Stuff the TFSA and a spousal plan instead of your own RRSP since future withdrawals could shove you into a higher tax bracket. Continued tax-free growth should pretty much cover that – so this sucker can stay alive a long time. More stuff: RRSPs can turn into income finds after you pass 71, but the forced payments are tiny – starting at just 5% of the fund per year. Then you get to use the money without paying any of the tax back – and you’re buying an asset that can provide a tax-free capital gain. In other words, you contribute to an RRSP and get a fat tax refund. Then, if you use it to buy real estate, the funds can be sucked out of the first-house funds with zero tax. (This is a great time to pick some dogs from 2022 to shift over, since there’ll be no capital gains triggered.)Īlso be aware eight grand in RRSP money can be transferred over into the weird FHSA when it debuts in April. Just transfer assets you already own into the RRSP as a ‘contribution in kind’ and get a tax refund for selling yourself stuff you already own. Plus, you don’t need actual money to fund your retirement plan. A spousal plan lets a higher-income earner dump money in, deduct it from his/her taxes, with the funds accessible to the partner in a few years at their lower tax rate. In other words, perfect for this gig economy so many people find themselves in. You’ll have reduced taxable income while employed, then access the funds at little or no tax when not working.
Contribute when working and pay less tax, for example, then take money out if you get laid off, take a gap year or to finance a maternity leave. One of the best uses of the RRSP is for tax-shifting. Or, you can chunk the money in now, grow it tax-free and claim the deduction in a future year when your income may be higher, or if there’s a commuted pension looming. The most you can lay down is $27,230 – and all of it can be used as a deduction on 2022 taxes. Remember that the max contribution is 18% of earned income (salary, commissions, fees, rent etc., but not investment returns). Investing is better, of course, but there’s no fighting the allure of interest rates in early 2023. That’s a monumental leap in a short period of time, and far exceeds the reality of most people.Īnyway, here we are. BMO’s famous survey two weeks ago found Canadians now think they’ll need $1.7 million tucked away for their wrinkly years. The 18-35 crowd is apparently leading the retirement savings surge this year.Īnd look what inflation’s done to perceptions. That’s been shoved along by a stock market that lost up to 20% last year, a year-long worrisome war in Ukraine and the weird thing inflation’s done to the brains of Millennials who (a) never experienced it before and (b) are stunned they can get 5% for doing squat. So, money has been gushing into RRSPs and TFSAs in a way not seen in years. And a one-year GIC is raking in a 5% yield. People are filtering back to work and normalcy. House sales have crashed and prices are falling. Why stick money into some tax tepid shelter when your leveraged house was rocking out 25% a year? Tax-free. We were still in the throes of pandemic mayhem and a head-spinning real estate eruption was sucking all the oxygen from the room.
When people were mulling their contribution a year ag, GICs paid 1%. That may seem weird since inflation’s nuts, grocery prices are crazy and everybody’s moaning about cash flow. Industry surveys are telling us contributions are w-a-y up so far this year. This pathetic, tedious (but taut, well-muscled) blog reminds you about RRSPs annually. Stuff money into a retirement plan by the first day of March and save on 2022 taxes.
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