Advisors have a key role to play in helping clients understand the intricacies of registered accounts.
Tax-sheltered investment accounts are critical tools in helping Canadians achieve their dreams of higher education, home ownership, retirement, or even purchasing other big-ticket items such as a car or dream vacation.
To that end, advisors have a key role to play in helping clients understand the intricacies and leveraging investment vehicles such as registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), tax-free saving accounts (TFSAs) and the relatively newer tax-free first home savings accounts (FHSAs).
These 10 articles published on Globe Advisor in 2024 highlight key strategies around the use of these tax-sheltered investment accounts:
RRSPs, TFSAs or FHSAs – where should Canadians invest when their money is limited?
With the increased cost of living expenses, fully funding registered accounts may not be an option for many, leading to questions about how best to contribute. For advisors, working with clients to navigate registered account contributions means taking a deep dive into their tax situation, their goals and the purpose for which the money will be used to find the best possible strategy.
What to know as RRSP reporting measure takes effect
The Canada Revenue Agency (CRA) is monitoring the contents of registered plans such as TFSAs, RRSPs and RRIFs more closely. The tax agency began by targeting day trading and aggressive tax planning in TFSAs and, starting with the 2023 taxation year, it has brought RRSPs and RRIFs in line with TFSAs with a new requirement that financial institutions report the year-end fair market value of the property contained in these plans. Experts are interested to see what the CRA does with the new information.
Top RRSP investment picks from three veteran advisors
Artificial intelligence (AI), the obesity epidemic and a historic rail line are some investable themes to consider when making this year’s RRSP contribution, according to three veteran advisors. Globe Advisor spoke with Corrine Spiegel of Scotia Wealth Management, Stephanie Douglas of Harris Douglas Asset Management Inc. and Jay Smith of CIBC Wood Gundy about the rationale for their top RRSP investment picks.
How an RRSP contribution can protect income-tested benefits and credits
When Canadians think about the near-term advantages of contributing to their RRSP, they likely focus on the potential for a tax refund. But there’s another important way an RRSP contribution can give them additional cash flow: by reducing their net family income to a level that preserves income-tested benefits and credits.
Why RRSP season is no longer a scramble to the deadline for many Canadians
RRSP season has long been a hectic time for financial advisors as they connect with clients to encourage them to make their final contributions ahead of the Feb. 29 deadline. But while the industry has long touted the benefits of dollar-cost averaging in its bid to get more Canadians to contribute monthly, some advisors are exploring the effectiveness relative to a lump-sum contribution.
In year two of the FHSA, how and where should Canadians invest?
FHSAs, which became available on April 1 last year, allow Canadians who don’t yet own a home to contribute up to $8,000 a year to a lifetime maximum of $40,000. Yet, a report from Investor Economics, an ISS Market Intelligence business, found that FHSA uptake was slow, with Canadians contributing about $4.4-billion to the accounts as of December, 2023. Clients of financial advisors and full-service brokerages accounted for only about 5 per cent of FHSA assets.
How to top up TFSAs as contribution limit hits $7,000 this year
The annual limit for TFSA contributions increased to $7,000 this year from $6,500 in 2023, and a big dilemma for those with average incomes is finding the money to make this top-up. Frank DiPietro, assistant vice president, tax and estate planning at Mackenzie Investments in Toronto, says some clients have cash available to earmark for a TFSA contribution. But if they don’t have savings available, there are opportunities to explore other avenues. “You can redirect money [from a non-registered account], which is taxable, to a tax-exempt [TFSA],” he says.
Should this year’s RRSP contribution go to a spouse?
As married and common-law clients top up their RRSPs before the annual contribution deadline and plan their RRSP contributions for the remainder of the year, they have the option to contribute to a spousal RRSP instead of their own. Kelly Kotello, vice-president and financial planning specialist at RBC Wealth Management in Foothills County, Alta., says spousal RRSPs are most useful when there’s an “imbalance” between spouses in income, assets or age.
Why patience and diversification remain proven RRSP principles for the long term
The mega-cap stock collapse in 2022 is a vivid illustration that RRSPs are sheltered from taxes, not risk. “The important part is to decide, okay, if you have $10,000 or $50,000 to invest this year, sit down and determine what to prioritize. The point is, don’t miss out on the contribution – make the contribution, then decide where to invest,” says Shelley Smith, investment advisor at TD Wealth Private Investment Advice in Toronto.
Why Canadians should avoid tapping into their RRSPs when they’re in a financial crunch
Matt Morrish, certified financial planner at BlueShore Financial in Vancouver, began to see inquiries from clients last year about withdrawing their savings intended for another purpose, including those in their RRSPs. He says the questions are coming primarily from younger families concerned about larger mortgages and higher expenses who have exhausted other resources. “People sort of managed through the higher rate environment,” he says. “Now that it has lingered, their flexibility has started to diminish.”