Page 10 - Best Magazine Winter 2017

PAY ATTENTION
IT’S TIME TO INVEST IN YOUR RRSP!!
TO YOUR
What is a RRSP? Registered Retirement Saving Plan is a special type
of account that helps Canadians save for retirement. The money you contribute reduces your taxable income for that year and it is tax shelter, meaning that you only pay taxes when you need the money.
PENSION !
When is it the deadline?
March 1st, 2018 to claim the contributions for 2017.
Maximum age to contribute:
December 31st of the year you turn 71.
WHAT IS THE DIFFERENCE BETWEEN RRSP AND TFSA?
BY DIEGO F. GONZALEZ
FEATURES
RRSP
TFSA
Contribution Limits:
18% of your salary up to $26,010 for 2017
$ 5,000 each year from 2009 to 2012
$ 5,500 from 2013 & 2014
$ 10,000 for 2015
$ 5,500 for 2016 & 2017 Total: $ 52,000
Contribution Tax Deductible:
Yes
No
Tax on Investment growth:
No
No
Tax on withdrawals:
Fully taxed
No taxes
Re-deposits:
Not allowed
Yes, next year of withdrawal
Carry forward unused contributions
Yes
Yes
When it’s better
• Long term investment
• Income higher than $ 35K
• Lower tax bracket in retirement the now.
• Short term investments
• Emergency fund
• After you have maximised your RRSP’s • Income lower than $ 35,000
• Higher tax bracket in retirement.
Counts toward Pension reduction (Old Age Security)
Yes
No
Penalty for excess contributions
Yes, 1% of the excess over $ 2,000
Yes, 1% of the excess
Investment options
Stocks, GIC’s, bonds, mutual funds, ETF’s
Stocks, GIC’s, bonds, mutual funds, ETF’s. There has been a misunderstanding that TFSA is a saving account and can only be invested in low income producing GIC’s.
INCOME
ESTIMATED MARGINAL TAX BRAKET
DOWN PYMENT INVESTED
IN HBP
TAX REFUND
TOTAL
DOWN PAYMENT
$70,000
31%
$25,000
$7,750
$32,750
$80,000
34%
$25,000
$8,500
$33,500
$90,000
38%
$25,000
$9,500
$34,500
Over $100,000
42%
$25,000
$10,500
$35,500
HOME BUYERS PLAN (HBP):
1. You and your spouse can use up to $ 25,000 each from your RRSP to buy the first home.
2. The money should be deposited back in your RRSP over 15 years.
3. Example of how to take advantage of the HBP:
10 THE BEST MAGAZINE WINTER 2017 - 2018
ECONOMY AND FINANCE