The Amazing Canada Savings Bond And You

Why We Spend Unnecessarily and What to Do About It

When you want to build up a good, safe investment for yourself, or you want to save money for a retirement without losing sleep, you should look at the Canada Savings Bond. The Canada Savings Bond is an investment instrument created by the government of Canada and it sells between October and April of every year. Issued through the Bank of Canada, it offers a competitive rate of interest and there is a guaranteed minimum interest rate on it.

Created in 1946 as Victory War Bonds, it was a safe way to invest and to save for Canadians who did not want to use mutual funds. The Victory War Bonds were just one of four different types of bonds that were issued including the Canada – Dominion War Savings Certificate, the Canada Fourth Victory Loan and the Dominion of Canada Victory Loan.

These Canada Savings Bonds became very popular and a great way to invest and they would often be bought for younger children as a gift that they could redeem years down the road. However, lately, bond sales have begun to fall because of the low interest rate environment causing yields to be lower, which means more people are going to stocks and mutual funds in order to get more money for what they are spending. During the 1980s, rates were as high as 18 percent, which yielded big savings, but these days the interest rate has fallen by so much that Canada Savings Bonds held by Canadians were no more than 10 percent of people. In totally, Canada Savings Bonds are worth $19.2 billion in terms of bonds held by Canadians.

There are many types of Canada Savings Bonds that you can buy. These include:

• Canada Savings Bonds are purchased with regular and compounding interest varieties and you can cash them at any time. They come in denominations of $100, $300, $1,000 and $10,000 with the interest guaranteed for a year and then fluctuating for the remaining nine years until the Savings Bond reaches its maturity date.
• Canada Premium Bonds are purchased with the same choices in interest as Canada Savings Bonds but they can only be cashed on the anniversary of the issue date, or within 30 days after. Other than that, they are pretty much the same as Canada Savings bonds except the interest rates differ slightly. These bonds are sold with interest rates up to the third each, with each year after having higher interest and the interest rate fluctuates for the remaining seven years depending on the condition of the market until the maturity date is reached.
• Canada Investment Bonds were available for a time between 2003 and 2004 and are were not redeemable until they matured, and each one had three-year maturities.

There are also several plans that are offered through the Canada Savings Bond, which include:

1. The Canada RSP, which is a no-fee retirement savings plan that, uses compound interest Canada Premium and Canada Savings Bonds.
2. The Canada RIF, which is a no-fee retirement income fund that holds Canada Premium and Canada Savings Bonds.
3. The Payroll Deduction, which is when employees choose how much they can have deducted off their paycheques in order to put into a Canada Savings Bond under the Canada RSP.

In regards to the rates that are used in the Canada Savings Bonds, with the exception of when the rate is fixed at the start of the bond term, the rate is always dictated by the market conditions. An example of this was seen in 2009 when there was a very low rate in the market, which meant that those who purchased the Canada Savings Bonds in that year having very low rates. Low rates mean that your bond is not going to increase in value by much, which is why the Canada Savings Bond market is not doing as well in terms of the number of Canadians buying the bonds.

If you want to withdrawal from your Canada Savings Bond, you can typically do so at any point from most of the big banks within Canada. If you withdraw within three months of issue, you typically will only get the face value of the bond back. What is meant by this is if you have a $10,000 Canada Savings Bond, then you will get $10,000 back. After the first three months, you get the face value plus any interest you have received on the bond. With the Canada Premium Bonds, you can redeem them one year and 30 days after issue, which is important to keep in mind.

You are going to be fully taxed since the Canada Savings Bond is seen as income at your current tax rate. This is why it is a very good idea to take your Canada Savings Bond and hold it in an account that is tax-deferred, like your Registered Retirement Savings Plan.

The Canada Savings Bonds are a very safe way to invest and a good way to build up money that you can use for your retirement. If the Canada Savings Bond grows at the 18 percent per year as was seen in the 1980s, then a $10,000 Canada Savings Bond over that ten years will go from $10,000 to $52,338 by the time the ten years is over. Even at a low of four percent per year, your $10,000 would grow to $14,802.

