Kingsmill’s Investment Miscellanea: Friday, April 17, 2020

April 17, 2020 | Joshua Kingsmill


Key Takeaways:

  • Tax-savings and deferrals for pensioners
  • Mortgage relief for eligible homeowners
  • Benefits for eligible teenage children

The federal government has rolled out a series of measures to help Canadian businesses and families weather the COVID-19 pandemic over the past few weeks. There is much information that has come out. Hundreds of billions of dollars have been committed in attempts to address many parts of the economy affected by COVID-19. I thought it might be helpful to highlight three actionable ideas from the myriad of government initiatives that have been introduced, that I have been advising clients to take advantage of:

  1. For those who are over the age of 72, there was significant legislation passed, and financial institutions are now able to implement. The government lowered the minimum amount that must be withdrawn from a Registered Retirement Income Fund (referred to as a RIF) by 25%.  What this means for RIF holders is that rather than have to withdraw and pay taxes on their registered, tax-deferred investments, based on the beginning of the year valuation, which is now a lot lower, this amount can be reduced by 25%. It reduces one's tax while allowing more time for the investments to realize further gains. I have already made this switch for a few clients and will reach out to each of you to see if this is feasible, and what the implications may be. I would encourage anyone who is in the position to do so, to explore the possibility of reducing your payment, and use funds from other sources that might not be taxable at all.
  2. For those who hold a mortgage: By decree from the government, the major banks are working with mortgage-holders. While I was initially skeptical of what the response may be, I am working with two clients that hold mortgages at RBC. In both instances, the clients have been able to defer mortgage payments for six months. In a nutshell, there has been nothing to sign, no additional fees. Of course, the delayed payments and interest re-amortized for the length of the mortgage, so this is a consideration. For those of you that do have a mortgage with RBC, I will work with you to decide if this is something that makes sense, and what the implications are, and provide the right introduction at the bank. Anyone else holding a mortgage at one of the other big banks, I would encourage you to explore this possibility.
  3. Finally, my dear nephew Jake is 15 and did work part-time in a restaurant that is now closed, and he has no visibility like so many on employment opportunities now or in the summer. He told me he applied and received his first installment of $2,000 directly into his bank account. I hadn't considered this eligibility. The only criteria required for teenagers like him to receive the Canada Emergency Response Benefit of $2,000 per month for up to 16 weeks: is to be at least 15 years of age and have earned at least $5,000 of income over the past 12 months, and have a SIN number. I would encourage every family who has teenage children who worked to explore their eligibility. While my nephew Jake is now flush: he is upset that I would not open up an investment account for him with his newfound wealth.

I found this web-site useful as a repository for all the information and links to other sources.

These are extraordinary times. One million Canadians lost their jobs in just one week in March. More than 6 million Canadians have applied for the Canadian Emergency Response Benefit. In January 2020, the US unemployment rate was at 3.6%. From January to April, about 20 million Americans lost their job. Businesses are closed across North America; almost no one is travelling.

The actions, coordination and stimulus in North America are unprecedented, resulting in trillions of dollars of additional monies being injected. The long-term implications of all of this stimulus are difficult to fathom. In the weeks and months ahead, this is a topic I will be exploring, and its impacts on the economy and market, in a post-COVID-19 society.

I do miss making weekly sports or culture predictions. I'm going to have to brush up on my Table-Tennis and this new phenomenon of e-sports for future predictions going forward. I was once pretty good at Pac-Man: perhaps I can dust off my Atari, and see if those skills are transferable to this e-sports world.