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The top 8 things that should be on your ‘end of the year financial to-do’ list

So you’ve made your holiday ‘to-do’ list and checked it twice. That’s nice. Now don’t forget about all of the financial details you also need to look after by December 31st.

If you hold any kind of investments, have children or grandchildren, turned 71 this year, or plan on purchasing a home in the New Year—this is one list you might want to bookmark (or print off if you’re more ‘old school’). While it may not be filled with elaborate gifts or delectable treats, taking care of the items on this list will provide you with the financial peace of mind to make merry not only during this holiday season—but also the many holiday seasons still to come.

Here are your top 8 financial ‘to-dos’ before the end of the year:

#1: TURNED 71 THIS YEAR? YOUR RRSP NEEDS TO BE CONVERTED TO A RRIF ASAP.

Typically you have until the end of February to top up contributions to your Registered Retirement Savings Plan (RRSP). However, when you turn 71, you have until December 31st of that year to convert your RRSP into either a Registered Retirement Income Fund (RRIF), or you can purchase an annuity.

If you did turn 71 this year and haven’t yet maximized your RRSP contribution for the year, you can do so before the December 31st deadline if you want to claim those contributions on next year’s tax return.

#2: TURNED 72 THIS YEAR? YOU MUST MAKE AT LEAST ONE RRIF WITHDRAWAL THIS YEAR.

One of the main differences between a RRIF and an RRSP is that you have to make at least one withdrawal per year from your RRIF account starting the year you turn 72. The amount you are obligated to withdraw each year is based on a percentage determined by the government and it must be made by December 31st of that year. That percentage withdrawal amount then increases, as you get older. Keep in mind that all withdrawals from a RRIF count as taxable income.

Click here to learn how to manage a Registered Retirement Income Fund (RRIF).

#3: GET THOSE RESP CONTRIBUTIONS IN BY DECEMBER 31ST IN ORDER TO MAXIMIZE THE CESG.

While RRSPs allow for contribution ‘top ups’ to be made until the end of February of the following year, the deadline for Registered Education Savings Plan (RESP) contributions is December 31st. While you can catch up on unused contributions, you can only do it one year at a time—which can make catching up on those contributions all the more challenging. Especially if you want to maximize the additional 20% of your investment in the form of the Canada Education Savings Grant (CESG), which could add up to an additional $500 a year in government contributions (for a total of $7,200 over the lifetime of the RESP).

Here’s why you should be contributing to an RESP (and what it’s costing your kids if you’re not).

#4: CONSIDER MAKING TFSA WITHDRAWALS BEFORE JANUARY 1ST.

If you were thinking about taking money out of your Tax-Free Savings Account (TFSA) in the New Year to pay for a March Break getaway or summer trip abroad, you might want to consider taking that money out before December 31st. Why? Well, if you withdrew those TFSA funds post January 1st, you wouldn’t be able to re-contribute that money until the following calendar year. By taking that money out in December, you’d be able to put it back as soon as the following month. Which would be beneficial if at some point you needed to postpone that trip or you fell into some serious money (such as an inheritance or lottery win). You could then immediately deposit those funds back into your TFSA for safekeeping without fear of over-contribution penalties.

Check out TFSA Master Class, Lesson 2: How to avoid the over-contribution confusion.

#5: TAX-LOSS SELLING—SPEAK WITH YOUR PLANNER BEFORE DECEMBER 31ST

The market is a rollercoaster. When interest rates go up, the value of your investment portfolio could go down. If you end up finding yourself with a portfolio that’s gone down in value and you don’t think it will recover by the year’s end, you may want to consider selling off certain assets within that portfolio before December 31st in order to use that loss to offset any capital gains. That applies to losses you’ve had in the same calendar year (or up to 3 years back). Naturally, this depends on your overall financial goals—which is why we recommend speaking with your financial planner first before making any final decisions when it comes to selling investments within your portfolio.

#6: MAXIMIZE ANY CHARITABLE DONATIONS.

‘Tis the season to give—so if you want to get a donation receipt (for this year) that you can claim on your tax return, be sure to give those charitable donations by December 31st. However, there are more than just cash donations to consider. If your investment portfolio has performed exceptionally well this year and you would rather give to a worthy cause instead of paying taxes on capital gains, you may also want to consider giving the gift of ‘appreciated shares’ or ‘provincial funds’ to charity. Because not only would you get a receipt for the fair market value of those shares or funds, but you would also pay no capital gains tax on that appreciation.

#7: REVIEW YOUR ESTATE PLAN, INVESTMENT BENEFICIARIES, INSURANCE POLICIES, ETC.

Getting married. Having kids. Getting divorced. Life can throw some big changes your way from one year to the next. That’s why it’s important to keep all of your important papers and policies updated and in order. From your estate plan and insurance policies, to the beneficiaries on all of your investments—be sure to conduct a review of all these important documents at least once a year.

#8: GET ALL OF YOUR YEAR-END EXPENDITURES IN ORDER.

From tuition and legal fees to childcare, medical, and moving expenses—there are a series of expenditures you can claim on your tax return (as long as you meet eligibility requirements of course). So if your plan is to include these deductions when you file your taxes next year, be sure to get all of those expenses paid and receipts in order by December 31st of this year.

Click here for a full list of all deductions, credits, and expenses you can claim on your tax return.

 

Need help with your financial to-do list? Contact Educators Financial Group for a year-end review.

We can appreciate how this time of year can be especially busy for education members. So if the thought of having to deal with your financial to-do list has you seeing red and green (it is the holiday season after all), then call on Educators Financial Group. From pay grids to pension plans, we understand how your pay structure works during your working years and in retirement. Which means we can provide you with the kind of financial advice that makes the most sense every step of the way—both during and after your education career.

 

Have one of our financial specialists contact you about setting up YOUR year-end financial review.

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