Looking to Buy a First Home? It Just Got Easier. Plus, Tax Tips for 2023
Squatch found the perfect Christmas gift for me this year. He was on Facebook Marketplace and he found a used FitDesk. This is a tall stationary bike that has a rubber-topped desk on it so I can bicycle while I’m working on my laptop. Genius! It even has a little drawer for pens and my notebook and a place to attach therapy bands so you can do arm exercises if you want to. With a little adjustment, it can double as a standing desk so I’m going to work on that. It turned out that it belonged to a friend of mine so we had a chance to catch up while we were putting the FitDesk in my car.
So now I hop on this FitDesk first thing in the morning to complete my morning workout. It really clears my mind.
While I was on it the other day, Squatch was in my office with me getting ready for work. And I was telling him that the year 2021 was a complete blur for me. I don’t remember a whole lot about that year because I wasn’t able to spend time in person with many of the people I love. In 2022, we began to come out of hiding and it has gotten me excited for the new year, 2023! Maybe you feel that way too.
So with that in mind, I have lots of good news to bring you today on some different subjects. Check them all out below!
What’s Inside?
Prefer to Listen?Here’s the podcast episode!
Rather Read All About It?Are Most Canadians Financially Comfortable in Retirement?
Have you ever felt anxious about whether you’ll be prepared for retirement? Maybe you’re not planning to retire for at least another five years but you’re still worried that you’ll never have enough?
Answering the question “Do I have enough money to retire?” is what I do every day.
In many ways, the answer to that is one big math problem. For some people, the math works, for others, we need to work together on making sure they’ll have enough.
Whether they have enough money on paper or not, what I don’t like to see is someone being stressed about it either way. My job is to relieve stress, not create it.
Yes, my job is to show you that it is important to save but telling you there’s no way you’ll ever have enough saved and you should just resign yourself to eating cat food in retirement serves no one. I want you to know that you can have a good life when you’re no longer working and you can get there if we work together. I think that’s more empowering than trying to scare people into saving their money.
So here’s that good news I told you about. A brand new study by Stats Canada shows that most Canadians were pleasantly surprised to discover they are more comfortable financially in retirement than they expected.
What Stats Canada did was, back in 2014, they surveyed Canadians who were retiring in a few years and asked them if they thought they were going to have enough money to live off of once they retired. Just over two thirds of the people said yes, they thought they’d have enough.
Here’s where the good news comes in. In 2020, after these same people had retired, they were asked if they actually had enough income in retirement to live comfortably. Over 80% said yes, they did. So retirement ended up being comfortable financially for more people than expected.
I have found that to be true in my business. Once they had retired, my clients found life was good. There’s lots of different reasons for that.
Because they worked with me they’re likely to have money saved to begin with.
Because they were serious about getting their financial house in order, they also likely have good financial habits. But I think often we beat ourselves up unnecessarily. Just do the math. Are you going to be okay? If you’re not sure, reach out to me.
Just knowing where you stand financially relieves so much stress. That leads me to my next piece of good news and my next survey.
The 2022 Fidelity Retirement Report is out.
This report surveyed almost 2,000 Canadians in July of 2022. If you’d like a copy of this report, let me know here:
One of the top findings of this report is this: Canadians who have a written financial plan that specifically addresses retirement income planning feel more positive about their retirement. They feel more financially, socially, physically and emotionally prepared for retirement than those without a written plan.
So, if you want to feel more optimistic, more confident and more prepared about your future, get in touch with me and let’s talk.
Use Your Tax Withholdings to invest in your RRSP - here’s how.
It is tax season, time to give the government your pound of flesh. Let’s talk about some of the ways you can save as much on taxes as possible.
First up is the RRSP, the Registered Retirement Savings Plan. Every dollar you invest into your plan reduces your taxable income, and that saves you taxes.
The problem, especially if you’re an employee and not self-employed is, your paycheque is only so big. Where can you find the money to invest in the first place?
There are short term loans you can get that you pay back when you get your tax refund. Or, if you tend to get a tax refund, you can always get in the habit of investing that refund into your RRSP so next year’s tax bill is less.
But both of those ways depend on you getting a tax refund. A tax refund means you’ve been lending the government your money for a year. Wouldn’t it make more sense for you to have use of that money the whole year so you can invest it as you go along? But for that, you’ll need a bigger paycheque. How can you get that?
This is something that’s not talked about much and I think it’s a great strategy. Before the year starts, if you fill out the proper form and send it to the CRA, they will send you back a letter that you then bring to your payroll department. This letter gives your payroll department the okay to not withhold as much tax from your monthly paycheques. If your payroll department doesn’t have to withhold as much tax from your paycheques, you get a bigger paycheque. You can then use that extra money to automatically invest every month in your RRSP. Brilliant!
All you have to do is go to the CRA website and download the form T1213. The CRA has told me that it’s best to do this no later than November before the year starts. But if you start late, no harm done, just get it done earlier next year. If you’re not sure how to fill it out, contact your tax advisor. Fill out the form and mail it or fax it over to the CRA. After a month or so, they will mail you a letter that you in turn bring to your payroll department. The letter, which was based on the form you filled out, gives your payroll department the authority to pay you more net cash on each paycheque.
Now…and this is important…this only works if you then turn around and invest that extra cash into your RRSP. If you don’t, and you just keep the cash, you will owe the CRA more in taxes at the end of the year. So be sure to work with your tax advisor to make sure you complete the form correctly. Remember, the whole purpose of this strategy is to find the money to invest in your RRSP so that you’re paying more money to yourself and less money to the CRA.
Are You Missing Out on Tax Deductions with Your Medical Expenses?
Another often overlooked way to reduce the taxes you owe is to write off as many medical expenses as you’re allowed. Your tax advisor can let you know how many of them you can use, but your job is to save those receipts.
Here’s a link to the list of medical expenses the CRA recognizes.
If you have any not on this list, save the receipt anyway and run it by your tax preparer. I recently had a client who lost her family doctor like so many of us have, and needed to pay a medical records company $100 to transfer her records to her new doctor. Her tax advisor viewed that as a deductible medical expense, which was a surprise to her. So, save those receipts.
What About First Time Homebuyers - Any Tax Savings for Us?
The Federal Government has allowed the creation of a new type of savings account for First Time Homebuyers. It’s called the First Home Savings Account, or FHSA. If you qualify as a first-time homebuyer, this account allows you to save up to $40,000 per person towards the purchase of a home.
Like an RRSP, contributions to an FHSA will be tax-deductible. The money in the account will grow tax free. Then, when it comes time to withdraw the money to purchase your home, that withdrawal will be non-taxable, like with a TFSA. It’s the best of both worlds.
There’s more good news on this. You may know that, if you have an RRSP, you can withdraw $35,000 from your RRSP to buy a first home. That program has been around a long time.
The good news is, once First Home Savings Accounts become available, you will be able to use both programs. If you do, that will give you $75,000 total to use as a downpayment. And that’s per person, so if your spouse has these accounts as well, you can have a downpayment of $150,000 together.
Also, the rules allow funds to be transferred to an RRSP, or from an RRSP to an FHSA on a tax-free basis. So if your money is tied up in your RRSP, no problem, you can make the switch without having to pay tax.
Are you going through a life transition and need to find a wealth advisor to manage your investments? You don’t have to feel intimidated wondering how to find the right one. Grab my free guide, “12 Smart Questions to Ask When Interviewing a Wealth Advisor.” This guide gives you all the questions and why you should ask them. Just go to GloryGray.com, pop in your email address and we’ll send it right to your inbox.
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