The start of a new year often coincides with a desire to make some big changes, to create room for something new, maybe even start a new chapter. Did you know that there are tools available to help you do that? Here’s an overview. 

Take back control 

After the 2022 we just lived through, lots of people are feeling as if they have been gradually losing control of their personal finances. According to a recent Nanos poll, no fewer than 46.9% of Canadians believe that their finances are in worse shape now than they were a year ago. Fortunately, there’s a tool specifically designed to get the situation back under control: your financial plan. This kind of plan can help you frame your financial situation within a broader, long-term outlook. If you don’t have a financial plan yet, the start of 2023 might be the perfect time to discuss it with your advisor and gain a new perspective on your financial future.  

For example, given the current state of the markets, a financial plan could be especially useful if the big changes you are considering include taking semi- or full retirement: it would provide you with a disbursement strategy appropriate for the situation we’re going through right now. Even if retirement is still far in the future, a financial plan could let you see the big picture and might put the future in a different light. 

In short, whether you already have a financial plan or not, this might be the right time to talk to your advisor about it. 

Going back to school for a new job 

Statistics compiled by LinkedIn show that, on average, employees are now likely to change employers up to four times in the first ten years of their working lives. And according to the staffing firm Randstad, it’s not uncommon for people to change jobs ten times over the course of their career. If you’re thinking of job-hopping, and if that would require gaining new knowledge or skills, consider looking into a little-known program: the Lifelong Learning Plan (LLP). 

An LLP allows you to withdraw funds from your registered retirement savings plan (RRSP) to help either yourself or your spouse, or both of you, go back to school to take an eligible full-time program. You can withdraw up to $10,000 per year from your RRSP, to a maximum of $20,000 in all, with no penalties or withholding tax. You would have to gradually repay your RRSP over a maximum of 10 years, starting no later than the fifth year after your initial withdrawal. The diagram below provides a simple illustration of this dynamic as it would apply if you withdrew the maximum amount from your RRSP over the next two years. 

Be aware that there are many conditions associated with this program. Your advisor can give you all the details and help you set up your own LLP. 

Buying your first home: a few tools that could help 

Do you see the cooling of the real estate market as an opportunity to buy your first home in 2023? If so, there are two tools that you could consider using. One is the Home Buyers’ Plan (HBP), and the other is the First-Time Home Buyer Incentive (FTHBI). 

• The HBP works something like the LLP described above. It allows you to withdraw up to $35,000 from your RRSP, with no withholding tax and no penalties, to help with your down payment. Since your spouse could do the same, this means that you could potentially free up $70,000 to put toward your first home, which might allow you to consider a smaller mortgage. Note that you would have 15 years to repay your RRSP and that, here too, many conditions apply. 

• The FTHBI works differently. It takes the form of a “shared-equity” mortgage with the federal government. The government’s share would be 5% or 10% of the mortgage, depending on the type of property. The Incentive helps to fill the gap for people who have saved the minimum down payment needed to get a mortgage, but can’t carry the financial burden associated with the property. By reducing the size of the mortgage required, it also reduces the monthly payments. The Incentive must be repaid after 25 years or when the property is sold, whichever comes first. Does it sound more complicated than the HBP? It is – but your advisor can clarify things for you. 

Finally, if your home-buying plans are farther in the future, note that a third tool will soon be available: the new Tax-Free First Home Savings Account (FHSA). Designed along the same lines as the tax-free savings account (TFSA), this new tool will enable you to accumulate tax-sheltered savings in order to purchase a first home. 

Other plans? Other tools. 

Maybe your dreams of change will take you in other directions in 2023: starting a family, taking a sabbatical year or extended vacation, launching a business… In fact, that’s what many Canadians are doing: in a recent FP Canada survey, 68% of respondents said that they had plans that would require a significant expense over the next year. While not specifically designed for these purposes, a number of tools (including some that you already have) could be useful: the TFSA, to provide quick access to funds with no withholding tax or to build up an emergency fund; the RESP, to save money for postsecondary education for your children or grandchildren; life, disability or critical illness insurance to cover your assets… And many more. 

It's time for plans – and for finding ways of making them a reality. 

A few reminders for the new year 

Things to remember as we move into 2023: 

• On your first pay for 2023, you might notice that your payroll deductions have changed. There are two possible reasons for this: first, certain rates may have been updated, and second, your contributions to certain plans may kick in again if they had been paused in 2022 because you had reached the applicable limits. 

• You have until March 1 to top up your 2022 RRSP contribution. 

• You have until May 1 to file your 2022 income tax return... 

• …unless you or your spouse are self-employed, in which case the deadline is June 15. 

• The annual TFSA contribution limit will rise to $6,500 in 2023 (it was previously $6,000).