Subject: Navigating the Road Ahead: A Year-End Reflection
Dear Clients and Partners,
As the year draws to a close, we find ourselves reflecting on the myriad of changes, challenges, and triumphs that have defined the financial landscape of 2023. We extend our sincere appreciation to you for your continued trust in the Perfect Timing Team. Amidst the ebb and flow of financial markets, your steadfast commitment to your long-term financial objectives has been the bedrock of our collective journey. As we delve into this commentary, we aim to share insights that go beyond the daily headlines and recounting of market trends. Instead, we will focus on the timeless principles that guide us through the intricacies of wealth management and briefly explore key themes that underscore our investment philosophy, offering insights into the enduring principles that form our commitment to your financial success.
- Staying Invested: A Strategy for Long-Term Growth
In the dynamic world of investing, staying invested remains a fundamental principle. The compounding effect over time is a powerful wealth-building tool. Historical data consistently supports the notion that time in the market is more valuable than trying to time the market.
- The Rewards of Patience: How Investors are Compensated
Patience is not just a virtue; it’s an investment strategy. Long-term investors are compensated for their patience through the potential for sustained growth and capital appreciation. Our commitment to a disciplined, patient approach aims to deliver enduring value for our clients.
- The Pitfalls of Timing the Market: Lessons from Data
Attempting to time the market can be a precarious endeavor. Historical market data reveals the challenges of accurately predicting short-term movements. By recognizing the pitfalls of timing the market, we emphasize the importance of a strategic, long-term perspective.
- Navigating Market Volatility: Benefits of Conviction
Market volatility is inevitable, but how we navigate through it is what makes all the difference. Maintaining conviction during turbulent times is a hallmark of successful investing. It is during these periods that opportunities often present themselves for those with a steadfast commitment to their long-term objectives.
- Cutting Out the Noise: Focus on the Long-Term
In a world inundated with information and headlines, it’s easy to get distracted. However, our advice remains simple yet powerful: cut out the noise. By focusing on owning quality assets aligned with long-term objectives, we can sidestep the short-term fluctuations and stay true to our investment principles.
- Strategic Vision: Beyond Investments, Embracing Comprehensive Wealth Management
While investments form the cornerstone of financial success, they are just one piece of the puzzle. The principle of “Strategic Vision” encapsulates our commitment to navigating not only the volatility of markets but also the intricacies of your broader financial planning needs such as tax planning, insurance coverage, retirement strategies, and estate planning. Investors should understand that true financial well-being involves a synchronized effort across these interconnected areas.
Navigating 2024 with Resilience
Looking ahead to 2024, we approach the future with a sense of optimism grounded in prudence. While uncertainties may persist, our commitment to sound investment principles, client-centric service, and thoughtful risk management positions us well to navigate the opportunities and challenges that may arise. We greatly value the trust you place in us, and we are eager to continue our collaboration with you in the coming year.
Wishing you a Merry Christmas, joyous Holiday Season and a prosperous New Year.
Paul & Conor
The Tax-Free First Home Savings Account (FHSA):
In 2023 the Canadian Government rolled out the “Tax-Free First Home Savings Account” (FHSA) which is another valuable financial tool available to prospective homeowners, particularly those who have never owned a home but aspire to buy one. This program provides a tax-advantaged savings vehicle to help Canadians save more effectively for their first home purchase. Some reasons why individuals and their families, including grandparents or parents, may find the FHSA beneficial include:
For Aspiring Homebuyers:
- Contributions made to the FHSA can be claimed as a deduction against all sources of taxable income. Income as well as capital gains (and capital losses) earned in an FHSA are not included in your annual income (or deductible) for tax purposes. This means income and capital gains can continue to grow and compound in the FHSA on a tax-free basis. Qualifying withdrawals to buy a home are tax-free.
- The FHSA is specifically designed for saving towards the purchase of a first home. Having a dedicated account helps individuals stay focused on their homeownership goal and ensures that the funds are used for the intended purpose.
For Family Members Contributing to FHSA:
Generational Wealth Transfer:
- Grandparents or parents contributing to a loved one’s FHSA is a strategic way to support their financial goals. It represents a form of generational wealth transfer, providing assistance towards a significant life milestone.
- Family members can help maximize the FHSA contribution limit by making additional contributions on behalf of the aspiring homebuyer. This allows the recipient to benefit from the tax advantages while potentially accelerating their journey towards homeownership.
Encouraging Financial Responsibility:
- Involving family in the FHSA process can be an opportunity to impart financial wisdom. It encourages a collaborative approach to achieving financial goals and instills a sense of responsibility in managing and planning for major life expenses.
Overall, the FHSA stands as a valuable tool for Canadians aspiring to own their first home but the plan also offers an opportunity for family members to play a pivotal role in helping them achieve this significant milestone.
CLICK HERE to learn more about the FHSA and as always feel free to contact our office directly for more information.
2023 RRSP Contributions and 2024 RRSP & TFSA Limits:
- RRSP Contributions for 2023 Tax Year
This is a reminder that you have until February 29, 2024 to make an RRSP contribution and claim a deduction for your 2023 income tax return. An RRSP account keeps your investments tax-sheltered until withdrawal and is Canada’s best individual retirement savings tool. The maximum RRSP contribution limit for 2023 is 18% of your 2022 earned income (less pension contributions and matching) to a maximum of $30,780.
- RRSP Contributions for 2024 Tax Year
The maximum RRSP contribution limit for 2024 is 18% of your 2023 earned income (less pension contributions and matching) to a max. of $31,560.
- Tax-Free Savings Accounts (TFSA)
The new annual TFSA contribution limit for 2024 has increased to $7,000.
With this TFSA dollar limit announcement, the total contribution room available in 2024 for someone who has never contributed and has been eligible for the TFSA since its inception in 2009 is $95,000. For those who have contributed before, you can find your remaining TFSA contribution room in your Notice of Assessment or through your CRA account online.
Twelve Tips to Lower Your Tax Bill in 2023:
- Most Canadians only think about their taxes when they file in March or April, but by then it’s often too late to take advantage of the many tax-saving opportunities out there. Minimizing the tax on your hard-earned income is something you should pay attention to year-round. What can you do today to lower your next bill? CLICK HERE for some ideas.
This Quarter’s Recommended Read:
- Same as Ever: A Guide to What Never Changes – By Morgan Housel
Recently we reviewed Morgan Housel’s second book entitled Same as Ever, the sequel to his best-selling book The Psychology of Money, which we recommended in a previous edition of this newsletter. While many people frequently ask the question, “What’s likely to change over the next decade?”, Housel instead investigates the less-contemplated question, “What’s not going to change in the next 10 years?
“The book focuses on what will remain constant, using historical narratives filled with enduring wisdom. We believe Housel’s book is packed with stories that resonate with the unpredictable nature of the world.