What is it?

The TFSA was introduced by the Canadian government and came into effect in January 2009 as a way of helping Canadians save for different purposes throughout their lifetime. The TFSA allows for tax-free growth of investment income and capital gains, while providing flexibility for contributions and withdrawals

Contributions

Because of its tax-free aspect, the government imposed maximum contributions inside this account.  Moreover, to be allowed to contribute you must be:

• Canadian residents
• aged 18 or older

It is important to consider your age when contributing to a TFSA to know how much contributions can be made into the account. For example, someone who turned 18 years old in 2019 may only be allowed to contribute 18000$ (6000$ in 2019, 6000$ in 2020 and 6000$ in 2021) versus someone who was 18 years old in 2009 and never contributed to a TFSA, in 2021, that person would be entitled to the full 75500$ contribution space.

Contribution room automatically accumulates each year, with any unused contribution room carried forward indefinitely for use in subsequent years.

There is no tax deduction on contributions. However, an over-contribution may result in a tax penalty.

Withdrawals

• Withdrawals are tax free and allowed at any time and for any purpose.
• The total amount of withdrawals can be re-contributed into your TFSA starting the following year without impacting your contribution room. However, re-contributing in the same calendar year will result in a tax penalty if you do not have available contribution room, as it is considered an over-contribution.

Who may benefit from a TFSA?

• Investors new to the workforce; they do not have to wait and “earn” any contribution room, as they would with RRSPs. This means that individuals over the age of 18 just starting a career may use the TFSA while they build RRSP contribution room to use in later years when they are in a higher tax bracket.
• People saving for education. Since 18-year-olds are no longer eligible for RESP grants, the TFSA can be a great way to save for post-secondary education. Money can be withdrawn from the account for any reason, even if post-secondary education is not pursued (unlike with RESPs).
• Future homebuyers. Rather than contributing to an RRSP and then borrowing those same funds through the Home Buyers’ Plan, investors can save for their home by contributing to a TFSA. When the funds are taken out of the TFSA to pay for the home, there are no taxes to be paid on any growth. Also, unlike the Home Buyers’ Plan, money does not have to stay in the account for 90 days before it is eligible for withdrawal, and the funds do not have to be paid back.
• Seniors and those concerned about clawbacks. Seniors can save and still collect Old Age Security when they use a TFSA. Since investment earnings and withdrawals are not reported on one’s tax return this eliminates the possibility of clawing back benefits such as Old Age Security (OAS). That’s because income and withdrawal from a TFSA will not affect their eligibility for these benefits and credits.
• Many others

The bottom line on TFSAs: Regardless of age or investment time horizon, a TFSA should be considered as part of an overall investment strategy..

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This video was designed and produced by Flavio and Violetta Vani, an Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe 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 securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated

A Registered Retirement Savings Plan (RRSP) is a savings account designed to help Canadians save for retirement.

 Contributing to an RRSP

How much you can contribute to your RRSP depends on your deduction limit, often referred to as your “contribution room”. Your contribution room is the maximum amount you can deduct to reduce taxes for a given year. To find out your contribution room for the current year, refer to your most recent Notice of Assessment from the CRA, which can be found on your previous year’s tax return.

Calculating your contribution room

The maximum RRSP contribution and deduction limits are determined as follows:

• 2021: 18% of previous year’s earned income up to $27,8301
• Plus (+)
• Current year’s Pension Adjustment Reversal (PAR)
•  Unused contribution room carried forward from previous years
• Minus (-)
• Previous year’s Pension Adjustment (PA)
• Current year’s Past Service Pension Adjustment (PSPA) [1]

Contribution rules

• Unused contribution room can be carried forward to use in any future year
• Contributions are deductible for the specific year when made during the year, or within 60 days following the year
• Contributions not deducted may be carried forward and deducted in a future year
• Contributions to an individual RRSP can be made up to December 31 of the year in which the annuitant turns 71
• You may contribute up to $2,000 above your annual contribution room without penalty. However, the excess amount will not be allowed as a tax deduction and any amount over $2,000 will be subject to a 1% per month penalty tax

RRSP Maturity Options

You can make contributions to your RRSP up to and including the year in which you turn 71. Your RRSP must mature by December 31 of that year, at which time, you will have three options:

1. Cash out the plan – the full value of the lump sum withdrawal will be added to your income for the year and taxed accordingly
2. Use the funds in the plan to purchase an annuity
3. Convert the plan to a Registered Retirement Income Fund (RRIF)

Spousal RRSP

Contributing to a spousal RRSP can help defer tax for the higher income earner and potentially reduce the family’s overall tax bill at retirement. A spousal RRSP allows you to contribute to your spouse’s or common-law partner’s RRSP, up to your personal contribution room.

