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RRSP season is in full swing!

February 8, 2017Living in Retirement

It’s time to think about contributing to your RRSPs again. It’s never too late to begin building your nest egg. According to The Globe and Mail, “Only 25 per cent of Canadians now expect to retire at age 66, with a growing number saying they will keep working because of financial need…” If one-time contributions into your RRSP or TFSA (Tax Free Savings Account) are not easy to save for, consider setting up a monthly contribution. The monthly contributions can be adjusted at any time.

The key is to understand your budget, taxation status and your financial planning goals. Seize the opportunity to build a nest egg and enjoy some peace of mind as you look ahead to your retirement years.

If you are making a contribution this year, you have until March 1st, 2017 to do so. Below is an RRSP and Tax Planning Summary sheet which highlights a few important things for you to consider during RRSP season.

RRSP TFSA
Age (Eligibility) N/A 18
Annual Contribution limit  18% of previous year’s earned income, (maximum limits apply), less pension adjustments $5,500 PLUS amounts withdrawn in previous years
Contributions Tax-deductible Not tax-deductible
Unused contribution room Carried forward Carried forward
Growth Tax-deferred Tax-free
Withdrawals  Taxable: affects federal income-tested government benefits such as Old Age Security Tax-free, does not affect federal income-tested government benefits such as Old Age Security
Withdraws amounts Contribution room is lost for amounts you withdraw Added to contribution room in future years
Primary purpose Retirement savings Saving for any purpose
Plan maturity End of year when you turn 71 None; no upper age limit on contributions
Spousal plan You can contribute directly to a spousal RRSP You can give your spouse money to contribute to their TFSA

Even though a TFSA is not specifically designed as a retirement savings account, its flexibility makes it an excellent complement to an RRSP or RIF. If you have already maximized your RRSP contributions, then a TFSA is another option for saving additional money and getting the benefits of tax-free growth and withdrawals.

Also, there is no maximum age limit on a TFSA. You may continue contributing to your TFSA and enjoy tax-free growth and withdrawals throughout your retirement.

Seize the opportunity to build a nest egg and enjoy peace of mind as you look ahead to your retirement years. For customized financial planning strategies contact your FaithLife Financial Representative and start planning for next year and beyond!

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