Year-end financial planning often becomes more top of mind as the year draws to a close. Many financial opportunities and deadlines are based on the calendar year, which means you’ll need to take advantage of them by December 31st. Taking stock now allows you to make sure you’re not leaving money on the table. Here are 6 year-end financial planning opportunities that can allow you to start out the new year in the best possible financial shape.
1. Registered Education Savings Plan
A Registered Education Savings Plan (RESP) provides some excellent saving opportunities. When you contribute to an RESP, you’re entitled to a Canada Education Savings Grant (CESG). You can earn up to $500 in grant money each year and up to $1,000 if you have unused grant room from previous years. The deadline for annual contributions to an RESP is December 31st If you haven’t reached the annual contribution limits in previous years, you have the ability to make catch-up contributions. If the beneficiary of the account is turning 15, you’ll want to ensure that the beneficiary remains grant eligible, since certain factors must be satisfied for beneficiaries 15 and over.
2. Tax-Free Savings Account
Tax-Free Savings Accounts (TFSAs) provide excellent savings opportunities since both earnings on investments and withdrawals are tax-free. If you have not already contributed to your TFSA, you may want to do so before December 31st. If you have not met contribution limits in previous years and therefore have contribution room, you may also be able to contribute more than the annual contribution limit. December may be an ideal time to make a withdrawal from your TFSA. If you take money out in January 2020, you’ll have to wait until the following January to repay the withdrawal. On the other hand, if you make a withdrawal in December, you can repay the withdrawal as early as January 2020.
3. Registered Retirement Savings Plans
You’re not required to make contributions to a Registered Retirement Savings Plan (RRSP) until February, but not all RRSP deadlines are in February. Upon turning 71, you must convert your RRSP into a Registered Retired Income Fund (RRIF) by the end of the year. This means that any contributions you want to make to your RRSP before converting it into an RRIF must be made by December 31st.
4. Registered Retirement Income Fund (RRIF)
While an RRSP helps you save for retirement, an RRIF uses these savings to provide you with a taxable income stream, while still providing tax-sheltering and growth. If you’ve already converted your RRSP into an RRIF, you’re required to withdraw the minimum amount annually, beginning the year after you opened the RRIF. You will need to withdraw the minimum amount by the end of the year if you have not already.
5. Charitable Donations
According to a recent study by Psychological Science, the happiness of giving a gift actually outlasts the happiness of receiving gifts. If you’re looking to receive a charitable giving tax credit, you’ll need to make a charitable donation by December 31st in order to receive a donation receipt for this year. Another option for a charitable donation is to donate appreciated provincial funds or shares to charity. This strategy allows you to minimize your capital gains tax. You may avoid paying capital gains tax on those assets while also receiving a donation receipt for the fair market value of the assets.
6. Tax Breaks
It’s possible for tax breaks to vary from year to year, so it’s worth checking where you currently fall. If you’re near the top of a tax bracket and have the ability to do so, you may want to defer some income sources to next year.
Though the entirety of these topics may not apply to you, it’s important to meet with a financial advisor to discuss financial tasks you need to accomplish beyond what’s addressed above. The important thing for you and your family to do is to carve out time before December 31st to create your own financial task list not only for the end of the year but also for the year ahead. Contact us today if you need guidance on building your year-end financial planning to-do list and goal setting for next year.