CCP Increasing In January 2025

The monthly benefit for the Canada Pension Plan ( CPP) is revised each January.  The calculation is based on the average monthly CPI (Consumer Price Index) for the most recent twelve month period ending in October over the same period for the previous year.  Because we don’t yet know the CPI for this month we cannot yet precisely calculate the upcoming January change.  On the other hand, the CPI for September 2024 was released this morning so we have eleven months of data available.  The average CPI for the eleven months ending with September 2024 was 160.2.  The average CPI for the twelve months ending October 2023 was 156.3.  Based on these two numbers the calculation for the January adjustment would be 160.2 over 156.3 indicating an increase of 2.5% for the new year.  Assuming the October CPI will be similar to September, we can easily predict a revision of 2.5-2.6% for January 2025.   

OAS To Increase In October 2024

Yesterday's release of the latest Consumer Price Index (CPI) data reveals that Canada's annual inflation rate has cooled to 2%.  This has long been the target of the Bank of Canada.  This bodes well for an additional interest rate reduction with the next BOC announcement on October 23.  As always, this is both good and not so good news...Good for young Canadians wrestling with mortgages and credit card debt...not so good for Canadian Seniors with savings invested in cash accounts.

That aside, Canadian Seniors will see an increase in their monthly OAS benefit beginning in October.  OAS monthly benefits are reviewed quarterly and revised if the average monthly CPI for the most recent quarter exceeds the average monthly CPI for the previous quarter.  The monthly benefit doesn't increase every quarter but it doesn't go down if quarterly data indicates no inflation or even a reduction.

The October benefit  is based on the average monthly CPI for May, June & July over the months of February, March & April if this later period resulted in an increase for the July benefit, which it did.  This data indicates an increase for the October payment of 1.21%.  As Service Canada uses only a single decimal for their math, they round the 1.21% UP to 1.3%.  They're obviously on to the fact that if they rounded down they could be accused of not complying with the established formula.

Sooooo, Canadians aged 65-74 will see their monthly benefit rise from $718.33 to $739.88 and those 75 and over will see a bump from $790.16 to $800.43. 

Next up.  Projections for CPP Benefits for 2025.       

DEPOSIT RATES RISING!

Over the years I've held savings and term deposits with a virtual division of one of Manitoba's Credit Unions. Generally, these virtual "banks" offer higher deposit rates than their "brick & mortar" parents. All Manitoba Credit Union deposits are 100% guaranteed without limit.  A number of years ago I asked one of them if this guarantee applies to deposits made by non-Manitoba residents.  The answer, at the time, was yes.  If  you live outside the province and are considering an investment, I'd recommend asking the question. 

With the recent uptick in the Bank of Canada overnight rate, deposit rates for all institutions are on the rise. Because of my particular interest in Manitoba Credit Unions and because they often offer the best available rates I decided to track their rates for a bit.  Until things stabilize or plateau, I'll update this as available rates change.  I've moved the chart to the top of the blog for easy access.

I'm finding it curious that a deposit rate of 5% for 5 years was available before the Bank of Canada hiked by a full 1% on July 13 and added an additional .75% on September 7.  There seems to be reluctance to move beyond 5%...but, it's gotta happen!

I haven't included all Manitoba Credit Unions.  A couple don't post their rates online.  A few others make no effort to be competitive and one retains the old "closed bond" format and membership is only open to a select employee group. 

Tax Free Savings Accounts (TFSAs) - Tax Savings For All!

TSFAs were introduced in Canada in 2009.  Every Canadian was allowed an annual deposit of $5,000 to a TSFA and all interest or investment income is exempt from tax...not only within the plan, but remains exempt even if and when withdrawn from the account.  The limit for the annual deposit is indexed to inflation and gradually increases over time in $500 increments.  To date we've had a limits of $5,000 for 4 years, $5,500 for 5 years and $6,000 for the past 4 years.  2015 was a bonus year when the Conservative government boosted the limit to $10,000.  The following year, the Liberals reduced the limit and reverted to the original plan with increases in $500 increments based on inflation.  

