The following is general tax filing information that may or may not apply to you.
Our clients will be receiving a tax package from their Portfolio Management team onlyif you have a Non-Registered account and there was activity in your Non-Registered account(s) in 2022. If you do not have a Non-Registered account you should not expect to receive this.
The tax package includes a Statement of Annual Management Fees, Foreign Asset Report, and a Realized Gain & Loss Report for Non-Registered accounts if there was any activity in 2022. You will need the Gain & Loss Report to pair with your T5008 tax slip that you will receive from your Custodian. The Gain & Loss Report provides the book value of activity in the account, while the T5008 provides the proceeds of disposition. Please provide both documents to your tax preparer. If there was no activity in your Non-Registered account or you do not have a Non-Registered account, you will not receive these forms.
Special Reporting: Our Portfolio Managers may invest in certain holdings which have a different type of reporting. The distributions for Non-Registered accounts that contain these holdings are reported on CRA Form T3 and/or T5013. These forms are expected to be sent out near the end of March. Your Portfolio Manager advises you to wait until after March to file your return to ensure you receive all necessary slips.
Note that if you have made an RRSP or Spousal RRSP contribution in the first 60 days of 2023, the deadline for mailing these slips is the end of March.
Please ensure you have received all necessary slips before filing your 2022 tax return. If you are signed up for online access with NBIN and have your preferences set to electronic delivery, your tax slips are available online only. Therefore, you will need to login to your account to check for tax slips as there will not be a hard copy mailed.
This will serve as a friendly reminder of the contribution limits and cut-off dates for RRSP and TFSA contributions if you are planning to make one this year and have not already done so.
RRSP Contributions:
The cut-off date for your RRSP contributions to count toward reducing your income for 2022 is Wednesday, March 1, 2023. The contribution limit for the 2022 taxation year was 18% of your taxable income up to a maximum of $29,210, whichever is less. The contribution limit for the 2023 taxation year is a maximum of $30,780. If you have unused contribution room from previous years, you may utilize this room as well.
TFSA Contributions:
If you would like to contribute to a TFSA for 2023 the limit is $6,500 for the year, unless you have not maxed out your contributions. The maximum one could have deposited into their TFSA account since 2009 is $88,000 as of 2023.
Our clients can make contributions through one of the following methods:
Transfer from Non-Registered Account: If you have a Non-Registered account set-up with enough funds in it, you can simply send us an e-mail indicating the amount you would like transferred from this account to your RRSP or TFSA.
Online Banking Transfer (Bill Payment): Add your Custodian (“Credential Securities” or “National Bank Independent Network” / “NBIN” – note it may show up as either, depending on your bank) as a “Payee” through your online banking and enter your account number as the bill account number. If you need assistance finding your account number or are unsure who your Custodian is, please contact our office. If you choose this method, please also notify us with the amount you are contributing, so we can have your Portfolio Manager watch for it.
EFT from your Bank: You will just need to sign an EFT form if you have not already done so, which allows your Custodian (Credential or NBIN) to take the money directly out of your account with your consent. Once you have signed the form, we will require an email from you indicating the one-time amount you are authorizing them to withdraw from your bank account and which account (RRSP or TFSA) you would like it deposited to.
If you have any questions or would like to book a video or phone appointment to review your accounts, please contact our office at 780-490-4200.
Today we’re talking about another common question from clients – what is a RIF and how does it work?
A RIF is simply a conversion from your Registered Retirement Savings Plan (RRSP) to a Registered Retirement Income Fund. So the income version of the tax sheltering that you receive from a registered account. A RIF is set up so you can continue to enjoy growth on your assets without paying tax as the assets grow.
Of course, you are going to be taxed when you take money out of your RIF. So how does that work?
You have to convert your RRSP to a RIF at age 71, and you must begin to draw income out of the RIF at age 72.
You can convert to a RIF prior to that if you choose to. You can also convert partially to a RIF from your RRSP account if you choose to, which can be a great way for you to use the pension tax credit for example.
So how much do you take out of a RIF when it’s time to convert? You have to take out a designated amount that’s specified by the Government as a percentage of your assets. Your assets will be calculated on December 31 of the previous calendar year and a percentage applied to it based on what CRA determines. This will give the minimum amount that you have to take out of your RIF once it’s in RIF format. You can always take more out of your RIF if you choose.
When you take money out of your RIF, it is taxed as ordinary income. The RIF minimum will not be taxed immediately, but you need to consider it in your tax planning for the year. Anything over and above RIF minimum will incur a withholding tax, and that portion will be taxed as you go. You can ask to have your RIF minimum taxed as you go as well, but it’s not automatic.
Another common question we get asked is whether you are taxed twice on a RIF? And the answer to that is absolutely not.
