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Take a Bird's Eye View of Your Investments

With tax season fresh in your mind, it's a good time to take a look at your investments as a whole - within and outside your RRSPs as well as in your Tax-Free Savings Accounts. There may be opportunity to rearrange your holdings to reduce annual tax and maximize growth for your future.

From a tax perspective, investments that earn heavily taxed interest income and foreign dividends should generally be sheltered within your RRSP or TFSA, while those earning more gently taxed capital gains and Canadian dividends are held in taxable accounts. Of course, in non-registered accounts, tax on capital gains is only triggered when the investment is sold at a profit by you or your portfolio manager. And with astute management, some of these gains can be offset with losses.

So what should you do if some of your investments appear to be in the less-than-ideal spot?

Realigning your holdings

One solution is to make gradual adjustments over time, reinvesting proceeds as term investments come due and making tax-smart decisions for new savings. A faster, more sophisticated strategy, which our team would be happy to discuss with you, is "swapping" investments held in your RRSP for those held outside. If implemented correctly, you won't be taxed on the RRSP withdrawals.

If you have a spouse or partner, you can expand this holistic approach by considering your individual tax rates now and in retirement. You may be able to even out incomes and reduce combined tax in retirement through strategies such as a spousal RRSP, or by having the higher earner pay living expenses while the lower earner uses cash flow to build up their own nest egg.

Aside from the potential tax savings, there is another important advantage of adopting an integrated approach to investing. It enables our team to assess and advise you on all your investments as part of your long-term plan - ensuring your overall portfolio has the right mix of growth potential, risk and liquidity to meet your personal needs and goals.

For a bird's eye review of your family's assets, give our office a call.

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