Living Your best Financial Life: Decoding Financial Acronyms

What are theyWhat are the benefitsWho is eligible How can I establish one

Some Interesting FactsUnder one quarter of tax filers reported that they contributed to their RSP in 2013.

Approximately half of those eligible to hold TFSA accounts and only 17.7% maximized their contributions to this account in 2013.

68% of Canadian children aged 17 years or younger have savings for their post-secondary education.

Only 15% of the estimated 643,000 that are eligible to establish a Registered Disability Savings plan have one.

Source: Statistics Canada

RRSP (Registered Retirement Savings Plan)

is a personal savings plan that allows you to save for the future on a tax-sheltered basis.

Contributions up to your limit can reduce your taxable income and are 100% Tax Deductible.

- Limit is 18% of your previous year’s earned income up to $24,930 in 2015.

Contribution amounts from previous years can be carried forward less your Pension Adjustment.

Growth on this fund is entirely Tax Free!

At age 71, you are required to roll over RIF (Retirement Income Fund).

Is it better to contribute to my RSP or pay down my mortgage?

RSP Portfolio versus Unregistered Portfolio

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 $-

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Non RegisteredRSP

Year

Net

Wea

lth

Equates to approximately $700,000 difference from age 30 until retirement age based on $18,000 contribu-tions per annum with a 5% compounded return.

TFSA (Tax Free Savings Account)

is a flexible investment account that can help you meet both your short and long-term goals.

If you are over the age of 18 are a Canadian resident and have a valid SIN Number you are eligible to open an account.

Contributions can be carried forward and if you make a withdrawal, you gain that ‘room’ back.

Growth and withdrawals on this fund are entirely Tax Free!

TFSA Portfolio versus Unregistered Portfolio

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 $-

$500,000.00

$1,000,000.00

$1,500,000.00

$2,000,000.00

$2,500,000.00

$3,000,000.00

$3,500,000.00

$4,000,000.00

$4,500,000.00

Non RegisteredTFSA

Year

Net

Wea

lth

Further demonstration of the impact of tax on your returns…

Net Wealth of a TFSA doubles between the age 18 to age 90 when maximizing your contributions on an annual basis with a compounding annual return of 5%

TFSA (Tax Free Savings Account)

Is it better to contribute to a TFSA or an RSP?

Annual and Cumulative contribution amounts that can be contributed to a TFSA

Year Annual Limit Cumulative Total

2009 $5,000 $5,000

2010 $5,000 $10,000

2011 $5,000 $15,000

2012 $5,000 $20,000

2013 $5,500 $25,500

2014 $5,500 $31,000

2015 $10,000 $41,000

2016 $5,500 $46,500

RESP (Registered Education Savings Plan)

is a tax-sheltered plan that can help you save for a child's post-secondary education.

An RESP can be set up for any child, grandchild, niece, nephew or family friend.The federal government will match 20% of the first $2,500 ($500) contributed annually to an RESP per beneficiary up to $7,200 until the beneficiary turns 18.Additional provincial grants could be available through the Alberta Centennial Education Savings PlanThe maximum contribution per child / beneficiary is $50,000.

RESP (Registered Education Savings Plan)

Tax on growth is deferred until funds are withdrawn.

Growth on funds withdrawn are taxed in the hands of the beneficiary.

1 2 3 4 5 $-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Accumulated Tax Paid at Different Tax Rates

at 15% Taxat 39% Tax

Year

Tota

l Tax

Pai

d

RDSP (Registered Disability Savings Plan)

is to assist eligible Canadians with disabilities and their families in saving for the long-term financial security of the person with a disability.

There is no annual contribution limit, but there is a lifetime limit of $200,000 for total contributions.

Contributions may be eligible for the Canada Disability Savings Grant (CDSG), which matches contributions of up to $3,500 annually and $70,000 lifetime until beneficiary reaches age 49.

Tax on growth is deferred until funds are withdrawn.

What can we conclude…

Everyone should establish a TFSA account!

These accounts are an effective way to reduce your taxable income while saving for the future.

They provide an excellent way to grow your money while potentially reducing the effect of tax on the growth of those funds.

Contribution to these plans can induce Government Grants increasing your money’s ability to grow.