Savings Accounts: TFSA's vs. RRSP's
November 22, 2019
Kimberley Short is a portfolio manager and investment advisor, who specializes in financial and insurance planning. She is insurance licensed and has successfully completed her CFP designation. She is a partner at ShortFinancial in St. John's, Newfoundland.
We know that there is quite a bit of alphabet-soup type jargon in the world of personal finance. Here’s a little bit about two types of savings accounts: the Registered Retirement Savings Account (RRSP) & the Tax-Free Savings Account (TFSA).
Contributing to an RRSP account may offset your tax payable or generate a tax refund, by reducing your taxable income. RRSP's play an important role in retirement income planning and can be very helpful in reducing your overall tax payable in higher income earning years. For those purchasing their first home, RRSP's can be used to help fund a down payment.
The deadline to make a contribution to your RRSP account to offset 2019 taxable income is February 29, 2020. The maximum RRSP contribution limit for 2019 is $26,500. However, to confirm your personal 2019 RRSP contribution limit, please refer to your Notice of Assessment generated by the Canada Revenue Agency (CRA) after you filed your 2018 income tax return.
TFSA's (also referred to phonetically as TIFFFF-SAs) are a little different. These accounts may also help fund your retirement income, but do not provide any income tax offset as these contributions do not reduce your taxable income. TFSA's do, however, grow and earn income on a tax-free basis. Your contribution room does not disappear if you don’t use it in any one given year.
The TFSA Contribution Limit for individuals has increased to $6,000 in 2019 and is estimated to be $6,000 again in 2020. For someone who has never contributed and has been eligible for a TFSA since it was introduced in 2009 - in 2019 they would have $63,500 in total contribution room. We often advocate for our clients to regard these accounts as a Tax Free Investment Account instead of a savings account, as the growth and income is tax free.
TFSA & RRSP contributions aren’t a one-size-fits-all solution and they may not be the preferred option for retirement planning for everyone. As financial advisors, it is our job to help our clients with their financial planning and make sure that their investment portfolio suits their goals. We also help to determine which amounts should be contributed to which accounts, according to individual circumstances.
If you would like to learn more about how ShortFinancial can help you prepare for saving in a meaningful way next year, send our team an email at email@example.com - or give us a call at 1 (888) 726-6991.
This information was prepared solely by Larry Short who is a registered representative of HollisWealth®, a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC).The views and opinions, including any recommendations, expressed in this article are those of Larry Short alone and not those of HollisWealth®
BComm, CPA, CGA, CIM®, CFP®, FCSI
Portfolio Manager & Executive Director, Private Client Group
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HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates. This information has been prepared by Larry Short, Portfolio Manager for HollisWealth®, a division of iA Securities, and does not necessarily reflect the opinion of iA Securities. The information contained in this document comes from sources we believe to be reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Manager can open accounts only in the provinces where he is registered. For more information about HollisWealth®, please consult the official website at www.holliswealth.com . ShortFinancial is a personal trade name of Larry Short.
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