Over a 14 year period one could accumulate $81,500 in a TFSA.  If you've never opened a TFSA, you are eligible to deposit this full $81,500 right now!  Yes, the annual deposit limits have accumulated each year since 2009.  The accumulated limit is referred to as your "deposit room".

Many suggest that TFSAs are for the rich.  Yes, an annual TFSA deposit along with a an RRSP deposit does add up and many are unable to set aside such amounts for saving.  But, what about existing savings?  How about that small inheritance from Grandma that you tucked away for a rainy day?  Since the day you deposited it, you've received and T-5 from the bank and have paid tax on the interest each year.  Move it to a TFSA and pay no more tax on the interest income.

An interesting feature of TFSAs is that if you withdraw from the account for any reason...vacation, new car etc. the amount of the withdrawal is added to your deposit room for the following year.  So, if you withdraw $10,000 for that dream vacation, you could deposit $16,000 next year.  Note: Your deposit room for the current year does not change.  The $10,000 you withdraw this year can only be added back to your TSFA in the next calendar year.  Check your deposit room on your online CRA account.   

Upon retirement you might need to withdraw the annual earnings from a TFSA to add to retirement income.  As mentioned, any withdrawal this year can be re-deposited next year in addition to the annual $6,000 limit.  This rapidly increases the amounts eligible for deposit to the TFSA.  In a perfect world, over time you may have all non-registered (open) account savings in TFSAs and never pay another cent of tax on interest or investment income generated by these savings.

With current increase in all rates, including deposit rates, there's never been a better time to open a TFSA and begin enjoying TAX FREE INCOME!   

Canadian Banks And The Foreign Exchange Shell Game

Recent posts described my search for a Canadian credit card with no Foreign Exchange Transaction Fees.  At the moment there are only five, four if you eliminate HSBC's World Elite MasterCard which is only available to HSBC high income, high net worth clients.

If you enquire at your bank about a credit card that does not charge FX Transaction Fees they'll make you an offer that they think is just soooo great.  They'll offer the full meal deal, a complete package with no FX transaction fees.  Are you ready?  The package includes your existing Canadian bank account and credit card PLUS, through their US subsidiary, a US funds bank account and US funds credit card.  Easy peezy, you use the US card in the States and for online shopping at American sites and make all payments on the US credit card from your US bank account.  Viola, no FX transaction fees!

There's a catch, right?  Sure there is.  If you're a typical Canadian retired boomer/snowbird, eventually you'll have to fund that US bank account.  With what?  A transfer of course.  From your Canadian bank account where all your money is.  And, guess what?  For the transfer they'll be charging today's exchange rate plus, at least 2.5% and as much 4%.  At the end of the day it's exactly the same, or worse, as if you'd used your Canadian credit card and paid the 2.5% FX transaction fee on each and every purchase.  And, by the way, that great banking package they offer comes with a whole set of fees of its own.  Our Canadian banks do love their fees.  I wrote about this way back in 2011 Canadian Banks - We Love 'Em And Hate 'Em

Is there anything one can do?  You bet, it goes right back to the need to source out and obtain at least one of the few Canadian credit cards that do not charge FX transaction fees.

If you're a snowbird and have a vacation home in the US and need a US bank account to pay things like HOA fees, property taxes, utilities etc. you should open your own US account with a US bank. It's easy to find an offering with zero fees when you make it clear you don't want any interest as you sure as heck don't want a wee bit of US interest income to trigger the IRS thing.

Again, you'll be in a position whereby you have to fund that US bank account from time-to-time.  Every bit of research I've done leads to a single solution for this.  The Snowbird Currency Exchange Program offered by the Canadian Snowbirds Association beats all others.  Their once monthly "buy" of thousands of dollars on behalf of their membership results in huge exchange rate savings.  Check it out Snowbird Currency Exchange Program

A Bit More About Canadian Credit Cards and Foreign Exchange Transaction Fees

In the previous post I related my experience with the excellent offering of Chase Canada.  The Amazon.ca Rewards Visa met all of our US shopping needs for five consecutive winters in Arizona.  NO Foreign Exchange Transaction Fees, NO Annual Fee and Cash Back. The cash back was automatically credited to the account each month.  This came to a sudden end last winter when Chase withdrew from the Canadian Credit Card business and closed all accounts on March 15.

