2023 January Update

Happy New Year!

Your Spring Plans team is just about to start our annual retreat, where we connect in person (we live very far apart from each other) and get busy contemplating. We like to do this after all the hustle and bustle of the holidays, and after we’ve had a bit of time to get used to the new year, so we have the potential of full brain capacity during this multi-day session.

We’re excited that this year our retreat happens to land on the first week of the lunar new year, the Year of the Rabbit, making it even more of a celebration than it usually is.

If you’ve worked with us for a while, you know that the heaviest lifting in financial planning is right at the beginning, when you gather all the initial data, make some assumptions, set some goals, and create a design for your future. After that, the design needs tweaking to take into account all the realities that come about as we live our day-to-day lives.

We apply the same approach to our business planning, and some of the realities we’ll be using to tweak our plan are realities that impact you as well. Here are just a few that we think you might benefit from considering:

Reality 1: Tax, Rules & Benefits

Many income tax and benefit amounts are indexed to inflation. Canada Revenue Agency announced they’re using 6.3%, and here’s how some of them shake out.

Government Pensions

If you’re receiving Canada Pension Plan, Quebec Pension Plan, or Old Age Security income, the amounts you’re receiving get an upgrade. You can find the updated numbers here.

If you’re contributing to the Canada Pension Plan / Quebec Pension Plan through payroll you’ll also find your contribution amounts and Yearly Maximum Pensionable Earnings in the same link.

Canada Child Benefit & GST / HST Credits

You’ll see a change in July of 2023, as the government calculates your benefit based on your 2022 tax return – so don’t forget to file on time! Learn more about the CCB here and the GST/HST credit here. For other types of benefits, please check out the Benefits Finder Tool here.

Federal Tax Brackets

All 5 federal tax brackets have been indexed to inflation. If you’re really into calculating income tax rates (and we don’t blame you one way or the other) you can check out the combined provincial and federal rates here.

TFSA and RRSP Contribution Limits

The TFSA contribution limit for 2023 increased from $6,000 to $6,500, which means if you’ve been eligible (i.e. a resident over age 18 since 2009) since the TFSA was created and you haven’t yet contributed, you have a cumulative limit of $88,000.

Your RRSP contribution limit is 18% of your earned income, up to an annual maximum. In 2023, the maximum is $30,780, an increase from $29,210 in 2022. To contribute the maximum, your 2022 earned income would need to be $171,000 or higher.

Reality #2: The First Home Savings Account (FHSA)

If you, your children, or anyone else in your life has not owned a home in the last four calendar years and happens to be over 18 years old, the brand-new FHSA is worth opening – even if a home purchase isn’t on your mind.

A bit of a combination between an RRSP and a TFSA, the FHSA allows you to make tax-deductible contributions, invest the money, and draw it out in the future for the purchase of a qualifying home – without paying tax on the withdrawal. If you withdraw from it for any other reason there will be income tax on that withdrawal.

If you don’t end up using the money towards a home purchase, whether you only used some, or whether the account has reached its end (after 15 years or your age 71), you can roll it over to your RRSP. This transfer does not impact your RRSP contribution limit. This effectively bumps up your available RRSP contribution room, a significant benefit.

We are recommending that those who qualify open up these accounts April 1, 2023 (when the rules enter into force), assuming the bill is passed. The most recent information we’ve received indicates that you don’t start earning the contribution room until the account is opened, so even a small contribution allows you (or your child) to start earning the room.

You can learn more about this account here and we’ll definitely be reminding you about it as we get closer to April.

Reality #3: Difficult Conversations

You’ve probably noticed that conversations and interactions in some spheres of your life have gotten harder, while others have gotten easier. That’s the natural ebb and flow of life, of course, but it does at times feel that since the start of the pandemic, we’ve been experiencing deep communications issues more frequently.

Difficult conversations are so incredibly valuable (even though, wow, they are exhausting) in helping everyone live better lives – and you know that’s what our core goal is at Spring Planning.

