Eight Important Financial Actions to Take Before 2020
When the calendar page turns to November, it seems the holiday season begins. The lights and décor go up, parties are scheduled and retailers showcase their holiday merchandise. In addition to all of the social activities in-store, it’s important to take some simple steps to ensure your financial matters are in shape. Below are eight important actions you should take before the new year.
- Contribute to an RESP
Unlike the RRSP deadline, which is 60 days after the end of the year, the RESP deadline is December 31. Each year you can contribute $2,500 per child and for that you will get a Canada Education Savings Grant (CESG) of 20%. That’s a $500 grant for a $2,500 contribution. If you have not maximized RESP contributions in past years, you can double up one year at a time. That means you can put in $5,000 per child as a catch-up contribution and you’ll get $1,000 in grant money. - Convert your RRSP to a RRIF
If you turned 71 this year, you’ll need to switch your RRSP to a RRIF before the December 31 deadline. There is no need to change your existing RRSP investments as they can be transferred “in kind” to your new RRIF, as long as you are staying with the same financial institution. While some financial institutions will make the switch automatically, make sure this is the case. Otherwise your RRSP may be deregistered and the entire value may become taxable income. - Make charitable donations
If you are planning on making a charitable donation, do it before the end of December so that you can take the tax deduction on your 2019 tax return. Instead of donating cash, you might want to think about whether to donate appreciated securities. Not only will you get a receipt for the fair market value but you won’t pay capital gains tax on that appreciation. - Make TFSA withdrawals
If you are planning on making a TFSA withdrawal in the next few months, consider making it before the end the year. By withdrawing the money in December, you can recontribute that amount as early as January 1, 2020. But if you wait until January to make the withdrawal, you won’t get the contribution room back until January 1, 2021. - Minimize Capital Gains Taxes
An important part of maximizing your long-term returns involves minimizing the taxes you pay. One strategy is to utilize tax-loss selling to minimize or eliminate the capital gains tax you pay after selling certain investments at a profit. In a nutshell, it means selling investments which are down in value. This creates a capital loss which can be used to reduce or completely offset the gains you realized if you sold investments for a profit. - Contribute to a spousal RRSP
If you are investing in a spousal RRSP, it’s a good idea to make the contribution in December as opposed to the new year. By deferring the contribution to January 2020, you’ll need to wait an extra year (January 2023) before you can withdraw the money to avoid attribution of income. The one-month difference in the contribution date can make a year’s difference in how the withdrawal is taxed. And here’s something you may not know. If you are over 71 and you no longer have an RRSP because it’s been converted to a RRIF, if it makes sense, you can still contribute to your spouse's or common-law partner's RRSP until the end of the year he or she turns 71 and get a tax deduction for it. - Give yourself a financial check-up
It’s important to take stock of your current financial situation and review how you have done over the past year. Did you meet your financial goals? Did you pay off the debts that you hoped to? Did you keep within your budget? Answer these questions thoroughly and honestly and if there are some areas that need improving, commit to making those changes now. - Speak to your financial advisor
As you can see, there are a number of actions you should take before the end of the year in order to minimize your taxes and maximize returns. Now is an important time to speak with your financial advisor to ensure your financial situation is in order and take action, if required. For more information, contact me at 416-777-4944 or mark.shimkovitz@raymondjames.ca
Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Mark Shimkovitz and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund.
Mark Shimkovitz is a financial advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Raymond James Ltd. is a member of Canadian Investor Protection Fund.