A GOOD START
North American equity markets have continued to push higher through the first month of the year. Given the anticipation of lower interest rates, all eyes remain focused on the world's central banks. In January, the Bank of Canada decided to maintain interest rates at existing levels, as we expected. While BOC Governor Tiff Macklem said that it's too soon to talk about rate cuts, we see a subtle shift in his language, which suggests growing confidence that the downward trajectory of inflation could be maintained in the current rate environment.
Speaking of inflation, we are closely monitoring supply chain disruptions arising from both the Panama Canal and Suez Canal, the former due to drought and thus historically low water levels, and the latter due to attacks on ships by Houthi rebels based in Yemen. Either situation could lead to a boost in inflation.
PRESERVING AND GROWING YOUR WEALTH
Starting in 2022, the Bank of Canada raised interest rates from 0.25% to 5% in just 15 months, making borrowing more expensive not only for consumers and businesses, but for governments as well. And so, since fiscal 2021-22, the interest on our federal debt has nearly doubled — from $24.5 billion to $46.5 billion. Per year. Very much in part to our federal government borrowing heavily in 2021, just before interest rates began to spike the next year.
To put $46.5 billion in perspective, it is nearly the same amount as the federal government transfers each year to the provinces for health care ($49.4 billion, in what is called the Canada Health Transfer), which is consistently one of the biggest line items in the federal budget. Or, consider that it vastly outstrips the $28.9 billion that Ottawa will spend on our Armed Forces this fiscal year.
And who is paying that $46.5 billion in annual interest, not to mention the national debt as a whole, which is $1.2 trillion - and, as you can see from this “national debt clock,” going up by $100 million every day?
You, the Canadian taxpayer. Your taxes are going to go up, which is why our most important job at Marche Wealth Management is maximizing your after-tax returns. Which is why we focus so intensely on optimizing what you keep after tax, in order to preserve and grow your family wealth as efficiently as possible.
IT’S TAX PLANNING TIME
That’s why tax planning is now more important than ever - and I am going to remind readers of what we said in the December issue of this blog:
“Because of the power of tax-sheltered compound growth, your registered plans are one of the most important components of your financial plan. A strategy of careful planning, consistent management and making your maximum allowable contributions on a consistent basis is essential to maximize the value of these vehicles.
“As we approach the RRSP deadline and tax season, we want to remind you of the details surrounding the use of tax-sheltered savings plans as an effective way to grow your savings.”
To review those details, please see the December issue of this blog.
You may also peruse the Client Guide to 2023 Tax Reporting, which summarizes the important dates and required tax information to help prepare your annual tax return, including as it relates to RRSPs, TFSAs and a relatively new tax-sheltering tool, the First Home Savings Account (FHSA), which we wrote about, in detail, in the March 2023 edition of Marche Monthly.
The Client Guide also includes a handy list of potential tax slips you may receive from RBC Dominion Securities (depending on your investment holdings and account activity).
Already this year, we have made many RRSP, TFSA, FHSA and other contributions for our clients. If you would like to discuss strategy, please contact us.
Timing is important because key filing dates are getting closer:
February 29, 2024: last day for 2023 RRSP contributions
April 30, 2024: last day to file your 2023 tax return without penalty
June 17, 2024: last day to file your 2023 tax return without penalty if you are self-employed
CHOOSING CARING OVER CHAOS
Every adult knows they should have a will - so why do only half of us actually have one?
That’s a question tackled by the fascinating field of behavioural economics, which explores how and why people make money-related decisions. We have the pleasure this month of introducing a very enlightening podcast, featuring Michael Sherman, head of RBC’s Behavioral Economics team. Michael is interviewed by Leanne Kaufman, president and CEO of RBC Royal Trust.
The podcast is under 14 minutes long, worth every minute, and entitled Why making a will is choosing caring over chaos. Have a listen and then let me know: what did you think?
You may want to consider the podcast in the context of last month’s Marche Monthly, in which we featured Epilogue, a very easy-to-use online will service targeted to Millennials and Gen Zs, 70% of whom do not have a will. You can revisit that discussion here.
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We don’t speak jargon. We’re all about uncomplicating your life, so we speak plain English. If there is someone you care about – someone who would appreciate this simple and straightforward approach – please feel free to share this message with them or put us in touch.
Want to discuss any aspect of this month’s blog, or any other issue on your mind? Have a story idea? I am always happy to receive your call or email.
Tyler Marche, MBA, CFP, FCSI
Your life, uncomplicated
tyler.marche@rbc.com
1-416-974-4810
WHO WE ARE
Tyler Marche, MBA, CFP, FCSI – Senior Portfolio Manager and Wealth Advisor
Tracy McClure, CPA, CA, CFP – Financial Planner
Joy Loewen – Senior Associate
Karen Snowdon-Steacy, TEP – Senior Trust Advisor
Steve Mogdan, CPA, CA – Financial Planning Specialist
Andrew Sipes, CLU, CFP – Insurance and Estate Planning Specialist
Alleen Sakarian, LL.B., TEP – Will and Estate Specialist
Kimberley Plewes, MFA-P – Philanthropic Advisory Specialist
**To learn about our unrivalled team of experts, delivering Canada’s widest array of wealth management services to our clients, visit our website, here and here.
WHAT WE DO
