Budget 2019: New Housing Affordability and Retirement Planning Initiatives

In late March, the Federal Government tabled their final budget prior to October’s federal election. The Budget holds key initiatives aimed at helping young people with housing affordability, and to help seniors with retirement planning. Here are some notable changes that may impact you or your loved ones, specifically targeting the young and the old:

The Young: Housing Affordability

While many children may be hoping for support from the bank of mom and dad to purchase a home, if this isn’t part of your financial plan, the budget may offer some relief in two initiatives:

First–Time Home Buyer Incentive — A qualifying first-time home buyer with household income under $120,000 per year may be entitled to receive incentives of up to 10 percent of shared equity on a newly constructed home (5 percent on an existing home). No monthly ongoing payments will be required but the buyer must repay the shared equity mortgage upon re-sale of the home. An insured mortgage and shared equity amount cannot be greater than four times annual household income. This program is expected to begin in September.

Home Buyers’ Plan (HBP) — The available withdrawal limit under the current HBP is proposed to increase to $35,000. Under current rules, a first-time home buyer can withdraw $25,000 from their Registered Retirement Savings Plan (RRSP) on a tax-free basis. Access will be extended to those who experience a breakdown of marriage or common-law partnership, even if they do not meet the first-time home buyer requirement.

Seniors: Retirement Support

There was also some good news to help seniors in retirement:

Automatic CPP Enrolment — Starting in 2020, Canada Pension Plan (CPP) contributors who are 70 years old or older will be automatically enrolled to ensure they receive benefits. Currently, an application must be launched in order to receive benefits and some have missed out because they apply late or not at all.

Advanced Life Deferred Annuity (ALDA) — Currently, an annuity purchased with registered funds must commence annuity payments by the end of the year that the holder reaches age 71. The budget proposes to allow up to 25 percent of a registered holding* to be used to purchase an annuity that begins payments at the latest by the end of the year in which the holder turns 85, for a lifetime maximum of $150,000 (indexed to inflation). This may present a tax-deferral opportunity, allowing retirees to keep more money in registered plans longer, and may support those who are worried about outliving their retirement income.

Improved GIS — For low-income seniors, the basic earnings exemptions are proposed to increase to $5,000 per year (from $3,500) for Guaranteed Income Supplement (GIS) benefit eligibility. Earnings up to $15,000 per year will receive a partial exemption.

For greater detail on Budget 2019, please get in touch.


*Including RRSP, RRIF, Deferred Profit Sharing Plan, Pooled Registered Pension Plan, Registered Pension Plan. At publication, this initiative has not been enacted into legislation.