Although many a New Year's resolution will likely go unfulfilled this upcoming year, achieving your financial goals doesn't have to be one of them. Luckily, the months occupying the twilight of our calendar year offer great opportunities to set up your investments for success. The following are several ways in which to prepare for the new year and to ring in 2018 with peace of mind.
Managing TFSA account withdrawals
If you anticipate the need to make a withdrawal from your TFSA in the near future, consider doing so in these final months of 2017. Unlike a RRSP, a TFSA allows you to withdraw money from the account and then put it back in the future. The only stipulation, based on TFSA registration rules, is that you cannot replace the amount withdrawn in the same calendar year. So, to avoid having to wait until 2019 to re-deposit your money, withdrawing the funds in 2017 will allow you to replace them in 2018, as the limit resets, without the worry of over-contributing and paying a penalty.
Speaking further on contribution limits, it is expected that the contribution dollar limit will remain at $5,500, meaning that the maximum anyone can contribute to a TFSA will be $57,500 by Jan 1, 2018. As the name implies, returns realized within a TFSA are tax-free, so take advantage of the account by investing sooner - rather than later - and give your investments the longest opportunity to grow.
Handling RRSP contributions
So, you've fine-tuned your TFSA for optimal performance in 2018, but what about your retirement plans? RRSP contributions for the 2017 tax year are accepted until March 1, 2018, but avoid waiting until then to invest. By contributing as early as possible, you are maximizing tax-deferred growth, along with checking another financial to-do off your list. Don't forget that your maximum yearly contribution limit is 18% of your earned income up to a maximum of $26,010. That being said, check your 2016 Notice of Assessment for any unused contribution room from prior years.
Now if you happened to have turned 71 this year, you have until December 31 of this year to make final contributions to your RRSP until converting it into a RRIF (Registered Retirement Income Fund). Before converting, if you earned income in 2017 that will create RRSP contribution room in 2018, it may be advantageous to make a single over-contribution to your RRSP this December. By over-contributing, you will pay a penalty of 1% on the over-contribution only for December, 2017. However, this will be eliminated by the new contribution room opened up in January, 2018. From there, you can deduct the over-contributed amount on your 2018 return.
Don't forget, in the spirit of the holidays, you can also use your contribution room after 2017 to contribute to your spouse/partner's RRSP until the end of the year in which they turn 71.
Offsetting taxable gains
You've planned out your moves with your TFSA, your RRSP is in good shape, but now it's time to look at your unregistered investments. To offset any taxable realized gains you may have over the year, consider selling investments with net capital losses - the losses that cannot be used currently can be carried back three years, or carried forward indefinitely, to offset net capital gains. However, in order to do this, the trade must be made before December 22, 2017. Lastly, it's also important to be mindful of the potential impact of foreign currency exchange on any foreign investments you may have, which may affect your net loss/gain.
If you're looking for more advice to help make sure that your investments are set for success, now and in the future, talk to a CWB Wealth Management specialist. We'll work with you to create a plan unique to your investment situation and goals, taking account of the factors that are important to you.