I wanted to provide some simple and proven tips this week to help ensure your portfolio and retirement plan is not lagging.
If it is, you may want to double check that you are taking advantage of all these strategies:
- Smooth out market cycles by staying invested for the long term.
- Diversify your investments using effective asset allocation techniques.
- Select investments that match your appetite for risk and take maximum advantage of the 'miracle of compounding'.
And practice tax-efficient investing - an investing rule that assumes even more importance when returns and interest rates are low.
Do you enjoy giving away up to 44 per cent of your hard-earned portfolio return to the tax man?
If the answer is no, then we should find you more tax-efficient strategies to generate return.
FYI: That Bond and GIC interest income is fully taxable.
All of a sudden your two per cent GIC return in your non-registered, taxable account could actually be returning as little as 1.13 per cent after taxes (assuming top marginal tax rate in B.C.). Not to worry.
We can shelter this from taxes and even increase yield by including a few simple strategies.
That's why you should:
- Make the most of your Registered Retirement Savings Plan (RRSP).
Your RRSP is an exceptional tax-saving, nest-egg building investment - and you'll get a maximum tax reduction by making your maximum RRSP contribution each year.
Fill up unused past contribution room for even bigger tax savings this year and a much larger nest-egg over time.
- Utilize your corporation and holding company for tax savings and income splitting opportunities.
Be careful which investments you place inside your holding company as this can sometimes attract even more tax than being invested personally.
I can elaborate on this further in future articles or by private consultation.
- Look at individual and/or corporate permanent life insurance strategies for tax sheltered wealth building and tax free estate protection.
- Reduce taxes generated by your non-registered investments by selecting investments that benefit from lower tax rates - for example, investments that generate capital gains or dividends eligible for the enhanced dividend tax credit.
- Utilize corporate class funds to switch and rebalance investments without triggering immediate taxes and deferring future capital gains taxes.
-Make an annual $5,500 contribution to a Tax Free Savings Account (TFSA). Your contribution isn't tax deductible, but money and interest inside a TFSA is tax-free and so are withdrawals, which can be made at any time for any purpose.
- Make the most of your spouse. Look into income-splitting with your spouse, having the higher-earning spouse contribute to a spousal RRSP, and/or having the spouse with a higher marginal tax rate make a prescribed rate loan to the other spouse in a lower tax bracket.
When used correctly these 'spousal options' can effectively reduce a family's taxes.
There may be other tax-reducing strategies that will work for you. A truly effective tax plan must be an integral part of your overall financial plan, investment program and life goals.
Jason Blucke is a certified financial planner who runs a private practice through Investors Group Financial Inc. You can e-mail him at