• Contributor claims the deduction for contributions to a spousal RRSP

• Deduction limit is based on the contributor’s RRSP contribution room

• Plan and assets within the RRSP are controlled by the spouse

 • Withdrawals will be added to the contributor’s taxable income, unless the contributions are held in the plan for at least two years after the end of the year in which the last contribution was made

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan allows you to borrow up to $35,000 from your current RRSP balance, tax free, to buy or build a qualifying home. The plan is restricted to first-time buyers who have not owned and lived in a principal residence during the five years up to and including the current year. From the date of withdrawal, you will have up to 15 years to repay the amount withdrawn from your RRSP. The repayment period starts the second year after the year in which the funds are first withdrawn.

The home cannot be acquired more than 30 days prior to the withdrawal and must be acquired by October 1 of the year following the year of withdrawal. Otherwise, the amounts withdrawn must be returned to the RRSP by the end of that year to avoid penalty. Any amount not repaid will be taxed as income.

Lifelong Learning Plan

The Lifelong Learning Plan allows you to finance a full-time training or education program by borrowing up to $10,000 per year, tax free, from your RRSP to a maximum of $20,000.[2]

The student may be you, your spouse or common-law partner and must be enrolled as a full-time student in a qualifying educational program. Any amounts withdrawn must be repaid to your RRSP within a ten-year time frame to avoid penalty.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This video was designed and produced by Flavio and Violetta Vani, an Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe 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 securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated

[1]Earned income includes employment income, net self-employment or business income, and certain other types of income that may also qualify. The amount that can be withdrawn from your RRSP cannot exceed the value of your RRSP account. For example, if you have $5,000 in your RRSP, the maximum you can withdraw is $5,000.

[2] Note: It is not possible to withdraw more funds than currently exist within your RRSP account. If you only have $5,000 in your RRSP, the maximum you can withdraw is $5,000.

source: https://dynamic.ca/content/dam/docs/marketing/brochures/retirement-centre/11DWD020_DF_RRSPfact_Inv_EN.pdf

To be a beneficiary of this plan, you must:

1. Being a Canadian resident
2. Hold a Social Insurance Number

• And to be eligible for subsidies, the child must be under the age of 16

The subscriber of the plan may be a parent, a grandparent, or any member of the family, even a friend who wishes to accumulate money to contribute to the child’s post-secondary education. You can invest a maximum of $2500/year per beneficiary or a maximum amount of $50,000 for life per beneficiary.

It should be noted that RESP contributions are not tax deductible, and invested capital and its growth, grow tax-free inside the account, until the beneficiary begins their post-secondary education.

Federal and Provincial Grants

For each amount contributed within a RESP account, you are entitled to 2 types of grants: the Canada Education Savings Grant (CESG) and the Quebec Education Savings Incentive. These grants are available until the child reaches the age of 17.

• For the Canada Education Savings Grant, it represents 20% of the first $2,500 of contributions per year, up to a maximum of $500 per year per beneficiary, or $7200 for life per beneficiary. Namely, if you contribute $100 per month to the RESP, you will receive $20 in additional grant from the government. Grant supplements could also be added to the CESG, depending on your family income.
• For the Quebec Education Savings Incentive (QESI), it is paid directly to the RESP by the Quebec provincial government. A RESP can receive, an amount equal to 10% of the net contributions made in the year and up to a maximum of $250. For example, if you contribute $100/m, an additional grant of $10 will be paid within the account. The total grant disbursed can be up to $3,600 per eligible beneficiary for life. An additional amount can also be paid into the RESP, for families with low family incomes.

Therefore, a person who contributed $100/m within the RESP account will have received grants of an additional $30.

Finally, it is important to start the investment in the first years, after the birth of the child, to benefit fully from the government grants and establish a consistent investment strategy. Starting such investment as soon as your child is born allows you to enjoy better growth for years to come and better prepare yourselves for your child’s future.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This video was designed and produced by Flavio and Violetta Vani, an Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe 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 securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated

According to the Mortgage Broker Regulators’ Council of Canada (MBRCC), several questions are important to consider, when applying for loan and here are the top 6:

