Responding to Market Recoveries After Recessions for Canadians

...Here is your New Year's buffet of financial information: they are in no particular order of importance, and could possibly be outdated by the time you read them.

An emergency fund is not a line of credit. Rather it is a readily available amount of money that you have saved.

Further on the topic of debt, now is the time to be paying off your loans especially if you are on a rate that is tied to prime. There is no time like today to put that line of credit to rest, because with the low interest rate more of your payment is going to principal rather than fattening the bottom line of the credit company or bank.

In the last budget the government introduced the Tax Free Savings Account. Its name is confusing but you can think of it along the same lines as the RRSP. The main difference is that withdrawals and growth in the account are not taxable. In fact withdrawals create new contribution room.

Retirees who are drawing on their Registered Retirement Income Funds have been given a temporary provision aimed at restoring some of their portfolio's value in a down market. They were allowed to take out only 75% of the 2008 minimum required withdrawal.

If they had already taken the minimum amount then they could return 25% to their account. That deposit would be considered a contribution (therefore would be a tax deduction) if deposited before March 1, 2009. It is also worth noting that a withdrawal does not necessarily mean selling your investment. An in kind transfer to a non registered account is also considered a withdrawal. Although this rule has been in effect for awhile it is only with the bear market and the advent of the Tax Free Savings Account has it started to make sense for retirees.....