There is a Chinese proverb that states “the best time to plant a tree was 20 years ago. The second-best time is now”. The same is true for tax and financial planning, the best time to plan was in the past – but it is never too late to structure yourself correctly to keep as much of your income in your pocket rather than sending it to the Canadian government.

As we roll into the fourth quarter of 2021, we can expect the leaves to change, snow to fall, and excitement to build for Halloween and Christmas. At Matco, we have talked with many clients and prospects about maximizing the benefit from your RRSP in the 2021 tax season. There is still a significant amount of time to make the contribution to take advantage of the tax savings, but it is never too early to start planning.

One reason for bringing up this topic now is the option of moving money out of your Tax-Free Savings account (TFSA) to fund an RRSP contribution. One rule with TFSA’s is that if you withdraw money in a calendar year you are unable to replace that amount until January 1st of the following year. This means that if you were to pull $10,000 from your TFSA on January 2nd of 2021 you would have to wait 364 days to replace it in your TFSA on January 1st, 2022. On the other hand, if you were to pull money out on December 31st, 2021, you could replace it the next day on January 1st, 2022. As we approach the end of the year with greater certainty of one’s 2021 income, there may be an opportunity to shift money between investment accounts to receive a refund on your 2021 tax return. Many clients end up replacing the money they took from their TFSA with this refund increasing their total wealth picture.

These calculations are individualized to your personal circumstance and should be discussed with your Portfolio Manager at Matco. We can help work through the numbers to maximize the “bang for your buck”.

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