This article from Family Enterprise Canada provides some great recommendations towards the end on how to build structure around those tough conversations. Even though the article focuses on family businesses specifically, every relationship you have, whether business or personal, could benefit from some or all of these steps to make difficult conversations safer and more productive.

Bonus Reality: Spring Planners’ Theories Receive Confirmation and We Try Not To Be Smug About It

The FP Canada Research Foundation funded research regarding the impact of human tendencies and bias on recommendations made by financial planners. You can read the four page summary here.

Standout takeaways for us included:

• Planners are far more likely to suggest universal life insurance, mutual funds, annuities, segregated funds, and ETFs when the planners own the products personally
• Planners who hold a license to sell mutual funds, segregated funds, long term care insurance, or ETFs are significantly more likely to recommend these products
• When a client asks about a specific product, planners are up to 4.5% more likely to recommend it if they’re licensed to sell itPlanners are – for some reason – 4% less likely to recommend mutual funds to female clients vs male clients

We know it’s impossible to entirely avoid bias in anything we do, but we’re proud to have designed a business that reduces conflict as much as we know how, so you can feel confident that the advice you receive is focused on what you need to create your life, well spent.

We’re looking forward to continual improvements as we move into our sixth year of Spring Plans, while celebrating Sandi’s 10th year and Julia’s 11th year as entrepreneurial, independent advice-only financial planners!

Practice Notes:

Our annual retreat, when we actually see each other in person (we are spread from BC to Ontario), will happen January 25 through 29, so don’t expect to hear much from us then. We spend that time learning from the previous year, and ensuring that learning improves our services for the year ahead. It’s intense, but we plan to have a lot of popcorn and tortilla chips on hand for fuel.

In February, Julia will be attending online school, continuing to update and improve her Canada/US cross border knowledge and advice on February 7 & 8th. Sandi’s birthday lands on February 9th, and she’s taking the day off to celebrate. February 20th is Family Day in many provinces across the country, and the Spring team will be taking the day off to spend with those we consider family – and we hope you will, too.

“Free” Fridays remain booked permanently in our calendars. These days are free to us at Spring in the sense that they are our opportunity to work on becoming better planners, whether through collaboration and discussion, education, research, or even a little down time. It’s been a regular practice since the summer of 2017, and we will continue to set aside the time to become better versions of ourselves every week. Even 1% better is solidly worth it, because we know that will be reflected in the work we do for you.

Events:

Julia will be speaking at the Pacifica Partners Event on February 16th 2023. This event is focused on retirement planning and Julia will be sharing her knowledge on designing your life-after-work, creating purpose in the last chapter of your life, and how to use that purpose to create a retirement income plan that actually works. Register here and watch for more details about this event on all of our social media channels (Facebook, LinkedIn, Twitter, and Instagram).

Spring in the News:

Julia spoke with Investment Executive about retirement income and one of this year’s hot topics: Inflation. Find out what she shared right here.

Planning News Digest:

• Difficult Conversations:  It’s surprising how many words go unsaid, even in families with great relationships. This article provides some great steps you can take to reduce anxiety and improve communications in your family.
• What Influences Recommendations: FP Canada, the CFP(R) designation’s governing body, released research investigating the impact of bias on financial planning advice. Key takeaways include:
  • Planners are far more likely to suggest universal life insurance, mutual funds, annuities, segregated funds, and ETFs when the planners own the products personally
  • Planners who hold a license to sell mutual funds, segregated funds, long term care insurance, or ETFs are significantly more likely to recommend these products
  • When a client asks about a specific product, planners are up to 4.5% more likely to recommend it if they’re licensed to sell it
  • Planners are – for some reason – 4% less likely to recommend mutual funds to female clients vs male clients
  • You can read the executive summary on this research here.
• 11 Tax Changes and New Rules for 2023: Many of the important tax figures have been substantially increase for 2023. Here are the new numbers, along with a few other changes that launch on Jan. 1.

Feature from the Archives:

Free Up Your Brain – The goal of this feature has always been to reduce the amount of things you need to pay attention to, by picking out a few items we found interesting from a month’s worth of articles, podcasts, and newsletters, and keep you from feeling like you have to drink from the firehose to stay informed.

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