Wealth Management
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Registered Accounts
Non-Registered Investments are taxable accounts available to Canadians. As the name suggests, it is not registered with the Canadian Federal Government. Non-Registered Accounts are flexible, and have no contribution limits.
There are also tax sheltered strategies available that allow an investor to defer most or all financial gains made in any given year. Gains earned are redistributed back into the investment account.
RRSP
A Registered Retirement Savings Plan (RRSP) is a retirement savings and investing vehicle for employees and the self-employed in Canada. After-tax dollars are placed into an RRSP and grows as a tax-deferral until withdrawal.
RRSP’s have quite a few benefits, however there are two main advantages. First, individuals may deduct contributions against their income. For example, if a contributor’s marginal tax rate is 40%, every $100 they invest in an RRSP will save that person $40 in taxes, up to their contribution limit. Second, the growth of RRSP investments is tax-deferred. Unlike non-RRSP investments, returns are exempt from any capital gains tax, dividend tax, or interest earned income. This means that investments under RRSPs compound on tax deferred basis.
RESP
A Registered Education Savings Plan (RESP), sponsored by the Canadian government, encourages investing in a child’s future post-secondary education. Subscribers to an RESP make contributions that build up tax-free earnings. The government contributes a certain amount to these plans for children under age 18.
Contributors do not receive a tax deduction for investments in an RESP. There are no taxes due until funds are taken out to pay for a child’s education. At that time, contributions made into the RESP are returned tax-free, although contributors’ earnings from the plan are taxed. The money the government pays out is taxed to the students, however since a large number of students have little to no income, many can withdraw the money tax-free.
TFSA
A Tax-Free Savings Account (TFSA) is an account in which contributions, interest earned, dividends, and capital gains are not taxed, and can be withdrawn tax-free. While it’s called a savings account, a TFSA can hold certain investments including mutual funds and cash. This account is available to individuals ages 18 and older in Canada and can be used for any purpose.
The benefit of holding an investment within a TSFA is that you won’t be taxed on any income the investment earns.
DPSP
A Deferred Profit-Sharing Plan (DPSP) is an employer-sponsored Canadian profit-sharing plan that is registered with the Canadian Revenue Agency, which is basically the Canadian version of the Internal Revenue Service (IRS) in the United States.
Employees who participate in a Deferred Profit-Sharing Plan see their contributions grow tax-free, which can lead to bigger investment gains over time, due to the compounding effect. They can access the funds prior to retirement; funds may be withdrawn partly or in their entirety within the first two years of membership. Taxes are then paid upon withdrawal.
RDSP
The Registered Disability Savings Plan (RDSP) bears some similarity to the RESP, but also shares some characteristics of the RRSP. This is a long-term savings instrument intended to provide a degree of financial independence for disabled Canadians.
A key benefit of the RDSP is that accumulation within the fund and withdrawals from the plan generally do not interfere with provincial disability supports. All of the growth from deposits made into the account and distribution given from grants are tax deferred until withdrawn.
RRIF
A Registered Retirement Income Fund (RRIF) is a retirement fund similar to an annuity contract, which pays out income to one or more beneficiaries. Often, owners of Registered Retirement Savings Plan (RRSP) roll over the balance from those plans into an RRIF in order to fund a retirement income stream. RRIF accounts are flexible and should be considered when discussing estate and financial planning concepts.
It is important to note that just like RRSP’s investment growth in a RRIF are tax deferred.
LIRA
A Locked-In Retirement Account (LIRA) is a type of registered pension fund in Canada that does not permit withdrawals before retirement except in exceptional circumstances. The Locked-In Retirement Account is designed to hold pension funds for a former plan member, an ex-spouse, or a surviving spouse.
It is also important to note that investment growth in a LIRA is not taxed.
wealth management
Non-Registered Accounts
Non-Registered Investments are taxable accounts available to Canadians. As the name suggests, it is not registered with the Canadian Federal Government. Non-Registered Accounts are flexible, and have no contribution limits.
There are also tax sheltered strategies available that allow an investor to defer most or all financial gains made in any given year. Gains earned are redistributed back into the investment account.