2021 – RRSP and TFSA basics

The link below provides some useful information on what you need to know about Registered Retirement Savings Plan (RRSP) and Tax Free Savings Account (TFSA).

RRSP and TFSA: 4 things every Canadian should know about (bccpa.ca)

this article is provided by bccpa.ca’s financial literacy program

Deadline for RRSP contribution this year is March 1, 2021.

Deadline for TFSA contribution this year is December 31, 2021.


Will our CPP benefits run out before we die?

For those Canadians who worry that our CPP benefits will run out before we do. You can rest easier. It will not!

Our nation’s pension plan (Canada Pension Plan or CPP) has a stellar report card. Its investment board reported on our collective Canadian plan with the following performance –

1) it has earned a very respectable 10.7% 10-year annualized rate of return at the time of this writing;

2) according to the Chief Actuary of Canada, the plan is sustainable over the next 75 years;

3) our collective retirement nest egg has grown to $434 billion.

Here’s the link to obtain more information and details on how CPP invests our money – https://www.cppinvestments.com/the-fund

Market volatility the only certainty during these uncertain economic times amidst COVID-19

The COVID-19 pandemic has given the world a jolt and woke us up to the fact that we are indeed, in this together. No country is an island no matter how tightly we want to secure our borders. It only takes one infection to sneak through and before you know it, can spread to many by leaps and bounds.

At time of this writing, there are now over 40 million infections impacting 215 countries around the globe.

Many countries are experiencing a second wave of infection and there’s no sign of the spread slowing any time soon. Until we have a proven vaccine, the world is a scary place for all of us, physically, emotionally and financially.

This uncertainty continues to create chaos in the stock market. Investors’ fears have caused it to take a nosedive. Then optimism in a vaccine and a hopeful turn around in the economy roar it back to new heights not seen in 80 years.

All in all, we must brace ourselves for more stock market volatility in the days to come. More than likely, at least until early 2021 when (and if) a COVID-19 vaccine will be available (if all goes as planned on some promising research).

If your financial plan is in for the long haul, you must accept short term volatility from time to time. Re-examine your risk tolerance and see if it’s still at your acceptable comfort level. Review your life plan and see if any major changes (ie: marital status, retirement, etc.) have been taken into consideration when re-balancing your investment portfolio.

History shows us that the market is like a pendulum. It swings up and it swings down. As the saying goes, what goes up must come down and what goes down must come up … well, we shall see.

In the meantime, stay safe and stay sane.

COVID-19 and your 2019 tax year filings

Canada Revenue Agency (CRA) has officially extended this year’s filing deadline for personal income tax to June 1, 2020.
Taxpayer will have until September 1, 2020 to pay their 2019 tax owing.

For more CRA information and updates, please go to https://www.canada.ca/en/revenue-agency.html

For tax measures to help support Canadians during the COVID-19 pandemic, please go to https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html

In this unprecedented times, please stay safe and well by:
– practising social distancing by keeping at least 2 meters apart from each other;
– correctly washing your hands with soap and water for at least 20 seconds;
– don’t touch your face, nose and eyes;
– supporting your loved ones, friends and community by staying connected virtually;
– self isolate if you don’t feel well. Contact your health care provider by phone. Do not just show up at your doctor’s office, clinic or local hospital.

Lastly, a shout out and kudos to all the front line workers (including health, paramedics, police, fire fighters, supply chain workers, politicians of all stripes at all levels of government) who are working hard to keep us safe, fed and healthy.

Please take care of yourselves and do what you can in your community. We’re all in this together.

2019 tax season is here!

FAQs on taxes …

Q: How much tax do I have to pay?
A: It depends on your income for the year. Total taxes owing is based on the income brackets you fall under. Here’s a simple chart for you to self check on your marginal tax rates for Canadians who are BC residents:

Income brackets – federalTax RatesTax Rates
≤ $47,63015.0% 
$47,631 – $95,25920.5% 
$95,260 – $147,66726.0% 
$147,668 – $210,37129.0% 
≥ $210,37233.0% 
Income brackets – BC  
≤ $40,707 5.1%
$40,708 – $81,416 7.7%
$81,417 – $93,476 10.5%
$93,477 – $113,506 12.3%
$113,507 – $153,900 14.7%
≥ $153,901 16.8%

Q: When is the deadline for filing my 2019 personal tax return?
A: April 30th, 2020.
June 15th, 2020 if you or your spouse is self employed.

Q: When is the deadline for RRSP contributions to qualify for 2019 claim?
A: March 2nd, 2020.

Q: What are some common deductions I should consider?
A: Gather your 2019 information and proof (ie: receipts) on –
– charitable donations made,
– medical and dental expenses paid,
– childcare expenses paid,
– tuition paid,
– employment expenses paid,
– political contributions,
– investment related expenses such as interest and carrying charges paid,
There are too many other possible claims to list here. To start jotting your memory, review your 2018 tax return to check for items claimed in the past and see if they’re still valid for 2019.
Also review Canada Revenue Agency’s 2019 income tax guide for ‘what’s new’ this year –

Beware of CRA phone scams

It can be financially devastating when one falls for one of these scams. Especially seniors today, who still are the most vulnerable to be taken by scammers. Trusting Canadians have lost hundreds of thousands of dollars, often to overseas scammers, believing that they are being threatened by Canada Revenue Agency (CRA) for outstanding tax bills.

