|
|
 | Tax Strategies and Tips
To take full advantage of the taxable benefits associated with an RRSP, the sooner you start investing, the better. The longer your savings have to grow, the more you can benefit from the tax-sheltered compound investment returns that RRSPs provide. Below are some strategies to consider:
| Tax Advantages Using an RRSP |
Option 1: An RRSP investor starts at age 25, contributes $1,000 per year, receives an average 8% annual rate of return on the investment, and is subject to a tax rate of 40%. The final contribution is made at age 69.
Option 2: A non-registered investor also starts at age 25, also wants to contribute $1,000 but has to pay tax on this amount first, leaving only $600 to invest per year, receives the same 8% return on investment, and is subject to a tax rate of 40%. The final contribution is made at age 69.
What is the end result? By taking advantage of the tax deferred benefits of a registered account (option 1), the value of the plan increased to $417,426 at age 69. This compares to the non-registered account (option 2) whose value is a mere $214,182. The difference is $203,244*.
* This example assumes that the taxable portion of the fund return is 25%, the tax rate on the investment earnings is 25% and the annual income tax payable by the non-registered investor must be paid through withdrawals from the fund.
How you invest in RRSPs, especially what you do with your income tax refund is an often-overlooked practice that has a huge impact on the size of your retirement funds. In this section, we identify five RRSP refund strategies, each producing different levels of retirement income.
LEARN MORE
| Tax Deductible Alternatives |
Many Canadians, particularly those with little RRSP contribution room, are seeking tax-deductible investment options beyond their RRSPs. In this section we identify the best tax-deductible alternative to use.
LEARN MORE
| |
| | |
|
|
New Page 2
New Page 2
|
RRSP
RESOURCE CENTRE |
|
.\...
|
|
