Top 5 Tax-saving Tactics Every Gen-Xer Should Know

In this week’s article, we’re exploring five essential tax-saving strategies explicitly tailored for Gen Xers. Born between 1965 and 1980, Gen Xers are in their prime earning years, benefiting from significant wealth transfer from the baby boomer generation and increased net worth due to home ownership.

This generation has witnessed a surge in real estate prices over the past decade, further enhancing their financial standing. Now, Gen Xers must leverage tax-saving methods to maximize savings and secure their financial futures.

Maximizing RRSP Contributions: Maximize contributions to Registered Retirement Savings Plans (RRSPs) to reduce taxable income while deferring taxes to retirement. With a contribution room of 18% of the previous year’s income and a cap of $31,560 for 2024, RRSP investments grow tax-free until withdrawn, amplifying savings potential.

Harnessing the Power of TFSAs: Utilize Tax-Free Savings Accounts (TFSAs) for tax-free growth and withdrawals, with a lifetime contribution limit of $95,000 as of 2024. TFSAs are ideal for meeting lump-sum needs in retirement, such as major purchases or unexpected expenses, since withdrawing funds has no tax consequences.

Leveraging Spousal RRSPs: Couples can redistribute income and optimize tax efficiency by contributing to a spouse’s RRSP. This strategy takes advantage of the receiving spouse’s lower tax bracket, ultimately reducing the household tax burden.

Exploring Spousal Loans: Consider spousal loans to mitigate taxes further by lending money to a lower-earning spouse. By doing this, you can attribute investment income to the spouse with the lower tax rate, reducing the overall tax liability.

Maintaining a Tax-Optimized Portfolio: During peak earning years, keep a tax-optimized investment portfolio by segregating fixed income in registered accounts and equities in non-registered accounts. Consider fee-based products to reduce taxable income through tax-deductible fees.

Implementing these tax strategies tailored to your unique financial situation can minimize tax burdens while maximizing savings and investment potential. For those seeking expert financial advice, these strategies offer valuable insights for securing your financial future. If you have any questions or want to explore these strategies further, please don’t hesitate to reach out.

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Tyler Robertson
Financial Advisor

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