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John Ranalletta

Old news...from 2008

 

When asked why he robbed banks, John Dillinger was supposed to have said, "...because that's where the money is".

 

RALEIGH — __________ (sanitized to stay legal) in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

 

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

 

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.

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No doubt this has been batted around before, but what is happening in Europe today is actual confiscation. That's not to say that it absolutely will happen here, but understanding the voracious appetite our elected officials have for spending other people’s money, it is something which should be paid careful attention to - especially with regard to IRA's and 402k's.

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In before the lock!

 

Not "political" (yet), as defined by our rules.

 

This goes way beyond politics. It's pure economics. Financial distress makes otherwise good people do foolish things.

 

It's a bipartisan situation. :D

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No doubt this has been batted around before, but what is happening in Europe today is actual confiscation. That's not to say that it absolutely will happen here, but understanding the voracious appetite our elected officials have for spending other people’s money, it is something which should be paid careful attention to - especially with regard to IRA's and 402k's.

 

It looks as though some of it, while perhaps short of pure confiscation, involves the application of serious financial pressure--i.e., turn your assets over to us as a condition of retaining your government pension.

 

I think we should all feel vulnerable here. The worst part is that those of us who have tried to plan responsibly for our retirements and have been able to weather the recession somewhat intact are the most likely to get zapped.

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It looks as though some of it, while perhaps short of pure confiscation, involves the application of serious financial pressure--i.e., turn your assets over to us as a condition of retaining your government pension.

 

I think we should all feel vulnerable here. The worst part is that those of us who have tried to plan responsibly for our retirements and have been able to weather the recession somewhat intact are the most likely to get zapped.

I don't see any actual confiscation happening at all. The Hungarian governmental scam is a more severe version of the US tax scam where we have to contribute to SS but if we prepare outside of that the income counts against our SS. (And whatever SS was supposed to have been it's now a retirement scheme)
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The demographics have been in place for decades, and for decades I have said something will have to give way, and even predicted action against 401k and pensions. It's either that or a period of hyperinflation to render those savings meaningless.

 

The demographics guarantee it. Not enough workers to support the burgeoning retiree population.

 

One reason why we need the illegals and need them normalized, now.

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John Ranalletta
The demographics guarantee it. Not enough workers to support the burgeoning retiree population.
Wrong issue.

 

Essentially, what governments elsewhere are saying (and our government is approaching) is the state is entitled to all of its citizens' wealth. It is one thing to increase a future tax around which a person can plan. It is another to change the rules and claw back wealth accumulated legally and taxed at many levels, e.g. inheritance taxes.

 

Ag Secretary Vilsap, in a NPR interview, lamented the decrease in family farms; however, he obviously couldn't place partial blame on confiscatory inheritance taxes that force heirs to sell the farmstead to pay the taxes.

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One reason why we need the illegals and need them normalized, now.

 

I have seen some arguments that this would "cure" the projected Social Security shortfall in the United States, but (ignoring the myriad other issues raised by mass "normalization") my guess is that our political leaders should simply use such a move to kick the fiscal can down the road.

 

 

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John Ranalletta

 

One reason why we need the illegals and need them normalized, now.

 

I have seen some arguments that this would "cure" the projected Social Security shortfall in the United States, but (ignoring the myriad other issues raised by mass "normalization) my guess is that our political leaders should simply use such a move to kick the fiscal can down the road.

They may work for less, but they're not stupid. How many immigrants want their pay docked to pay for fat, old American pensioners? Likely, they're smarter to work "off the books".
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It looks as though some of it, while perhaps short of pure confiscation, involves the application of serious financial pressure--i.e., turn your assets over to us as a condition of retaining your government pension.

 

I think we should all feel vulnerable here. The worst part is that those of us who have tried to plan responsibly for our retirements and have been able to weather the recession somewhat intact are the most likely to get zapped.

I don't see any actual confiscation happening at all. The Hungarian governmental scam is a more severe version of the US tax scam where we have to contribute to SS but if we prepare outside of that the income counts against our SS.

 

I know much less about my personal SS benefits than I should, but my understanding is that those benefits are only offset by "earnings," defined as wages or income from self-employment. As of right now, if you've earned a pension or if you are deriving income from retirement savings, there's no offset/reduction, regardless of when you begin collecting SS. If you begin collecting SS before your full retirement age, your "earnings" (as defined above) are partially offset by a benefit reduction until you reach full retirement age, at which point the offset disappears.

