Kicking off 2024 with 3 Planning Strategies for Retirees

The turning of the calendar marks a good time to plan for a successful and fulfilling year.  For many people this can include goal setting or resolutions that focus on our personal well-being, our relationships, and areas in our life that bring us fulfillment.

The beginning of the year is ALSO a good time to dust off our retirement plan and take some proactive steps to make sure that we are setting ourselves up for success for the rest of the year.  In this video, I am going to walk through 3 planning steps to help retirees get their financial year off to a good start.

And, if we haven’t met yet, my name is Mark Walhout.  I run a financial planning and investment advisory business called Walhout Financial.  I help people with retirement and I created this channel to share ideas and concepts that I am using to help people with retirement every day.  If you want to get more videos like these consider subscribing to the channel and hitting the bell icon so that you are alerted when new videos are posted.

Financial Planning Items:

FIRST PLANNING STEP:

1. New TFSA Room

As of January 1, Canadian residents who are over the age of 18 all received $7,000 of new contribution room.  So, if you are retired and previously maxed out on TFSA contributions, you can contribute an extra $7,000 to your TFSA accounts as of January 1.   Furthermore, if you made any TFSA withdrawals in 2023 OR you had previously unused TFSA contribution room, you can contribute those amounts to your TFSA as well.

Here’s a quick example:

Johnny has a TFSA with $80,000 in it and on December 1, 2023 he had unused TFSA contribution room of $15,000.   On December 15th, Johnny withdrew $10,000 to replace the roof on his cottage.  On January 1st, Johnny got $7,000 of new TFSA contribution room.   Johnny went to his financial planner and asked how much total TFSA contribution room he has this year.

The answer is $15,000 + $10,000 + $7,000 = $32,000

It is very important to know your TFSA limit and not go over.  The penalties for over contribution are 1% of the over-contribution amount PER month.  To check your TFSA contribution room you can check your CRA My Account Portal account and locate your contribution room and contribution history.    Take note, however, that the CRA My Account Portal often lags by between 6 months and 12 months.  And, the CRA will not give you a break if you tell them that you contributed based on what was listed on their website.  They will tell you that it’s your responsibility.  This, in my opinion, is why it is important to have as few TFSA accounts as possible, try as best you can not to use it like a “savings account” where there is a lot of activity going in and out.  And, whenever you make a transaction into and out of the TFSA account, keep a note of it so that you can keep track of where you stand.

SECOND PLANNING STEP

1. RRIF minimums re-set

If you have money in a RRIF account (which is the income phase of the RRSP), the RRIF minimum amounts that you need to withdraw this year reset as of the beginning of the year.  The new minimum amount that you have to take out of the account is calculated based on the account balance on January 1, 2024, multiplied by your RRIF factor which is the amount expressed in percentage terms that the CRA requires you to withdraw from the account this year.  

The reason that this is something to take note of and plan around, especially this year, is:

a. You are a year older and your RRIF factor has gone up

b. Markets have gone up so the amount that is being multiplied against your RRIF factor has also gone up.  

These changes may have an impact on your income planning this year, so it is good to understand what the impact will be and adjust your planning accordingly.  

Here’s a quick example:

Janey is 66 years old and had $500,000 in her RRIF account as of January 1, 2023

Janey took out the RRIF minimum in 2023 which was 4% based on her age last year.  Her 2023 withdrawal was $20,000, which she took out immediately on January 1, 2023

Her portfolio rose by 8.5% in 2023 and the balance in her account on January 1, 2024 was $520,800

Janey intends to take only the RRIF minimum this year.  She is now a year older, and she needs to take out 4.1667% of the RRIF balance as of January first.  For Janey this works out to $520,800 * 0.041667 = $21,700.27

So, Janey’s RRIF minimum in 2024 will be $1,700.17 MORE than 2023.  This works out to 8.5% MORE RRIF income in 2024.

It may make sense for Janey to review her financial plan and confirm whether she can, in fact, go and spend this additional income or whether he should be reinvesting it into his plan.  

HINT: a good candidate for these additional proceeds, if she does, in fact, need to save them may be the TFSA account.  This is a popular strategy for retirees who have excess income and excess TFSA contribution room.  

1.  Tax Slips

When you are working, assuming that you earned a T4 income, you receive a pay check from your employer and you receive perhaps as few as 1 tax slip (T4) in the spring. 

A retiree, on the other hand, may have upwards of 7 or 8 different tax slips due to income coming from difference sources.  January is a good time to make a list of the T-slips that you are expecting to receive so that you make sure you have them all collected well before the tax deadline and over to your tax preparer.

Here’s a quick list of the slips that a retiree can expect:

T4A(OAS) - if you are in receipt of OAS (this slip will also include GIS)

T4A(P) CPP - for CPP recipients

T4RIF - if you made RRIF withdrawals during the tax year

TFRSP - if you made RRSP withdrawals during the tax year

T4A - Statement of Pension, Retirement, Annuity and Other Income

T3/T5/T5008 - if you own investments in a taxable (non registered) account or if you receive income from a Trust It includes your interest, dividends, capital gains or losses inside of your investment holdings, capital gains/losses from your transactions

AND of course, T4’s if you had part time work during the year.

BONUS TIP - there are other transactions or situations during the tax year that you may need to report on as a retired that DON’t include a tax slip.

1. Sale of a property for a capital gain - ie. a cottage if it’s not your primary residence
2. Reporting of foreign property on a T1135 if you own foreign property over $100,000 CAD your cost at any point during the year (property not held in an RRSP, RRIF, TFSA or in a Canadian domiciled mutual fund)
1. Stocks, bonds, cash, real estate (not primarily used for personal enjoyment)
3. NEW in 2024 - Trust reporting rules will now require trustees of trusts to file - NEW Video next week that will dig into this in detail 

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