Investment & Registered Accounts 

In Canada, there are registered and non-registered bank account. Today we will focus on the most common registered bank account in Canada.

1. Tax Free Saving Account (TFSA)

TFSA was introduced by Canadian gouvernment in 2008. Anyone who is 18 years of age or older and who has a valid social insurance number (SIN) is eligible to open a TFSA.

Benefits 

  • Interest, dividends and capital gains earned in a TFSA are tax-free for life.

  • Flexibility: you can withdraw money tax-free from TFSA at any time (remember to put money back in the following year)

  • Independence: Withdraw money from TFSA will not affect benefits and income 

Annual contribution room

Year                    Contribution limit

2020                    $6000

2019                    $6000

2016~2018          $5500

2015                    $10,000

2013~2014          $5500             

2009~2012          $5000

Any unused contribution room from one year is carried forward and added to the TFSA contribution limit the following year.

2. Registered Retirement Savings Plan(RRSP)

Benefits: Reduce taxable income

Annual contribution room: based on the earned income from the previous year

Withdrawals are counted as income. 

3. Registered Retirement Income Fund (RRIF)

A Registered Retirement Income Fund (RRIF) is an account registered with the federal government which allows you to withdraw money accumulated through RRSP  for retirement. 

Tips about RRIFs

  •  Age limit: The conversion of RRSP into a RRIF must be completed before December 31st of the year you turn 71. No maximum age to liquidate a RRIF.

  • ​Generally, you open a RRIF to transfer money from RRSP. On certain occasions, you may transfer from pension plans or deferred profit sharing plans (DPSPs). 

  • No contributions should be made once the RRIF is set up. 

  • You can choose any types of investments you want: GICsmutual funds, exchange-traded fund (ETFs)segregated fundsstocks and bonds.

  • A minimum amount must be taken out from RRIF each year. No maximum withdrawal limit.

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4. Registered Education Savings Plan (RESP)

A RESP is a special savings account for parents who would like to save for their child's education after high school.

Reasons for open a RESP

  • Prepare for your child's future education

  • Investment grows tax-free (Magic power of compounding)

  • Pay less tax (money taxed in the hands of the beneficiary)

  • Free money from Canadian government. Canadian Education Savings Grant (CESG) is 20% of the money you invest, up to a maximum of $500 per year. You can also get additional grants.  Some investment companies sometimes also offer bonus. 

Do you have the above accounts? Contact us to know more and have one today!