 

There are no circumstances under which SS would require you to turn over control of your savings in order to participate in the program.

 

However, I believe we'll ultimately get to the point where "means testing" will be adopted. At least to some degree, this will mean that those who actively plan for their retirement will end up subsidizing those who don't.

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They may work for less, but they're not stupid. How many immigrants want their pay docked to pay for fat, old American pensioners? Likely, they're smarter to work "off the books".

 

Not within their control ... the control lies with the person, business, corporation etc. that pays them.

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John Ranalletta
They may work for less, but they're not stupid. How many immigrants want their pay docked to pay for fat, old American pensioners? Likely, they're smarter to work "off the books".

 

Not within their control ... the control lies with the person, business, corporation etc. that pays them.

As long as there's an entire underground industry committed to producing fake documents for the I-9 form, that's just not a barrier.

5378.jpg.c360f0933d8de5c807fcb9860e99819f.jpg

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Didn't say it was a barrier, but the control to pay someone off or on the books still ultimately lies with the employer not the employee.

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Thanks Mike, I'm so far away from collecting either SS or my 401K that I hadn't studied the relationship carefully or even much at all. Of course they will almost certainly change the rules before I get to a point where I can collect...

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Thanks Mike, I'm so far away from collecting either SS or my 401K that I hadn't studied the relationship carefully or even much at all. Of course they will almost certainly change the rules before I get to a point where I can collect...

 

You kids should start paying attention to these things. :grin:

 

I'm far from conversant in all the nuances. However, even as I approach 56, I have tried to structure my planning to account for the possibility of not receiving SS, or receiving a lower, means-tested amount than what the Social Security Administration currently tells me I should receive. The simple reality is that the numbers don't add up, given the current provisions of law.

 

By the way, the SS website has a lot of good information about the program and what you should receive, given the current laws. What they can't predict, of course, is how things may change in the future. I wouldn't be surprised to see huge changes in the next few years.

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John Ranalletta
Thanks Mike, I'm so far away from collecting either SS or my 401K that I hadn't studied the relationship carefully or even much at all. Of course they will almost certainly change the rules before I get to a point where I can collect...

 

You kids should start paying attention to these things. :grin:

Though I think I get the intent of this counsel, of what use is it? Likely, given the trends, a young person or couple is probably better off financially spending all they make and not saving, especially if confiscatory taxes continue to escalate.

 

A cynic might suggest savings in the form of precious metal coins that could be sold as retirement cash is needed; however, Congress, in passing the health care legislation, blocked that exit.

Starting Jan. 1, 2012, Form 1099s will become a means of reporting to the Internal Revenue Service the purchases of all goods and services by small businesses and self-employed people that exceed $600 during a calendar year. Precious metals such as coins and bullion fall into this category and coin dealers have been among those most rankled by the change.

 

This provision, intended to mine what the IRS deems a vast reservoir of uncollected income tax, was included in the health care legislation ostensibly as a way to pay for it. The tax code tweak is expected to raise $17 billion over the next 10 years, according to the Joint Committee on Taxation.

 

The upside of the trend is a growth in enforcement personnel.

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Thanks Mike, I'm so far away from collecting either SS or my 401K that I hadn't studied the relationship carefully or even much at all. Of course they will almost certainly change the rules before I get to a point where I can collect...

 

You kids should start paying attention to these things. :grin:

Though I think I get the intent of this counsel, of what use is it? Likely, given the trends, a young person or couple is probably better off financially spending all they make and not saving, especially if confiscatory taxes continue to escalate.

 

I understand your point, but I think that would be a poor strategy. Understanding that little in life is predictable, I've counseled my 23-year-old son to do the opposite of what you suggest. In other words, I've urged him to start saving aggressively, acting as though he will have to to fund his retirement years entirely through his investments and savings.

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John Ranalletta

That's been my strategy as well. I hope it works for our kids.

 

I just put a date on my exit from my current situation and used ESPlanner to calculate a "die broke" financial plan.

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Old news...from 2008

 

When asked why he robbed banks, John Dillinger was supposed to have said, "...because that's where the money is".

 

 

I believe Willie Sutton said that.

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John Ranalletta

Another fallacy...

 

While rates on AGI or net income may be low, many of the adjustments reducing gross to net have been eliminated; so, many taxpayers are paying a lower rate on a higher amount.

