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✔ TFSA
✔ RRSP
✔ RESP
✔ FHSA
Tax-Free Savings Account
A Tax-Free Savings Account (TFSA) is a savings option that does not apply tax to the growth earned by the investment. This is unique from traditional savings accounts that do charge tax on the growth. Even in a Retirement Savings Plan (RSP), the growth is taxed when the money is withdrawn from the RSP. With a TFSA, no matter how much the investments earn, the growth will never be taxed.
Annual limit contribution: $7,000 per year*
Notable Features
- Flexibility and tax-free growth
- Unused contributions carried forward from year to year
- Contribution room is regained the year following a withdrawal
- Transferable to spouse/common-law partner upon death
- Does not affect eligibility for government-sponsored retirement income programs
- Investment options that include a full range of funds and guaranteed interest options
Each year residents of Canada who are at least 18 years of age can invest an annual limit into a TFSA. Deposits made into a TFSA are made with after-tax dollars meaning that withdrawals can be made at any time on a tax-free basis. Once a withdrawal is made, the contribution room is regained in the year following the withdrawal.
Products that offer a TFSA
- Guaranteed Interest Account
- Pivotal Select
* Annual limit is set by Canada Revenue Agency (CRA) guidelines, currently $7,000 per year.
Government income programs make up part of a retirement plan, but they do not provide the level of income that most Canadians look for during retirement. A Retirement Savings Plan (RSP) is one of the best ways to help ensure your financial security. You may also know it as a Registered Retirement Savings Plan (RRSP). Only when it is set up with the Canada Revenue Agency (CRA) is it called an RRSP. Around for over 60 years, the tax structure has allowed you to defer paying income tax on your deposits and earnings. It is only when you withdraw the money that tax is applied. Since many Canadians have a higher tax rate during their working years than retirement years, this often results in overall tax savings.
Notable features
- Annual limit contribution – 18% of earned income (subject to the annual contribution limit)
- Unused contribution room – Carried forward from year to year
- Home Buyers' Plan
- Lifelong Learning Plan
- Income splitting
- Retirement Income Fund
Your employer typically deducts income tax based on your total annual income. A deposit to your RRSP reduces your taxable income. This means you may end up paying more income tax than required during the year. When you file your tax return with the CRA and claim your RRSP deduction, you would receive a refund for any income tax that was overpaid.
You can locate your maximum contribution limit by looking on your most recent Notice of Assessment. This Notice is issued from CRA. This maximum amount is based on 18% of your previous year’s earned income, up to the maximum RSP contribution limit. It also includes any unused contribution room from previous years. If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP. Unused contribution rooms can be carried forward and used in future years.
You can locate your maximum contribution limit by looking on your most recent Notice of Assessment. This Notice is issued from CRA. This maximum amount is based on 18% of your previous year’s earned income, up to the maximum RSP contribution limit. It also includes any unused contribution room from previous years. If you are a member of a pension plan, your pension adjustment will reduce the amount you can contribute to your RRSP. Unused contribution rooms can be carried forward and used in future years.
Contributing to an RSP
RSP contributions can be made during the tax year or within the first 60 days of the following tax year. Contributions can also be made monthly. When you contribute monthly, you benefit from something called dollar cost averaging. Dollar-cost averaging is an investment strategy. Deposits of a fixed-dollar amount are made at regularly scheduled intervals. This means that you make regular purchases and your costs are averaged over the year. This benefits you in two ways. One is that this helps reduce the impact of a bumpy market. And two, your contributions are compounding over the year, making your money work that much harder for you. Making retirement savings a financial priority can help you achieve your desired retirement income.
Products that offer an RSP
- Guaranteed Interest Account
- Pivotal Select segregated funds
Call to get a quote with the best coverage and best rates: Sharon 647-880-8329