Plans & Accounts

What is an RRSP?

A Registered Retirement Savings Plan (RRSP) is a savings plan, registered with the Canadian federal government that you or your spouse or common-law partner can contribute to for retirement purposes. When you contribute money to a RRSP, you get a tax deduction upfront in the year you make the contribution. Also, as long as you keep the money in your RRSP account you don’t pay tax on any investment growth you earn in the account, you generally have to pay tax when you start making withdrawals from your account.

There is some exception for paying tax on withdrawal

✅ It can be used to finance the purchase of a first property (Home Buyer Plan) before applying withdrawal under HBP program make sure you are eligible.

✅ It can be used to go back to school (Lifelong Learning Plan). This plan helps you to pay education coast under LLP program.

✅ Also, can be use for unforeseen medical expenses that are not fully or partially covered by insurance. This option applies only in the case where medical expenses are related to an extraordinary and unforeseen expense that is necessary for your health or that of your spouse or a dependent.

✅ An RRSP offers a double tax advantage. First, the money invested is tax deductible. Therefore, the more you contribute to your RRSP, the less income tax you will pay for that year (tax deduction). Second, as long as you don’t make any withdrawals, the money saved in your RRSP is growing and non-taxable.

How much is the contribution limit on my RRSP?

The contribution is up to 18% of your annual income up to a maximum of $29,210. If you didn’t use your contribution room you can be carried over year to year, which means if your RRSP account is not maximized you can contribute more that 18% of your annual income. You can find your maximum RRSP contribution limit on your previous years Notice of Assessment, or by logging into your MYCRA account.

Deadline for the RRSP contribution

you have until March 1 to contribute and enjoy tax deductions for previous year. For example, you have time until March 1, 2023 for contributing on your RRSP and deducted from your 2022 income. You can still do contribution after this date; however, you can be deducted from your next taxable income.

What is the advantage of an RRSP?

➕ You enjoy tax saving and bring your bracket tax lower.

➕ You enjoy tax exemption on the money earned in your RRSP.

➕ You enjoy contribution more than your annual limit by carry over unused contribution room.

➕ You can use it for down payment to buy a first property (HBP) or for go back to school (LLP) or for unforeseen medical expenses that are not fully or partially covered by insurance.

➕ You can contribute to spousal RRSP to bring your taxable income lower.

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What is a TFSA?

A Tax-Free Savin Account (TFSA) is a saving account used for long-term, medium-term or short-term saving projects and the returns generated in the account are not taxable. Your money is accessible at any time which makes this account very special on using for emergency fund or collecting money for a down payment of your home, or for long-term tax-free wealth building and retirement.

There is no tax deduction up front, which means you can grow your money and withdraw tax-free.

The contribution limit of TFSA

You can contribute up to the limit set for the year from Canadian federal Government, or contribute more than your annual limit by carry over unused contribution room and you may carry forward any unused contribution amounts into future years.

The annual TFSA dollar limit for the year 2023 is $6,500, for the years 2019 to 2022 was $6,000, for the years 2016 to 2018 was $5,500, for the year 2015 was $10,000, for the years 2013 and 2014 was $5,500 and for the years 2009 to 2012 was $5,000.

Which means, as long as someone was minimum 18 years old in 2009 and/or landed in Canada in 2009, and pay income tax, they would have the max contribution room limit of $88,000.

What are the Key advantages of the TFSA?

➕ You enjoy tax-free income on the return generated in your account.

➕ Withdrawal is not taxed and it does not affect your taxable income.

➕ You can carry over unused contribution room to the following year.

➕This is a great solution for long-term, medium-term or short-term savings goals.

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RESP For Children Education

This is the greatest gift from you and Government to help your children achieve their dream career.

What are RESPs?

A Registered Education Saving Account is a saving account for your child’s post-secondary education.

RESP’s let you put money aside for your child’s post-secondary education. By contributing to this account, you will receive benefit from generous government grants.

The way it works is you contribute to the account and government will match it up to 40% of your contributions, depending on your family income.

For each child, total family contributions to get the maximum grants are $2500 per year, and government add Canada Education Savings Grant (CESG) up to $500 per year. with a lifetime maximum of $7500 in grants. Also, may qualify for Canada learning bond (CLB) and some provinces contribute Education saving grant to this account. You can contribute up to $50,000 lifetimes per child.

There is no loss if your child does not go to post-secondary education, you can designate another child in the family to the account or withdraw your contributions or transfer the money to an RRSP under certain conditions.

What is an non-Registered Account?

A non register account is the type of investment account that there is no limit on annual contributions. It is a great idea to invest your money in this account when your contributions limit on RRSP and TFSA are maximized. This account is subject to tax on return generated in the account.

There is no tax deduction upfront, but when set up properly you can pay half the tax on the way out.

Investment Options

When you open any Investment account such as an RRSP or TFSA, you need to understand the basic concept of this account and the investment options. It is very important to understand your risk tolerance, your time horizon, liquidity, investment diversifications and average rate of return.

What are the investment options?

✅ segregated fund

✅Guaranteed interest fund

✅ High interest savings account

What are segregated funds?

Segregated funds are very similarity to mutual funds, with additional major advantages. They are a type of investment made up of equities, bonds or money market securities. Since they are offered by insurance companies’, they come with guarantees that protect the amounts invested against market downturns.

To maintain investor interest, segregated fund assets are managed separately from those of the company, thus the designation “segregated funds”.

What are the main benefits of segregated funds?

➕ Protection of the amount invested at maturity of the investment and at death

➕ Protection of investment gains each year because of resets

➕ Possibility of not paying probate fees as they pay out on death directly to your beneficiary, unlike mutual funds

➕Rapid settlement in the event of death

➕Potential protection against creditors

➕Easier and faster tax return

➕Possibility of a lifetime guaranteed income

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What are Guaranteed Interest Funds (GIF) / Guaranteed Investment Certificates? (GIC)

GIF/GIC’s offer a fixed interest rate that is guaranteed for the life of the investment contract. They guarantee 100% of your capital at maturity.

These often come with a locked-in time period, like a 1 year or 2 year GIF/GIC’s, for example. The money would be locked-in, and at the end of the pre-determined and agreed upon time period you would get your initial investment + the guaranteed interest.

These guaranteed investments are great for people with:

✅These guaranteed investments are great for people with:

✅ Want to avoid fluctuations of the market

What are High interest savings account?

The HISA offers high returns with no minimum investment and no maturity date. Means you can invest as much as you want and make withdrawals at any time, making them very flexible. It is great ideas for your short-term goals, emergency funds or waiting for the right time to invest.