Retirees – Gordon Malic

Comparing TFSAs and RRSPs – 2019

February 1, 2019/in Blog, Family, Individuals, Investment, Retirees, RRSP, Tax, Tax Free Savings Account /by Charter Wealth

If you are seeking ways to save in the most tax-efficient manner available, TFSAs and RRSPs can both be effective options for you to achieve your savings goals more quickly. However, each plan does have distinct differences and advantages / disadvantages. Let’s take a look at their key features:

While a TFSA can be used for any type of savings, an RRSP is used exclusively for retirement savings.
You can enjoy tax free withdrawals from your TFSA due to the fact that you make your contributions after you have paid tax, whereas the opposite is true for withdrawals from your RRSP (except in the case of lifelong learning plan and home buyers’ plan)
TFSA contributions aren’t tax deductible whereas RRSP contributions are i.e. with an RRSP, you can deduct the contributions that you make from your income when you file your tax return.
It is required that you use earned income to contribute towards your RRSP but this is not the case for your TFSA.
You can continue to contribute towards your TFSA for as long as you like, whereas you must close your RRSP and stop contributing towards it when you turn 71 and purchase an annuity or convert it to a RRIF with the savings that you have made within the plan.
You are able to specify your spouse as your beneficiary with both your TFSA and your RRSP, however there is a key difference with how your savings are treated upon your spouse’s death. With an RRSP, there will be taxes payable upon the monies left in the plan by your children who inherit it, whereas with a TFSA, tax is only paid on the increase in the value of the plan since the date of death in the year that it is inherited by your children. What’s more, no tax is payable if the value that they receive is less than the value of the TFSA at the time of death.

In summary, your individual circumstances will dictate which plan is the most appropriate for you, depending on your tax position and withdrawal intentions. The primary difference between both plans is the timing of the taxes payable i.e. if you want to defer the payment of your taxes, particularly if your marginal tax rate will be lower in retirement, an RRSP may be more beneficial for you. Alternatively, if your marginal tax rate will be higher when you plan to make withdrawals, a TFSA may suit you better.

Retirement Planning for Business Owners

August 1, 2018/in Blog, Business Owners, corporate, Retirees, RRSP, Tax, Tax Free Savings Account /by Charter Wealth

Retirement planning can be a complex process for us all, but if you are the owner of a small business it may can get even more complicated, due to the various factors and circumstances that you have to take into consideration. A common mistake made by small business owners is reinvesting extra money to grow their business, at the expense of putting it aside to save for their retirement.

Although there is no magic formula for getting started on a retirement strategy for your business, there are some general principles which might help you to get a handle on the steps that you need to take. One of the key ideas is the consideration of both your business and your personal finances and how to structure and integrate the two in order to create a robust retirement financial strategy.

Here are some tips on how to get started on a retirement plan.

Set aside time to plan for the future – It’s important to make retirement planning a priority, or you run the risk of never getting around to it. A professional financial planner can help you to assess your personal circumstances and create a personalized plan that suits you and your business, with the right balance between saving and reinvestment to help your business to grow.

Think about your future retirement income – Here are the main sources of retirement income that small business owners usually rely on:
Equity held in your business – If your business is successful, you are likely to benefit from equity from it in your retirement. Selling your company is an option, particularly attractive to some as, in some cases, you could benefit from the lifetime capital gains exemption on the sale. Of course, finding the right person to run your business in the future is easier said than done. A clear succession plan, created in advance of your retirement, can help you to ensure that business continuity will be affected as little as possible and will give you peace of mind as you approach your retirement. You may also want to consider using the expertise of an accountant or mergers and acquisitions specialist to help you to value your business correctly and also look after your interests when liaising with potential purchasers.

Alternatively, you may choose for your children to inherit your business, or you may decide to retain ownership of dividend-paying preferred shares in order to maintain an ongoing source of income.

Registered plans – A Registered Retirement Savings Plan (RRSP) can offer personal tax deductions on your contributions, plus your savings will grow as tax-deferred whilst in the plan. In addition, tax-free savings accounts (TFSAs) can be a useful way to save tax-free in particular circumstances.

Consider offering a retirement savings plan to your employees – Paying your statutory contribution of the Canada Pension Plan is just the minimum – many small businesses choose to offer their employees enhanced pension contributions as an incentive or employee benefit. For example, you could match their RRSP contributions to a set limit, to help their retirement nest grow more quickly. Alternatively, you could offer a benefit plan with an investment contribution package from an insurance company, which can be a more straightforward and cost-effective choice.

Be sure to diversify – As a small business owner, you should avoid putting all of your eggs in one basket, financially speaking, as this could leave you vulnerable to changes in the market. Try to diversify your investments and spread your funds in order to protect yourself and engage the help of a professional where necessary to help you to do so.

