RRSP and TFSA

All About Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA)

To motivate Canadians to save more Canadian Government launched different registered savings account for Canadian residents and Permanent citizens. These saving accounts offer additional benefits that will help account holders. Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) are a type of registered accounts started by the Canadian Government. Both accounts help you save but for different purposes.

What is the Purpose of a Registered Retirement Savings Plan (RRSP)?

RRSP was introduced by the Canadian Government in 1957. The plan offers several great features and acts as a fantastic investment vehicle for a Canadian resident or permanent citizen. RRSP is for you if you are planning to save for your life after retirement, it is one of the best savings plans.

You are eligible to open an RRSP account if:

  • You are a Canadian resident or permanent citizen of Canada
  • You are fall in the age band of 18 to 71
  • You file income tax in Canada
  • You are below 18 but have a parent’s or local guardian’s consent letter
  • You work somewhere or have a business of your own

You can open an individual RRSP account or you can open an account with your spouse or legal partner or open a group account that is generally opened by your employer. There are different types of RRSP accounts available offering different benefits. 

Don’t get confused between different types of accounts and make a wrong decision. Top Financial being one of the best insurance and financial brokers across Canada can help you with the entire RRSP process and choose the most suitable type of RRSP account depending on your financial goals. Planning to open an RRSP account, get free professional advice from our financial advisors.

How an RRSP Works and Benefits It Offers

RRSP was introduced by the Canadian Government in 1957. The plan offers several great features and acts as a fantastic investment vehicle for a Canadian resident or permanent citizen. RRSP is for you if you are planning to save for your life after retirement, it is one of the best savings plans.

Benefits offered by RRSP are:

  • The contribution made to RRSP is tax-exempted
  • The investment you make through an RRSP account will be compounded and no tax is charged on that.
  • You can make a tax-free withdrawal in case you are buying a home for the first time or you or your spouse is going back to school through government programs.
  • You can make a withdrawal anytime from your RRSP account.

Tax-Free Savings Account (TFSA)

The Canadian Government initiated TFSA in 2009. It helps you to save money and save on tax at the same time if you are above 18 years of age. Even if you are not a permanent citizen of Canada you are eligible to open a TFSA, the only thing you need is a valid SIN. There is no upper age limit for TFSA.

Benefits of TFSA

  • TFSA contributions are not included while you are calculating your taxes.
  • The earnings you made from your TFSA account are tax-free.
  • Withdrawals made from TFSA are tax-free.
  • If you borrow money to contribute to a TFSA account then the interest will be exempt from tax.
  • You can open more than one TFSA account.

If you are a non-resident then you have to pay 1% tax every month till you have a contribution in your TFSA account.

You can start a TFSA Account in the form of

  • Deposit
  • Annuity Contract
  • Trust Arrangement

TFSA is easy to open and does not need much documentation. Once the account is open you start contributing. Another important step is to start investing your TFSA contribution. It will help to earn money on your TFSA contributions. It is important to choose an investment tool that suits your financial goal and risk-taking ability. Top Financial can help you choose the most suitable investment tool and make the most out of your investment. The investment solution we provide suits the risk taking ability of our client, their financial goals and their investment profile. 

Types of RRSP and TFSA Accounts

Depending upon the investment you want to make from the contributions in your RRSP or TFSA account there are different types of options available. 

  1. 1. Guaranteed Investment Certificates (GIC):
  • This type of investment will keep your capital and the earned interest from the account safe irrespective of the market conditions.
  1. 2. Market-Linked Guaranteed Investments (MLGIs):
  • MLGIs offer both guaranteed and variable returns. Your capital is safe that you get at maturity and the additional earnings will depend upon the market condition.
  1. 3. Mutual Fund:
  • The money in the account is invested in mutual funds depending upon your investment profile and a team of professionals will help you maximize your returns.

Top Financial has years of experience in the insurance and financial sector. We are always keeping up with the market trend and help you choose the suitable type of TFSA account as per your financial requirements. We are available to assist you throughout the process. To get more information on RRSP, TFSA or any other financial vehicle and to discuss the best financial solution, call us now!

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