A safe investment that can also serve as a good gift for someone, the Canada Savings Bond is what you should consider if you are new to investing, or you do not want to invest in the riskier investments of mutual funds and stocks. This way you keep your money growing, albeit at a slower ate, while at the same time increasing your savings using nothing but the interest rate that exists at the time. Look into the Canada Savings Bond and see your savings grow without you having to do anything.

Canada Savings Bond Website

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Understanding Canada Pension Plan or CPP

One of the most important things in your retirement, if you live in Canada, is your Canada Pension Plan. This is what will provide you with much needed money to go with your savings after you have retired, but there are some important things to know about it. Many assume that the payments just happen, regardless of when they take their retirement, but there is much more to the Canada Pension Plan than that.

First of all, your Canada Pension Plan is a monthly benefit that is paid to you, when you have contributed to it through your working life. It is designed to provide you with one-quarter of the earnings you have received, to a maximum amount and as of 2010 that amount is $934.17.

In order to qualify for the Canada Pension Plan, you need to have made at least one valid payment through work, usually based on at least one year’s of work. You also need to be at least 65 years old, unless you meet the earnings and contributions requirements and then you can start receiving it between the ages of 60 and 64. If you decide to take your pension between the age of 60 and 64, then your pension payment will be reduced by .5 percent for each month before you turn 65. The maximum your payment can be reduced is 30 percent though.

One thing many people do not realize is that the pension plan does not kick in automatically at the age of 65; you need to apply for it. That being said, if you are receiving a CPP disability benefit, then that will automatically change over to the Canada Pension Plan payments when you turn 65.

If you do not start your pension plan until you are past the age of 65, you actually increase how much you get and many people do not realize that is the case. If you are between the age of 66 and 70 and you start your payments, you will get .5 percent more each month after the age of 65, and before the age of 70, to a maximum amount of 30 percent. If you start your pension after the age of 70, you receive the same pension amount you would have at the age of 70.

Sometimes people change their minds after they start the pension and decide to cancel it. Under the law, you are allowed to do this up to six months after the pension starts. You need to request a cancellation in writing and, most importantly, you have to pay back all the benefits you received to that point. In addition, you must pay any CPP contributions that you would have during that period of time you collected a pension.

These are just some of the important things to know when you are dealing with a Canada Pension Plan. Knowing these can ensure you get the most out of your pension when you do decide to take it.

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The Performance of the Canada Pension Plan

Mutual Funds 101: Part 1

The Canadian Pension Plan is very important to many people because it serves as a good chunk of their monthly income when they retire. To ensure that the Canada Pension Plan always has money in it, the Canada Pension Plan Investment Board oversees the plan to ensure that it keeps growing to accommodate the growing population of Canada. Under the direction of the Finance Minister at the time, Paul Martin, the CPP Investment Board was created in 1997 as an independent organization that monitors the funds in the CPP and invests them. Every three months it reports on its performance and a professional team oversees the operation of aspects of the CPP fund, while also planning out the direction of the investments.

In order to provide more money to those who will be retiring, especially baby boomers, the Canada Pension Plan Investment Board decided to use 45 percent of its assets to invest in securities located outside of Canada, including in Western Europe and the United States. The Investment Board has also been investing heavily in emerging markets because, as the board states, Canada as one market cannot accommodate the future growth of the pension plan.

According to most estimates, to sustain the population in 2020 that will be using the Canada Pension Plan, the CPP must grow at least 4.1 percent per year. By 2010, the CPP Investment Board had grown to $147 billion. The next 40 years also see some benchmarks for the CPP Reserve Fund that the CPP Investment Board hopes to achieve to accommodate a growing population:

• 2015:  $200 billion
• 2030:  $592 billion
• 2050:  $1.55 trillion

The performance of the CPP has varied in the past few years, as has the CPP Reserve Fund, which grows based on the contributions by Canadians. In the past few years, the CPP Reserve Fund has grown and fallen over the years, seeing a rate of return that was highly fluctuating:

• March 2003 Total Value: $55.6 billion Rate of Return: -1.1 percent
• March 2004 Total Value: $70.5 billion Rate of Return: 10.3 percent
• March 2005 Total Value: $81.3 billion Rate of Return: 8.5 percent
• March 2006 Total Value: $98.0 billion Rate of Return: 15.5 percent
• March 2007 Total Value: $116.6 billion Rate of Return: 12.9 percent
• March 2008 Total Value: $122.7 billion Rate of Return: -.29 percent
• March 2009 Total Value: $105.5 billion Rate of Return: -18.6 percent

The large fall in 2009 was because of the recession that hit the world due to the credit crisis that began in the United States. However, the increase in 2010 was expected to be roughly seven percent, which would allow the CPP Reserve Fund to increase for the first time since 2008.