 

Kimberly Blanchard explains it better than I could here.

 

The only items of expense or loss that were not deductible, other than capital items, were truly personal items (that is, expenses that did not relate to the production of gross income). That is not the case today. This shift has included, in no particular order:

 

* phaseout of the personal exemption and the cutback on itemized deductions (even more severely in New York state);

* expansion of the alternative minimum tax, which functions as a disallowance of the deduction for state income taxes;

* virtual elimination of the deductions for section 212 expenses and medical expenses;

* the cap on the mortgage interest deduction;

* numerous caps on tax-deferred retirement savings;

* other rules limiting the use of losses, interest deductions, etc. (including the failure to index the $3,000 cap on capital losses of individuals);

* removal of the cap on the 2.9 percent Medicare tax;

* the repeal of the General Utilities doctrine and reinforcement of double taxation on corporate prof ts;

* enactment of the passive loss rules, which for the first time put a class of income on a separate schedule to eliminate base stripping; and

* enactment of the passive foreign investment company rules.

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One reason why we need the illegals and need them normalized, now.

I have seen some arguments that this would "cure" the projected Social Security shortfall in the United States, but (ignoring the myriad other issues raised by mass "normalization") my guess is that our political leaders should simply use such a move to kick the fiscal can down the road.

Whether or normalization of current immigrants in the USA is part of the solution is probably off topic, but certainly an aging demographic with a mean 0.85 replacement rate (current in the USA) is no recipe for long term sustainability. If US Americans don’t start having more babies and/or encouraging and simplifying immigration, where’s the base to both prop up the existing, and grow the future populous going to come from?

 

China has finally woken up to the problem which is one of the reasons they have dropped their max. two children per couple rule.

 

Canada has finally woken up to the problem and is working to ease its immigration rules/barriers.

 

Will the USA wake up?

 

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The demographics have been in place for decades, and for decades I have said something will have to give way, and even predicted action against 401k and pensions. It's either that or a period of hyperinflation to render those savings meaningless.

 

The demographics guarantee it. Not enough workers to support the burgeoning retiree population.

 

One reason why we need the illegals and need them normalized, now.

 

Jan, I find your comment above very interesting. On one hand, you point out that our social security system is deeply flawed, then promote a solution which ultimately leaves it even more flawed. It's like someone who sells watermelons at a loss of 50 cents per mellon concluding he needs a bigger truck. It just doesn't make sense.

 

Wouldn't we be better off correcting the flaws in the system instead?

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Steve-

 

Not sure about your analogy there. A guy who sells watermelons at a loss certainly doesn't need a larger truck, presumably for more supply. He requires more demand.

 

Jan's point is that demand exceeds supply, and he sees illegal immigrants as an added source of supply. I am not saying I agree or disagree with Jan on that particular point, but certainly one cannot argue with his basic point, which is that the essential problem of the entitlement is that demand is set to exceed supply.

 

In pure free market terms, as you like, you therefore need to focus on reducing demand, increasing supply, or (much more realistically) some combination of both. What would you suggest?

 

-MKL

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John Ranalletta

It appears Canada doesn't want our poor, Brown brethren either...

 

Are you suggesting the US should wake up and institute the same policy?

The Canadian Government has announced that from 1st December 2010, it will once again accept applications under the federal Immigrant Investor Program. Applications had been suspended from June 2010, in order to give the Government time to finalise its new policy changes and to avoid a flood of applications prior to the re-opening. One of the factors behind the changes was the large number of outstanding applications and thus long processing times.

Under the new program criteria, investor applicants will need to have a personal net worth of C$1.6 million, (up from C$800,000), and make an investment of C$800,000, up from the previous requirement of C$400,000.

 

Minister Kenney explained that the changes were necessary to bring the country in to line with its immigrant “competitors”, such as Australia and New Zealand.

“Raising the requirements will help reduce the flow of applications while ensuring we attract experienced businesspeople who can make a more substantial contribution to the economy. Higher personal net worth criteria mean the program is now better positioned to attract investors with valuable business links and the resources to make secondary investments in the Canadian economy. Higher investment amounts mean provinces and territories will receive more investment capital to put toward job creation and economic development projects,” added the Minister.

 

Canada’s Immigrant Investor Program offers several benefits to international investors, including permanent resident status up front and guaranteed repayment of the investment.

