Investment

Here’s why you should make your RIF withdrawal at the beginning of the year

Published

9 months ago

February 8, 2024

For those of you who have Retirement Income Funds accounts, or RIFs, you should soon be getting letters or notification as to what the minimum required withdrawal amount is for 2024. You can always withdraw more than the minimum, but be aware that all amounts are taxable as income in the year of the withdrawal.

The more important decisions are in what form of asset should the withdrawal be made, and when.

Do you withdraw cash, or “in kind,” which is in the form of an investment such as a stock, bond, mutual fund, etc.? And what time of year should you do so?

There are multiple ways of thinking on the answer to this question. The following is my view, although keep in mind it doesn’t apply to all personal circumstances.

I think that the RIF withdrawal should be made in the beginning of the year, preferably in kind. But if you need the cash as a retiree to cover your expenses, it’s great to know that the money is available and will provide stable payments each year. You can hold the cash in a high-interest savings account and draw from it as you need. I usually set up my clients with a monthly payment to their bank account to provide them with a steady cash flow.

For those who do not need the security of the fixed cash payment, I recommend making a dividend-paying investment equal to the value of the required minimum withdrawal amount. For example, if you withdraw Canadian bank shares, they pay a dividend no matter what account they are held in. Since the dividend is going to be paid anyway, I rather that it be paid outside of the RIF into a non-registered account. (You can opt to move some into a Tax Free Savings Account, but that adds a whole other wrinkle.) The income is taxed at a lower rate as a dividend and is entitled to the Canadian dividend tax credit. If that same dividend is paid inside the RIF account, when those funds are taken out, they are taxed 100 per cent as income.

Although the holder is giving up the tax sheltering of the dividend, eventually the funds will be taxed anyway. But it’s not possible to know when the optimal time is to make the withdrawal without knowing how long one is going to live. That means you can’t calculate the benefit of the sheltering and compounding because you don’t know what the “break even” age would be.

In this case, you can benefit from the tax saving now, versus leaving your estate to possibly pay a much larger amount at an unknown date.

There are many variables that affect what would be the best approach to this dilemma, including price appreciation of the investment, tax brackets and the overall value of the RIF. This is a situation that requires a conversation with your investment and tax professional to decide what is best for your specific situation.

Nancy Woods is portfolio manager and senior investment adviser with RBC Dominion Securities Inc.

Source link

Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

7 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

Source link

Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

4 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link

Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

1 month ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

Source link