There was some good reader engagement with last week’s column on Advanced Life Deferred Annuities. Carrying on the theme of practical financial planning tips, here is a potpourri of ideas for your consideration.
Keep your TFSA contribution records. The government reporting is often delayed. I am putting this at the top of the list because if you don’t accurately track your TFSA contribution history there is no assurance that anyone else can either.
Pay yourself first. Take 10 percent of your income and use if for something important like RRSP contributions or mortgage prepayments. Learn to live off the remaining 90 percent of your income.
If you get a raise, increase your savings before you increase your spending.
Open a First Home Savings Account as soon as possible, even if you are years away from buying a home. Contribution room only starts after the account is opened.
Make at least $2,000 of RESP contributions before the end of the year your child turns 15 or you may lose future grant eligibility.
Apply for the $1200 B.C. Training and Education Savings Grant in your RESP between ages 6 and 9. It is not automatic.
Hold RESPs joint with your spouse or name your spouse as successor subscriber in your will. If you don’t you risk unintended consequences if you pass away.
If you are over 65, make sure you are claiming the pension income tax credit. RRIF income counts. You can take $2000 out of your RRIF tax free.
You can split up to 50% of qualified pension income with your spouse. RRIF income qualifies.
Even with pension income splitting now widely available, spousal RRSPs still have a role, especially if you are looking at strategic withdrawals before age 65.
Review your beneficiary designations every few years, especially after marriage, divorce, or the birth of a child. Don’t forget the beneficiary designations on your group benefits.
Do not keep long term money perpetually sitting in cash or GICs if you do not need it soon.
Contribute to your RRSP early in the year rather than waiting until the deadline. You can get an extra year of compounding.
Dollar cost averaging is a premier way to build wealth. Set up automatic contributions to savings and investments.
Don’t neglect your emergency fund. Sometimes you need quick access to cash.
If you have credit card debt, pay that off before investing.
If you have dependant children, make sure your will names a guardian.
Keep a list of all your accounts, passwords, insurance, and important documents in one place. Do not assume your spouse can access your accounts if something happens to you.
Delay CPP if you do not need it and expect to live a long time.
Use TFSA withdrawals before RRSP withdrawals if you are trying to reduce OAS clawbacks.
If one spouse dies, review the survivor’s tax situation. There is a tax-free rollover on the death of the first spouse, but not on the second.
If you own a corporation, do not leave excess cash sitting there without a plan.
If you are helping a child buy a home, decide in advance whether the money is a gift or a loan.
Review your insurance every few years instead of simply renewing it.
Make sure your disability insurance will actually cover your expenses.
Do not let old bank accounts, small RRSPs, or forgotten pensions get lost.
If you have unnecessary paperwork for obsolete accounts, destroy it. You might know what has value, but to your executor every piece of paper is potentially something they need to trace.
Check your CPP statement every few years for errors.
Do not judge an investment by what it did last year.
Avoid making major investment decisions based on headlines.
Avoid making major money decisions in times of severe emotion, such as grief or FOMO.
If you have aging parents, make sure powers of attorney and wills are in place.
If you have a pension, find out what survivor benefits it provides.
Keep enough cash available in retirement so you are not forced to sell investments during a market decline.
If you are charitably inclined, donating appreciated securities is often more tax efficient than donating cash.
Review your full financial plan annually, even if nothing seems to have changed. Something probably did.
This will be my last column for a few months. I am overhauling my financial planning practice, and that needs my full attention. In the meantime, you can send your ideas for future columns to brad@bradbrainfinancial.com. Have a great summer.
Brad Brain. CFP, R.F.P., CIM, TEP is a Certified Financial Planner in Fort St John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.
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