First and foremost, know that CRA will never leave threatening phone messages. They will also never demand immediate payment by Western Union, e-transfer, prepaid credit card, bitcoin or any form of gift cards from popular retailers (ie: Amazon, Apple, etc).

If in doubt with the legitamacy of the call, check by calling CRA directly. Their official phone numbers are listed on their website. Their current toll free number is 1-800-959-8281. Here is the link to CRA’s website https://www.canada.ca/en/revenue-agency/corporate/contact-information/telephone-numbers.html#h1.

And don’t worry, they will never threaten you with police intervention or jail time over the phone.

CPPIB good news update

The Canada Pension Plan Investment Board (CPPIB) manages $392 billion as of 2019/Mar/31 for Canadians. Its mandate is to optimize return on investment for the Canada Pension Plan (CPP), for many generations and with a low risk profile.
It released its latest annual report. The results are impressive.

  • the plan produced a solid 8.9% return this past financial year;
  • the plan’s net assets increased by almost $36 billion;
  • the plan produced an average of 9.2% return for the last 10 years.

Facts on CPP. Did you know that –

  • it was designed to provide just 25% of an average income (not 100%)?
  • CPP contributions are kept entirely separate from government general accounts, and at arms length from possible federal government’s meddling and political interference?
  • the plan’s chief actuary is responsible to review and make projections to ensure there will be no shortfall, for at least over the next 75 years?

If you’ve ever contributed to the Canada Pension Plan, you can view your estimated monthly CPP benefits on retirement. You need to obtain an account with MyService Canada and request a record of your personal CPP contributions over your working live.
MyService Canadahere’s the link

The bottom line on our collective CPP government pension – we need not worry our CPP will run of money any time soon!

CPPIBhere’s its link

Beware of CRA scams!

Canada Revenue Agency (CRA) has posted some warnings on scams whereby thousands of unsuspecting Canadians have fallen prey to and lost millions of dollars to scammers.

Check out the government’s website for more information and how to protect yourself – click here. Here are some important points mentioned by CRA on its website –

1) By phone, CRA will never

  • ask for information about your passport, health card, or driver’s license
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • use aggressive language or threaten you with arrest or sending the police
  • leave voicemails that are threatening or give personal or financial information

2) By email, CRA will never

  • give or ask for personal or financial information by email and ask you to click on a link
  • email you a link asking you to fill in an online form with personal or financial details
  • send you an email with a link to your refund
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

3) By mail, CRA will never

  • set up a meeting with you in a public place to take a payment
  • demand immediate payment by Interac e-transfer, bitcoin, prepaid credit cards or gift cards from retailers such as iTunes, Amazon, or others
  • threaten you with arrest or a prison sentence

4) CRA never uses text messages or instant messaging such as Facebook Messenger or WhatsApp to communicate with taxpayers under any circumstance. If a taxpayer receives text or instant messages claiming to be from the CRA, they are scams!

5) Other useful information on scammers posing as CRA employees. Check out this CRA’s website link – click here.

TFSA accumulated savings, RRSP and tax tips – 2019 update

Here’s another update of my previous posts on TFSA (Tax Free Savings Account) accumulation.
Since 2009, one can contribute to a TFSA and any investment income earned is tax free.

I’ve dropped the assumed annual return from 4%  to a conservative 3% due to recent decline and uncertainty in the markets.  Even with this reduced drop over the plan’s life-to-date, and assuming the maximum is contributed each year at the beginning of each year, one can still expect to have over $75,000 by the end of 2019! The magic of compounding and accumulation.

Here’s the link – 2019Jan-TFSA savings accumulation

Chartered Professional Accountants of BC (CPABC) is committed to providing resources to assist individuals and businesses prepare their income tax returns, invest in RRSPs, and plan their finances.   As a service to the public, here’s the link to its latest RRSP and other useful tax tips.

Short and sweet for the year-end

It’s really amazing that another year-end is upon us.    Living just keeps happening and time flies.

Before you know it, we might be at a stage where we’ll need a little financial cushion to help us along.   Hopefully over the years, you’ve been socking away a little savings regularly and that it has grown nicely and steadily for you.

Here again is a reminder to help you along in maximizing your savings and minimizing your taxes along the way.

  • Tax free savings account (TFSA) – building a tax free nest egg  without worrying about future tax liability on the income.
  • Registered Retirement Savings Plan (RRSP) – building a tax deferred retirement nest egg, saving you taxes today and hopefully to pay tax in the future when you income is taxed at a lower rate.
  • Regular withdrawal to invest – getting into the habit of forced savings by withdrawing a set amount each payday.   Investing those savings into tax efficient investments will help maximize your savings.  The compounding effect of regular savings can also have a pleasant surprise over time.
  • Spend less.   Think twice before buying will often result in a bigger nest egg.  Remember, this is often from after tax money so your saving has even more bang for the buck.

It’s often said that having family and friends is the most important things to have during the holidays.   This is so true, and you don’t need to spend a huge sum to have a memorable and wonderful time.

Merry Christmas and Happy New Year!