The federal government uses the inflation data for the 12-month period between October 1 to September 30 to determine a number of figures for the following calendar year. September’s inflation rate was announced earlier this month, so we now have the entire data set needed to calculate the indexing rate for 2024, which gives us a new TFSA limit, OAS clawback threshold, tax brackets, and more.
Thanks to Aaron Hector for doing the math to give us these important details.
The indexing rate for 2024 will be 4.7%. That’s down from 6.3% in 2023. If you are receiving a federal pension, expect your benefits to increase by 4.7% as of January 2024.
Note that the indexing rate for CPP is based on a different calculation (inflation data for the 12-moth period between November 1 to October 31), so the rate may be different. Last year’s CPP increase was 6.5% based on 2022 inflation data.
The TFSA contribution limit will increase to $7,000 (up from $6,500 in 2023). This marks the second consecutive increase in the annual limit. The TFSA lifetime limit for those eligible since 2009 will be $95,000.
The OAS clawback threshold will increase to $90,997 (up from $86,912 in 2023). That means those collecting OAS can earn up to $90,997 in taxable income in 2024 without fear of having to repay their benefits.
A host of tax bracket thresholds will be updated for 2024:
The year’s maximum pensionable earnings (YMPE), which is the maximum salary amount on which you need to contribute to the Canada Pension Plan, is increasing to $68,500 (up from $66,600).
Budgeting nerds like me can use these figure to update their spreadsheets and forecasts for 2024.
If you were planning to max out your TFSA next year, make sure to budget $7,000 instead of $6,500.
Of note for me and my wife, we aim to keep our taxable income at the top of 30.5% marginal tax bracket so we can safely increase our income (the amount we pay ourselves from our small business) by 4-5% next year.
The one small silver lining of higher inflation over the past two years is that our tax brackets and a bunch of other important figures are also indexed to inflation.
This Week’s Recap:
Earlier this month I updated my article on how to crush your RRSP contributions next year. It’s a reminder for those who contribute significantly to their RRSPs to use the T1213 form to request to reduce tax deductions at the source.
Despite the current interest rate environment I still come across many people who are interested in real estate investing as a source of passive income. Reality check: There’s nothing passive about owning a rental property, and with rates where they are right now the odds of your property being cash flow positive are vanishingly small.
Remember, you can’t go back in time and replicate the returns that your parents, friends, co-workers experienced over the past decade or more. Your starting point is now, in this current environment of sky-high real estate prices and higher interest rates. Adjust your expectations accordingly.
Who in their right mind is thinking right now, you know what – a couple of income properties might just be the ticket to financial freedom?
— Boomer and Echo (@BoomerandEcho) October 23, 2023
Promo of the Week:
A reminder if you want to up your credit card rewards game for better travel experiences then you should really be using American Express cards to maximize your points.
Even better if you can use American Express’s referral program to “activate your player 2” (e.g. your partner) to earn points faster. That’s what my wife and I have been doing over the past few years.
We use Aeroplan for our flights and Marriott Bonvoy for our hotel rewards. The best way to accumulate Aeroplan miles and Bonvoy points is to collect American Express Membership rewards points and then transfer the points to those respective programs.
Here’s our credit card line-up to get you started:
- The American Express Platinum card – Earn up to 100,000 Membership Rewards points.
- The American Express Aeroplan Reserve card – Earn up to Aeroplan points.
- The American Express Cobalt card – Earn up to 30,000 Membership Rewards points and 5x points on food and drink (this is my main every day credit card).
- The Marriott Bonvoy American Express card – Earn up to 55,000 Marriott Bonvoy points and a free night certificate.
And, for small business owners, even more lucrative rewards await:
- The Business Platinum Card from American Express – Earn up to 120,000 Membership Rewards points.
- The Marriott Bonvoy Business American Express card – Earn up 55,000 Marriott Bonvoy points and a free night certificate.
Overwhelmed by all the negative news? Here’s why you might need financial therapy.
Certified Financial Planner Shaun Maslyk explores what financial freedom means in Canada.
Anita Bruinsma writes about personal finance hogwash – five phrases you need to stop feeling bad about:
“The truth is that most people should be using traditional methods for achieving financial stability. Yes, it’s boring, yes, it takes time and yes, it takes sacrifice and self-discipline, but wealth and financial stability don’t come free and easy.”
If you knew when you were going to die and the money you would leave, what would you do differently?
Rising rates, inflation, and housing affordability aren’t the only reason early retirement plans don’t pan out.
Michael James on Money shares what experts get wrong about the 4% rule.
What you can expect from the Canada Pension Plan and why it won’t run dry anytime soon.
Advice-only planner Jason Evans explains the danger of using the CPP breakeven calculation.
Speaking of CPP, here’s a really informative Q&A on Alberta’s attempt to form its own pension plan (APP):
— Timothy Huyer (@tim4hire) October 27, 2023
Beating the stock market isn’t easy. So why do many Canadian investors act like it is? (subs).
Finally, in his latest Charting Retirement post Fred Vettese asks if dementia risk is part of your retirement plan. Some sobering statistics for those over 85 years old.
Have a great weekend, everyone!