The deadline for RRSP contributions is fast approaching – March 1st! (In Canada) A question that I always get asked is; “Is the RRSP still the best way for me to fund my future, or should I be maximizing my contribution to a tax-free savings account first, and only then use my additional cash to contribute to an RRSP?”
Well, that depends on a whole lot of things; what do you need, what do you want and how do you want to get there?
RRSP’s can save you money today through tax savings and provide you with a larger investment portfolio at retirement. But the thing with an RRSP is it only works if you actually use it.
Nowadays most companies don’t offer pension plans. YOU have to be pro-active and create your own plan. RRSP’s work for some people and may be a building block in your financial future portfolio.
Some of the other alternatives to save for your future; Real Estate, Stocks, a Business or a TFSA may be a better fit for you.
In 2009, the Canadian federal government introduced a savings vehicle called the tax-free savings account (TFSA). The TFSA allows Canadian residents who are 18 years of age or older to have an alternative way to save for their future.
Contributions to a TFSA are not deductible for income tax purposes. However, any amount contributed as well as any income generated in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn.
You can only contribute up to your TFSA contribution room. The maximum that you can put in a TFSA to date is $46,500 (2009-2016)
The biggest advantage to committing to one plan or the other is that this will help you create a savings discipline. When you can systematically save via an RRSP, TFSA or even a non-registered investment account, they will help provide you with a more financially comfortable future than maybe relying on an LRSP (Lottery Retirement Savings Plan!).
Education is the key. If you don’t know what you have or why you have it then you need to ask questions and get educated about your options that are the best fit for you.
Are you one of those people that runs in to your bank at the last minute and puts money into an RRSP? It’s usually because your accountant said you needed to reduce your taxes! (And then you end up cashing it in anyway!)
This is important planning, so if you have left it to the last minute it is not too late to get advice!
Call me for a complimentary appointment to look at your situation. I’ll be honest with you (maybe even recommend that you don’t get an RRSP!)
It’s your money, don’t leave it up to someone else to take care of your plan. When you know better – you’ll do better!
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