As we move into 2024, several personal finance topics are shaping the financial landscape for Canadians. Here’s a roundup of key issues you should keep an eye on in the coming year:

The OAS Clawback: Who's Impacted and What Does it Mean?

The clawback on Old Age Security (OAS) benefits is a critical consideration for high earners in retirement planning. Currently, around 8.3% of OAS recipients, approximately 500,000 individuals, are affected. Given the federal government's ongoing struggle to manage rising OAS costs—accounting for about 15.5% of total expenditures for the last fiscal year—there's talk of lowering the income threshold for the clawback from the current limit of $90,997 that will apply in 2024. This change could lead to even more seniors potentially losing out on their benefits.

Canada Pension Plan Survivor Benefits: A Cause for Concern

Frustration is brewing among widowed individuals regarding the Canada Pension Plan (CPP) survivor's benefit, which averages only $323.05 for new beneficiaries aged 65 and over. With a 25% increase in survivor benefits promised by the Liberal government yet to materialize, many are left wondering if this promise will resurface as the 2025 election approaches. This issue highlights the importance of financial planning for couples and the impact of inadequate benefits in times of loss.

A Common TFSA Pitfall: Avoiding Costly Mistakes

Tax-Free Savings Accounts (TFSAs) are a valuable tool for Canadians, but many are tripping up. In 2022, Canadians faced over-contribution penalties totaling $132.6 million, averaging around $1,461 per person. The burden often arises from outdated information regarding contribution limits. It's crucial for individuals to refrain from checking their TFSA contribution room on the Canada Revenue Agency's My Account portal until April or May of 2025 to avoid these penalties. This highlights the need for better financial literacy around tax regulations.

Navigating New Capital Gains Tax Rules for Property Owners

Those with cottages or investment properties should prepare for changes in capital gains tax. As proposed in the 2024 federal budget, the inclusion rate for capital gains exceeding $250,000 will increase from 50% to 66.67% effective June 25, 2024. While pending legislation has not yet been enacted, the Canada Revenue Agency is already gearing up for these changes. Property owners may need to consider strategies to minimize their tax burden as these regulations come into effect.

Downsizing: A Smart Move Amid Rising Mortgage Rates

With mortgage renewals looming, many families are reconsidering their living situations. A recent case of a family opting to downsize from a spacious 2,700-square-foot home to a more manageable townhome illustrates a growing trend. The Canada Mortgage and Housing Corporation predicts that 1.2 million mortgages will need to be renewed in 2025, most likely at significantly higher interest rates compared to previous years. Given that average mortgage rates have increased from around 2% in 2020 to approximately 4.2% today, downsizing has emerged as a prudent financial strategy for many.

A Golden Opportunity for First-Time Homebuyers?

Interestingly, 2024's easing mortgage rates might create a unique window for first-time buyers. While prices remain high in some markets, the declining mortgage rates have led to stabilization, making homeownership more attainable than it has been in recent years. Despite an average resale home price of $694,411 in November—a 7.4% rise from the previous year—potential buyers are advised to keep a close watch on job market trends, as a rising unemployment rate could signal a shift in housing demand and affordability.

In conclusion, staying informed on these topics will position Canadians better for the financial challenges and opportunities that 2024 presents. Are you prepared to take charge of your financial future?