At the beginning of a new year, it is always a good idea to review the goals you’ve established regarding your investment accounts as well as to take stock of the opportunities permitted within a new tax year. Consideration needs to be given to RRSP and TFSA contributions, education planning for children, as well as reviewing the objectives you’ve established for the management of your wealth in general.
Of particular importance right at the start, is determining if you are going to contribute within the first 2 months to your RRSP. If completed within the year’s first 60 days (March 1, 2013) your contribution can be attributed to either the previous or current tax year. RRSP contributions can be managed in the same way as most other investments, and can be contributed in cash, or i n - kind. This means that if you don’t happen to have the cash immediately available to meet the deadline, but you have a non - registered investment account or Tax Free Savings account, you can contribute these assets, in - kind, at their current market value. You benefit from not having to sell the investment while meeting your contribution goals. However, an in - kind security contribution can be considered a taxable event. This means that if it is coming from a non - sheltered account, it is considered a deemed disposition and you may have to pay Capital Gains tax on any gains. Conversely, according to the superficial loss rules, if there is a loss, you may not be permitted to use this to offset current or previous capital gains.
Another consideration is to contribute to your TFSA for 2013. The new contribution amount for 2013 is $5,500 – this is in addition to the $20,000 accumulated from the past 4 previous years. When you contribute early in the year, you benefit as all growth and income is immediately sheltered from tax. Like RRSPs, you can hold a very wide variety of investments within TFSA accounts, and you can contribute with cash or in - kind from a non - registered account (capital gains and superficial loss rules also apply to in - kind TFSA contributions) . If you have not taken advantage of previous year’s contribution amounts, or have made TFSA withdrawals in past years, you can increase your contribution this year by whatever amount is missing (for a total contribution amount of $25,500). While you benefit from the sheltering of income and growth in a TFSA account, unlike an RRSP, these assets are not locked in and are available for withdrawal at any time without increasing your taxable income.
The start of a new year is also an opportunity to start off on the right foot financially. This might mean spending some time planning around your various savings accounts, and sound, strategic action in this regard today, will greatly benefit your future.