The Canadian Pension Plan needs to grow at a continuous rate to ensure that there is enough money available for the growing retiring population in Canada. With millions of Baby Boomers retiring and not enough of subsequent generations to prop up the Pension Plan, the Pension Plan needs to grow to ensure everyone has enough money when they retire using the Pension Plan. As long as there are no more years like 2009, it should continue to grow to meet those needs.

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Understanding Old Age Security Pensions

Retirement can be a stressful time for many individuals when they realize that they will no longer have a steady income, and instead will be hoping that the savings they put together will be enough for them to live on. While company pensions are great, they do not always cover everything and that means many retired individuals rely on old age pensions. In Canada, the old age pension is the Old Age Security Pension, which is a taxable-monthly social security payment that is available to Canadians who are 65 years and over. Currently, the basic amount for the old age pension is $502.31 per month. During tax season, if you have an income that is greater than $64,718, you must pay back a portion of your Old Age Security to the tune of 15 percent of your total net income.

It is important to note that not everyone will qualify for the old age pension. Depending on your circumstances, you may or may not qualify. If you want to collect a full pension, then you must meet the following requirements:

1. For Category 1, you will have had to live in Canada for at least 40 years after you turned 18.
2. For Category 2, you must have been born on or before July 1, 1952 and you must have lived in Canada for some period of time between that point and July 1, 1977.

If you want to collect only a partial pension, which usually happens if you are not approved for a full pension, then you need to meet the following conditions.

1. You must be over 64 years of age.
2. You must be a Canadian Citizen or a Permanent Resident of Canada.
3. You must have lived in Canada for the last 10 years at least.

Just because you lived in another country though, that does not mean that you cannot collect payments. Canada has agreements with many countries that can allow you to count years spent in another country so that you qualify for your Old Age Security pension. It is important to determine what countries they are but generally the United States, the United Kingdom and much of Europe allow you to qualify.

If you do not have much income, then your Old Age Security can be supplemented by a Guaranteed Income Supplement, which is non-taxable. That means that you are not taxed on that income, which gives you more money to use. The amount of money you receive with this Guaranteed Income Supplement will depend on how much you make your marital status and the age of your spouse if you are married.

Currently, the maximum supplement that you can receive as one individual with no other source of income is $597.23 and $392.01 for each spouse if you are married to someone.

It is also very important that you do not confuse the Old Age Security pension with the Canada Pension Plan, which is something that you contribute to, and which is earnings-related, which is paid in addition to the Old Age Security pension.

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Canada’s Deficit Shrinks

There was some good news from the federal government this week as the government discovered there may be less of a deficit for the economy than was original thought. In February, the government ran with a budget deficit of nearly $1 billion, which would make it the smallest monthly shortfall in the space of a year. Now, with one month left in the fiscal year for the government, it looks like the deficit is going to be less than the $53.8 billion originally estimated by the government. Thanks to the small shortfall within February, and with the surplus from one year earlier that amounted to $817 million, the total shortfall for the fiscal year in Canada is only going to be $40.5. Yes, that is quite a significant number, especially considering that last year the government had a $1.3 billion surplus last year during the same 11 months. However, it is all in how you look at it. The $40.5 billion shortfall is pretty bad, but with it being $13.8 billion less than what was originally expected, you have to consider that to be a win.

The Finance Department considers this good indication that while the economy still is pretty weak, the Action Plan of the government is helping to improve things and lessen the hit that the government and the country are taking from the extended recession that began in late-2008.

