We have had a lot of doom and gloom in the news lately. High inflation, possible recession, war in Ukraine just to name a few. It can be hard to find positives in the daily news cycle, or when watching the markets.
That being said, we do have some good news for your TFSA.
A small consolation of the high inflation (cost of living) is the government has raised the 2023 TFSA contribution limit to $6,500. This is a $500 increase from 2022.
This means anyone over 18 can contribute $6,500 as of January 1st, 2023.
It’s important to note that the limit only applies to clients who have contributed the maximum amount in previous years. In other words, unused contribution space accumulates over time and can be carried forward to future years. According to the latest estimate from the Canada Revenue Agency (CRA), only 10 per cent of clients contribute their total TFSA limits.
With $6,500 in new available contribution space coming in January, the total allowable space for those 18 years or older when the TFSA was introduced in 2009 will be $88,000.
Your available contribution room is based on contributions and withdrawals made over the years. You can find yours through your CRA “May Account”
The TFSA Advantage
Since its introduction in 2009, the TFSA has become a fantastic tax-free investment option for everyone.
Your money can be withdrawn at any time and investment returns - be they capital gains from equities sold, or income from Canadian dividends and fixed income - are “tax free”.
In non-registered accounts, by comparison, half of capital gains are taxed and most income is fully taxed at your marginal rate. Dividends are also subject to full taxation, but tax credits can be applied against payouts from eligible companies.
As another comparison, An RRSP is basically a tax deferral. Contributions can be deducted from taxable income Those same contributions - along with the returns they generate over time - are fully taxed when withdrawn again at your marginal rate.
Unlike RSPS, TFSA contributions cannot be deducted from taxable income.
The TFSA is great for short-term savings goals like education or vacations but has also become a very effective retirement tool as the allowable contribution amount grows. With proper planning, TFSA funds can be used as a source of Tax-Free income. This can be very advantages, especially if you are in higher tax bracket come retirement.
A word of caution, many investors contribute to their TFSAs through more than one institution and it’s the account holder who will be penalized if they exceed their limit.
Contribution space from TFSA withdrawals can not be reclaimed until the following calendar year. If you maxed out your TFSA and made a withdrawal in 2022, as an example, you need to wait until 2023 in order re-contribute. That is why it is important to confirm your room through your CRA “May Account”
Investment options for a TFSA
Like a RRSP, a TFSA can hold just about any type of investment including GICs, mutual funds, exchange-traded funds (ETFs) just to name a few.
I ensure your portfolios tailored for any time horizon, risk level or personal goals.
I have spent my professional life helping my clients build the financial plan that is right for them. I work hard to listen to your needs and help you find your goal.
If you want to discuss how a TFSA can benefit your financial future, send me an email [email protected] or give me a call at (519) 279-0186. You can also book an appointment through my website: www.bjkfinancialgroup.ca
I guess it’s been long enough since I finished carving the turkey and enjoying leftover dressing. Now it’s time to stock up on treats and prepare for the yearly visit from our local contingent of pint-sized ghosts and goblins. And get ready to rake up the leaves and even dig out the snow shovel. Sigh.
The changing of the seasons is often a good time to bring things into perspective and prepare for the season ahead. While it might be more challenging to barbecue burgers or take a dip in the pool there are still things I look forward to as fall turns to winter. Going skating, building snowmen, and drawing pictures on icy car windows are just a few examples.
While we can have some fun thinking about the family activities we have to look forward to I also think it’s important for us to loo back on the year that’s been and the year to come.
While getting caught up in the moment can be fun when we’re jumping into a pile of freshly raked leaves, it’s not the best way to look at our personal finances. There you need a longer perspective and an appreciation for the influence of other types of seasons.
News of the last year has been dominated by war in Ukraine and inflation at home. And COVID almost “ALMOST” feels like a forgotten memory. And time before the pandemic? What was that like?
As an old folk-pop song from the 60s used to remind us, there is “a time to every purpose under heaven”. The Byrds tried to offer light in a dark time in American and Canadian history. The Vietnam War, the Cuban Missile Crisis and the October Missile Crisis filled television screens then just as COVID, the war in Ukraine and debate about the “Freedom Convoy” fill our twitter feed now.
