Canada Revenue Agency: 1 big change for the RSP in 2021

Canadian pension plans have been thrown into the stream as a result of the COVID-19 pandemic. This is a worrying development, as retirement planning for Canadian individuals was already in dire need of improvement before this crisis began. In September 2019, a BDO Canada survey of 2,047 Canadians found that 53% had little disposable income as they struggled with overwhelming debt. Additionally, 38% of Gen-Xers had no retirement savings. Nearly half of this cohort said they could not afford to save for their post-work life. Fortunately, the Canadian Revenue Agency is working to change the Registered Retirement Savings Plan (RRSP) in a positive way.

In October 2019, I warned Canadians against trying to work forever rather than building a retirement plan. While younger generations may need to work longer than older people, it is still important that they actively plan and prepare for retirement. Otherwise, you could seriously compromise your quality of life as you reach old age.

Today, I want to look at a big change for the RRSP that comes in 2021. Beyond that, I want to go over two actions that Canadians should be looking to add to their RRSP before this historic year ends.

Canada Revenue Agency has announced changes to the RRSP

In early November, the Canada Revenue Agency announced changes to the Canada Pension Plan (CPP) and the RRSP. Liberals managed to retain power in 2015, albeit with a minority government, in the wake of promises to strengthen programs and accounts administered by the Canadian Revenue Agency.

At that point, it announced that the RRSP dollar limit, also indexed, will be $ 27,830 in 2021. This is up from $ 27,230 in 2020. This gives Canadians who save for retirement a little more than room for maneuver. Investors should use that extra RRSP room to add shares with higher dividends.

Don’t forget to make the most of it as you prepare for retirement

RRSP investors should look for dividend stocks that offer good value, strong income, and an excellent dividend history. These two titles qualify for all three.

Genworth MI Canada (TSX: MIC) is the largest private residential mortgage insurer in Canada. Its shares fell 10% in 2020 at the close on November 12. The stock fell 2.9% yoy. The shares were up 26% month over month. It released its third quarter 2020 results on November 2.

Net income increased 12% yoy to $ 124 million and fully diluted operating earnings per share increased 3% to $ 1.38. It achieved this with a 36% growth in total premiums issued and a 37% jump in transactional premiums. Housing in Canada continued to record huge numbers of sales, even in the face of the COVID-19 pandemic.

Genworth’s latest stock had an attractive price / earnings (P / E) ratio of 9.2 and a price / book value (P / B) of one. Additionally, it offers a quarterly dividend of $ 0.54 per share, which represents a yield of 4.8%. This is a great stock dividend for an RRSP today and for the long haul.

Manulife Financial (TSX: MFC) (NYSE: MFC) is another dividend stock that I’ve been optimistic about since it slipped during the March market crash. This company is one of the largest insurers and financial services providers in Canada. Its shares were down 18% in 2020. However, the shares were up 9.8% week to week.

In the third quarter of 2020, Manulife’s profit jumped to $ 2.07 billion, as it earned $ 1.04 per diluted share. This was $ 723 million or $ 0.35 per share in the previous year. However, core earnings fell 4.8% to $ 1.45 billion or $ 0.73 per share. The company continues to fight the COVID-19 pandemic in its global business. It still boasts a fantastic balance sheet which has allowed it to withstand the volatility.

RRSP investors should indulge themselves with Manulife’s very favorable P / E ratio of 7.8 and P / B value of 0.8. Better yet, it offers a quarterly dividend of $ 0.28 per share. This represents a strong yield of 5.4%.