Money Thoughts

26 Feb Money Thoughts – Q1 2024

Posted at 15:46h in Money Thoughts by DLD Financial

DLD Quarterly Money Thoughts (February 2024) includes: RRSP Contribution Deadline for 2023 Tax Year: February 29, 2024, FHSA – straight forward, but not! Fund manager spotlight: Connor Clark & Lunn and DLD’s BIG MOVE!

RRSP Contribution Deadline for 2023 Tax Year

The deadline to make any further RRSP contributions for the 2023 tax year is on Thursday, February 29, 2024!

Below are some quick refreshers on RRSPs:

Anyone who has earned income and filed a tax return can contribute until December 31 of the year they turn age 71
Spousal RRSPs can be used until December 31 of the year the spouse turns age 71

Should you be using or topping up your RRSPs?

If you’re not sure, please get in touch ASAP to further discuss your specific situation.

Contribution limits and where you find your limit:

The annual RRSP contribution limit is the lower of 18% of your earned income from the previous year or the maximum annual contribution limit coupled with unused contribution room from past years. RRSP contribution room can be carried forward to subsequent years if you don’t maximize your room this year.

There is also a one-time $2000 lifetime over-contribution allowance.

> Here is a chart indicating the maximums on past years.

For your personal contribution limit, please check your most recent Notice of Assessment from CRA

The power of Dollar-cost averaging:

We are huge advocates of automating your long-term savings contributions as it’s one of the best ways for forced savings. Dollar-cost averaging means you buy more units when the prices are low and less units when prices are high.

Spousal RRSP:

This strategy makes sense for spouses where one spouse earns more than the other spouse. This allows for the higher-income spouse to deduct the contribution on their taxes and for the lower-income spouse to own the RRSP. This is a great way to be proactive about future income splitting.

RRSP Contribution Calculator:

A common question we often get is how much of a tax deduction will one receive based on a certain dollar value.

> Here is a calculator we use to help clients calculate their approximate tax savings.

First Time Home Buyer’s Plan (FHP) and Lifelong Learning Plan (LLP):

If you have taken advantage of one or both of these programs, please remember to contribute and allocate the specified amount as noted on your notice of assessment when you file your taxes. Otherwise, the repayment amount will be added to your income.

For example, if you took out funds in 2019 to purchase your first home, your first repayment is due for the 2021 tax year and you have 15 years to repay what you took out.

For the lifelong learning plan, you also have a 2-year grace period before repayment begins except you have 10 years to repay the amount you took out.

VERY IMPORTANT- You will not receive a further tax deduction on repayments since you already received the tax deduction the first time around.

First Home Savings Account (FHSA)

We’ve covered the basics of this account in previous newsletters so we thought we’d take a deeper dive with the help of Jamie Golombek – Managing Director Tax & Estate Planning, CIBC Private Wealth.

In order to open an FHSA, you cannot have lived in a home within the relevant time period as your principal place of residence that was owned by either you, or your spouse or common-law partner.

First, if you own an investment property that you have never lived in as a principal place of residence, then this should not disqualify you from opening an FHSA.

Secondly, if you are about to move in with a significant other who owns a home, this should not disqualify you from opening an FHSA prior to you moving in. Once you do move in and when you become a common-law partner with your significant other, then you will be disqualified from opening an FHSA. [A common-law partner is a person with whom you have lived with in a conjugal relationship for at least 12 months, or if you have a child together.]

You can continue to contribute to an FHSA even after you would stop being eligible to open an FHSA.

The requirement before you can open an FHSA is that you have not lived in a home as your principal place of residence that you (or your spouse or common-law partner) own within the year or the previous 4 years. So if you have not lived in an investment property for over 10 years, then this property should not disqualify you from opening an FHSA.

Source: Jamie Golombek and Debbie Pearl-Weinberg of CIBC Private Wealth

Fund Manager Highlight: Connor Clark & Lunn Investment Management Ltd.

Founded in 1982, CC&L is one of the largest independently owned investment management firms in Canada with $59.2 billion in assets under management. They’re part of the CC&L Financial Group, a multi-boutique investment management company whose affiliates collectively manage over $110 billion in financial assets on behalf of institutional and retail clients across Canada, in the United States, England and India.

CC&L has centralized their non-investment management functions. This allows portfolio managers and investment professionals to do what they do best and focus on delivering results.

Each investment manager of our model portfolios has a distinct investment approach and deep expertise within their specialized areas of portfolio management. For CC&L, those areas are equity, fixed income and balanced funds.

Canada Life has recently partnered with the CC&L Fundamental Equity team on the Canada Life Canadian Fundamental Equity Fund (previously called the Canada Life Canadian Concentrated Equity Fund).

This team is co-led by Gary Baker and Andrew Zimcik and supported by a deep team of five portfolio managers. Each portfolio manager has dedicated sector responsibilities. They’re also supported by a broader team of nine other investment professionals.

For more information from CC&L visit: cclinvest.cclgroup.com

Source: Canada Life Investment Management