And you can add the impact of increasing real estate costs, skyrocketing interest rates, and unpredictable gas prices to the mix if you want.
The important thing to keep in mind is that these too shall pass. Each of these events will have an impact (some bigger than others) but the world we are looking at five years from now will be addressing an entirely different set of problems, concerns and opportunities. Oh yeah, do you remember when Bitcoin was going to transform the world and make us all rich instantaneously? Well...
The important thing to remember is that we have to try and make our plans without getting overwhelmed by current events and current fads.
When you open the business section you can see stories about escalating rents, volatile real estate, the likelihood of recession, and how much avocados are going to cost this winter. But that is not the news you need to be focusing on as you build your financial nest egg. Whether you are saving to buy a house, send the kids to college, or better enjoy your golden year, you need to keep the end goal in mind.
The best way to do that is with the help and understanding of a financial advisor who can help you understand what will best fill your particular needs. Your timeline, your comfort with financial risk and your end goal all play in a role in putting together the portfolio that is right for you.
I have spent my professional life helping my clients build the financial plan that is right for them. I work hard to listen to your needs and help you find your goal. If that sounds like something you’ve been looking for send me an email at [email protected] or give me a call at (519) 279-0186
It is hard for me to properly put my feelings about HM Queen Elizabeth II into words. As many have already said, there are personal and historical reasons to treat this time with solemnity and sadness. Her role as Head of State here in Canada, as the leader of the Commonwealth, and as the longest-ever reigning monarch in British history leaves us with a legacy beyond compare.
Elizabeth has been a steady element in my life and no doubt in yours – whatever your thoughts on the role of the crown in today’s crazy world – full of blog posts, Twitter feeds, and Facebook updates. And now these new social media elements have been there to give tribute to this amazing world leader.
She Served Us All
Our Queen was always there – to offer a rock-solid steadiness in an otherwise crazy world. The British crown is as secure as it is because she gave the role the gravitas it so richly deserved.
She was the most travelled British Monarch in history, visiting Canada something like twenty-two times (please forgive me if I’m off by one or two). Maybe, like me, you will remember the episode of The Crown when she and Philip, on a safari in Africa, are informed of her father’s death and must rush home to step into a role she was not expected to fill when she was born. Let’s remember that at the time of her birth, Elizabeth was the first child of the King’s brother, not the King. Once her uncle abdicated, she became the direct heir to the throne.
Looking back at her relationship with her uncle – and he with the monarchy – I can appreciate the steadiness of nerves and commitment to tradition and to the British people that she displayed.
It’s Personal - Thank You Very Much
Like all of you (well, almost all of you), I knew of no one else as our Monarch, our Queen. And in my youth (my exact age is not important), I joined the Military Reserves as a member of the Royal Highland Fusilier of Canada. And on November 12, 1994, I took the Canadian Forces Solemn Affirmation to the Queen. An affirmation I hold dear to this day.
I, Brian Joseph Kettles, do solemnly affirm that I will be faithful and bear true allegiance to Her Majesty, Queen Elizabeth the Second, the Second Queen of Canada, her heirs and successors according to law.
It was one of the proudest moments of my life. And will remain a cherished memory throughout the years to come. Her ties, and those of the entire Royal family, to the military both in Britain and abroad gave me strength and solace.
And Now We Must Say Goodbye.
As the events of the last month or so have unfolded, we have had the opportunity to reflect upon and pay tribute to a life well lived, in service to the British people, to the entire Commonwealth, and to the world as a whole. As much as we knew that this day had to come, its arrival was still shocking and disheartening.
And then last week, as the procession travelled from Westminster Abbey to Wellington Gate, I was overwhelmed with pride as I watched members of the RCMP – the Royal Canadian Mounted Police – lead the way.