1. Do you have a good credit history? Your credit history determines your credit worthiness and your ability to get a mortgage. Lenders will always ask to check your credit history to decide if they want to offer you a mortgage. 
2. How stable is your income and employment? This is especially important for seasonal and contract workers. A decrease in pay or losing your job could seriously change what you can afford and your ability to get a mortgage. Typically, lenders like to see a minimum of 2 years of stable employment and constant pay.
3. How much does owning a home cost? Owning a home costs more than the amount of the mortgage. When you purchase a home, there are closing costs, including legal and other fees, along with appraisals, etc. Once the home is yours, there are also other expenses that rise such as moving expenses, property taxes, insurance, condo fees, home repairs, etc. Make sure to include all of these expenses as part of the total cost when you are considering if you can afford a mortgage.
4. Will owning a home affect your other financial? Mortgage payments could limit your ability to manage other expenses. After making your mortgage payments, would you have enough money to also pay for your everyday expenses or future projects? You might need a vehicle, wish to travel, have children, etc. Consider if a mortgage could prevent you from being able to manage other commitments or goals.
5. What happens if you can’t pay for the mortgage? Not paying your mortgage on time and in full can lead to breach of contract, penalty fees and foreclosure. That means, if you default, the lender has the right to take possession of the property to recover the money still owed on the mortgage.
   If this happens, all of the previous mortgage payments you have already made, all the money you have invested into the home and any equity (value beyond what is owed on the mortgage) in the home could be lost. If the lender sells the home for a price that is less than what was left on the mortgage when it went into default, you might even have to pay the difference. Also, it will be much harder in the future to find a lender willing to offer you another mortgage.
6. Will your property value increase or decrease? A home is often a good asset. But not always, the value of a home can go up or down. Decreases in value can result in losses of equity. This is why we always strongly recommend hiring a building inspector prior to the purchase to secure the state of property you are looking to buy.

Finally, always consider not just how much money you have today, but your financial position for the length of the mortgage (mostly for the next 20-25 years). Ask yourself if you will be able to continue to make the full payments on time, for example, consider how the payments will affect your spending money and your ability to deal with sudden or unexpected financial needs. Did you plan for an emergency fund to cover those unexpected expenses? Will you have difficulties making sure you have enough left for other things you need? 

Source: Mortgage Broker Regulators’ Council of Canada., https://www.mbrcc.ca/BeingaResponsibleBorrower

To find out which savings plan or plan combination is best for you, savers should always consider their own circumstances and aim for rational personal goals.

The Registered Retirement Savings Plan (RRSP) is designed to help Canadians build capital to provide themselves an income on the day of their retirement.

Contributions to the Registered Retirement Savings Plan are deductible from taxable income.

The contribution and income from the RRSP investments are taxed on withdrawal. Withdrawals from the Registered Retirement Savings Plan are perceived as income and will also need to be added to your tax return.

RRSP withdrawals or RRIFs (registered retirement income fund) can also affect eligibility for the federal Guaranteed Income Supplement (GIS) benefits and old-age pension, as the latter are calculated based on Canadians taxable income. Withdrawals may also, depending on the reported income, influence eligibility for other tax credits offered by both federal and provincial government.

TFSA 

The Tax-Free Registered Account (TFSA) is also a vehicle to stimulate savings and contributions made in this plan come from earned income net of tax and are not deductible from taxable income.

On the other hand, as the name describes it, contributions and investment income in this plan are tax-exempt. Any capital gains, dividends or interest paid within the TFSA can be withdrawn tax-free.

When there are one or more withdrawals in the TFSA plan, they have no impact on taxable income, nor on the eligibility for federal benefits, such as the Guaranteed Income Supplement (GIS), on the old age pension or any other tax credit offered by both provincial and federal government.

All Canadians who place their money in an unregistered account should first consider contributing to a Tax Free Savings account.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This video was designed and produced by Flavio and Violetta Vani, an Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe 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 securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated

Our goal is to create a relationship of trust with each of our clients and advise them in personal financial services, to help them achieve their goals and ultimately financial security.

So, what can you expect when you decide to work with us? 

We begin each meeting with new clients with an analysis of their complete financial needs. To fully understand your investor’s profile, it is important to have a global view of your affairs and therefore we ask you a few questions that allow us to better define you, among others:

• What is your investment knowledge?
• What aspect of your current life is most dear to you?
• What new skills would you like to acquire?
• Who would you like to spend more time with?
• Where would you like to spend it?

Then we talk about objectives: short, medium, and long-term. When we execute an investment plan, analyzing your financial goals allows us to put in place an investment horizon and risk tolerance that is most appropriate for your needs. It is these values that allows us to build your portfolio and distinguish which types of financial products are most appropriate for you. Other types of questions help us distinguish it, for example:

• What will your retirement look like?
• When do you plan to take it?
•  How much will it cost you to finance your retirement?

These types of questions will also help you verbalize your financial needs, desires, and goals. It is important to keep in mind that retirement and financial security can mean different things, depending on the individual.

Finally, once this financial needs’ analysis is completed, we present it to you by offering you our explanations and our results corresponding to the information collected.

We sincerely believe that listening is an indispensable value in our field. Flavio and I offer our clients a continuity of services throughout their financial journey. We listen to your needs while establishing follow-up meetings according to your different life stages (change of goals or net worth, marital status, birth of a child, death, estate, business, etc.).

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This video was designed and produced by Flavio and Violetta Vani, an Investment Funds Advisor with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe 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 securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated