Stay flexible – roll with those financial planning punches
Financial planning is a tricky business at the best of times – especially for longer-term goals like retirement and estate planning. But when the tax framework on which you’ve built your plan changes, that tricky business becomes that much harder.
If 2017 taught us anything, it’s that nothing lasts forever when it comes to financial planning for your future. For the hundreds of thousands of small businesses and professional corporations in Canada, the federal government’s new rules on income sprinkling and holding investment income in a corporation are creating both uncertainty and a need for many to go back to the drawing board and revise what they have in place. You can find a quick overview of the changes here.
While no one knows with certainty what future tax changes will be, we do know this: tax change itself is a certainty. The current tax framework in 2018 will not be the same in 2028. Governments will continue to tinker, creating new tax policies to address emerging needs and new tax policies to shutdown strategies that the government sees as “too tax effective” from a tax policy standpoint.
A recent article in the Globe and Mail highlighted a good example of what could change in the future – the TFSA. What began as a modest but very tax-effective savings vehicle is now almost 10 years old, with lifetime contribution limits approaching nearly $60,000 for those who were age 18 when TFSAs were introduced in 2009.
Is this one of the strategies that could be too effective to be sustainable long term? Time will tell. In the meantime, some suggestions for your financial planning:
- Diversify – avoid putting all your financial eggs in one strategy basket if possible, as your chosen basket may not look the same in 20 years;
- Monitor – make sure your financial planner or tax advisor has their ear to the ground in terms of proposed changes and possible impacts on you; and
- Be flexible – be prepared to change strategies, because future tax changes are a given and they could require you to change course.
Thank you for reading … Enjoy your day,