In summary, it’s important to remember that retirement planning is a process which is unique and personal to your own and your business’ circumstances and there is no uniform approach which works across the board. Take time to take stock of your current situation, as well as your goals for the future and this will help you to create a retirement plan that is right for your needs, both current and future.

Tax Lines to look out for

March 7, 2018/in Blog, Charitable Gifting, disability, Family, Individuals, Investment, Retirees, RRSP, Tax /by Charter Wealth

It’s that time of year again, when many of us sit down to complete our income tax return and hope that we have done enough preparation to ensure a smooth and speedy process. Unfortunately, there are a number of complexities that can cause us problems – here are a few of the most common issues experienced by individuals when submitting their tax returns:

Medical Expenses

Expenses relating to medical expenses such as prescriptions, dentures and many more can be claimed for a non-refundable tax credit. You should also be aware that you can claim for yourself, your spouse or common law partner and any dependent children under the age of 18. You can also claim for certain other individuals whom you can clearly evidence are dependent on you (and the list of such individuals has recently been widened and can include grandparents, uncles, aunts, nieces and nephews).

Charitable Donations

You can claim tax credits for qualifying charitable donations that you made in 2017, though they are subject to an annual limit at 75% of your net income. You may also be eligible for a provisional donation tax credit. To receive such credits, you must supply a charitable donation receipt as evidence of your donation.

What’s more, there is a new formula for calculating the federal tax credit, depending on the value of donations. This is as follows:

1. 15% of the first $200 of donations

2. 33% of donations equal to the lesser of the amount of taxable income over $202,800 or the amount of donations over $200

3. 29% of total donations not included in the two stages above.

Public Transit Pass

Although this credit ended in the 2017 federal budget, it can still be claimed for the time period of January 1 – June 30, 2017. There are a range of eligible passes, including passes allowing unlimited travel within Canada, short term passes allowing unlimited travel for five days of which at least 20 days’ worth are purchased during a 28 day period and electronic payment cards.

Interest Expense and carrying charges

Interest on money borrowed to earn business or investment income is generally deductible, however interest expenses incurred on money borrowed to generate a capital gain is not tax deductible.

Carry forward information

Take note of the notice of assessment from your previous year’s tax return as it will contain important information that will apply to the submission of your current year’s return, such as your RRSP contribution limit and any carry-forward amounts.

Remember that you may be required to submit receipts alongside your electronic return at a later date, as requested by the CRA.

Child care expenses

Child care expenses include payments made to caregivers, nursery schools, day care centres and camps and other similar institutions. The deduction is usually best claimed by the lower earning spouse.

The deduction is the lesser of the following three:

· the total qualifying child care expenses which have been incurred

· $8,000 for each child under the age of 7, as well as $5,000 for each child between 6 and 16 and $11,000 for each child for whom the taxpayer has claimed the disability tax credit.

· two thirds of the income earned by the individual making the claim.

If you owe money when your income tax return is complete, the only way to delay payment is to delay the filing until the April 30th deadline. Alternatively, if CRA owes you money, then file as early as possible.

Importance of a Financial Plan

September 1, 2016/0 Comments/in Business Owners, Families, Insurance, Investment, Retirees /by Charter Wealth

The importance of a financial plan. Working with us to create your financial plan helps you identify your long and short term life goals. When you have a plan, it’s easer to make decisions that align with your goals. We outline 8 key areas of financial planning.

Brexit Commentary

June 30, 2016/0 Comments/in Investment, Preparing for Retirement, Retirees /by Charter Wealth

Investment Company opinions on Brexit.

Impact on Life Insurance

June 1, 2016/0 Comments/in Business Owners, Estate Planning, Families, Growing Families, Insurance, Investment, Maturing Families, Preparing for Retirement, Retirees, Starting your career, Succession Planning /by Charter Wealth

Major changes are coming to life insurance, if you’re looking to apply for life insurance or review your insurance needs, this is the best time to do it. The last significant changes made to life insurance were in 1982.

Sit down with us to do a review prior to the changes coming into effect.

Exempt Test Legislation

May 18, 2016/0 Comments/in Business Owners, Estate Planning, Families, Growing Families, Insurance, Investment, Maturing Families, Preparing for Retirement, Retirees, Starting your career, Succession Planning /by Charter Wealth

Major changes are coming to life insurance, if you’re looking to apply for life insurance or review your insurance needs, this is the best time to do it. The last significant changes made to life insurance were in 1982.

Sit down with us to do a review prior to the changes coming into effect.

Comparing TFSAs and RRSPs – 2019

Retirement Planning for Business Owners

Tax Lines to look out for

Importance of a Financial Plan

Brexit Commentary

Impact on Life Insurance

Exempt Test Legislation

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