Skip to content

Posts from the ‘Retirement Planning’ Category

18
May

Budget 2015 Highlights

On April 21, 2015, Finance Minister Joe Oliver tabled his first federal budget.  The provisions of the budget will be of particular interest to owners of small and medium sized businesses, seniors and families with children.  As well, those looking to make certain charitable donations will be encouraged by Oliver’s budget.

Below is a brief commentary on each of the key budget proposals.

For Seniors and Savers

Increase in Tax Free Savings Account (TFSA) Limit

  • Effective January 1, 2015 the annual contribution limit has been increased from $5,500 to $10,000;
  • As a consequence, the automatic indexing of the annual contribution limit has been eliminated;
  • On April 24, the CRA announced that even though this provision is not law as yet, they will allow increased deposits to a TFSA effective immediately.

Read more »

12
Feb

TFSA or RRSP?

One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?

Here’s the good news – it doesn’t have to be an either or choice.  Why not do both? Below are the features of both plans to help you understand the differences.

 

Tax Free Savings Account (TFSA) 

  • Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • Maximum contribution is $5,500 per year starting in 2013 ($5,000 per year for the period of 2009-2012).  The contribution must be made by December 31st.
  • There is carry forward room for each year in which the maximum contribution was not made.
  • The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
  • Withdrawals may be made at any time on an income tax-free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

Read more »

19
Feb

TFSA or RRSP?

Lately, one question clients are asking me is whether they should contribute to a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP)?  Personally, I really like the TFSA. however it doesn’t have to be an either or choice.  Why not do both?  If both, in what proportion should you divide your contributions?  In order to make an informed decision, let’s quickly review the main features of each program as discussed in last month’s article.  I will use bullets to illustrate the features as nothing gets people’s attention more than bullets.

TAX FREE SAVINGS ACCOUNT

  •  Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income.  There is no maximum age for contribution.
  • Maximum contribution is $5,000 for each year from 2009 to 2012 and must be made by December 31st of the year of contribution.  For 2013, due to indexing the maximum contribution is $5,500.
  • There is carry forward room for each year in which the maximum contribution was not made.
  • The deposit is not tax deductible, but the funds accumulate with no income tax payable on growth.
  • Withdrawals may be made at any time on an income tax free basis.  Withdrawals create additional deposit room commencing in the year after withdrawal.

Read more »

13
Dec

Got an RRSP and Turning 71?

If you have been accumulating wealth in a Registered Savings Plan and are turning 71 this year or next, you should be aware of the decisions you have to make. The Income Tax Act says that you have to terminate your RSP’s by December 31st in the year you turn age 71. In doing so, you basically have three options:

1. You can withdraw all the funds in your RSP in one lump sum. Unless you have a negligible amount in your registered plan this is not a good option. It kind of defeats the whole plan in having an RSP in the first place.
2. You can transfer the balance of your Registered Savings Plan into a Retirement Income Fund (RIF). This is a simple process involving the transfer of the assets. You can keep the same investments you had before the transfer and nothing really changes except for the fact you will now be drawing income from the RIF, but the remaining funds will continue to accumulate tax-deferred.
3. You can use all or part of your RSP funds to purchase a life or term certain to age 90 annuity. Partial use would give you a combination of a RIF and an annuity providing you retirement income.

There are also three factors that should be taken into consideration in the year you turn 71:

Read more »