You have limited funds and you’re wondering whether it’s better to put them in your Registered Retirement Savings Plan (RRSP) or in Tax-free Savings Plan (TFSA) eligible investments.
That depends on two factors:
1. How frequently the funds will be removed from and re-contributed to either investments within an RRSP or TFSA in the years leading up to your retirement.
If you are going to need the funds prior to retirement and intend to re-contribute them at a later date, a TFSA may be the better option because you can make withdrawals at any time and the contribution room is restored; but when you make RRSP withdrawals, you lose that contribution room.
2. What your marginal tax rate is today and what your marginal tax rate will be when you finally remove the funds:
Generally, if your marginal tax rate is lower at the time the funds are removed from your registered plan at retirement, the RRSP option will usually produce a better result – but that is only true if your marginal tax rate actually is lower.
Your marginal tax rate can be influenced by income-tested benefits including the Age Credit, Old Age Security (OAS), the Guaranteed Income Supplement (GIS) and the GST Credit. Because they are income-tested benefits, they are reduced or clawed-back as your income increases, ultimately disappearing entirely at an upper threshold that is different for each of the benefits. If the funds you remove from your RRSP after age 65 increase your taxable income and result in the loss of some or all of your income-tested benefits, you will have effectively – and perhaps substantially – reduced your income and increased the tax you pay. And you would have cancelled out some or all of the value of your RRSP withdrawal.
There is no doubt that RRSPs and TFSAs play key roles in financial and retirement planning and there are strategies – like income-splitting – that you can use to reduce your taxable income and avoid claw backs. A professional advisor can help you decide what’s best for your situation. For more info call 905-216-2445 click email@example.com or visit www.vnaccountingsolutions.com
“Phishing” is a term used for unsolicited email messages from allegedly legitimate companies that trick innocent victims into divulging personal information. This scam is known as “phishing” .
Legitimate financial institutions would never ask you to respond via email to any requests for confidential, private, or personal information such as your password, your customer card number, or your login information. In truth, you should never, ever send personal identification numbers or confidential information of any kind by email, since it is not a secure method of contact.
So, how do you spot a scam? These phishing emails often urge you to click on a link or attachment for any of the following reasons:
- To change or update your personal information
- To invite you to enter a contest
- To warn of possible suspension of your client card or account
- To invite you to apply for products
After clicking on an attachment or link from an unsolicited email, the user is usually taken to a phony site that requests confidential information, which could include any of the following:
- Bankcard numbers or user IDs
- Account numbers
- Personal identification numbers (PINs)
- Credit card numbers
- Social insurance numbers (SINs)
- Any other personal or private information
These scams are designed most often to impersonate the look and feel of an authentic site. They contain a web address with the “@” symbol or a numeric address (e.g., 123.456.7.8). The address may also include the word, phrase, or text of a company name (e.g., “XYZ”) to make it appear genuine.
How do you protect yourself:
You can help protect yourself quite easily from email fraud and sites that request your personal or banking information if you remember these simple rules:
- If you encounter a suspicious-looking unsolicited email that appears to be from a bank or other financial institution, do not reply or click on the link. Instead, contact the institution immediately and report the attempted fraud.
- Review all your financial statements on a regular basis to check for any unauthorized or suspicious transactions. Never send personal or financial information to anyone by email.
- Do not immediately assume that an email has come from a legitimate source, just because the “from” line logo, or image appears to be legitimate. They can easily be forged with the kind of graphics technology available today.
- You should always be suspicious of email attachments from unknown sources. If you do not know or recognize the sender of an email, do not open any attachments, regardless of the circumstances.
- Never click on links in email messages from unknown sources. A link in a phishing email will take you to a bogus website that has been designed to look real. If you want to log in to your bank’s online services, type the URL into the address/location window on your web browser; or save a link in your favourites list and go from there.
- Don’t ever trust offers of money or threats of legal action. Also, do not be fooled by warnings about “security compromises” or “security threats.” Swindlers and charlatans will often make such claims in an attempt to frighten people into disclosing personal information to resolve the alleged threat.
- When you receive emails, you should run your anti-virus software to ensure they don’t contain any viruses.
- If you think you may have received a counterfeit email or disclosed any confidential information, or if you have any other security concerns, call your bank or financial institution for advice on what steps you should take.
By taking all the precautions given above, you should be able to safely avoid falling into the hands of the multitude of phishing email scam artists who are constantly on the prowl. For more info call 905-216-2445, click firstname.lastname@example.org or visit www.vnaccountingsolutions.com
The Lifelong Learning Plan (LLP) allows you to withdraw amounts from RRSPs to finance training or education for you or your spouse or common-law partner. You cannot use the RRSP funds to finance your children’s training or education, or the training or education of your spouse or common-law partner’s children.
Who can participate in the Lifelong Learning Plan?
To participate in the LLP, all of the following conditions must apply:
The student (RRSP owner) must be either the LLP participant or be the spouse or common-law partner of the RRSP owner.
- You must own an RRSP
- The student must be a full-time student (or a part-time student if he or she meets the disability conditions).
- You (the RRSP owner) have to be a resident of Canada.
- The student has to enroll in a qualifying educational program at a designated educational institution.
- The participation in the Lifelong Learning Plan (LLP) has to be done before the end of the year the student reaches the age of 71 years old.
You are responsible for making sure that all LLP conditions are met. If a condition is not met while you are participating in the plan, your RRSP withdrawal will not be considered eligible. You will have to include the RRSP withdrawal as income on your income tax return for the year you received the funds.
If you meet the conditions for participating in the LLP when you make a withdrawal from your RRSP, you can do the following:
- Participate in the plan as many times as you wish over your lifetime. Starting the year after you bring your LLP balance to zero, you can participate in the plan.
- Participate in the LLP at the same time as your spouse or common-law partner. You can use the LLP for either or both of you.
- Participate in the LLP even if you have withdrawn amounts from your RRSP under the Home Buyers’ Plan (HBP) that have not been fully repaid.
For more info call 905-216-2445, click email@example.com or visit www.vnaccountingsolutions.com