As the year winds down, now’s the perfect time to get ahead on your finances and make the most of the opportunities available before December 31st. From maximizing your RRSP contributions to making savvy moves with your TFSA, a little year-end planning can go a long way in boosting your financial future.

Let’s dive into the top strategies you should consider before the clock strikes midnight on the year.

Make Your RRSP Home Buyer’s Plan Withdrawal in January to Delay Repayments by an Extra Year

Qualified first-time home buyers can withdraw up to $60,000 tax-free from their RRSPs, with the condition that the funds must be repaid over a maximum of 15 years. The repayment period starts the second year following the year of withdrawal—or, if you withdraw between January 1, 2022, and December 31, 2025, the fifth year following the year of withdrawal.

This means that if you wait until January to make your withdrawal, you can delay your repayment period by a full year.

For example, an HBP withdrawal made in December 2024 would require repayments to start in 2029 (the fifth year after withdrawal). However, if you make your withdrawal in January 2025, repayments won’t start until 2030.

Waiting gives you extra time to settle into your new home before adding RRSP repayments to your yearly budget. Plus, it gives you the opportunity to start your repayments early, which could reduce the amount you need to repay each year.

Example: If you withdraw $60,000 from your RRSP under the Home Buyers’ Plan, your repayments will be $4,000 per year ($333.33 per month) for 15 years. But if you use the extra year before your repayments start, you could spread the repayment over 20 years instead, lowering your annual payment to $3,000 ($250 per month).

Open your First Home Savings Account Now

Aspiring first-time home buyers who are at least 18 years of age and reside in Canada can now contribute up to $8,000 per year to a First Home Savings Account. Unlike TFSAs, FHSA contribution room doesn’t start accumulating until the year the account is opened. You are allowed to catch up on missed contribution years one year at a time, meaning the most that can be contributed to an FHSA in any one year is $16,000.

If you wait until January to open your FHSA, your contribution limit for 2025 will be $8,000. However, if you open your FHSA before year-end, you’ll receive an additional $8,000 in contribution room for 2024 that can be carried forward to the following year. Don’t forget, contributions to FHSAs are tax-deductible, meaning if you double your contribution next year, you’ll also double your tax benefit.

If you don’t have an extra $16,000 lying around and this isn’t feeling super relevant to you, remember that you are allowed to directly transfer funds from your RRSP to your FHSA as well, which will save you from having to repay the money you withdraw down the road. These transfers, however, are also subject to FHSA contribution limits so if you’re planning to move money from your RRSP next year, you can double the amount you’re allowed to transfer by opening your FHSA now, before year-end.

Consider Timing of TFSA Withdrawals

If you have a maxed-out TFSA and are thinking about withdrawing money for short-term use, it’s often better to make the withdrawal late in the year rather than early in the following year. This is because any amount you take out of your TFSA is added back to your available contribution room—but only in the calendar year after you make the withdrawal.

By withdrawing late in the year, you ensure that the contribution room is restored on January 1 of the next year, allowing you to re-contribute right away. If you wait until early in the new year to withdraw, you won’t regain that contribution room until the year after, which means losing nearly a full year of potential tax-free growth. This small timing adjustment can help you maximize the efficiency and growth potential of your TFSA while keeping your options open for future contributions.

Contribute to your Child’s RESP Before Year-End

Contributing to your RESP in December instead of waiting until January can help you maximize government grants, specifically the Canada Education Savings Grant (CESG).

The CESG matches 20% of your annual RESP contributions, up to $500 per year, for each child. To get the full $500 grant, you need to contribute $2,500 within a calendar year. If you miss a year, you can catch up on unused grant room later, but you can only claim one extra year’s worth of CESG at a time, meaning a maximum of $1,000 in grants (current year’s $500 + one catch-up year) per calendar year.
By contributing in December, your contribution counts for the current year’s CESG, so you can start fresh in January and continue contributing to claim the next year’s grant as well. Waiting until January to contribute means you miss out on the previous year’s grant, delaying your ability to reach the lifetime CESG limit of $7,200.

Simply put, making your RESP contribution in December keeps you on track to maximize these grants and take full advantage of the program.

Contribute to your RRSP before Year-End

If you turned 71 this year, you are obligated to convert your RRSP to a Registered Retirement Income Fund (RRIF) by December 31st, meaning you have until then to make a final RRSP contribution.
Beyond contributing your remaining room, if you earned income this year you might also consider making a one-time overcontribution in the amount of RRSP room you expect to generate from that income, since you won’t be able to contribute it next year.

Overcontributing does come with a 1% monthly penalty, however if you overcontribute in December and the contribution room is applied in January, you would only be subject to a penalty for one month. It’s possible that the long-term tax benefits will outweigh the penalty, as you can claim the extra contribution as a deduction in future years when your income might be higher due to RRIF withdrawals or other taxable sources. This strategy ensures your future contribution room isn’t wasted and allows your funds to start growing tax-deferred immediately.

This strategy can be effective, but it’s important to work with your accountant to estimate your earned contribution room for next year and ensure the benefits outweigh the penalty. They can help you make the best decision based on your situation.

Consider Timing of Investment Purchases

Be mindful of the distribution dates for any investment contributions you’re considering, especially in a non-registered account where income is taxable. Mutual funds and ETFs distribute taxable income on these dates, often near the end of the calendar year. These distributions include the fund’s accumulated realized income up to that point, which you’ll be responsible for if you purchase the fund before the distribution date.

To potentially reduce your tax bill, ask your advisor whether it’s better to buy the fund after the distribution date. You could also explore options like segregated funds, where income is calculated based on the time you’ve been invested, as opposed to the entire year.

Be sure to consult with a financial professional to review your year-end tax position and ensure your investment strategy aligns with your overall financial plan.

Tax Loss Harvesting

Tax-loss harvesting is a strategy that helps reduce your taxable income by using investment losses to offset gains. It works by selling investments that have decreased in value, allowing you to realize a capital loss. This loss can then be used to offset any capital gains earned during the same tax year, reducing your taxable income.

After selling, the funds can be reinvested in a similar, but not identical, investments to maintain your portfolio balance and avoid violating the superficial loss rule, which prevents you from being able to claim a capital loss if you (or an affiliated person, such as your spouse), buy back the same or an identical investment within 30 days before or after selling.

Superficial loss rules also apply when funds in a non-registered account are sold and used to immediately repurchase the same investment within a TFSA or RRSP.

This can be an effective way to lower your tax bill while rebalancing your portfolio, but it’s important the strategy also aligns with your long-term financial goals. Consult with your investment advisor or accountant to maximize the benefits of this strategy.

With a little strategic planning before the year ends, you can set yourself up for financial success in the year ahead. Whether it’s maximizing your contributions, timing your withdrawals, or making savvy investment decisions, every move counts. Take advantage of these year-end opportunities to put your finances on the path to growth and stability. Don’t wait—start planning today and enter the new year with confidence!