The Tax Free First Home Savings Account (TFFHSA) Explained

The Tax Free First Home Savings Account (TFFHSA) Explained

There is a new tax advantaged account in Canada, the Tax Free First Home Savings Account! Along with the TFSA and RRSP, the new Tax Free First Home Savings Account (TFFHSA) is another great way to reach your financial goals in a very tax efficient way. The account provides a significant advantage to those planning to purchase their first home and creates a new option for parents who are thinking about helping their children with a future home purchase.

The new Tax Free First Home Savings Account (TFFHSA) does add a little bit of complexity to an already complex landscape of tax planning options, however like the TFSA and RRSP, if used properly it can help accelerate progress towards financial goals like purchasing a home and planning for retirement.

When saving and investing for future goals you can now choose between TFSA, RRSP, and the new TFFHSA, and for families with small children, there is the RESP too.

The new Tax Free First Home Savings Account is very new, so in this post we’re going to explore how this account works, the eligibility criteria, the contribution and withdrawal rules, some things to possibly watch out for, and some strategic options when using it within your financial plan.

How Do Tax Returns Work When There Is An RRSP Contribution or Withdrawal

How Do Tax Returns Work When There Is An RRSP Contribution or Withdrawal

The RRSP is a great financial planning tool. Investments grow tax-free within the account. Contributions to an RRSP reduce taxable income. And in some unique circumstances, it may even be advantageous to make contributions in one year and then deduct them in future years.

RRSP contributions and withdrawals will decrease and increase taxable income respectively. This effect can be seen on the tax return.

So, how do tax returns work when there is an RRSP contribution? What effect does an RRSP contribution have on the tax return?

And what about in the future? What happens when RRSP withdrawals are made? What effect does an RRSP withdrawal have on the tax return?

These are important questions. The benefit of strategic RRSP contributions and withdrawals can be $10,000’s or more.

Understanding how RRSP contributions and withdrawals affects your tax return is very important for Canadian retirement planning. We’ll go through the basics of how RRSPs work, as well as a few examples to show how an RRSP contribution or withdrawal shows up on the tax return.

A New Way To Share Your Financial Plan: The PlanEasy Public Dashboard

A New Way To Share Your Financial Plan: The PlanEasy Public Dashboard

Talking about personal finances has always been somewhat taboo. It’s difficult to discuss personal finances with friends and family. Everyone has different values and goals. We all have different financial circumstances. And sometimes… talking about personal finances can lead to hurt feelings and personal strife.

This has led to many people avoiding personal finance discussions or discussing personal finances anonymously in online forums and communities.

But discussing personal finances in an online community can be difficult. Personal finances are personal. A financial plan can differ dramatically from one person to the next. To have a good discussion requires a lot of information, something difficult to do in an online community.

At PlanEasy we want to make financial planning easy. We want to make it easier to share and discuss personal finances online.

That’s why we’re introducing the PlanEasy Public Dashboard, a completely anonymous way for PlanEasy users to share their financial plan… let’s take a look at the Public Dashboard…

Can You Retire When The Stock Market Is At An All Time High?

Can You Retire When The Stock Market Is At An All Time High?

Can you retire when the stock market is at an all time high? For many soon-to-be retirees this is an important question. It can be extremely nerve-racking to “pull the plug” and leave a stable income when investment values are at their peak.

But is this really a concern? Is it bad to retire when markets are at an all time high?

For many soon-to-be retirees, their investment portfolio will make up an important part of their future retirement income. Even retirees with a pension or full CPP/OAS will often have a small investment portfolio to support additional spending in retirement.

Many retirees worry about retiring at an all time high. They worry about a large decline in investment values soon after retirement. They believe this will dramatically impact their retirement plan. But is this concern justified? Or is this one of those biases that we’re all susceptible to?

Working for a few additional years would certainly help solidify a soon-to-be retirees financial plan, but at what cost? That lost time can never be recovered and could represent some “prime retirement years”. That income may also never be needed if everything goes to plan.

As it turns out, we’re actually at an all time high quite often, and the impact of retiring at an all time high isn’t even close to what we’d assume…

Don’t Get Surprised By OAS and CPP Survivor Benefits

Don’t Get Surprised By OAS and CPP Survivor Benefits

For many people, CPP and OAS will make up a significant portion of their retirement income. A reduction in CPP and OAS income due to CPP survivor benefits or OAS survivor benefits can be very stressful. Even more so because this reduction will follow the unexpected death of a partner or spouse.

Many people may not realize, but OAS and CPP survivor benefits are reduced by anywhere from 40% to a full 100%!

For higher income households, who may have significant assets in either RRSPs or TFSAs, it’s not uncommon for CPP and OAS to make up 25%-30% of their retirement income.

For lower and moderate-income households, government pensions like CPP and OAS can provide 50%-75% of their retirement income.

For very low-income households, CPP and OAS, when combined with other low-income benefits like GIS, can easily make up 100% of retirement income for some couples.

In all of these situations, losing even some of these benefits can result in a big change to retirement plans, and what many people may not realize is the extent to which some of these benefits can be reduced when a partner passes away.

Although difficult and unpleasant to even think about, the impact of a partner’s death is an important consideration for many retirement plans. It’s important to understand what changes there might be to both retirement income and retirement spending if the unfortunate were to happen.

For some plans, those which have a large amount of investment assets, the risk is much smaller. Investment assets inside RRSPs and TFSAs can be transferred through spousal rollovers with no tax consequences. So, the disruption to these plans may be smaller.

But for some plans, the change in CPP and OAS income due to an unexpected death can be quite large, especially in certain circumstances. In the worst-case scenario, the loss of CPP and OAS combined can easily represent more than $20,000 per year in lost retirement income!

Here’s what to watch out for when it comes to CPP survivor benefits…

Low Income Benefits That Are NOT Automatic

Low Income Benefits That Are NOT Automatic

There are a large number of benefits available to low and moderate income households. Some of these benefits are government benefits, they provide direct income support. But some of these benefits are a combination of government & private benefits, and they help offset specific expenses.

Many government benefits are automatic based on annual tax filing. As long as an income tax return is filed on time each year, these benefits are automaticity calculated and paid based on adjusted family net income (aka. AFNI… this is essentially line 23600 of your tax return).

But there are other benefits that are available to low and moderate income households and these benefits must be applied for individually, and are not automatic based on annual tax filing, but they can still provide a significant benefit for low and moderate income households.

Most of these non-automatic benefits are delivered with help of private companies and they help offset specific types of expenses. These benefits are a combination of government/private and must be applied for every 1-2 years.

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