Category: Finance

Do online programs that I use to do my taxes sell my information?

Reader Heather Osborne in Ottawa asks: “If I use tax software, is my data protected?  Or am I giving away my personal financial information?” Report on Business reporter Ian McGugan says, “No – at least not without your consent. You should check the details in the privacy agreement that accompanies whichever software package you use, but generally you must approve any use of your personal information.” He explains:

Intuit, maker of the popular TurboTax software, declares it “will not rent, sell, or otherwise distribute your personal information without your permission.” The main exceptions are if courts demand the information be handed over or if the information is “reasonably required” to fulfill your service or product requirements, but even then the third parties are bound to privacy requirements.

H&R Block, the maker of another popular tax software package, takes a similar line. “We do not disclose your personal information to third parties except as described in this Privacy Policy, with your consent, or as permitted or required by law.” A spokesperson says the company does not sell any personal information and the company’s privacy statement assures users that “H&R Block only retains personal information for as long as necessary or required for the purposes for which it was collected or as required by law.”

But here’s where things get tricky: Read your privacy statement and you’ll find that every tax software company will acknowledge making use of your personal information in various ways that does not involve actually selling it. You may or may not find these to be objectionable.

H&R Block, for instance, says it will use your personal information to alert you to products and tailor marketing material to your needs. You can choose not to receive these materials by calling them at a number provided or sending them an e-mail.

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Rob Carrick answers (more) money questions

Earlier this week, The Globe’s personal finance columnist Rob Carrick took over @GlobeBusiness to answer your questions live. (See the recap here.)  Money questions for Rob have continued to flow in from Globe readers. Below, Rob answers more of your questions:

Q. “Any recommendations for some solid USD denominated Equity, Balanced or Sector ETFs that I can purchase with USD from my Investorline RRSP?”
– Derrill MacDonald, Newmarket, Ont.

Rob: What I recommend is taking a broad, diversified approach to any stock market, including those in the U.S. Sector guessing is a form of market-timing and very difficult to pull off well. Not too long ago, people thought energy was a great sector.

“I inherited a 6-figure sum from my father, and – mindful of the effort he put in to earning it – I am very risk-adverse to losing it. What are my best options for earning a good return with low risk?”
– Suzanne Robins, Ottawa

RC: Depends on your time frame. If less than five years, suggest a GIC ladder – equal investments in GICs maturing in one through five years. If longer, preferably 10+ years, you could try adding a little stock market exposure for more growth. Keep in mind that safe investing is low-return investing these days. Nothing wrong with that, as long as you buy in.

“I am 70 years old with a secure pension. My investments are 100% in dividend paying equities. 50%canadian and 50% u.s. Do you feel we are taking on too much risk. We have a small mortgage.”
– Howard Charles, Guelph, Ont. 

RC: The pension is like a bond, so having your own investments in stocks can work. Big factor is your ability to tolerate a market crash. Are you OK seeing your stocks plunge in value, even if they continue to churn out dividend income for you?

“Currently, I pay 5 per cent of my salary into the group RRSP that by boss matches.  I also contribute money voluntarily each month. Can I transfer funds out of this RRSP to my own personal RRSP? – Eva Junk, Toronto 

RC:  It’s best to ask the Human Resources people who run your group RRSP. You may not have access to the money unless you leave the company.

“I’m retiring next year. my wife is retired now. we both have about 750K RRSP and 65K TFSA. No Debt.  What is the best way to minimised tax on our withdrawal of about 55K a year for both of us?”
– Huat Weg, Mississauga, Ont. 

RC: Suggest you consult a fee-for-service financial planner to design a personalized plan. That’s a planner who charges a flat or hourly rate and doesn’t sell products.

“I am 22-years-old and have $23,000 saved and no debt. Should I buy stocks, make a down payment on an investment property or go back to school?
– Conor Amyot, Oshawa. Ont. 

RC: Outstanding, Conor. Back to school sounds interesting, if you can acquire additional education that will, first, help your earning power and, second, that you won’t end up in debt. Stocks are great if you plan to hold for 10+ years and want to build long term wealth.

Read the full recap of Carrick’s Twitter takeover here and read more tips from experts on how to save and make money from The Globe’s personal finance section here

Personal finance expert Rob Carrick answered your questions live

With the RRSP deadline fast approaching, are you in a healthy financial position? What’s the different between a Tax Free Savings Account and an RRSP? How much should you invest? Should you pay someone to do your taxes, or go it alone? What does a good retirement plan look like?

