Investments

REGISTERED DISABILITY SAVINGS PLAN (RDSP)

TO BE ELIGIBLE FOR RDSP, THE APPLICANT MUST HAVE THE FOLLOWING REQUIREMENTS:

• Be under 60 at the time of the first contribution.
• Be a Canadian citizen with a social security number
• Must be eligible for the Disability Tax Credit so that it is confirmed that plans are only started for those with either mental or severe physical impairment
• No tax on all money that is contributed
• As long as there is written consent from the holder of the plan, anyone can contribute
• The Government of Canada will gladly match contributions (based on family income) up to $3500 in CDSG (Canada Disability Savings Grants) a year and up to $1000 a year in CDSB (Canada Disability Savings Bond)
• Each beneficiary’s lifetime contribution is $200,000 without any annual contribution limitations.
• If a parent or grandparent passes away and has a financially dependent child or grandchild, they can transfer up to $200,000.00 of their RRSP/RRIF or RPP to the dependent’s RDSP on a tax-deferred basis

REGISTERED EDUCATION SAVINGS PLAN (RESP)

BENEFITS OF REGISTERED EDUCATION SAVINGS PLAN (RESP)

AN RESP IS A PLAN SPONSORED BY THE GOVERNMENT THAT ENCOURAGES INVESTING IN A CHILD’S FUTURE POST-SECONDARY EDUCATION.

An RESP is an effective way to save for a child’s post-secondary education. The government and certain provinces offer grants to help investors build their education savings. Contributions are not tax-deductible, but money within the plan and any donations can grow tax-free until it’s withdrawn for educational purposes.

• The government may add to your RESP contributions (up to a maximum of $500.00 per year, per child) with the Canada Education Savings Grant (CESG). The CESG is payable until the end of the calendar year in which a child turns 17, and the maximum lifetime CESG payment is $7,200.00
• Although contributions are not tax-deductible, all investment income generated in the RESP is tax-sheltered as long as it remains in the plan
• You can decide how much money should be withdrawn and when it should be withdrawn. The withdrawals can be used for a variety of education costs, including tuition, books and living expenses
• When money is withdrawn and used to pay for the child’s post-secondary education, the plan earnings and government contributions are taxed in the child’s hands. As a student, the child may pay little or no taxes on the money

NON REGISTERED ACCOUNT

• A non-registered account, or OPEN plan, is a type of investment account that allows individuals to save for the short or long term with only the capital gains realized inside the reserve being taxed at 50% of the account holder’s top marginal tax rate.
• OPEN plans have no contribution limits
• OPEN plans allow individuals to build additional savings beyond the maximum amount they can invest in registered programs and can be used to save for short or long-term goals
• OPEN plans are generally used by investors in conjunction with Registered Retirement Savings Plans (RRSP), as this allows investors to invest the tax savings generated by the RRSP into the OPEN plan.
• Capital gains realized inside OPEN plans are taxed at 50% of the account holder’s top marginal tax rate
• Individuals can hold a range of investments in OPEN plans

TAX-FREE SAVINGS ACCOUNT (TFSA)

A TFSA is an account that provides tax benefits for saving. Investment income, including capital gains and dividends, earned in a TFSA is not taxed in most cases, even when withdrawn, and TFSA with substantial progress could be taxed. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a Registered Retirement Savings Plan (RRSP). A TFSA may contain cash and other investments such as mutual funds, certain stocks, bonds or guaranteed investment certificates (GICs).

BENEFITS OF TAX-FREE SAVINGS ACCOUNT (TFSA)

• Individuals can contribute up to $6,500.00 tax-free
• Individuals are not required to have earned income to contribute
• Individuals can withdraw money for any reason – without being taxed
• Individuals can choose from a variety of investment options, such as mutual funds, GICs and savings deposits
• Individuals don’t lose the contribution room if they make a withdrawal, but they do need to wait until the following year to re-contribute the money
• Individuals can provide funds to their spouse for them to contribute to a Tax-Free Savings Account without being subjected to income attribution rules
• If an individual does not contribute the maximum amount, they can keep their unused contribution room indefinitely. For example, if an individual contributed $2,500.00 to their TFSA in 2016, their contribution room for 2017 would be $7,500.00 ($2,500.00 carried forward from 2016 plus $5,000.00 for 2017)
• Contributions are not tax-deductible, but investment returns (i.e. capital gains, interest and dividends) earned in a TFSA are not taxed, even when they are withdrawn.

REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

An account used for investment assets and holding savings RRSP has many advantages regarding taxes as long as they fall within the Canadian Income Tax Act guidelines. Mutual funds, income trusts, mortgage loans, bonds, and savings accounts are all approved assets. RRSP rules will determine the maximum contributions, allow the purchase of support, and the account's conversion to a Registered Retirement Income Fund (RRIF) at age seventy-one.

BENEFITS OF REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

• Tax-deferred investments as long as they remain within the plan
• Only your registered plan may hold cash, bonds, mutual funds, and other types of investments
• Tax-deductible contributions

REGISTERED RETIREMENT INCOME PLAN (RRIF)

An RRIF is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their Registered Retirement Savings Plan (RRSP). As with an RRSP, an RRIF account is registered with the Canada Revenue Agency.

• Investments compound tax-free as long as they remain in the plan
• Holdings can be chosen from a wide range of options
• The ability to leave remaining RRIF assets to heirs
• Can split RRIF income with their spouse if the spouse is at least 65 years of age