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Time is running out! RRSP vs. TFSA savings

Erica Szczech - Feb 09, 2016
Time to focus on your retirement goals - with only three weeks left until February 29th, the last day to contribute to your RRSP for the 2015 tax year, it’s never too early to start planning and saving by investing in your RRSP.  Here is a refresher

2016 is a Leap Year - only 3 weeks left to contribute!

Time to focus on your retirement goals - with only three weeks left until February 29th, the last day to contribute to your RRSP for the 2015 tax year, it’s never too early to start planning and saving by investing in your RRSP.  Here is a refresher on some timely information: 

 

Maximum annual RRSP contribution limits are:

 

Year           Contribution Limit

2015           $24,930

2016           $25,370

 

Your allowable RRSP contribution for the current year is the lower of:

  • 18% of your earned income from the previous year*, or
  • The maximum allowable contribution limit for the taxation year, or
  • The remaining limit after any company sponsored pension plan contributions.

*Earned income includes salary or wages, alimony received and rental income, but does not include items such as investment income.

 

Great reasons to invest in your RRSP:

The downturn in markets has created great price valuations.  Besides the lower prices we are seeing at the pump, there are some great buys in today’s markets. Capital markets won’t stay this low for long, but your RRSP holdings can grow tax free for several years which amplifies the advantage now.

 

Enjoy immediate tax savings and generate a cash return which can then be used to pay off debt or contribute to a Tax Free Savings Account (TFSA) where your investments are also tax sheltered and have no withdrawal restrictions. You can shelter up to $46,500 in a TFSA.

 

Catch up with a loan. An RRSP Loan is a great way to add to your savings at an attractive low rate. Get a loan at Prime + 0.50% for 1 or 2 years. With no early repayment penalties, we can delay your first payment to coincide with your tax refund!

 

RRSP vs TFSA savings:

If you would prefer to contribute to a Tax Free Savings Account, here are some of the differences:

 

  • An RRSP is structured primarily for your retirement savings, while a TFSA can be used for any savings goal.
  • Contributions to an RRSP are tax-deductible and reduce your taxable income, while TFSA contributions do not.
  • Withdrawals from an RRSP are added to your income and taxed at your current marginal rate, while TFSA withdrawals are tax-free.
  • By December 31, of the year you turn 71, you need to wind down your RRSP either by transferring to a RRIF or distributing the funds as income.  No collapse rules for TFSAs.
  • Once a contribution is made to your RRSP, the contribution room is “used up”. With TFSAs the amount of a withdrawal is added back to your contribution room at the beginning of the following year.

Canaccord now accepts online cash transfers/bill payments directly to your RSP and TFSA accounts!  Please ask me for your account information and instructions on how to do this.

 

I look forward to the growth opportunities ahead in 2016!