Canadian RRSP’s, TFSA’s and Government Grants

With tax time fast approaching I thought it was a good time to pool together a few articles that I have read recently on some tax programs offered by the Government of Canada.

The first article deals with Registered Retirement Savings Plans(“RRSP”) and discusses some of the down sides and negative affects they can cause.  One of the biggest negatives that people don’t think about is the size of the withdrawal from your RRSP that is required each year in retirement and the tax that must be paid on the withdrawal.

Far too often I find that people are looking for the sure automatic answer without considering the benefit today and the negative tomorrow.  In this case often people think the sure answer is to invest in RRSP’s every year regardless and get that nice tax refund today and forget about the nasty tax they may have to pay later.  The major reason to hold investments through an RRSP should be to give you a higher after tax return on your money over your life-time than investing outside of your RRSP.  So the actual answer should be to do the math and put your money in the investment that makes the most sense to you after considering all the options and the implications of each option including tax now and in the future.

To read the full article here is the link

http://www.financialpost.com/personal-finance/rrsp/Were+RRSPs+major+mistake/4129581/story.html

In 2009 the government introduced a new savings vehicle called a Tax Free Savings Account or TFSA.  It is similar to an RRSP, the major difference being that you do not get a tax deduction when you contribute to a TFSA, but you don’t get charged tax when you take money out of it either.  Similar to an RRSP your money can grow inside the TFSA tax free.

The Canada Revenue Agency has provided some information on TFSA’s on their website and here is a link to that:

http://www.cra-arc.gc.ca/nwsrm/txtps/2011/tt110111-eng.html?=eml20110111

Another article I came across recently looks at RRSP’s and TFSA’s together and how one can use them together to get the most out of each of them.

Here is a link to the article.

http://www.financialpost.com/personal-finance/rrsp/Maximize+your+RRSP+TFSAs+benefits/4121555/story.html

The last article I want to talk about today has to do with grants the Government of Canada makes available and how people are not taking full advantage of them.  For example, the article mentions that eligible seniors do not receive up to $1 Billion worth of old age security benefits, scary isn’t it!  Now major reasons for people not taking advantage of grants and benefits provided by the Government are because they either don’t know they are available, don’t ask for them, or don’t apply for them.

Here is the article:

http://www.financialpost.com/news/Free+government+benefits+have+apply+them/4266032/story.html

To help with the “don’t know they are available” issue here are 2 links to Government of Canada websites where grants are available.

http://www.servicecanada.gc.ca/eng/home.shtml

http://www.canadabusiness.ca/eng/

If you find other sites please write a comment with the link so that we can all benefit.

To help with the “don’t apply” and “don’t ask” issues please contact me and find out how I can assist.  At times the paperwork can be over whelming but I am here to help.

If you would like to discuss any of the above please feel free to contact me at 289-812-1505.  For more details on the services I offer please visit the services page.

Angus Shuttleworth Chartered Accountant

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