So, there we were, in Arizona for the winter needing to source out and apply for a replacement card with no FX Transaction Fees.  As usual, we turned to Professor Google.  This was in early February.  We quickly discovered the Home Trust Preferred Visa card and the Rogers Bank Platinum MasterCard.  A bit of research revealed that both of these had been around for a while.  Curiously, neither were being aggressively promoted.

When introduced, the basic Rogers MasterCard offered filled the bill with No FX Transaction Fees, No Annual Fee and 1.5% Cash Back.  Sometime later, Rogers began charging 2.5% Foreign Exchange Transactions Fees.  They offset this fee by upping the cash back on all FX transactions to 4%.  So, it was a wash, still the equivalent of 1.5% cash back.  A downside for this card is that the cash back accumulates and is applied to the account each January, and then, only is you remember to make the specific request each December.  Note: This info relates to the offering last February.  There have been changes since then.

Alternatively, the Home Trust Preferred Visa was similar.  No FX Transaction Fees, No Annual Fee but with reduced cash back of just 1%.  One difference, while the cash back similarly accumulates throughout the year, it is automatically credited to the January account without the cardholder having to do a thing.

In the end, we choose the Home Trust card with the lower cash back.  The main motivator for this decision was the fact that it's a Visa which is the only card accepted by Costco in the USA.  Yup, the reverse of Costco Canada.  In Arizona, Costco is one of our main shopping destinations for all the usual reasons.

Since February, there has been a couple of new cards introduced which do not apply foreign exchange transaction fees.  Watch for info about these in coming posts.

Canadian Credit Cards With No Foreign Exchange Transaction Fee

I've been away for nearly four years.  They've been four great years. Our real estate investment in Arizona has provided a winter getaway and enabled us to escape Manitoba winters.  2018 was our fifth full winter in Arizona. For us, a full winter is January through April as the practice has been to hang in 'til after Christmas with family.  On Boxing Day we tidy up and it's a run for the border on December 27.  This year may be different as I finally fully retired at the end of 2017.  Thinking maybe we'll get away in early November and possibly return for Christmas...possibly.

We've now joined the legion of Snowbirds who spend a lot of time researching cross border stuff like cell phone roaming costs, US/CA$ exchange rates etc. etc.  I'll post about some of these later on. Today it's about the huge foreign exchange transaction fees charges by Canadian banks.  A minimum of 2.5% and up to 3% or even 3.5% if you're using a "premium Canadian card"!  I wrote about this way back in 2011.  Canadian Banks - We Love 'Em and Hate 'Em 

Four years ago our research sourced out a suite of cards offered by Chase Canada.  Chase had a number of infinity cards with various benefits and annual fees.  In the end, we applied for and received the Chase Canada Amazon.ca Rewards Visa.  It seemed to meet all the requirements:

• NO Foreign Exchange Transaction Fee
• NO Annual Fee
• 1% cash back on all purchases, 2% for purchases made on Amazon.ca

Sometime over the past couple of years Chase Canada stopped offering cards to new applicants.  The writing was on the wall.   One by one Chase not only stopped offering new cards but actually closed the accounts.  The Amazon.ca Rewards card along the the Marriott Rewards card lasted the longest but notice was eventually sent out that these too would come to an end on March 15, 2018.  Chase withdrew from the Canadian credit card business.  So the search was on.

A Google search with the title of this post leads to some very helpful sites and discussions about various credit card offerings.  It's amazing how many Canadians add comments suggesting that they have a bank issued credit card which does not charge FX transaction fees when in fact they're paying at the very least 2.5% over the actual exchange rate.  Just because it doesn't show as a separate amount doesn't mean the bank is not charging it!

