Happy New Year: Are these financial updates on your radar?
If working towards financial goals is one of your top resolutions for the year ahead, then you’ll definitely want to be on top of the following updates for 2023.
TFSA Update: The annual contribution limit has increased from $6,000 to $6,500.
Whether you’re looking to build savings for an emergency fund, save for a down payment on a home, or create an extra financial cushion for retirement (over and above your pension income)—being able to contribute more to your TFSA annually provides you with even greater earning potential.
If you haven’t been topping up your annual TFSA contributions, here is the cumulative contribution room as of January 1, 2023:
|Year||TFSA Annual Limit||TFSA Cumulative Limit|
TFSA quick tips
- Get into the habit of making TFSA contributions in January(versus waiting until later in the year) in order to capitalize on the earning potential of compound interest
- If topping up your TFSA all at once is too much of a strain on your budget, setting uppre-authorized contributions can make it more manageable by choosing how much you can afford to contribute and how often
- Plus, here are3 more tips to truly maximize the benefits of a TFSA
OTPP Update: An inflation adjustment of 6.3% has been made for 2023.
If you are a retired education member receiving pension benefits from Ontario Teachers’ Pension Plan, this means you’ll receive a pension increase equal to 100% of the Consumer Price Index (CPI).
What is CPI?
The CPI is a measure used to determine inflation rates based on a weighted basket of goods and services typically purchased by Canadian households each month (such as transportation, food, and medical care). A weight out of 100 is calculated and assigned by taking price changes for each item in the weighted basket of goods and averaging them.
If you retired in 2022, your first pension increase will be prorated from your last day of credit in 2022.
If you’re still years away from retirement, there are steps you should be taking now to put your finances on the right path to retirement.
RRSP Update: The annual dollar limit for 2023 is $30,780 (up from $29,210 in 2022).
Keep in mind that while the amount you can contribute to your RRSP is limited to 18% of earned income in 2022, your individual maximum contribution will depend on any pension adjustments and carry-forward of unused deduction limits from previous years.
NEW TAX CREDIT: Multigenerational Home Renovation Tax Credit.
As of January 1, 2023, this new tax credit comes into play—which is equal to 15% of eligible expenses (up to $50,000) on the amount spent for a qualifying renovation that creates a secondary dwelling to permit an eligible person (i.e., a senior or person with a disability) to live with a relative.
COMING SOON: Tax-Free First Home Savings Account (FHSA).
With a tentative launch date of April 1, 2023, the FHSA is a new registered plan that will provide prospective first-time Canadian homebuyers with the ability to save up to $40,000 of tax-free money—which they can then put towards the purchase of their first home.
In addition to the above updates, there is also a chance that 2023 will see further increases to interest rates.
With that said, it probably comes as no surprise that according to a recent poll, the number one goal for most Canadians this year is to repay debt.
Paying down debt is a great goal to have and the following articles are a good place to start:
- 3 tips for taking your credit card debt to zero
- 5 credit tips to put you on a path to borrowing responsibly (and saving money)
- Rising interest rates and debt: what you need to know
Do you have specific financial goals for 2023 and beyond? Call on Educators Financial Group.
No matter where you are on the pay grid or what your pension income is in retirement, we can work with you to develop a financial plan that is able to grow and adapt according to your needs, goals, and budget.