Some tips for the end of 2021

My end-of-year advice for 2021? Plan now for your future years, and don’t just try to optimize or save the one that is ending. Financial success consists of accumulating many small decisions over a long period of time.

It is important to be able to identify your goals, not only for 2022, but also for the long term. If this is the time of year when the media is talking about “outliving your holiday budget,” between you and me, you should already have your budget for the next calendar…

The sum of the little things really matters

Some high interest bank accounts in which accumulate sums not invested in the markets. Debts with non-deductible interest payable while you have a TFSA in a guaranteed investment product with little or almost no return. Permanent life insurance when your needs are temporary and your financial risk is more in the area of ​​disability. Accelerated mortgage debt repayment preventing you from contributing to your RRSP. Funding through installments of goods or vacations that were not included in your annual budget. Individual RRSP contributions rather than using your spouse’s RRSP because it is simpler. A request to the Régie des rentes du Québec at age 60 or 65 automatically without prior analysis … The list of decisions taken piecemeal, without a global vision or strategic reflection, grows over the years of financial life.

Taken one at a time, these decisions may not have too much impact, you say to yourself. Is it so tragic to “let a few thousand dollars sleep” in a savings account unnecessarily for several years?

After all, it’s not about millions, you might say. Over a long period of time, however, it is likely to be hundreds of thousands of dollars tied to this microdecision alone. And when tax factors are integrated with the financial factors of financial planning, the little things do more than they add!

Moreover, the effect is also considerable whether you are in a well-off financial situation or not. Planning is your tool to anchor your long-term financial health, achieve all of your goals and protect yourself against the increase in the cost of living, while optimizing the estate to be passed on to future generations of your family.

Let’s still finish 2021 on a few tracks

That being said, here are some important reminders to take note of by December 31st …

If you are a shareholder of an incorporated business with little personal taxable income in 2021, you should consider paying a small salary (up to $ 20,000) or dividends (up to $ 25,000). $ 30,000) by December 31.

If you have a portfolio of non-registered investments, you should consider managing capital gains and losses, such as selling certain securities at a loss to reverse capital gains realized during the year. Be careful with this strategy; a good tax transaction can be a bad financial decision. Also, don’t forget the superficial loss rules.

If you turned 71 in 2021, this is your last chance to contribute to your RRSP, which will need to be converted into a RRIF (registered retirement income fund) before December 31 (not December 1).is March 2022). If you still have employment income, you may be making excess contributions. You will, however, have to manage a 1% penalty between now and the withdrawal (ideally in January).

Finally, convert your RRSP to a RRIF, but use your younger spouse’s age (if you have that “chance”!) To determine the minimum withdrawals to be made.

In the event that your income was significant in 2021 and you retire with a marked drop in income, you might consider making a large RRSP contribution this year and therefore receive a tax return in 2022.

65-year-old taxpayers without pension income should make a RRIF withdrawal of $ 3,000 to qualify for the federal and provincial pension income credit.

Regardless of your age, if your earned income in 2021 was very low, you could withdraw a small amount from your RRSPs without major tax consequences. It should also be remembered that even if an RRSP withdrawal generates little tax – for example, without any other income, an RRSP withdrawal of $ 15,000 to $ 20,000 could generate zero tax – it will be more difficult not to not spend this amount if it is more easily accessible in a TFSA, for example.

If you intended to take advantage of the Home Buyers’ Plan (HBP), it is better to withdraw in January 2022 rather than by December 31 since you will be able to postpone the start of the repayment by one year. Also, if you’ve recently separated, paying off your HBP balance by December 31 may allow you to use the program again in 2022.

If you have a child or grandchild who turned 15 in 2021, you must open an RESP and contribute at least $ 2,000 to benefit from the grants. For 17-year-olds, you might even consider taking out a loan by December 31 to make a contribution of $ 5,000 and get the grants on that amount (subject to certain conditions).

I will happily meet you in January 2022 after a long family leave. I sincerely wish you a holiday season filled with love, zenitude and fun. Your financial questions are always welcome, so feel free to submit them to us for future columns! Happy Holidays !

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