What mo­ti­vates you to con­tribute to your RRSP or TFSA?

The McLeod River Post - - Viewpoint -

How do you con­tribute to your regis­tered re­tire­ment sav­ings plan (RRSP) and your tax-free sav­ings ac­count (TFSA) o you make reg­u­lar con­tri­bu­tions through the year? Do you con­tribute when a friend or fam­ily mem­ber nudges you? Do you re­mem­ber to do so when your pro­fes­sional ad­vi­sor re­minds you? Or do you want to make up for last year when you for­got to in­vest in or top up your RRSP or TFSA?

It re­ally doesn’t mat­ter what mo­ti­vates you to con­tribute to your RRSP or TFSA what mat­ters is that you do make reg­u­lar con­tri­bu­tions. Here’s why

In­vest­ment ex­perts agree: An RRSP is the best re­tire­ment sav­ings strat­egy for most Cana­di­ans our con­tri­bu­tions and all the in­vest­ment earn­ings that ac­cu­mu­late in your plan are tax ex­empt un­til you start us­ing the money in re­tire­ment. Add in the fact that your con­tri­bu­tions can be used to re­duce taxes and the magic of com­pound­ing that en­hances RRSP growth over time and it’s easy to see why a regis­tered plan makes such good fi­nan­cial sense.

To get the most in im­me­di­ate tax sav­ings and long-term growth from your RRSP, al­ways make your max­i­mum con­tri­bu­tion each year. For the max­i­mum RRSP con­tri­bu­tion is $26,230 (Con­tri­bu­tion room is based on your pre­vi­ous year in­come, how much you can con­tribute can be found on your most re­cent no­tice of as­sess­ment from the Canada Rev­enue Agency.) The RRSP con­tri­bu­tion dead­line for the tax year is March 1, 2019. If you have any un­used con­tri­bu­tion room left over from pre­vi­ous years, fill it up as quickly as pos­si­ble for max­i­mum long-term tax-de­ferred growth and ad­di­tional tax sav­ings. our RRSP con­tri­bu­tion tax de­duc­tion can be car­ried for­ward to fu­ture tax years, which can be use­ful if you ex­pect a jump in in­come in the next few years.

TFSAs are an ex­cel­lent and flex­i­ble way to save ou put your money into a TFSA and you get your money back out at any time, for any pur­pose. With a TFSA there is no tax de­duc­tion for your con­tri­bu­tions but all TFSA in­vest­ment earn­ings are to­tally taxfree and will not trig­ger claw­backs on fed­eral tax cred­its or ben­e­fits pro­grams (such as the Guar­an­teed In­come Sup­ple­ment, Old Age Se­cu­rity, Age Credit, GST Credit, or Canada Child Ben­e­fit). The cur­rent an­nual max­i­mum TFSA con­tri­bu­tion is $5,500 plus the full amount of any pre­vi­ous year with­drawals. If you don’t use all your con­tri­bu­tion room right away, it ac­cu­mu­lates year af­ter year fill it up any time you want. By the way, your TFSA con­tri­bu­tions do not af­fect your RRSP con­tri­bu­tion room.

There’s no doubt that reg­u­lar con­tri­bu­tions to a 55S3 and TFSA are vi­tal to your fi­nan­cial fu­ture. our pro­fes­sional ad­vi­sor can help you get the most from a RRSP, a TFSA and ev­ery other el­e­ment of your over­all fi­nan­cial plan.

This col­umn, writ­ten and pub­lished by In­vestors Group Fi­nan­cial Ser­vices Inc. (in Québec – a Fi­nan­cial Ser­vices Firm), and In­vestors Group Se­cu­ri­ties Inc. (in Québec, a firm in Fi­nan­cial Plan­ning) presents gen­eral in­for­ma­tion only and is not a so­lic­i­ta­tion to buy or sell any in­vest­ments. Con­tact your own ad­vi­sor for spe­cific ad­vice about your cir­cum­stances. For more in­for­ma­tion on this topic please con­tact your In­vestors Group Con­sul­tant.

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