Topping up during tax time

Feb 19, 2020 | Kyle Sarai


This month is usually a very busy time of year, as tax time is fast approaching. At this time, clients are often speaking with their accountants to find out if making an RSP contribution would lower their taxable income and benefit them financially. Although contributing to RSPs can be a great strategy for preserving wealth, if you are a business owner, there may be a better way to help you save more money for retirement. Individual Pension Plans, or IPP strategies, are targeted to business owners and senior partners over the age of 50, who retain earnings in their operating or holding company. Contributions to an IPP are larger than those allowed in RSPs, with the tax benefits accruing to your corporation instead of you personally. This is a great way to move assets from a OPCO or Holdco to a personal account without paying any taxes. 

Market Update:

Equity markets around the world have had a strong start to the year. The TSX (Canadian index) and the S&P500 (U.S index) have returned 4.50% respectively in the first month and a half of the year. It seems that investors are not worried about the coronavirus in China and its possible effects on future corporate earnings.

How Are We Doing?

Our Canadian equity portfolio has returned 17.73% over the past year, an average of 12.85% over the past three years and an average of 11.47% over the past five years. Our U.S equity portfolio has returned 19.95% over the past year, an average of 15.71% over the past three years and an average of 12.50% over the past five years. (U.S returns are in USD)

Where Are We Going?

Does anyone really know what to expect in the next few months? Probably not. We can make an educated prediction for the short term, but that is all we can do. Market bears have been calling for a recession for the best part of six months, but nothing has yet happened which indicates a recession is imminent. There are however, a few negative indicators appearing which have been successfully used to predict recessions in the past. For instance, the yield curve has been severely inverted in Canada since April of last year, U.S manufacturing data has been weak in the past quarter, and European interest rates are at an all-time low. In fact, Germany, usually one of Europe's most economically stable countries, is currently very close to a recession and corporate earnings growth has stalled. Even with these negative factors appearing in the world markets, the S&P500 has returned 18% over the past year; so the question needs to be asked-what will stop the bull market?

Up Next: Goals-Based Investing

Next month, I will be introducing goals-based investing and why we believe each client should embrace this investment strategy.


Kyle Sarai, MBA