A Tax Plan for All Seasons

Q1 | February 2020

Word "Tax" with clock on the office workplace. Business concept.

Topic: Tax Planning

Brad Weber  CPA, CA, CFP, CIM

February 16, 2020

Image used with permission: iStock/LIgorko


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A Tax Plan for All Seasons

Q1 | February 2020

As we move further into 2020, you’ll notice your annual T-slips have been arriving in the mail, RRSP contribution advertisements have been everywhere and the tax deadline is just emerging on the horizon, albeit later than normal this year due to the announced temporary delay. All signs that point to the arrival of tax season.

This time of year comes with a flurry of activities as many people think about their taxes. While anytime is the right time to start planning, it’s not ideal to be concentrating your activities around particular deadlines. At Nexus we believe a well developed financial plan that focuses on your goals considers a long-term time horizon. The tax planning portion of your plan should map out your strategies well in advance. Put simply, you should never be in a last minute rush to meet any tax deadlines as your plan will have anticipated your needs well in advance.

The RRSP Contribution Deadline

RRSP season is in February. It’s the time when many people decide how much they should contribute to generate a deduction to their previous year’s taxes. While the RRSP is a great tax strategy, the beginning of the year should be when you’re deciding on your RRSP contributions for the coming year. A financial plan will ensure your RRSP contribution strategy will be laid out beforehand, without a need for rushing to meet deadlines.

Spousal RRSPs and Using Contribution Room After 71

The year after you’ve turned 71, you can no longer contribute to your own RRSP. But if you still have outstanding RRSP contribution room that you want to use, all is not lost if your spouse is younger than you. You can still contribute to a Spousal RRSP if your spouse is 71 or younger on December 31 of that year, and that contribution will be deductible on your own tax return. While this can be an opportunity to ensure the RRSP room isn’t lost, you may likely have benefited from making that RRSP contribution earlier, and a financial plan would have helped in determining that.

Turning 71 this Year and Deciding How Much to Withdraw

If you are turning 71 this year, you’ll finally have to convert your RRSP into a RRIF and begin making withdrawals. But you might not know how much you should be taking out of your RRIF. Should it be just the minimum? Or should you choose something more? A financial plan analyzes your cash flow and determines what amount is best for you to withdraw. Even more, with a financial plan in place you would already know if waiting until 71 was the right time to start your RRIF or if there were benefits to you in starting your withdrawals earlier.

Keeping an eye on the taxes you pay is important; but you should make sure that is combined with the right financial plan. At Nexus we work with you to build your financial plan which ensures your decisions are proactive and not reactive.

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