It's Been An Interesting Year

Remembering back to the time TPCI included the Daily Squawk page it's hard to imagine that I haven't posted for over a year.  From the first post, Investing 101, published May 8, 2009 to Okay...I'm outta here, published July 24, 2013, it was a lot of fun!  I was able to enjoy my hobby of writing while applying it to another hobby, investing.  My investing "career" saw me go from a total passive investor, when I blindly threw money at finance guy each RSP season, to an aggressive trader of stocks as I fought my way back after the big crash.

Along the way, I went out of mutual funds, into exchange traded funds and finally into individual stocks.  I had some home runs and some misses but at the end of the day my portfolio doubled in value from the low on November 20, 2008 to March 13, 2012.  Since then my stuff continued to grow at an acceptable rate with very little effort on my part as I gradually moved into low risk investments.  As I said in Who Should(n't) Be In Funds?, there's a time to get the heck out and that time is as retirement approaches.  Anyone planning to retire does not belong in things that can go down by 50% the day after an event half way around the world!  Old guys just may not have time to get it back as I did.

I am now truly The Passive Canadian Investor as I clip coupons with my bond funds and GICs.  Even though I began monthly RIF withdrawals in March of this year my portfolio value continues to climb.  If this keeps up, the money will last forever...is that really possible??

Like the title says, it's been an interesting year.  We began the year with our first extended stay in our new investment home. We refer to the Fountain Hills condo as an investment home because it didn't feel like we were spending money when we bought it.  Rather, it was like we were shifting funds from one investment pool to another, hopefully one with some upside potential.  Our timing was perfect in two ways.  Firstly, we bought in late 2012, near the bottom of the Arizona real estate market.  Secondly, we able to enjoy Arizona during the most brutal Manitoba winter since 1898!  

Okay...I'm outta here

In May I suggested that the time had arrived for me exit...stage left. With my plan to spend at least three months in Arizona this winter I'll be officially "semi-retired". Time to cash 'em in methinks. As is so often the case, as soon as I decide to sell, the bottom falls out, and that's exactly what happened. In June I posted a chart showing what happened to my bank stocks as soon as I placed my sell orders.

Well, the story has a happy ending after all. The TSX in general and the banks in particular rallied this month and I was able to sell all three banks, BMO, RBC & TD at fifty-two week highs. You gotta know that after I sold they continued to go up. What's new? Doesn't matter. I did really well on these three and will not look back. I also sold my Suncor, leaving only a few penny stocks in my trading account. With all the money parked, for now at least, in the Bond Fund I am after all these years truly a Passive Investor. To be honest, it feels good...been sleeping better than ever!

I do plan to hang in here at TPCI and chip in from time-to-time. After all, as a semi-retired boomer, I should have more time to write.

IMPORTANT REMINDER:
Nothing on this site should ever be considered to be advice, research or a suggestion or invitation to buy or sell any securities. Every investor should do their own research and consult their own finance guy. See full DISCLAIMER.

As always, Good Luck & Happy Investing!

Spoke Too Soon!

In my May 22 post I mentioned my plan to cash out of individual stocks and move on. At the time, all three of my Canadian banks stocks, BMO, RBC and TD, were very near their fifty-two week highs. My strategy, if you can call it that, is very simple. Figuring that they reached a the high sometime in the past year they'll get there again soon and I'll take that as my exit point. I placed three sell orders, one for each bank stock. Figuring that I'd like to net the fifty-two week high, each sell order was for the previous high plus a few cents to cover brokerage fees. Too easy!

My guess was that I'd be out of these long held stocks within days. Not!  Could I have been more wrong or timed things any worse. No sooner did I decide to sell, my bank stocks and the whole TSX hit the skids. RBC is off 5.47%. BMO and TD not quite so much. I now figure it could take many weeks or even months before they get back into the range of my sell orders. That my friends is why I've decided to get out. Yes, over the long term they do tend to go up, but the crazy volatility is enough to drive one to drink.  Guess I'll be holding for a while yet.  In the meantime,

Good Luck & Happy Investing!