As Canadians, We Can be Particularly Proud
One of the things that many Canadians have proudly commented about was the role those Mounties played. And it was not just the riders that many of us were so proud of. It was also the horses they were riding. Even Horse Canada wrote about it. (https://horse-canada.com/horse-news/horses-queens-funeral/)
All of these horses were gifts over the years from Canada to Her Majesty and three of the four had even been ridden by other members of the royal family at the Queen’s 96th birthday parade just a few short months ago. Thank you, Darby, George, Sir John and Elizabeth. A fine equine quartet to be sure.
Your service spoke well to both yourselves and your homeland.
However Personal, It Is Also Historical
I marvel at the mesh of history we have witnessed over these last few weeks. Grief was shown over social media, in a context no one could have imagined, when HM Queen Elizabeth received her coronation on June 3, 1953. That event at Westminster Abbey, where every British Monarch since 1066 has been crowned, adds an element I can barely comprehend. It adds gravity and consequence to the events – in both their current and historical context. That is a level of stability we should truly appreciate in the topsy-turvy world we are witnessing right now.
And now let us reflect and remember - the Queen has died! Long live the King!
As we enjoy our time at the cottage and the backyard barbecue, it's hard to believe that the school year is right around the corner. And maybe this September, it will be relatively normal, i.e. COVID-free. (Here’s hoping)
Maybe you’re dreading the end of another summer, or you’re excited by the prospect of sending the kids back and getting a little bit of sanity. I mean, we love ‘em but sometimes… It’s okay.
I won’t tell anybody.
In fact, my daughter is starting as a freshman at Laurier this fall. These days it’s all about what books to get and what other supplies to lay in for the school year.
Just What Is An RESP?
Years ago, my wife and I began planning for our daughter’s post-secondary education from the day she was born. Because of my line of business, we knew about the benefits of investing in a Registered Education Savings Plan (RESP) offers. The number of parents that don’t take advantage of this uniquely Canadian investment tool is quite discouraging.
A significant part of the RESP is the Canada Education Savings Grant (CESG). Employment and Social Development Canada (ESDC) (the last acronym, I promise. Well, maybe). The basic grant provides a 20% top-up to your contribution, up to $500 per year per beneficiary. That means your $2500 contribution immediately grows to $3000 – each year you put that money into the plan.
ESDC will even contribute up to twice that amount for unused grants from previous years – effectively allowing you to make two years’ worth of contributions in a single year. But that is where the top-up will stop.
There are more rules about contributions made when your child is 16 or 17 and when your household incomes fit certain thresholds, but I’ll let you check out the website for those details on your own.
So, as you can see, RESPs are structured to encourage you to invest in your children’s post-secondary education over the long haul - building on compound interest and making RESP contributions a regular part of your financial plan.
And the other thing to remember is that almost anyone can set up an RESP on a child’s behalf, just as long as the overall contributions are within RESP limits. This includes grandparents, aunts and uncles, etc. I have helped many grandparents add this to their ongoing financial plan.
Your RESP Has Lots of Flexibility
And it doesn’t have to be university. You and your child can put that money into any post-secondary program, like university, community college or almost anything else. And you have years to decide what to do. Taking a gap year or two is permitted. And if not all your children decide to pursue more education, the children that do go can take advantage of the additional resources.
And if there is still money left over after all of that, you can transfer it to your RRSP—lots of flexibility here.
Flexibility Yes, But There Are Some Rules of Thumb to Keep in Mind
One of the general rules of thumb I will remind my clients about when setting up their children’s RESP is that the timeline for its usage is significantly shorter than their RRSPS.
So, because the investment window for RESPs investments is shorter, more consideration needs to be given to possible market volatility. The punishing stock market we have witnessed over the last year or so can devastate your child’s educational plans if you are cashing in at the bottom of the market. And if you used your RESP to invest in crypto, well…
That said, the important thing is the timeline until you need the money. Your RESP investments, like your retirement investments, should become gradually more conservative as the time approaches to cash them in. If you’re planning RESP investments while the twins are in diapers, you could try a greater degree of risk and reward… But I would counsel caution—each and every time.
Many excellent portfolio funds offer excellent allocation flexibility. They are the type of fund products I generally suggest to anyone developing their investment portfolios – no matter what the ultimate use of those funds might be.
