From time to time, Wheatland features events for their clients as well as the community.
Understanding the effects of RRSP and TSFA contributions
- An RRSP
contribution up to your contribution limit will be a deduction from income
for 2015 if it
was made in the last 10 months of 2015 or the first 2 months of 2016, but
will be taxable the
year it is withdrawn from the plan.
- A TFSA contribution is not a deduction from taxable income, but neither is the increase in value of the fund taxable, so you can build a tax free retirement or rainy day fund, subject to the contribution limits in place. At this point in time you are allowed total contribution of $46,500.00 in your TFSA.
- An RRSP contribution applied against 2015 taxable income: under $45,000 may save 26%, $45,000 - $89,000 will save 35% and over $89,000 will save at least $39% tax. So you can see RRSPs are more of an advantage for those with higher taxable income than lower (particularly if they will be taxed in a lower bracket when withdrawn from the plan).
- Once you (and your
spouse) are 71 years of age you can no longer contribute to an RRSP, but
still can contribute to a TFSA. If you fall in this age group and have funds to invest in a TFSA, by all means do so.
- If you are under 71
years of age and have maxed out your RRSP limit and still have funds to
invest in a TFSA, it is a good plan to do so.