Investments

According to Statistics Canada, 35 per cent of Canadians contribute each year to an RRSP.

A Registered Retirement Savings Plan (RRSP) is a tax-deferred account typically used for retirement savings. Any resident of Canada age 71 or under can participate in a RRSP.

The Benefits of an RRSP are as follows:

• The RRSP contribution limit is determined by taking the lesser of 18% of the individual’s previous year’s earned income and the current year’s RRSP dollar limit subject to a maximum contribution limit. Money contributed to a company pension plan and unused contribution from previous years adjust an individual’s contribution room. Contributions may be tax-deductible and the investments grow tax-deferred until removed.
• Contributions to an RRSP can be tailored to fit the individual tax payer’s budget such as weekly, bi-weekly, monthly or yearly.
• RRSPs must be converted to Registered Retirement Income Funds (RRIFs) by the end of the year you turn 71; Foxgrove Benefit Consulting can assist you in consolidating all your RRSP holdings into one account. This simplifies the ease of planning before and during retirement.

There are a range of RRSPs that can fit an individual’s pre retirement needs, such as:

• Individual RRSP
• Spousal RRSP
• Group RRSP
• Self Directed Plans

A survey by ING DIRECT finds slightly more than half of Canadians have yet to take advantage of Tax-Free Savings Accounts.

The Tax-Free Savings Account (TFSA) is a flexible, registered savings vehicle that allows Canadians over the age of 18 to contribute up to $5,000 annually.  Although the contribution is not tax-deductible, any income accumulated in the TFSA is tax-free.

The advantages of a TFSA are:

• Investment income earned is tax-free.
• Withdrawals are tax-free.
• Unused contribution room is carried forward to future years.
• Withdrawal amounts can be put back into the TFSA in future years without affecting the contribution room.
• Complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).
• Choose from a wide range of investment options such as segregated funds, mutual funds, Guaranteed Investment Certificates (GICs), stocks and bonds.
• Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.
• TFSA assets can generally be transferred to a spouse or common-law partner upon death.

A Registered Retirement Income Fund (RRIF) is an account registered with the federal government that gives you a steady income in retirement. Before, you were putting money into your RRSP to accumulate savings for retirement. Now, you withdraw that money from your RRIF as retirement income.