Financial planning

If you’re looking to plan your retirement, pay less taxes, build a tax-efficient investment portfolio, or make sure you leave an inheritance, you’ve come to the right place.

Frequently asked questions about financial planning

What is retirement planning?

Retirement planning is a personal financial planning exercise that enables a single person or family to map out their ideal retirement in terms of where they want to live, how much money they envision spending each year, what types of activities they want to do in retirement, etc. before developing a suitable financial plan to build towards those goals. Starting retirement planning early is seen as advantageous by many personal finance experts as it enables people to have a longer timeline for savings and investments, and for their money to compound further over an extended period of time.

How do I use the Hardbacon retirement planning calculator?

The Hardbacon retirement planning calculator is intended to help you determine the total amount you can expect your portfolio to grow from now until your retirement age if you make regular deposits to your RRSP. It also offers the additional benefit of allowing you to see how much annual income you can generate in retirement based on the value of your portfolio at the time of retirement. To use the calculator, you simply need to enter the inputs as directed by the tool. The main inputs here are: the total amount you have currently have in your RRSP account(s), your expected rate of return on your portfolio, the frequency and size of your RRSP contributions, current age, number of years until retirement, estimated number of years you expect to spend in retirement, and your annual rate of return while retired. Most of these are personal questions which you can answer. For the rates of return though, you can consult a financial advisor on the expected performance of your asset portfolio if you are unsure of what number to use. In general though, equities historically return 8-10% per year, fixed income returns 3-5% per year, and cash depreciates at the value of inflation (approx. -2%).

What is the best free tax software in Canada?

There are several free tax filing software options available to prospective tax filers in Canada. Each of these options have their own benefits and downsides depending on your objectives and priorities as a tax filer. As such, it is important to review each of them individually and assess whether their merits are aligned to your needs before making a final selection.

How do I save for retirement?

Saving for retirement requires a high degree of diligence and discipline. In Canada, there are several government programs that enable people to save and invest their money over the longer term for retirement. The two most commonly used programs are the Registered Retirement Savings Plan (RRSP) and the Tax Free Savings Account (TFSA). Making regular contributions to these accounts and ideally maxing them out each year can help you maximize your tax-advantaged nest egg at retirement. If you do end up maxing out your RRSP and TFSA though and still have available disposable income, you can continue saving and investing in the markets with a personal account to generate long-term growth on your portfolio. The earlier you start, the more time that your money has to compound in the market. Also, ensure that you do not withdraw these funds as far as possible until retirement to prevent any disruptions to your retirement plan.

What is a Canada RIT deposit?

The RIT is short for Refund of Income Tax. In Canada, you may see one of three things when you file for a tax return. You may see that you have paid exactly the amount you owed, in which case your tax refund would be nil. You may have underpaid taxes based on the amount you earned, in which case you need to pay an additional amount as directed. Lastly, if you submitted your tax return and the CRA determines that you paid too much in taxes, they will send you a RIT which is a direct deposit back to your account for the excess tax you paid.

How do I pay less income tax in Canada?

There are several legal ways you can lower the income taxes that you pay to the CRA each year. Perhaps the most important way is by ensuring that you contribute to your RRSP each year which reduces your total taxable income for the year. You can also deduct eligible home office expenses if you worked from home during the COVID-19 pandemic. Some of the other legal approaches you can take are deducting eligible expenses (such as moving, education/tuition, and childcare costs), using net capital losses that you may have suffered on your investment portfolio, and making donations to registered charitable organizations that you can claim on your next year’s tax return.

How to prepare yourself for retirement?

Preparing for retirement may seem like a long, arduous task. However, by starting early and remaining diligent with your savings and investment contribution goals, you can let the markets do your work for you. You may also want to look into creating a retirement plan. This includes developing an idea of what you want to do, where you want to stay, the amount of money you will need every year to sustain your planned lifestyle, etc. Based on this information, you can then work backwards to determine the amount you need to save and invest today in order to meet those retirement goals you have in mind.

How much can I withdraw monthly from my retirement?

Hardbacon’s retirement withdrawal calculator enables you to understand how much money you can reasonably afford to withdraw each month in retirement based on the amount you have invested and the rate of return that you earn on your investments. To get started, you need to enter the expected value of your retirement portfolio on Day 1 of your retirement, the monthly withdrawal amount you envision making, the expected rate of return on your portfolio, and the number of years that you think you will be making withdrawals for. You can then see whether you can afford to make those withdrawals or not depending on whether the ‘Balance remaining at the end of the period’ is positive or not.

How are dividends taxed in Canada?

In Canada, dividends are taxed at the federal level as well as the provincial level. The federal government taxes eligible dividends at 38% and non-eligible dividends at 15% to arrive at a ‘gross-up’ total. For example, on a $1,000 dividend where 70% of the dividend was eligible and 30% was non-eligible, the gross-up would be ($700 x 1.38) + ($300 x 1.15) = $966 + $345 = $1,311. This is what the government will calculate tax on using a person’s nominal tax rate. The last step is to calculate the dividend tax credit, which reduces the amount of taxes a person pays on dividends. The federal government uses a fixed dividend tax credit of 15.0198% on eligible dividends and 9.031% on non-eligible dividends. Each province then applies its own rate for dividend credits.

How can I plan my child’s future with a RESP?

As a parent, an RESP is one of the most useful tools for securing your child’s future from an education standpoint. There are several benefits to using a RESP. The first and foremost benefit is that savings in the RESP grow tax-free while they remain in the RESP, thus enabling them to grow faster. Additionally, the government of Canada also adds to RESP savings each year, providing a further boost to your savings. Ultimately, when your child heads off to university, they will ideally have an amount that has grown to be sufficient enough to cover all or part of their tuition costs.

What does a financial planner do?

A financial planner is a specialized advisor that provides advice, insights and research to clients in the areas of investing, insurance, taxation, estate planning, and retirement. Financial planners work with you to identify your unique goals for yourself and/or your family, and then help you build suitable financial plans that enable you to meet these goals. Financial planners are often employed by a large bank (such as the Big 5), specialist wealth management firms, or may operate independently with a qualified license.

What is the retirement age in Canada?

As of 2022, the official retirement age in Canada is 65. This doesn’t mean that you cannot retire earlier from your job if you want to. However, the age of 65 is when your CPP pension will start kicking in. In fact, you can start receiving it as early as 60, but if you choose this option, the monthly amount you receive will be lower than if you started at 65.

Which platform would be the most advantageous for buying Bitcoin and transferring it to a key?

The most important thing to consider when looking for a cryptocurrency platform are the associated fees. This includes deposit fees, transaction fees (buying and selling), and in your case, withdrawal fees. Using our cryptocurrency exchange comparison tool, you can check “Withdrawal” in the left sidebar and you will get a list of platforms that offer this option. According to our comparison tool, BitBuy, NDAX and have the lowest fees and therefore give you the highest return. When you want to withdraw Bitcoins to put them on your Ledger key, the platforms usually charge a mining fee. This is not the case with since it is a non-custodian, you must to your cryptocurrency in a wallet. As for selling your Bitcoins, it is the selling fees that will interest you. Among the most affordable are BitBuy and NDAX, with a fixed fee of 0.2% per transaction.