Farewell taxes, hello portfolio review
Now that tax season is behind us, you hopefully have a bit of free time to review your finances and look over your portfolio. One thing you may want to think about is whether or not you need to consolidate existing accounts and investments to make managing them simpler, or whether to add new ones to optimize your taxes and plan your finances better.
Keeping it simple
Simplicity is very desirable when it comes to portfolio management. Given the lives we lead today, it can be tempting to open accounts for a variety of needs: a foreign-currency account for travelling abroad, an extra savings account for paying off cottage property taxes, a high-interest savings account for emergency funds, etc. Remember, though, that an additional chequing account will often charge fees if you don’t keep a minimum balance, and those costs can add up quickly. In addition, you’ll have extra paper and extra passwords to keep track of, and you may be creating an administrative headache down the road. Plus, when the time comes for your spouse or a loved one to manage your affairs, simpler is always better. And given how easy it is to transfer funds electronically these days, there’s a strong case to be made for consolidating accounts.
On the other hand, you also have to consider what kinds of accounts you’ll need in the long term, and how they’ll fit into your lifestyle. Here a key consideration is your financial plan for retirement. When you stop working, you’ll likely need to generate a stream of income from your various accounts (in addition to what you’ll receive in Government of Canada benefits and any pensions you might have). This makes tax issues into a much bigger consideration than at any other time in your life, and you’ll want to have a tax-efficient plan for withdrawing the right amounts from your different accounts.
Withdrawals from your RIFs come first, since they are mandatory, followed by income you receive from non-registered investments. Your TFSA should probably be a last resort for income in retirement, since you’ll want to maximize the benefits it provides in sheltering income and capital gains for as long as you can. You’ll also need to think carefully about things like high-interest savings accounts, since the need for a cushion of emergency cash increases as you get older. Remember also that cashable GICs provide comparable liquidity to a savings account, and in today’s interest rate environment that makes cashable GICs a viable alternative for your immediate financial needs.
Of course, when it comes to managing your different types of GICs and savings accounts, this is also something we can help you with. Feel free to give us a call or stop by one of our locations any time, and we’d be more than happy to chat further. Or, if you already know what you need, you can always open an account online via our website in just a matter of minutes.
Not forgetting those other registered plans
We’re all familiar with the big three registered savings plans available to Canadians, namely RSPs, TFSAs and RIFs. But there are two others that you may also want to take advantage of, depending on your family circumstances: RESPs which are designed to encourage saving for education, and RDSPs which help disabled people plan for their financial future. Even though Oaken doesn’t currently offer either of these plans, we still feel it’s important that you are aware of them.
Registered Education Savings Plans (RESPs) are a way of putting aside money for further education. And while they’re mainly intended for children, they can also be opened for adults. The person who opens the plan is called the subscriber, and he or she sets aside money for the beneficiary to use when that person enrols in post-secondary education. Here’s what you need to know about them:
- Savings in the plan grow tax-free. That can add up to a lot over time.
- For children who are 17 or under, the federal government kicks in extra money! Through the Canadian Education Savings Grant (CESG), the government will contribute 20% of what is contributed annually, subject to certain maximums.
- You can contribute up to $50,000 total, per beneficiary.
- The plan lets you invest in a wide range of instruments, such as stocks, bonds, ETFs, mutual funds and GICs.
- An RESP is valid for 35 years from the time it was opened. However if the beneficiary decides not to take up any type of post-secondary education, the funds can be transferred to another child in the family, or into an RSP. There’s always the option to cash out as well, although this would mean having to pay taxes on the interest earned and returning any CESG contributions to the government.
Registered Disability Savings Plans (RDSPs) are sheltered accounts for people who have mental or physical disabilities. You can read more about RDSPs here, but the main features of them are as follows:
- For every dollar contributed to a plan, the federal government can match it with up to $3.00 under the Canada Disability Savings Grant. This is available to families with income under $91,831.
- For people living on low income, the government will also contribute the Canada Disability Savings Bond, which can be as much as $1,000 a year for 20 years.
- An RDSP is exempt from most provincial disability and income-assistance benefits. That means a disabled person can still collect the full amount of assistance to which they are entitled.
- RDSPs can hold the same kinds of investments as other registered accounts, and income earned within the account is tax-deferred.
Remember that when combined with the federal contributions, both these vehicles are outstanding ways to grow your investments.
Gearing up for Garden Days
We know that many of our readers are big fans of gardens and gardening, so we wanted to give you lots of advance notice about an event you’re sure to love next month. Saturday, June 16 is National Garden Day, and it kicks off Garden Days 2018, a nine-day celebration of all things leafy and green.
Between June 16 and 24, garden clubs, schools and horticultural societies across Canada will be joining together to highlight the variety and diversity of gardens, as well as the great pleasure we derive from one of the world’s greatest hobbies. Individuals will be highlighting their private gardens, and businesses such as gardening centres will also be participating. This is a great opportunity to explore everything there is to explore about gardening, especially if you’re a novice looking for a place to start.
Get informed (or even get involved)
Your hub for information about everything related to Garden Days is found at, appropriately enough, GardenDays.ca. It’s a wonderful site that green thumbs will want to bookmark. Here’s what you’ll find:
- Garden Days activities in your area, including links for registering your own activity
- Ways to contribute ideas and help publicize them with your provincial spokesperson
- How to get your city or town to declare an official Garden Day
- Social media links for Facebook, Twitter and (of course!) Instagram
There are also links to other really great sites. There’s Gardens Canada, which acts as an online information centre for gardening across the country, and also has various social media links. Then there’s Canada’s Garden Route, which bills itself as “the most comprehensive listing of Canada’s outstanding garden experiences,” and lets you search for everything from heritage gardens to garden networks and trails in your area. Finally, there’s the Canadian Garden Council, which is largely for professionals but offers membership for individuals as well.
Traveling with technology
The latest post to our Oaken Blog is a timely one, given that we’re approaching the start of the main travel season. It’s all about how technology has changed the way we experience the world when we venture abroad.
Our post reviews the big changes that technology has made to both choosing your destination, and also enjoying it more once you get there. To take one example, think of the smartphone. Now that smartphones can do everything from take pictures to navigate maps to display restaurant reviews, the world of travel has been changed forever. It also covers online booking tools that let you compare things like hotels and flights, as well as sites like Airbnb that provide more of a “homestay” experience. It touches on various online planning tools that let you scope out your destination before you leave, such as Google Maps. And it provides some interesting tidbits about the latest in more gadgets and travel technology, including the “smart suitcase” which is another futuristic development that was unimaginable only a decade or two ago.
To find out more, you can read the entire post here. Happy traveling!
To help you enjoy the season’s gardening weather, here’s a little bouquet of reading items to sample while you’re outside in the shade…
- A little more detail about RESPs from the Toronto Star.
- Horticultural therapy can help with dementia, according to this article from a newspaper based Down Under.
- CTV News explores how your smartphone could soon be your way through international border clearance, thanks to this Canadian initiative.