Retirement Saving and Income Plan

REGISTERED RETIREMENT SAVING PLAN - RRSP

Since the introduction of RRSP in 1957 and even up to this date RRSP remains one of the most relevant tax-efficient retirement planning tool. 

When you make a RRSP contribution, you get to deduct that amount from your taxable income thereby reducing your income tax liability at the time of contribution. Your contribution inside your RRSP grows TAX-FREE, however, upon withdrawal during retirement years, money withdrawn is added to all other sources of income and total income will be taxable according to your marginal income tax rate which generally is lower during retirement years. In essence, RRSP does not avoid tax, instead it works on the principle of tax deferral to encourage Canadians to save for retirement and enabling to reduce tax burden during high taxpaying years.

TAX FREE SAVING ACCOUNT - TFSA

Since 2009, government re-invented the wheel and provided us probably one of the best financial planning tool that is simple enough to understand and offers a highly tax-efficient saving vehicle.

Ottawa named it TFSA but one of the great personal finance authors - Mr. David Chilton of The Wealthy Barber called it – totally fantastic savings account and this rightly is fantastic because any growth achieved within a TFSA will not be taxed in any way throughout an individual’s lifetime. 

In addition, there are no restrictions on the timing or amount of withdrawals from a TFSA, and the money withdrawn can be used for any purpose. That's what we call flexibility.

For 2020, you can contribute $6,000 to your TFSA, bringing the cumulative total to $69,500, or $139,000 between a couple. This means that a TFSA can help meet almost any investment objective.