Winter 2021 - Schaefer Financial Group
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Winter 2021
2021 has arrived and it couldn’t get here soon enough. Ringing in the New Year is cause for celebration
as we say goodbye to 2020, a year that was aptly described as a “dumpster fire” of a year. But here we
are as we all breathe a sigh of relief. Cheers to new beginnings, fresh starts and a time of reflection.
We are grateful to have clients and friends like you who are a pleasure to work with and know. May the
New Year bless you with good health, wealth and happiness.
For 2021: Continue to Look Forward
Amidst the ups and what seem like mostly downs of 2020, revenue went to pay interest costs on federal debt. Today
there has been light shining from the North. Despite the this percentage hovers in the single digits.3 Many questions
difficult circumstances we have faced, there are many bright remain: will recovery drive enough economic growth to reduce
spots to reflect on as we look forward. the burden or will austerity in the form of tax increases or
reduced spending be needed?
Unlike previous recessions, the economic effects of the
pandemic have been uneven and concentrated to certain Darkest Before the Dawn
sectors. This has resulted in a relatively weak multiplier In the near-term, the outlook continues to have an air of
effect for the overall economy. Sectors that have been able uncertainty as we endure the difficult winter months with
to thrive during the pandemic, such as technology, have an advancing virus. However, we can all take comfort in the
helped to drive equity markets, as largely seen with the U.S. recent news of the development of effective vaccines.
markets. Canadian equity markets, generally influenced This is a remarkable feat considering the typical vaccine
by the energy and resources sectors, have been hindered time-to-market is 10 to 15 years — the fastest ever, the
by lower demand due to the slowdown. In response, many mumps vaccine, took four years.
companies have reassessed their business models, cut
costs and leaned operations. South of the border, the U.S. has chosen a new path forward
after a highly contested presidential election. Given considerable
After the spring shutdowns, Canada’s economy rebounded and continuing unrest, there is hope that change will temper
better than expected as restrictions lifted. Employment levels tensions and bring a necessary stimulus package to help
grew faster than anticipated, as did consumer spending. support Americans throughout the winter.
The housing market continued to perform well. Unlike other
developed nations, household incomes grew at a time when Progress in combatting a pandemic takes time, but we will
the economy contracted and savings rates also increased.1 get there. And, as we have seen in 2020, equity markets don’t
wait on the sidelines for recovery to happen. They are forward
One must not overlook the significance of government looking in nature — perhaps an admirable quality to uphold as
stimulus efforts. Canada has been very generous with its we leave 2020 behind and bring in the new year.
support and, as a result, will have the largest stimulus deficit
1. https://nationalpost.com/news/canadas-generous-covid-19-income-
of any nation globally in 2020.2 While there are likely to be supports-vastly-outpaced-other-developed-nations-oecd-report;
future consequences, the good news is that the current 2. As % of GDP;
cost of carrying debt remains low due to near-zero interest 3. “The Bearable Lightness of Canada’s Debt Burden”, Globe & Mail,
rates. In the 1990s, more than 35 percent of government 10/30/20, p. B6.
“A New Year has tiptoed in. Let’s go forward to meet it.” – Anusha Atukorala
schaeferfinancial.ca
income splitting. An individual can allocate up to 50 percent of
their eligible pension income to a spouse for tax purposes.
(Note that pension income splitting may occur as young as
age 55 for qualifying individuals.)
Age 71 — Convert your RRSP before year end. You must
convert your Registered Retirement Savings Plan (RRSP)
before the end of the calendar year in which you turn 71 years
of age. The most common choice is to open a RRIF, but there
are other options to consider, including purchasing an annuity
or distributing funds as income.
Make final payments to the RRSP before year end. Consider
catching up on any unused contribution room from previous
years before the end of the year. You won’t be able to
contribute until the usual RRSP deadline (which is 60 days
after the end of the calendar year), as your plan will need to be
PLANNING FOR THE YEAR AHEAD collapsed before the year ends.
In 2021: Will You Reach These Consider contributing to a spousal RRSP. If you have
reached the age of 71, but have a younger spouse and have
Age Milestones? leftover RRSP contribution room (or are still generating RRSP
We often remind our clients that as we get older, certain contribution room if still at work), consider a spousal RRSP.
milestones are important when preparing for retirement. See below for more details.
As we begin a new year, if you are nearing the following ages, 1. There are certain exceptions in which the Pension Income Tax Credit can
take note of these considerations as you look to maximize be used before the age of 65, including for those individuals 55 years of age
your retirement savings. Don’t leave money on the table. or older who have certain qualifying types of pension income, or widow(er)s,
so seek advice on your particular situation. In Quebec, the pension recipient
If you need help, please get in touch. It’s also recommended to must be 65 years old to split all types of pension income.
consult with a tax advisor who can assist with any tax-planning
related matters.
Age 60 — You are able to begin early Canada Pension Plan TAX PLANNING STRATEGIES
(CPP) payments. Although the standard age for starting
CPP payments is 65, you have the option to collect your CPP RRSP Season Again: Consider the
retirement pension as early as age 60. Payments will be Benefits of a Spousal RRSP
permanently reduced if you begin early. You may also wish to
Over the years, the federal government has eliminated
defer CPP payments to receive an increased benefit by starting
many income-splitting opportunities available to investors.
payments between the ages of 65 and 70.
However, if you have a spouse/common-law partner, a spousal
Age 65 — Don’t forget the federal Pension Income Tax Registered Retirement Savings Plan (RRSP) may provide a
Credit. The Pension Income Tax Credit allows you to claim a valuable opportunity if your spouse is expected to be in a lower
tax credit on an amount equal to the lesser of your pension tax bracket in retirement.
income or $2,000. Since this is a non-refundable tax credit, it
cannot be carried forward.
A Tax Break Now…A Tax Break Later
A spousal RRSP is a plan to which you contribute and receive
If you don’t have a pension, one way for individuals aged 65 tax deductions based on your available contribution room,
years or older to generate eligible pension income is by opening similar to a traditional RRSP. However, the difference with a
a Registered Retirement Income Fund (RRIF).1 We can assist spousal RRSP is that your spouse is the annuitant, so any funds
with this option. withdrawn are considered your spouse’s income and must be
Consider pension income splitting. If your spouse/common- included in their income tax return. As such, withdrawn funds
law partner has a lower marginal tax rate and/or available tax will be taxed at a lower rate should your spouse pay tax at a
credits to provide tax savings, you may consider pension lower rate than you.
schaeferfinancial.ca
Be aware that income attribution rules apply to a spousal
RRSP. In general, your spouse must wait for three calendar
years after your last RRSP contribution before making a
withdrawal. Otherwise, some or all of the RRSP withdrawal
would be taxed in your hands.
Greater Flexibility Than Pension Income Splitting?
A spousal RRSP may provide an enhanced opportunity when
compared to pension income splitting. Pension income
splitting can only be done after reaching the age of 65 and is
limited to 50 percent of eligible pension income. A spousal
RRSP can begin before age 65 and the full amount of RRSP
income may be included in the spouse’s tax return. However,
RRSP contributions can only be made until age 71. If you have
a younger spouse, you can contribute to a spousal RRSP until
the spouse reaches age 71.
For assistance with this, or other RRSP matters, please call Contribute to TFSA
the office. The Tax-Free Savings Account (TFSA) has
been in existence since 2009. In 2021, the
total available contribution room is $75,500
TFSA: Naming Different Beneficiaries for those eligible Canadians who have not yet
May Have Implications contributed. The annual TFSA dollar limit from
With the lifetime contribution amount now totaling $75,500 2009 to 2012 was $5,000. In 2013 and 2014,
in 2021 (for those eligible since 2009), the Tax-Free Savings the limit increased to $5,500, the limit for 2015
Account (TFSA) has become a significant investment vehicle. increased to $10,000 and from 2016-2018
If it will play a substantial role in your estate plan, understanding $5,500 and for 2019-2021 $6000.
the impact of naming different beneficiaries is important.
