An early-year warning for TFSA contributions
In recent years, tens of thousands of Canadians paid penalties to the Canada Revenue Agency (CRA) due to Tax-Free Savings Account (TFSA) overcontributions.
One reason for overcontributions involves account holders contributing in the early part of the year based on information in their CRA “My Account” portal.
Financial institutions have until the end of February to report clients’ TFSA transactions made in the previous year. So, in the first months of the year, what you see listed in My Account as the current year’s contribution room may not be up to date. If you only use your My Account information to determine your TFSA contribution room, you could be at risk of overcontributing.
The solution? Keep your own records of your TFSA transactions, so you always know your current contribution room. Or, if you rely only on My Account, wait until April before contributing – allowing time for last year’s data to be submitted and processed.
Do you have questions for any of these topics?
Contact our team for additional financial recommendations.
If you’re asked to co-sign a loan
A friend who’s just endured a bankruptcy asks if you’ll act as a co-signer for a car loan. Or your son and his wife are facing challenges in securing a mortgage and want to know if you’ll co-sign.
If you’re ever asked to co-sign a loan, understand that the decision requires serious thought. You would be legally responsible for any payments your friend or family member fails to make. Also, beyond the financial consequences, you must consider the matter of your relationship. If you had to step in and make one or several payments, would you be okay with helping out or would you feel resentful?
If you’re confident that co-signing the loan is the right decision, you’ll have the satisfaction of making a difference in your friend or family member’s life.
If you don’t want to co-sign, you may wish to explain that your decision isn’t personal. You can say that money issues sometimes lead to rifts between friends or family members, so your policy is not to risk jeopardizing a relationship.
How lower rates may affect your investments
The Bank of Canada’s recent interest-rate cuts are the first rate reductions in about four years. We’ve become familiar with the impact of rising rates on our investments, but what about the effect of falling rates?
GICs
Bonds
Equities
What to do when retirement is around the corner
When retirement approaches, several wealth planning to-do’s arise. To help make these into a plan, here are the important items in two groups – what you do on your own and what to do with our input.
Your own to-do’s
Managing debt and expenses. You’ll find paying off debt more manageable while you earn income than paying it off in retirement when you’re drawing income. Any home repairs or renovations may also be easier to cover as an income earner rather than a retiree.
Covering health costs. Upon retirement, you may want private health insurance to cover dental treatment, vision care and other health costs. If you track these expenses before retirement, you could get a better idea of whether you want to pay insurance premiums or cover these costs on your own.
Planning together
Setting the date. A lot goes into setting your retirement date, and we’re here to help with the financial side. You can tell us when you’d ideally like to retire, and we’ll run the numbers – letting you know if you can live your desired retirement lifestyle while feeling secure you won’t outlive your savings.
Safeguarding your savings. If the market suffers a downturn just before your planned retirement date, you want to be confident you won’t need to postpone your retirement. We develop a plan well in advance that suits you, whether it’s making your portfolio more conservative, building a cash reserve or implementing another strategy.
Timing government benefits. You should plan the timing of your government benefits sooner rather than later because you have the option to begin Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) and Old Age Security (OAS) benefits immediately upon retirement – or even before. Our input is valuable because the timing is part of an overall retirement income strategy.
Talk to us when you want to discuss wealth planning strategies during the years before retirement.
A powerful partnership to help reach your goals
To find out how you can benefit from working with an experienced Wealth Planning Team, Contact us