The Globe’s personal finance columnist Rob Carrick took to the Report on Business Twitter account to answer your questions live

Reading this on a smartphone? Click here

Have a question about personal finance, tax time or retirement? Tweet with #AskTheGlobe

Will I have enough money when I retire?

Rob Dawson, a reader in Waterloo, Ont., asks, “Will I have enough money when I retire? I’m in my 50s.”  Ian McGugan, The Globe’s Report on Business investment editor says the right ratio of what you earn now compared to what you’ll need in retirement is dependent on how much you make now, how much you spend now, and what your ambitions are for life after work.  “The good news,” McGugan says, “is that retirement is likely to be more affordable than you think.” He explains:

Most people find they need a retirement income that is 50 to 75 per cent (called the replacement ratio) of what they made while working.  Financial planners will tell you vanishing expenses like mortgages, daycare costs, tuition bills, and RRSP contributions eat up at least a quarter of your income during your working years. Therefore, planners typically recommend a replacement ratio of 75 per cent of your previous income will allow you to live in retirement much as you did while working.

But a 75 per cent replacement ratio is a guess, and one that tends to err on the high side. People who examine the facts on the ground often conclude that middle-income couples can live happily on 50 per cent to 60 per cent of what they were making during their earning years.

For instance, Russell Investments Canada analyzed Statistics Canada’s 2007 Survey of Household Spending and found that, for most retirees, a replacement ratio of 47 per cent of their working income was sufficient to cover the bare essentials, while 60 per cent of pre-retirement income was enough to cover both essentials and “lifestyle” expenses such as travel and dining out.

Focusing on the specifics of your own situation is important. Here are three questions to ask:

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In the age of fast data sharing, why do online payments take 2-3 days to be processed?

On Twitter, reader @itsgifty writes, “In the age of fast data sharing, why does it take two to three days for bill payments made online to be processed?” The Globe’s financial services reporter David Berman found the answer:

The apparent slow pace of bill payments does stand out when you consider the lightning-fast speed of today’s electronic telecommunications. Indeed, two or three days of processing time conjures thoughts of mailed cheques, rubber stamps and pneumatic tubes.

The reason has nothing to do with old-school technology, though, and everything to do with a complex payments infrastructure that kicks in after you leave your bank’s website. In short, your payment doesn’t go immediately to your hydro or cable account, but rather winds its way through a system following a number of steps, each of which can take time.

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How do RESPs work?

Daryl Frewing in Surrey B.C. asks: How do RESPs work? The Globe’s personal finance digital editor Roma Luciw explains the basics:

Many Canadian parents understand that saving for their child’s post-secondary schooling through a Registered Educational Savings Plan is a good idea. What many Canadian parents don’t understand are the nuts and bolts of how an RESP works. And given the confusing array of regulations, options and limits that surround RESPs, that’s not surprising.

Here, in a nutshell, is what you need to know: In order to open an RESP, the beneficiary of the account must be a Canadian citizen and have a social insurance number. (Note to new parents, get your child a SIN as soon as they are born.)

You – or any family member, friend or loved one – can contribute as much as $2,500 a year per child in an RESP and receive a matching 20-per-cent grant from the federal government.

Yes, you read that right. Through something called the Canada Education Savings Grant, the government is going to give you 20 cents in free money for every dollar you put into an RESP – to a maximum of $500 each year.

Doesn’t sound like much? Well, between when a child is born and turns 17, they can receive a lifetime maximum of $7,200 in government funds, providing their RESP account has been topped up annually. (Some children from lower-income families might also be eligible for additional grants.) At a time when college and university costs are higher than ever, that kind of money is nothing to scoff at.

The other important thing to know is that an RESP is not an investment but rather an investment account. That means that you can put anything from guaranteed investment certificates (GICs), stocks, exchange-traded funds (ETFs), mutual funds to bonds into an RESP. When your child is young, you can likely afford to invest more aggressively in your RESP, then as your child ages slowly reduce the risk level, eliminating it by the time they are done high school.

The investments within an RESP will grow tax-free, which means that if you start the account when they are young, there will eventually be more money in your child’s educational nest egg. If you wait until your child is older to start the account, there will be less time to make annual contributions and less time for your investments to grow within the RESP.

If you fall behind, one year of missed contribution room can be used each year, in addition to the current year’s maximum contribution room. The moral? Don’t wait until your child is a teenager to open an RESP.

And with the holidays looming, now might be a good time to ask grandma and grandpa to skip the dollhouse or train set and invest in your child’s future education instead.

Follow Roma Luciw on Twitter, and read more from The Globe’s Personal Finance section.