid out                    $490.47 ($5,885.64 annually)  
Individual Annual Income before any clawbacks start    $67,668.00
Individual Annual Income when no OAS is received    $109,607.00

What Happens With Low Rates

The Bank of Canada Governor, Mark Carney, has been warning Canadians for a while now that we will be in a low interest rate environment for a few years.  He has clarified that by "low" he means lower than average, not necessarily as low as interest rates have been over the past 2 years.

This past week a deputy governor at the Bank of Canada also spoke about low rates and their impact, warning that while usually good for the economy, people's behaviour can create risk during low rate times.

The following is a short list of impacts that low rates have on the economy:
Low Inflation - The Bank of Canada is trying to keep inflation between 1% & 3% annually.  They can influence this by increasing or decreasing the Bank of Canada overnight rate, which is the rate the BoC charges Banks for borrowing money from them to cover some daily incidentals.  Because inflation has been very low for the past 2 years, the BoC rate has been very low.  This means it costs the banks less to borrow money, and the lower cost is passed on to consumers and businesses through lower loan costs.

Lessons Learned from 2010

After a very enjoyable Christmas holiday, it's time to get back to work and the regular busy routines of life.

I must admit that while my family stayed very close to budget with Christmas gifts this past year, we went way over on the food budget during the holidays.  We only had some family over one evening, but we had other friends over a few times and we ended up buying a lot of snack foods.  While the snacks tasted good in the moment, I found that later on I wanted something more filling or substantial that wouldn't leave me feeling so groggy.  After seeing the bill for all the snack food, I really wished we'd just spent the money on a meal of ham, scalloped potatoes and corn rather than potato chips and fried spring rolls; in the end it would have tasted better and been far less expensive. A lesson learned for next time.

I'm starting out 2011 by looking at the things I've learned in 2010.  Here are a few of them: