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Financial Planning all Year Long

Every year we notice that more and more people seem to be doing financial planning all year long, as opposed to a last minute contribution to an RRSP money market in February to take advantage of the tax benefit for 2006. A key point is to remember to meet with your advisor and invest these funds according to your financial plan once the ‘RRSP rush’ is over.

This is the time of year people in RRIFs also think about their portfolios; they are now finding out how much they must and deciding how much they would like to withdraw from their retirement portfolios.

I would like to note a few items that you may consider, whether you are contributing or withdrawing from your retirement portfolio.


Do you have a large registered portfolio compared to a non-registered investment portfolio and have to face the income tax implications including possible claw-backs? It is possible to convert more funds to a non-registered portfolio and subsequently withdraw income with little or no immediate tax consequences.


Although you may not be able to contribute to RRSPs, you can still make investment decisions that will reduce your income, such as flow-through shares. Typically, these are considered higher risk investments and you should talk to your advisor and accountant to determine what options are suitable for your situation.


Think about the ultimate purpose of your portfolio; if registered, and you have no spouse or dependent children, almost one half may go to Revenue Canada upon your demise. Is that your intention for your life savings?


RRSPs may not be the best investment vehicle for you. If you will be making more income when you retire than you are now, there may be better options to consider—RRSP season is here—know your mortgage options. Want to buy a house and contribute to retirement? Do both. Contribute to your RRSP then use up to $20,000 ($40,000) per couple) of your RRSPs accumulated assets to purchase or build a home. Under the federal Home Buyers’ Plan (HBP), the Canada Revenue Agency lets first time homebuyers access their retirement savings without tax consequences.


Should you pay down your mortgage or invest in an RRSP? The easy answer is to do both—invest in RRSPs and use your tax refund to pay down your mortgage.

Should you access your home equity to contribute to an RRSP? Factors to consider are your income and the interest rate you would be paying on the mortgage compared to the investment return. Remember that interest paid on a loan to contribute to RRSPs is not tax deductible.


Are you still on track? Making annual RRSP contributions does not make for a financial plan. Monitor and review your progress annually and revisit asset allocation as needed.

If you are a contributor, you may ask “How much money will I need when I retire?”, and, if you are withdrawing, you may ask “How long will my money last?” –---- Don’t let the answer be a surprise.

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