Almost half of the deficit came in February when the government began doing economic stimulus spending. During that month, $18 billion was spent to get the economy moving. The government also saw its revenues fall drastically compared with the previous fiscal year. Revenues were down to $16.9 billion, which is a 7.9 percent drop. Program spending increased to $26.4 billion, or by 14.4 percent because of the higher amount of individuals currently on employment insurance payments, as well as the bailout of the automotive industry.

The public debt charge did fall by $1.5 billion thanks to the lower interest rates, which are now increasing as the government tries to stem the incredible growth of the real estate industry to prevent another collapse. In the federal budget released in March, Finance Minister Jim Flaherty announced that there would be spending restraints. Coupled with the stimulus program of the government, this is expected to reduce the deficit of the budget to $27.6 billion by the fiscal year of 2011-12. It is expected that the budget will be balanced by 2014-15.

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Multiple Listing Services or MLS

If you are planning on buying a home in Canada, then you will most likely be finding that home through MLS, unless you go through a private sale. MLS, or Multiple Listing Service, is a one-stop shop for all the homes that are listed through the major real estate agencies within Canada.

MLS has actually been around for quite a long time, finding its origins in the late 1800s when real estate brokers would gather in offices of their local associations to share the information about the properties that they were attempting to sell. They would do this under the agreement of compensating other brokers who helped them sell properties, and this created the basic principle of MLS.

The Real Estate Board of Greater Vancouver claims to be the pioneer of MLS in Canada, and currently the MLS service in Canada has 98,000 members of the Canadian Real Estate Association, who work through the 101 real estate boards and 11 provincial/territorial associations.

MLS is extremely beneficial to you as a homebuyer for the following reasons:

1. It allows you to search through properties based on location, price, services and more.
2. It allows you to see pictures of a home anywhere in the country without ever having to travel to that area of the country.
3. You can comparison shop homes in a wide area to find the home that is right for you.

Some people criticize MLS because it allows the realtors who use it to have a monopoly on listings. Roughly 80 percent of homeowners in Canada use MLS to find their home, so for realtors who are not listed on it, they lose out on a lot of potential business. Lawsuits have been launched to allow other realtors to list homes outside of MLS, but these have mostly been thrown down.

If you are doing a home search, you can either look on MLS yourself (www.mls.ca) or you can have an agent do it for you. When you do a search, you can search in a number of ways for the right home for you and your family.

• Postal Code
• Radius Search
• Street/Subdivision
• Price Range
• Number of Bedrooms/Baths
• Garages
• Pools/Spas
• Square Footage

Once you find your home, you can look through the pictures, find out where it is on a map and even e-mail the realtor questions about the place. This puts a lot of the control in your hands and in fact all you need the realtor for is to buy the house and inspect it when you are in the area.

MLS is a great service that really makes the entire process of finding a home much easier. You are able to find a great number of homes anywhere within the country through the easy map function. You can see exactly where the home is, what it looks like, the things it has and anything else you may need. Without MLS, it would actually be more complicated to find a home for average homeowners.

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Is It Possible To Make A Private Property Sale In Canada?

Canadian Real estate 101 Selling is a serious process just like buying is. A person needs to understand how to go about it. The most recommended process is finding a selling agency to offer guidance. A seller has to be prepared to pay a certain commission in exchange to the help a selling agency provides. In this case he or she does not have to worry about being swindled or anything of the sort. This is a good option if a seller has no time or expertise to find a good property buyer.

On the other hand, a seller can decide to oversee the entire process personally to avoid paying realtor commissions. This is certainly complex but not when a seller has taken time to research the Canadian market currently. He or she must be ready to find all the information that an experienced agent is aware of. The good news is that one can easily find sites that guide homeowners through the process of making private property sales. Choosing to use an agent is a decision one can make freely in Canada or some other countries in the world.

After going through these sites one realizes that this procedure is not as complicated. There are some advantages that a private property sale can bring. For instance, a homeowner is always in a position to disclose everything about his or her property to a buyer. Therefore a private home seller can oversee home viewing and price negotiation personally. If a seller decides to make private home sale, he or she has many advertising options. Internet is the trendiest advertising platform right now and there are famous gateways in Canada.