Time to Go Study – Here’s The Tuition Money
While there is a great deal of flexibility around where your children study, when they attend, and what classes they can decide to take, there are still rules for accessing the funds. Both your financial advisor and educational institution can help you sort that out. Just be ready to jump through a few hoops. Not a lot, just a few.
And money from the RESP can be used for much more than just tuition. Everyone understands that tuition and books are just one expense in the overall process, and RESPs take that into account,
So Here Goes. It’s Time.
And now it’s time for your children to experience frosh week. And for you to begin experiencing empty nest syndrome. Don’t get too comfortable; they’ll be back in May. Or, if they’re attending the local college, they’ll be coming home well after their old curfew – trying to be quiet (but failing miserably). But heck, weren’t we just like that when we were… Oh, never mind.
If you want to talk to me about saving for your children’s education, getting their money out to pay for this year’s tuition or anything else related to your financial well-being, give me a call at (519) 279-0186, email me at [email protected]. I look to chatting with you.
And yes, I’ll be reflecting on how quickly they grow up too.
Even as we witness all the trials and tribulations of a hectic housing market here in KW and across the country there are certain basic elements to a sound financial plan for you and your family. Our home and the mortgage attached to it are most couples’ largest investments.
Knowing that – you have probably come across the issue of mortgage insurance. “Buy insurance to pay off your mortgage if you die. It sounds simple enough. But I want to tell you it’s not and there are other options I want to share with you. Other options I think are better for you, your family and your overall financial well-being.
Last month I shared my thoughts with you about the importance of doing proper estate planning – before it’s too late. Now I want to return to the topic of preparing for death in a way that will protect, and insure, your family and your most important asset – your home.
Insurance – It Plays an Important Role
You get insurance because you don’t want your family to be financially ruined when you die and your ability to earn money disappears. Your family needs to be able to find a way to keep going without you. You want to make that as easy as possible. After all, that is why you got insurance in the first place, right?
But let’s get something straight. You need to ensure your life, not your mortgage. Let me lay out for you what I mean and why I think it’s important so that you can decide what is best for you.
Mortgage Insurance vs Life Insurance. What’s the Difference?
The name of each of these kinds of insurance explains their role. Let’s look at them and compare
Mortgage insurance is generally arranged through the bank that holds your mortgage. Its benefit is that it is easy to set up and doesn’t take a lot of extra thought. For a small additional fee your mortgage is insured so that if you die while you still owe money on your mortgage, the mortgage will get paid off and you will not have to worry about that anymore.
But the problem with mortgage insurance is that your family has no flexibility around how to use that money. When you die your family’s first priority might not be paying off the mortgage. Other expenses or concerns could be more important.
With mortgage insurance, your family has no options. Yes, your mortgage has been paid, but that’s it.
Term Life Insurance Gives You Flexibility
With term life insurance, your family can figure out how best to use the proceeds. If they choose to pay off the mortgage, they can. And depending upon the amount you still owe on your mortgage on that fateful day, this might leave a fair bit for the other things in life. And if they decide you maintain their mortgage payments and use the payout that can also help cover the other costs you have beyond your mortgage.
And what happens when you finish paying off your mortgage? Do you still want life insurance coverage? Well, you’re going to have to go elsewhere now to get it. As you can imagine, beginning the process of looking for life insurance as you enter your “golden” years can be more expensive than you want. Getting and keeping term life insurance can be much more cost-effective. And the options for conversion to whole life insurance can also be beneficial.
Besides, you can also decide to change your coverage as your life circumstances change – something else that mortgage insurance allows for. When you remortgage your home or move your mortgage insurance needs to be reviewed and renewed. That isn’t really what you were looking for when you chose to move to a new neighbourhood was it?
Get the Insurance That Fits Your Life – Not Your Mortgage
If you want to talk about your insurance needs, your retirement savings, or even saving for your children’s college or university – send me an email at [email protected] or call me at (519) 279-0186.
Talking about your life insurance needs or how to plan for your estate can be challenging. I can help make it a little bit easier.
I look forward to hearing from you. To talk about your financial plans and to hear about your plans for the barbecue or the lake.
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