TFSA / Tax-Free Savings Accounts

As an opportunity to generate tax-free income, a TFSA can be an important part of your investment plan.

With a TFSA:
• The 2023 contribution limit/room is $6,500. The amounts contributed as well as any income earned in the account is generally tax-free, even when it is withdrawn.
• The $6,500 annual contribution limit is indexed to the Consumer Price Index and rounded to the nearest $500.
• You can hold the same investments as registered accounts, including mutual funds, segregated funds, stocks and bonds.
• You never lose your contribution room. Any amount withdrawn from the account is added back to your contribution room for the following year.
• Unused contribution room can be carried forward indefinitely to future years.
• Contribution room starts accumulating in the calendar year in which a person turns 18

Comparing TFSAs and RRSPs

TFSA

For virtually all savings and investment objectives
Contributions are made with after-tax income
Contribution room is added back the following year when withdrawals are made
Withdrawals are tax-free
Contributions can be made any time for those age 18 and older
Can make a withdrawal at any age
Currently 2023’s annual maximum contribution – $6,500 indexed to inflation

RRSP

Primarily for retirement savings
Contributions are tax-deductible
Contribution room is used up when withdrawals are made *note: withdrawals do not create more contribution room
Withdrawals are added to income and taxed at your current rate
Contributions cease at age 71 and must be converted to a RRIF by the end of the calendar year that you turn 71; withdrawals after that age are mandated according to a schedule based on age
Annual maximum contribution – 18% of earned income in the previous year to a maximum of $30,780 in 2023

RESP / Registered Education Savings Plan

When your kids are young, it seems like post-secondary education is in the far-away future. But college and university are more important than ever, if we want our children to be successful.

And yet the cost of a post-secondary education keeps growing. In 2022/2023, the average annual undergraduate university tuition in Canada for a full-time student was $6,834, compared to $5,366 in 2011/2012. Tuition and related fees are not the whole story. They represent only about one-third of the expenses that students face each year. Add in accommodation, food, transportation, books, computers, leisure, and the cost of a four-year postsecondary education could add up to roughly $80,000.

But there is a way to meet these rising costs. By setting aside education funds for your children now, you can help them earn a university or college degree and avoid the crippling debt many students are incurring.

*Source, Mackenzie Financial

RDSP / Registered Disability Savings Plan

People with disabilities and their loved ones face a distinct set of financial challenges throughout their lives. To help address these challenges, in 2008 the Government of Canada introduced the Registered Disability Savings Plan (RDSP). Designed to help build long-term financial security for disabled persons, the RDSP makes it easier to accumulate funds by providing assisted savings and tax-deferred investment growth.

What is an RDSP?

The RDSP is a tax-deferred savings vehicle introduced by the Government of Canada to help parents and others save for the long-term financial security of a person with a severe disability.

Eligibility

A Canadian resident under the age of 60 who is eligible for the Disability Tax Credit (DTC) is eligible for an RDSP. The DTC is available to individuals who have mental or physical impairments that markedly restrict their ability to perform one or more of the basic activities of living (i.e., speaking, hearing or walking). The impairment must be expected to last a period of one or more years, and a physician must certify the extent of the disability. Individuals can apply to the Canada Revenue Agency (CRA) for the DTC using form T2201. Information on the disability tax credit and other tax credits available to disabled individuals can be found in our brochure, Making a Challenge Less Challenging.