November 16, 2006
I’m 52 years old, self employed most of my working life and of course no organized pension fund other than what I have managed to save over the years. I’m a saver, frugal even, we have RSP’s but it is not a great amount; both my wife and myself have other savings, my house is paid out and we have also managed to put some money into a resp for my daughter should she decide to carry on her education.
In planning for our retirement I have being looking for several years on options to continue an income stream upon retiring; and in so doing happened upon Trusts about 4 years ago and started slowly to create a portfolio of diversified and royalty trusts. We educated and informed ourselves regarding trusts and what to look for as to sustainability of income flows. We did not invest blindly into trusts!
In doing financial planning for my self and wife we will need to earn almost $80,000 before tax to continue with the same life style that my wife has become accustom to. I was surprised at this amount and repeated it several time only to continue to come up with this same figure. We are not big spenders, three quarters of the after tax money went straight to living expenses.
So you see why I had fallen in love with Trusts, it would allow us to enjoy a life style that we had grown accustom to and potential growth. So, over the past few years we have slowly added to our portfolio to the point I could see some light at the end of the tunnel and perhaps a retirement date in the near future.
Last year, when the Liberal government suggested that trust should be tax or the structure of trusts be change we lost on paper a fair amount of capital. We along with all trust investors were quite relieved when they decided to not proceed with these changes. Further, a new conservative government stated that no future changes would be needed or attempted.
Now I am in a bit of a quandary, under the presumption that this new government would not touch trusts, we made application for a margin account and of course purchased more trusts to take advantage of the low prime rate and the attractive over all return on our basket of trusts. What could go wrong, we were finally on top of our financial future by using all the tools and resources legally allowed to us and sanctioned by our own government! We have lost far more money now than we ever thought possible!
This week, like tens, thousands, hundred of thousands, perhaps millions of others, have run the full range of emotions from disgust, to fear, to loathing this government. We have lost a fair amount of capital, and we still owe the margin amount to the bank.
The future looks grim for us and many others, we will have less capital, less money to spend, less trips and our standard of living if and when we retire will be lowered substantially. With less spending from the so-called “boomers” what will happen to the Canadian economy. Business communities have being gearing up for the future spending of this group that I think will not be as great now as it could have been. Tax loss selling and expenses will no doubt be greater this and following years to offset there income from years previous. We will ultimately pay fewer taxes to help fund Revenue Canada and many trusts will be at risk of being purchased from other than Canadian companies. Our resources are slowly being purchased and controlled by non-Canadians along with any income, tax revenue (if any is available after write offs) and the ultimate spending benefit from such.
What is ultimately the trickle-down effect, we are not the only Income, Reit or Royalty trust holders. Many individuals from mutual fund investors, to pension funds, to CPP, to perhaps even yourselves. How is this multi billion dollar loss in investors portfolios going to affect spending habits of the so called “boomers”. For the last ten years we have been hearing about this massive group of individuals that will have money to spend or at least did until this attack on fixed income retirees and those of us who where close to retiring. Spending from this group will affect every business from restaurants to cosmetic surgery.
The future looks grim for ourselves and many others, we will have less capital, less money to spend, less trips and our standard of living if and when we retire will be lowered substantially. With less spending from the so-called “boomers” what will happen to the Canadian economy?
To me this ill-advised, knee jerk reaction that this Government has proposed will ultimately hurt not only our country but those that have built this country by paying their taxes in the past. My wife and I, since owning trusts, have never paid so much tax as we have these past four years.
As I mentioned above that our future retirement timing, capital and income has been affected greatly by this government decision.
Please add your voice; say no to this incredibly destructive proposal!
Source: Senator Larry Campbell's Weblog
Stephen Harper lays his trap
Sunday, October 21, 2007
November 16, 2006