The right moves

Pas de surprise. The bank rate stays put. Tiff is turtling. Realtors moaning. Despite the Yanks going in the opposite direction, our guys have decided the economy is not weak enough to make your mortgage any easier to pay.

Said the central bank: “We will be assessing incoming data relative to our outlook. If a new shock or an accumulation of evidence materially change the outlook, we are prepared to respond.”

That shock would be Trump, of course. If he walks out on CUSMA talks, throws around new tariffs or sends Reaper drones over Calgary, then your loan costs will fall. So would the economy. And your job. Those things are unlikely, but if stuff happens, the Bank of Canada will have your back.

That’s the theory. In reality, the US president is weakening and his disastrous tariff policies may be scaled back as more damage is done to America. Canada’s “who cares?” response to Trump – delivered by our PM and unique in the world – may turn out to be exactly right.

We’ll see. But today’s central bank decision is a hopeful one.

Cutting rates might have helped you sell your house, but that would also signal worries about the state of the economy. It should be evident to everyone that things are looking notsobad. Over 180,000 new jobs created in the last few months. Inflation at barely 2%. The economy actually growing (albeit slowly). Mark and Danielle hugging and kissy. No recession. No election. And we did not take a knee to America.

In practical terms: probably a lousy rutting season for real estate starting in three months’ time. Inventory is likely to swell a lot faster than sales this Spring, suggesting the slow melt in prices will continue a while longer. But no crash. And certainly no boom. Just stability. Imagine that.

Take advantage of Ottawa’s tax gifts in 2026

Meanwhile, a new year is always a great time to plan a diet, tell your spouse to improve his/her annoying habits and, of course, review your finances. Central to that should be those all-important tax shelters that have been showered on Canadians.

For 2026, the max RRSP contribution limit jumps from $32,490 to $33,810. As usual, the limit is 18% of your earned income from last year, up to this limit. It’s always best to make the contribution at the beginning of the new year, for that year, instead of for the last one (the way most people do it). The longer your dough is inside the shelter, the more it will earn.

No hike this year for TFSAs. That will come in 2027. So the annual limit for everyone stays at $7,000. This will push the cumulative contribution total to $109,000 (since the account was launched in 2009), or a whopping $218,000 for a couple. Yahoo. And just imagine how much you’d have by faithfully making annual max payments for the last 16 years and sticking the money in equity-based ETFs.

Yes, the TFSA would have doubled – to about $220,000. For a couple, $440,000. Annual income you can expect from that amount in retirement (at a reasonable 6% return) would be $2,200 a month, tax-free. Not a princely amount, but far more than CPP benefits – which are taxable. If you have a couple of decades to go before retirement, multiply all this by four.

And for all you homeless, entitled, whiny moaners, there’s the FHSA. The annual limit for contributions remains at 8,000, with a $40,000 lifetime limit. This is Canada’s most outrageous tax shelter since the contributions are deductible from taxable income, invested funds grow tax-free and yet withdrawals are untaxed. Moreover, if you regain your sanity and do not buy a house, the thing can be rolled into your RRSP.

Finally, if you want free money from the government, make sure to feed your kid’s RESP in 2026. There’s no annual limit (but an overall contribution cap of $50,000), and putting in $2,500 a year (per child) will garner the maximum government grant of $500. That’s a 20% return for doing nothing. As with the other plans, RESP funds grow tax-free. So if you open one for a baby, don’t start stuffing money into a brain-dead, no-growth GIC but instead throw it into equity funds.

When your kid needs the funds for education, withdrawals are taxed in his/her hands. Unless you have a young Justin Bieber in your home, that will likely mean zero sent to Ottawa.

By the way, the OAS clawback threshold for 2026 will be $95,323. Below that, you get to keep all your wrinklie pogey. Above that level, it is nibbled away. However, it takes a ridiculous income of $152,000 before it’s all gone (or $157,000 for the over-75 crowd).

Don’t tell your children. They already hate us.

About the picture: “I noticed that cat photos are beginning to take over the daily blog,” writes Gail, in Ontario.  “Here is a picture of Mabel who is looking up at her dog sitter mom, Amanda, with a look of ‘seriously, you want me to be a reindeer too?’.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/12/10/the-right-moves/