There are several other sites that do private property listing in Canada but it is prudent to find out how it happens. Of course every private home seller wants to be sure of the site’s authenticity trademarks. He or she may want to consider a site’s traffic hits and if the site is actually moving properties fast. A real estate advertising site that a client can flexibly use and obtain support when necessary is good. Before posting a home poster online, one has to make sure that the house is properly maintained.

Avoiding using any realtor does not mean a seller won’t deal with one. Any buyer will often prefer to hire an agent to help him or her in the process of buying. A seller will therefore deal with a person who has ample knowledge of the Canadian real estate 101 selling procedure. The process can get complicated and a seller may end up hiring a lawyer or an agent. In fact it is possible to receive calls from agents willing to do business with a seller after viewing his or her property ad.

If a seller is still willing to sell the privately, he or she may need a lawyer’s note to shun the persistent realtors. Selling a private property via auction is possible but a seller’s home must be cozy, attractive and modern looking. A home situated in the hottest locations in Canada and it is also upscale will receive good bids fast.

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Canadian Real Estate Market Outlook

Investing in real estate in Canada is a prudent step to take right now. According to recent reports, Canadian real property market is attractive. 2010 is a perfect year for any real investor in the country. Probably even international investor would be glad to take advantage of declining property prices. Many countries lack luring residential or commercial investment opportunities.

This means that an investor can currently expect a good return on property investment in Canada. Just like in other developed countries, Canadian commercial real estate market growth rate is slow. However the cost of these properties have not been too steep lately. An investor can choose to buy a commercial property in busy places where people are seeking business premises. Also buying a house in an area where income potential and employment odds for residents seems promising is perfect.

Buying commercial properties is often beneficial because one is assured of steady income flows. Furthermore, buying a property a time like now when prices are reasonable is wise. In future, a house’s value is expected appreciate and it is much more likely to cost more than its initial buying cost. Before one can buy any property, it is important to examine his or her finances. To be specific, a foreigner who intends to invest in Canadian real estates need not consider the currency conversion alone.

There are extra financial factors that are handy. For instance, a person may decide to purchase a real estate by paying a mortgage loan. The option is available to both the natives and international investors through banks, although the former is favored. As a foreigner, one needs to approach a Canadian bank to inquire about it. Some banks will definitely provide this type of home buying loan based on some conditions. An investor must ensure that his or her credit score is above reproach.

It is very possible to apply for a mortgage in Canadian currency from anywhere. Having a motive to relocate to Canada is a good intention still. To achieve this, one must find a good international mortgage broker. This is not an easy task because these brokers operate in some select countries. If an investor lives in Canada, it is easy to find a good mortgage broker. A broker is always useful to help investor during price negotiations. They are source of advice too.

Even before one can select a mortgage plan, evaluating his or her financial ability is crucial. Every investor knows his or her financial strengths. It is wise to consider that real estate prices can suddenly change due to fluctuating currency exchange rates. Select a home mortgage plan that is easy to pay, putting into consideration such random economic changes. As an international investor, it is important to seek consultation before signing any mortgage documents. Choosing to invest through a certain bank that supports international mortgage loans is a trouble-free approach.

A homebuyer or a commercial real estate buyer, from Canada or a foreign country must not default in payment. This can hurt an investor’s credit score or result to a foreclosure process. Foreclosure is the process through which a real estate is repossessed after an investor defaults. This can be difficult for international real estates investors, although it can be a bad experience for anyone.

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Canadian Real Estate Purchasing Process Explained

Real Estate 101 buying knowledge is very important to sellers and buyers of properties. Learning its basics can facilitate the process of buying. Property buying will always require a client to select his or her realtor, also called an agent. It is very easy to make a mistake at this point by selecting the wrong agency. When trying to purchase a Canadian house, avoid working with a dual agency because of some decision-making limitations. Certainly it has its advantages but as it represents both buyers and sellers, every decision is made after consulting each other.

