Between the new Canadian federal income tax changes, and the fact that it’s RRSP season, taxes are top-of-mind. Here are some things to consider regarding taxes and investing.
Federal income tax changes: If your annual taxable income is between $45,282 and $90,563, you’re paying 1.5 per cent less in tax effective January 1, 2016, due to changes to Personal Federal Income Tax. Since you’re already used to this money not being included in your paycheque, it’s worth considering investing or saving it somehow, rather than adding it to your spending budget. Due to the impact of compound interest, what seems minimal now - 1.5 per cent of your income - can have a substantial impact by the time you are ready for retirement.
It’s RRSP season: If you wish to contribute to your RRSP (and enjoy the corresponding tax deduction), the deadline for the 2015 tax year is February 29, 2016. Rather than leaving it to the last minute, determine your available contribution amount, and how you want your money invested. There are lots of options; RRSPs can contain everything from T-bills, GICs and bonds to equities, stocks and mutual funds. Starting early gives you the chance to consider them all.
Take your time to review any investments you are considering this RRSP season. Make sure you know what you are investing in, including details such as risks and fees. Asking questions and getting informed will help you to make smart decisions to benefit your retirement.
Two things in life are certain as the saying goes, and one of them is taxes. Certainly, there are ways to maximize your exemptions through RRSPs, TFSAs, charitable donations, etc. You can avoid taxes, but you cannot ever truly escape them. In fact, it should be a red flag when you see an investment being promoted as “offshore/tax-free” - scammers often use this as a marketing ploy to entice you to invest your money overseas, where it is more difficult, and often impossible, to get it back if something goes wrong.