Roadmap to Retirement
Hello All,
As we approach the deadline to contribute to RRSPs which is February 29th , I thought it would be useful to look at the potential sources that might contribute to your retirement income. For many of us, retirement seems like a long way off and consequently we perhaps don’t spend enough time thinking about it until it’s too late to make much of a meaningful change.
In my last newsletter article about RRSPs (around this time last year), I highlighted how 5,000 per year over 30 years i.e. a total investment of $150,000 invested at 5% (which is lower than the average return on the stock market) would result in $338,899.11 at the end of 30 years. This applies to all types of investments and is essentially the power of compounding which is a function of the rate of return and time i.e. the number of years the investment is earning the return. This demonstrates that contributing, even small amounts, as early as is possible, can lead to a significant nest egg.
So, let’s look at the most popular sources of retirement income for Canadians (both employees and self employed):
Old Age Security (OAS) which is a monthly stipend paid to all Canadians at approximately the same rate. Currently this is about $700 per month. Note that above a certain amount of income, this is clawed back.
Canada (Quebec) Pension Plan (CPP/QPP) is also a monthly payment which is linked to how much you have contributed. (contributions come from your salary or self employed income). The maximum amount you could receive as of 2024 is $1,364
Registered Retirement Savings Plan (RRSP) is entirely dependent on what you contribute (contributions are deductible from your taxes. Withdrawals are then taxable). There is a minimum withdrawal amount once you turn 71 that starts at about 5% and progressively increases.
Tax Free Registered Savings (TFSA) can be withdrawn tax free anytime.
Employer Pension Plan (RPP) is usually applicable to employees who work for the government as well as some businesses in the private sector.
Corporate Investment Portfolios for those who are owners of corporations and have set up investment portfolios for their excess earnings
Other Personal Assets/Savings including home equity, especially if you expect to move after retirement and non registered savings/investment account.
No matter what stage of life you are in, it is useful exercise to estimate how much you might need to retire. There are a variety of retirement calculators out there. This one from Revenue Canada is quite thorough. I also like this one from Wealthsimple. Note that like with all estimates, it doesn’t have to be exact. But most of us can extrapolate our future expenses based on our current lifestyles.
And while it is evident that the earlier you start, the more you will be able to accumulate, it is never too late to start putting a plan into place to ensure that retirement is actually something you look forward to rather than a source of stress.
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From the Blog
As the deadline for salary declarations (T4s and RL1s in Quebec) approaches, I thought I would share
my newsletter from last year at this time
some insights on filing your T4s etc.
Feel free to email me with any questions about salaries and year end declarations.
The Salary Question
As we approach the tax filing deadline for T4s (and RL1s in Quebec), I thought it might be useful to (briefly) explore salaries for small business owners, and their implications.
When you’re an employe
Information on Filing T4s/RL-1s and T4As for Small Business Owners
When I was employee, I never really gave much thought to the T4 (and the Quebec equivalent RL-1) process. I knew that sometime around February an envelope would appear on my desk with a tax document
Small Business Stuff:
7 (Small Business/Self Employed) Career Paths to Leverage Your Knowledge: Dan Koe discusses how any one can create income streams from their knowledge once they have built an audience and gives 7 detailed and useful paths to a career and/or income diversification.
Cons and Fraud in 2024: CPA Canada reviews some of the new ways in which fraudsters and scammers will operate in 2024
Ellevate Women Entrepreneur Pre Accelerator : ELLEvate Women Entrepreneurs is an initiative by YES Employment that aims to empower women in Quebec’s entrepreneurial ecosystem. The program offers a support, tools, and resources to help women successfully launch and grow their businesses. There is also a pitch competition where the top 3 businesses, chosen by a panel of judges, can win up to $10k. If you fit the profile, I encourage you to apply.
Tax Stuff:
Short Term Rentals Deduction Denial: CRA will deny tax deductions to operators of short term rentals such as AirBNBs if you do not have the required licenses or permits to operate these rentals.
Life Events with Tax Implications: An interesting presentation of tax deductions etc within the context of life events such as buying a home, having children or going to university, from WealthSimple.
QuickBooks Tutorials:
My latest QBO tutorials on YouTube:
Lesser known features of bank feeds One the best features in QuickBooks Online is the ability to download bank and credit card transactions which dramatically reduces the amount of time required for data entry. This tutorial looks at all the additional features available in the banking download feeds interface which can help you save even more time and streamline the process dramatically.
Difference between Zero rated, exempt and Out of Scope: A response to a question that I get frequently. While it doesn’t matter too too much since they all result in $0 in GST/HST and QST, it is useful to know the difference.
My YouTube channel continues to be a work in progress. For now, all my videos relate to QuickBooks and how to use specific features.
If you think it is useful and relevant to you, please subscribe to the channel.
If you have any questions about QuickBooks/Xero/Excel or finance in general for which you would like to see a video, please either leave them in the comments section of any of the videos (I see them all) OR email me directly at ronika@montrealfinancial.ca
Other QBO videos can be found at my channel here
Free Tools and Resources
Small Business Books
Enjoy 15% Off with code SPECIAL
The Essentials For Starting Your Small Business Corporation
CA$24.99
A Comprehensive Guide to Working with QuickBooks Online
CA$24.99
A Straightforward Tax Guide For Canadian Small Business Owners
CA$19.98
Everything Canadian Business Owners Need to Know about Dividends and How to Pay Themselves
CA$19.97
Everything You Need to Know About Starting Your Sole Proprietorship
CA$14.99
Consultation Services
I also provide one on one paid consultation services where I can answer your specific questions relating to your small business and/or personal finances. To find out more click here or on the “book a consultation” link below:
Note that I no longer provide ongoing accounting or tax preparation services.
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Hope everyone is enjoying the unusually warm weather (at least here in Montreal) and wishing you all a great weekend!
Ronika
