Alphabet Soup

As 2023 draws to a close, we have added another new acronym to the ever-growing alphabet soup of government financial and tax planning programs. Here’s a quick update on what’s new (and old):

FHSA.  The First Home Savings Account is available to Canadian residents who are at least 18 and have never owned a home. Tax deductible contributions of up to $8,000 per year and $40,000 lifetime can be made. Accumulated investment earnings inside the FHSA and the principal you invested can be withdrawn tax free if used to buy a home. While the $40,000 lifetime limit seems small, over the maximum 15-year life of an FHSA, a 7% annual return will grow the balance to around $100,000. Unlike RRSPs, the annual contribution deadline is the calendar year end. We can open an account before then if you let us know you want one right away.

TFSA.  The contribution limit for Tax Free Savings Accounts is $6,500 for 2023 and will be $7,000 for 2024.  TFSA contributions are not tax deductible but the earnings inside the account are tax free. If you are planning to take money out of your TFSA in the near future, it is better to do it prior to year-end. This would allow you to replace it at any time in 2024. If you wait until 2024 to make the withdrawal, you will not be able to replace your withdrawal until 2025.

RRSP.    The contribution limit for Registered Retirement Savings Plans is $30,780 for those under age 72. The time limit for 2023 contributions is February 29 (yes, 2024 is a leap-year). You can find your unused contribution amount on your CRA Notice of Assessment or online at My Account.

RRIF.      We have now rolled the RRIF and LIRA accounts of all our clients who turned 71 in 2023 into RRIFs or LRIFs. For those who are 72 or older and who have opted for a lump-sum withdrawal, these will take place in mid-December, and will transfer directly into your bank account or non-registered NBIN account.

RESP.     Registered Education Saving Plans have a December 31 limit for 2023 contributions. While missed contributions can be made up in subsequent years, the rules allow only a doubling of contributions that are eligible for the maximum government grant of $500, so it is better to make contributions annually. The lifetime contribution limit for RESPs remains at $50,000/child. The amount required to earn the $500 government grant is $2,500 per year, up to around age 15.

CPP.       Canada Pension Plan is available starting as young as age 60 and can be delayed to as old as age 70.  Healthy people who do not need the income should consider delaying receipt of the CPP as the monthly payments rise quite sharply. You will “break even” on delayed payments if you live to 82 or older. You can read Benjamin Klein’s article on the topic here.

Each new government program adds complexity to financial planning. What is the best blend of FHSA, TFSA and RRSP for a younger person? When should money be taken out of a TFSA? Should I open an RESP for my grandchildren? How much tax should be withheld on my RRIF withdrawals? All these are important questions that can have an important impact on your financial well-being. Luckily, we have the answers. Call your portfolio manager and ask for a consultation. We love talking to our clients.

We wish everyone a healthy, happy and prosperous 2024.


David Baskin

Media Appearances 

Barry Schwartz on BBN’s The Street: The U.S. equity market is the place to be – November 8, 2023

Barry Schwartz on BNN’s The Street: Look for companies that are cash rich or near the debt targets – November 8, 2023

David Baskin on BNN’s Market Call – November 14, 2023

Benjamin Klein on Your Radio Hit Today on CBC Montreal – November 24, 2023

Long Term Investing with Barry Schwartz & Ernest Wong 

Episode 28 – November 1, 2023

Episode 29 – November 12, 2023

Episode 30 – November 20, 2023

Episode 31 – November 27, 2023

Interesting Reads

The Inside Story of Microsoft and OpenAI – The New Yorker

Charlie Munger’s reflections on his life – CNBC