Prepare for the Future Now

What are the most important things that you want to accomplish this year, financially?

-        Invest savings?

-        Pay off debts?

-        Have projections prepared for your achievable future spending and develop a tax-efficient income plan?

-        Save for children or grandchildren’s education?

No matter what your goals, I guarantee you will be more successful if you make them specific and actually write them down. Even if you track things on computer or with a phone app, also write your specific goals down with a pen and keep that piece of paper handy where you see it frequently. Attach a date and deadline to everything.

Break down your long-term and medium-term goals into the steps you have to take weekly or monthly to get you there. Consult an expert or a credible online source if you need help with any of that.

Higher inflation has had some positive effects on several tax-related items, like the 6.3% indexing of tax brackets and a higher TFSA limit.

The 2024 TFSA limit is now $7,000, up from $6,500 last year. The lifetime limit for deposits is now $95,000, assuming a taxpayer was 18 or older in 2009, when the program began.

The TFSA is a great place to store short or long-term savings, as all the investment income earned is tax-free, and there is no tax on withdrawals. That makes it ideal as a retirement funding vehicle since the withdrawals have no effect on income-linked programs like OAS or the guaranteed income supplement.

The TFSA does not provide an immediate tax deduction like an RRSP, which makes the RRSP more attractive to people whose income and tax bracket are high now. That allows you to reduce taxes now and invest more, assuming you also invest the tax savings.

However, every dollar withdrawn from an RRSP or RRIF is added to taxable income and net income in the future.

Most taxpayers will have more money by accumulating in an RRSP than in a TFSA but will pay more tax when they draw on it for income. For that reason, a blend of the two programs is generally the best option, maintaining the convenience of the tax-free withdrawals from TFSA for lump-sum purchases in retirement.

The RRSP contribution limit is 18% of net income (to a maximum this year of $31,560), reduced by any pension adjustment, plus any unused carry forward from the past. You have until February 29 to make a contribution deductible on your 2023 income tax return.

A big change this year is the elimination of the “simplified method” of claiming a fixed $500 deduction for home office expenses, when working from home is mandated by an employer.

This year, employers will be very busy filling out T2200 forms for employees who worked from home at least half the time for four consecutive weeks.

Since CRA has not yet made it clear that the claim will be available to employees who work form home by choice, stay tuned to this space for more information as CRA releases it. 

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

Please consult legal, tax, insurance, and investment experts for advice on your unique situation.

David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction.  He is a Senior Wealth Advisor and Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.