When you make a contribution to your RRSP in your working years, typically you are at a much higher income than you are in your retirement years. Often this means you get a great tax benefit throughout your working career to make those RRSP contributions. Following that up, you pay a much lower rate of tax when you draw that money out from your RIF.
So are you taxed on your RIF? Absolutely, but you’re certainly not double-taxed. And typically, you are seeing a significant benefit in terms of tax planning from your working career to your retirement years.
If you have any questions about how your RIF fits into your financial plan, please contact your advisor or give us a call.
As 2022 comes to a close, it is an excellent time to review your finances and plan for the year ahead. Here are 5 financial boxes you should check off before the year ends.
1 – Take advantage of your company benefits.
Most employer sponsored health plans turn over at the calendar year end. If you have benefits remaining, be sure to schedule some time to get that massage, see your physiotherapist or arrange the dental cleaning you’ve been putting off. Now is a great time to review your coverage overall, and start planning for next year especially if you’re not quite sure what your coverage provides. Bonus: Pull out your life, disability, and any other insurance coverage you hold. Review your beneficiaries, the amounts of the coverage, and when/how it would pay out. Contact your financial planner to help you determine if you have what you need.
2 – Review your registered contributions and your income for the year.
You have until the end of February of the following calendar year to contribute to your RRSP or a spousal RRSP to reduce your taxable income for the current calendar year. Talk to your financial planner who can help you optimize this.
3 – Review your fixed expenses, recurring expenses and your borrowing costs.
Sitting down at least once/year to look at your financial commitments can help put your finances into perspective. Borrowing costs have increased dramatically for some in 2022, and now is a great time to make sure you’re compensating for these increases in your variable spend or elsewhere if necessary. Bonus: set a calendar reminder to review your cash flow quarterly.
4 – Consider your goals for next year plus the next few.
Determine how much those goals might cost. Sit down with your financial planner to help you find the best source of money to tap into to achieve these goals.
5 – Make a plan for charitable contributions.
Review who you’ve donated to and if you want to make further donations for the calendar year. Donations should be complete by the end of December to use for the current calendar year income or saved for future years. If you have securities that have appreciated, consider a donation of securities in-kind. Bonus: Review the profiles of the organizations you donate to at charityintelligence.ca.
If you need assistance with any of these financial planning items before year-end, please reach out to us.
This is a common question that most start to consider as they approach their retirement years. There are typically 3 phases of retirement spending that one will age through. Watch this video to learn more.
Today we’re going to talk about how much you need to retire, which is a very common question that everyone eventually asks when they’re thinking about their future years. And the answer is really not simple. However, a good gauge is how much you’re currently spending.
Most retirees find that they don’t spend a whole lot less from their working years to their retirement years. Especially in the early stages of retirement. So a good planning strategy is to make sure that you’ve got enough of a retirement income when you’re starting retirement to approximate what you’re spending in your working years.
None of us know when our expiry date is, which is a factor in understanding how much you’ll need to save to provide you with that income for a lifetime. If we knew, it would be a lot easier to plan. But what you can do is make sure that you’re looking at where all of your assets are going to be coming from. Some people have pensions through work, and of course, all of the dollars that we save for our retirement will be added together to provide that income in retirement.
Having a proper financial plan completed along with projections to ensure you know where your income is going to be coming from in your retirement, how that’s going to be taxed, and what your net result will be is very important.
When you enter retirement, we find that there tends to be three phases of retirement income needs. In your early years of retirement, you’re going to need an income quite similar to your working years as this is typically when you are in your best health and interested in pursuing some of the hobbies and activities that you didn’t have time to pursue when you were working. That typically lasts from the time that you retire until maybe 75 or 80.
Once you hit your 80s, for most people they’re going to slow down and so will your spending. Oftentimes, the spending shifts from things that you might want to buy or do to being able to shift some of your wealth to the next generation. You might be thinking about giving money to children or grandkids. And you may be just done with travel and some of the major expenditures that people tend to pursue in their early retirement years. You will still spend money, and you want to make sure you have enough income to meet the needs of those years, but it will change.
The final phase of retirement spending is the later years of retirement. That third phase tends to be a lot of a slower spend, however, the challenge with the third phase of retirement is that sometimes there are healthcare costs. Healthcare costs can be really difficult to predict. We don’t know if somebody is going to need care, and it can be particularly challenging for couples. If one person needs care while the other is able to remain at home, you can end up having double the costs of living at this stage of life.
It is really important to build a buffer into your retirement plan so that if need be, you have assets available for that phase of life and potential healthcare costs that could arise.
If you haven’t done a projection, please reach out to your advisor so that you have a good understanding of what your retirement income is going to look like and that you have everything you need to make your retirement comfortable. You can learn more about our retirement planning services and approach here.
