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Now’s a good time to think about RRSPs, taxes

By Staff

Taking the time now to consider personal tax implications and laying down a financial foundation for the coming year can go a long way to setting yourself up for success down the road, says Dawn Marchand, vice-president of marketing, product and direct distribution for Lawyers Financial.

Marchand suggests a good way to begin is by taking stock of the past year.

“One of the most important things that everyone can do is to see if their debt situation has improved over the past year,” she tells

“If it hasn’t, then now is the time to do something about that — set those automatic payments higher, for example, so that at the end of the year you will be able to say, ‘Yes, my debt situation has improved.’”

That might include taking a spending holiday by holding off on purchases, says Marchand. That could include not buying any clothes for an extended period or not dining out as often.

Setting monthly goals, she adds, can help to whittle down personal debt to achieve an improved financial picture by the end of the year.

Lawyers Financial was originally set up through the Canadian Bar Association and designed to address lawyers’ personal financial issues, explains Marchand. It now runs independently as a non-profit organization with 30 advisers available to lawyers — and their families and employees — across the country.

She points out that the RRSP contribution deadline is March 1 and the tax filing deadline is April 30. The trick, says Marchand, is not to wait until the last minute. Lawyers should start considering their options now and reach out to their advisers while they still have plenty of time.

“Quite often we’re doing our taxes, or March 1 is coming, and we’re making rushed decisions,” she says. “Take a weekend beforehand, look at your income statement and the RRSP assessment from last year, and use an online RRSP calculator. And then make an informed decision about your contribution.

“RRSPs are simply one of the best tax savings vehicles you can find,” says Marchand. “Depending upon your tax bracket, you can save up to 40 per cent on taxes. What that means is that a $1,000 contribution could provide up to a $400 return in tax savings or a tax refund. So sometimes it makes sense to take a loan to get an RRSP.”

Another consideration is whether to make a spousal RRSP contribution. That involves looking at the family’s retirement income, and whether one spouse will have a lower salary than the other, she says.

The ideal position in retirement is to have the RRSP money with the person who has the lowest income when it’s withdrawn because taxes are due at that time, says Marchand. And the tax you pay is subject to the tax bracket you fall into when the RRSPs are cashed in.

“So, if your spouse is in a lower tax bracket in retirement, it makes sense to contribute the money to their RRSP now. And you get the tax credit,” she says.

Finally, Marchand suggests now is a good time to seek advice from a financial adviser on other tax considerations, such as selling equities in a stock portfolio. It might make sense, she says, to sell losing stocks to offset gains earned elsewhere.

“Everyone thinks about that in December, but why not think about it in January and keep an eye on those stocks that you might want to sell because of either a profit or loss. The trick is talking to your adviser now,” Marchand says.

“Start doing some tax planning at the beginning of the year, and you can check again at mid-year and the end of the year,” she suggests. “You’ll be less rushed and already have your basic decisions made. Then you can act on them.”

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