While any income or capital gains earned in the TFSA to the
date of death are exempt from tax, keep in mind that the If Naming a Spouse, Consider Designating as Successor
way that beneficiaries are named and structured may have Holder — If you intend for a spouse (or common-law partner)
differing financial implications. As such, it is important to to be the plan’s beneficiary, they should be designated as a
carefully plan ahead. “successor holder,” which is a designation only available to
If you haven’t revisited your TFSA beneficiary designations spouses. This allows the spouse to automatically become
since opening the account, perhaps now is a good time to the holder of the TFSA at your death, simply through a
review them. Here are some things to consider: name change on the account. If the spouse already has their
own TFSA, they will now have two accounts. If they wish to
Deciding “Where” to Designate a Beneficiary — In all consolidate accounts, they can directly transfer part or all of
provinces except Quebec, you may designate a beneficiary the value from one account to the other. This transfer doesn’t
of your TFSA by naming them in the plan documentation or affect their own TFSA contribution room.2 If the spouse
in your Will.1 If a beneficiary is designated within the TFSA is designated only as a beneficiary, as with any designated
plan documentation, the main benefit is that you’ll be able to beneficiary, any increase in the value of the TFSA after the
minimize probate taxes as the value of the TFSA will generally deceased’s date of death will be subject to taxes.
not pass within the estate.
“Life’s not about expecting, hoping and wishing, it’s about doing, being and becoming.”
– Mike Dooley
schaeferfinancial.ca
Planning for a Minor as Beneficiary — Careful planning should Designating a Charity — If you wish to make a gift to charity
be done when designating a minor as the TFSA beneficiary. as part of your estate plan and are seeking opportunities to
Depending on the applicable provincial laws, proceeds will minimize the taxes paid by your estate, consider designating
generally need to be paid to a parent on behalf of the minor child, a charity as a beneficiary of a registered plan. With the TFSA,
a court-appointed guardian of property, or an appointed any value on the date of passing would not be considered
trustee (i.e., such as through a testamentary trust created as taxable income. However, the full value of the RRSP or
under a Will for the benefit of the minor). In some cases, a RRIF would generally be considered to be taxable income in
parent may not automatically be considered the guardian of a the year of passing (unless there is a successor or spouse
child’s property and as such may need to apply to the courts. beneficiary who can roll the amount into their own registered
In other cases, if no trustee is named, TFSA proceeds may be plan). A charitable donation tax credit can be used to reduce
paid into the courts. Keep in mind that the involvement of the taxes payable in the year of death.
courts can be a time-consuming and costly process. As such, 1. In Quebec, beneficiaries cannot be named within plan documentation;
it is advised to consult with a legal advisor to plan for naming a they must be named within the Will;
minor beneficiary. 2. U nless there is an excess amount in the deceased’s TFSA at the time
of death.
Staying Informed
As part of our ongoing due diligence to ensure client portfolios are well-positioned for the current and future market environment,
our commitment to our clients is that we regularly meet with portfolio managers and management teams to stay informed.
Here is a list of companies we teleconferenced with during the quarter:
Canaccord Genuity – Envestnet Platform – integrated, TD Asset Management – NextGen Wealth Transfer – Plan for
customized client solutions. the Future
Mackenzie Investments – Severance and Pension Planning Franklin Templeton – Ethics of Aging
In case you missed our video holiday greeting message
from Chris, please take a moment to view. We have
come through a year that was both filled with challenges
and victories. On behalf of Schaefer Financial (Chris,
Joanne & Cynthia) please allow us to extend our
personal gratitude and genuine appreciation to you.
https://bit.ly/2JkZSMo
The Schaefer Financial Group
Chris Schaefer Joanne Atkins Cynthia Lynagh
Senior Vice President, Branch Manager Executive Assistant & Client Liaison Branch Administrator
cschaefer@cgf.com jatkins@cgf.com clynagh@cgf.com
519.885.8030 519.885.8032 519.885.8033
Contents Copyright J. Hirasawa & Associates – Licensed for Personal Newsletter/Blog/Comms Use Only
This newsletter is solely the work of the author for the private information of clients. Although the author is a registered Investment Advisor at Canaccord Genuity Corp., this is not an official publication of Canaccord Genuity Corp. and the author is not a
Canaccord Genuity Corp. analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone, and are not necessarily those of Canaccord Genuity Corp.
The information contained in this newsletter is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability. This
information is given as of the date appearing on this newsletter, and neither the author nor Canaccord Genuity Corp. assume any obligation to update the information or advise on further developments relating to information provided herein. This newsletter
is intended for distribution in those jurisdictions where both the author and Canaccord Genuity Corp. are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdictions is prohibited. The holdings of the
author, Canaccord Genuity Corp., its affiliated companies and holdings of their respective directors, officers and employees and companies with which they are associated may, from time to time, include the securities mentioned in this newsletter.
Insurance and estate planning services provided through Canaccord Genuity Wealth & Estate Planning Services Ltd.
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