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I got to get me a Serta Mattress and will go to the Bank this afternoon. :(

 

I don't believe for one minute that such Pension Fund or Savings grab cannot happen here (Canada or U.S.)Implemented either by the Pension Providers or the Government. There sure was a lot of talk about drastically reducing Pension payouts here in CA, and I don't mean just for the Auto Sector. The big Pension Funds eyed the financial melt-down as a great opportunity to reduce their financial obligations, especially since their investments took a huge hit. Those prospects and the looming insolvency of the banks prompted me in 2008 to acually cash my Savings in and to find a really safe place to hide it.

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Huh.....A few years ago, I thought the pressure was in the opposite direction.......An attempt to invest SS money in the stock market. I guess that died with the great collapse.

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Another fallacy...

 

While rates on AGI or net income may be low, many of the adjustments reducing gross to net have been eliminated; so, many taxpayers are paying a lower rate on a higher amount.

 

Kimberly Blanchard explains it better than I could here.

 

The only items of expense or loss that were not deductible, other than capital items, were truly personal items (that is, expenses that did not relate to the production of gross income). That is not the case today. This shift has included, in no particular order:

 

* phaseout of the personal exemption and the cutback on itemized deductions (even more severely in New York state);

* expansion of the alternative minimum tax, which functions as a disallowance of the deduction for state income taxes;

* virtual elimination of the deductions for section 212 expenses and medical expenses;

* the cap on the mortgage interest deduction;

* numerous caps on tax-deferred retirement savings;

* other rules limiting the use of losses, interest deductions, etc. (including the failure to index the $3,000 cap on capital losses of individuals);

* removal of the cap on the 2.9 percent Medicare tax;

* the repeal of the General Utilities doctrine and reinforcement of double taxation on corporate prof ts;

* enactment of the passive loss rules, which for the first time put a class of income on a separate schedule to eliminate base stripping; and

* enactment of the passive foreign investment company rules.

 

Ok, some have been lowered and others raised. I did some searching to try to find overall effect. Lots of data from lots of folk, many with an agenda. But to sum it up, from what I can see based on a number of sources is that overall taxation has been relatively stable for a long time. Something like 8% of GDP from personal income taxes (7.2-8.8% over time), and something 18% of GDP for overall taxation (something like 14 to 21% over time). It appears that are fluctuations and we are now (latest data from 2003 - 2008 depending on source) in a bit of a low tax period, certainly not a period of increased taxation, but in any event well within historical norms. Something like 7.2 percent of GDP for personal income tax and about 17% of GDP for total taxation. We are, apparently, the 4th lowest taxed nation as a percent of GPD. That's a pretty rough picture, as I did not take detailed notes. But I think it's ball park.

 

Can we roughly agree on this?

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The demographics have been in place for decades, and for decades I have said something will have to give way, and even predicted action against 401k and pensions. It's either that or a period of hyperinflation to render those savings meaningless.

 

The demographics guarantee it. Not enough workers to support the burgeoning retiree population.

 

One reason why we need the illegals and need them normalized, now.

 

Jan, I find your comment above very interesting. On one hand, you point out that our social security system is deeply flawed, then promote a solution which ultimately leaves it even more flawed. It's like someone who sells watermelons at a loss of 50 cents per mellon concluding he needs a bigger truck. It just doesn't make sense.

 

Wouldn't we be better off correcting the flaws in the system instead?

 

you point out that our social security system is deeply flawed

 

Really? I don't recall mentioning SS. I was talking about pensions and 401k. Although I concede that SS is subject to the same demographics of course, I would hardly go so far as to say SS is deeply flawed.

 

then promote a solution which ultimately leaves it even more flawed.

 

Sorry, not seeing this at all. Don't even have a clue what you are talking about.

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In pure free market terms, as you like, you therefore need to focus on reducing demand, increasing supply, or (much more realistically) some combination of both. What would you suggest?
Clearly no free market can ever be in play for a Social Security system - no security in that for one thing.

 

Growth is not the answer, that is just what created the problem. We can't grow continuously forever. What's needed is a rationailisation of the system, that's probably going to mean that some people who were expecting to get SS won't (probably me) and a lot won't get as much as they expected. This is all part of the realization that the economy is not as solid as it was thought to be and that some serious belt tightening is needed. SS has to run on a balanced budget forever to have a chance of being useful. I'm totally in favour of a SS system but it can't live in financial pretendville.