Selecting a seller agency is not safe too because, as the name suggests, a buyer enjoys no representation at all. A buyer agency is the answer when a person wants to get more information about a real estate ad. Avoid choosing just about any Canadian buyer agency available. There is a realtor available to professionally handle the exact interests any client desires. These agents work on commission basis. Money should only be paid to them if a property is bought.

How does Real Estate 101 purchase process work?

The very first step to fulfill in the property buying process is seeking a mortgage pre-approval. This is a very positive progress that impresses any seller. It involves Mortgage form filling and forwarding all the required documents for approval. This can amazingly boost a buyer’s negotiation position because pre-approval shows his or her seriousness. This makes an agent’s job much easier and swift. He or she won’t continue searching for other properties that might interest the buyer.

Another very important document involved in the process is called a Property Condition Disclosure. A buyer must read it to know about the current property condition, its appliances, heating and water systems and so on. Failure to disclose any crucial detail about the property by the seller is not acceptable legally. An agent’s work is to help a buyer report and solve such a problem legally even after closing the sale.

Do you know what earnest money is in real estate 101 buying? A buyer is required to set a side a predetermined percentage of property cost in a Trust account. This money will be locked in the account until the parties reach an agreement and actually finalize the sale. Any realtor knows about this requirement anywhere in Canada and can provide help. If the first offer made by the buyer is good, a seller might accept it right away. If not a seller will reject this offer and propose another.

A buyer is free to accept, meaning he or she does not have a problem with any changes a seller proposes. Rejecting an offer means that a buyer is done and want to sign a Terminate Contract document. He or she wants to have his or her earnest money back. This gets buyer and the agent in the first step of finding a different property. A counter offer can be disappointing if no agreement is reached. However, if both the seller and buyer negotiate fairly, a final solution can be found. After this the parties are ready to close the sale and the buyer will own the property henceforth.

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Tips on Buying and Selling a Real Estate Property in Canada

Canada Real Estate Home Buying and Selling Tips

Canada is a good home to many immigrants and natives. Some immigrants end up spending their lives in the country. Attractive real estate market in Canada is one of the major causes. One can buy a home or a commercial property and still have a chance to sell it later. In fact one can join in the business of buying and selling real estates any time, as long as he or she knows how to do it.

The following steps can help a potential property buyer who wishes to invest in Canada soon:

Decide on the area- Canada is a big country and each section has its merits in terms of real estate investment. Foreigners can use Internet as a source of geographic information. Visit the country if possible.

Source of finances- Canadian banks are the key source of finances. They normally demand a thirty five percent down payment on real estates. Mortgage loan is allocated over a period of twenty-five years. Evaluate several options while keeping in mind that credit is difficult to find in the country.

Locate an agent- a mortgage broker understands the nature of Canadian market and can help you lower the overall cost. International investors can still find correct brokers from home. These agents understand better the agreement of purchase document.

An attorney is vital- it is important to allow an attorney check all documents regarding the purchase process. This results to extra overheads apart from brokerage fees.

Closing the process- submit all required documents, receive mortgage documents and read them carefully. Sign or ask for extra clarification.

If a person is not buying a real estate, he or she could be interested in selling. Canada being a civilized country, immigrants and natives are always willing to buy properties. In fact within three or more months one can sell his or her property.

The following steps can help a Canadian or international real estate owner sell his or her property:

Pay a contractor- an older house requires a makeover before it can be sold. There are many certified contractors in the country that can improve the standards of older properties. Make sure the contractor of choice is a member of Home Builders Association.

Work with An attorney- selling a property is not a simple process because it has to be legal. This explains the importance of a lawyer who represents any legal formalities. A real estate agent can serve the same role too but one has to be prepared to pay a commission.

Advertise the house- one must find a way to advertise a property to attract bids. Online advertising is working amazingly nowadays. It is a good method to attract even international investors to the property on sale. One can also advertise in local papers, including the home’s image.

Even so, it is advantageous to try MLS listing organized by Canada Estate Association. This listing can be found online now and many property sellers are using it. The key requirement is a property disclosure document that should be filled in.

Handling appointments and sales after posting a property ad, interested buyers will call to set an appointment to perform evaluation. A seller can invite everyone but must be careful with offer acceptance. An attorney or an agent becomes very essential in this final step.

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