 

Brought to you by the fiscally conservative socialist

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Clearly no free market can ever be in play for a Social Security system - no security in that for one thing.

 

Bob, I was a little tongue in cheek there with Steve, based on our previous discussions on the "Hybrid Hatred" thread. I wholeheartedly agree with your sentiment above, and as "4wheeldog" brought up earlier, clearly you are correct.

 

-MKL

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lawnchairboy

If I had the option to direct my SS contributions to privately invest the large quantity of income taxes I have paid over my lifetime then perhaps I might actually also get to see/use some of those funds. As it now stands, I have no such expectation. The demographics and the administrative inertia dooms anyone younger than 50 IMHO.

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I think it is a great idea!!!

 

Lets start with retired folks that have way to much money and retired too early.

 

Teachers, Fireman, Police, NYC Sanataion Workers...etc.

 

I don't have a pension. It would make me feel better if we spread some of their wealth around.

 

I don't think it is fair that I have been matching my employees FICA for 28 years now and I won't get anything for it.

 

 

POWER TO THE PEOPLE

 

:clap:

 

 

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Really? I don't recall mentioning SS. I was talking about pensions and 401k. Although I concede that SS is subject to the same demographics of course, I would hardly go so far as to say SS is deeply flawed.

 

Technically, you didn't mention SS by name, but your comment certainly alluded to it. After all, private pension funds such as IRA's and 401k's are not in trouble. But, limitless entitlement retirement funds are, so it is obvious that you were referring to those instead of the private accounts.

 

Sorry, not seeing this at all. Don't even have a clue what you are talking about.

 

What I wrote was clear, but I'll paraphrase it for a better understanding. You alluded to the fact that entitlement retirement accounts are in trouble and you attribute that cause to demographics which were not anticipated for reasons which are not important to this discussion. Then you go on to advocate solving the problem by increasing the entitlement burden. In other words, creating more of that which is sinking the current plans. Sure, bringing a bunch of new "contributors" into the mix will provide short term relief, but it just delays the inevitable to the point when they reach benefit age. That is not a fix, it's just another band aid, which is what I found so interesting in the first place. Why are we so adverse to actually solving the problem for good?

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In pure free market terms, as you like, you therefore need to focus on reducing demand, increasing supply, or (much more realistically) some combination of both. What would you suggest?

 

You pretty much have a handle on it. Increase revenue or decrease expenditures. So, what do you think we'll do? Raid the kids IRA's or tell Grandma she ain't getting a raise?

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In pure free market terms, as you like, you therefore need to focus on reducing demand, increasing supply, or (much more realistically) some combination of both. What would you suggest?

 

You pretty much have a handle on it. Increase revenue or decrease expenditures. So, what do you think we'll do? Raid the kids IRA's or tell Grandma she ain't getting a raise?

 

I vote we raid the Englishman's 401K.

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I vote we raid the Englishman's 401K.
That wouldn't keep you in Dewars for a month...

 

..how bout dog bones for Mooo?

Mooo only has to ask and it's all his, to fund the revolution of course.
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It appears Canada doesn't want our poor, Brown brethren either...

 

Are you suggesting the US should wake up and institute the same policy?

The Canadian Government has announced that from 1st December 2010, it will once again accept applications under the federal Immigrant Investor Program. Applications had been suspended from June 2010, in order to give the Government time to finalise its new policy changes and to avoid a flood of applications prior to the re-opening. One of the factors behind the changes was the large number of outstanding applications and thus long processing times.

Under the new program criteria, investor applicants will need to have a personal net worth of C$1.6 million, (up from C$800,000), and make an investment of C$800,000, up from the previous requirement of C$400,000.

 

Minister Kenney explained that the changes were necessary to bring the country in to line with its immigrant “competitors”, such as Australia and New Zealand.

“Raising the requirements will help reduce the flow of applications while ensuring we attract experienced businesspeople who can make a more substantial contribution to the economy. Higher personal net worth criteria mean the program is now better positioned to attract investors with valuable business links and the resources to make secondary investments in the Canadian economy. Higher investment amounts mean provinces and territories will receive more investment capital to put toward job creation and economic development projects,” added the Minister.

 

Canada’s Immigrant Investor Program offers several benefits to international investors, including permanent resident status up front and guaranteed repayment of the investment.

The Investor category is only one of several ways to immigrate to Canada.

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