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Tax-efficient strategies are available for every individual’s needs. These are just a few ways you can take the first step today to better achieve your financial goals.

Registered Retirement Savings Plan (RRSP)

An RRSP is the most effective retirement savings and investing tool available to most Canadians. It lets the money you invest grow unaffected by taxes until it is withdrawn. That means your money has the potential to grow faster and accumulate more returns. What’s more, you’ll get a tax deduction for every dollar you put into an RRSP, reducing your annual tax bill.

Investments in an RRSP grow on a tax-deferred basis until the money is withdrawn. The fact that your plan is “registered” with the Canada Revenue Agency allows you to benefit from this tax-deferred growth.

Outside an RRSP, most investments are taxed. Interest earned is fully taxable, half of the capital gains are taxable and dividends are taxable but eligible for the dividend tax credit. Inside an RRSP, none of these taxes apply. Because you pay no tax on investment growth while your money remains inside an RRSP, your investments compound far more quickly.

At the end of the road, that makes a huge difference. Even though you’ll be taxed on amounts you withdraw from RRSP savings during retirement, your tax rate will likely be lower than during your working years. So the tax bite will be considerably smaller. And the money left in the retirement plan continues to grow sheltered from tax

Registered Education Savings Plan (RESP)

RESPs permit savings to grow tax-free until the beneficiary is ready to go to college, university or any other eligible postsecondary educational institution. Under the family RESP plan, if your child decides not to attend higher education, the RESP can be transferred to another beneficiary such as a sibling. RESP assets can also be transferred into parental RRSPs, provided the parent has enough contribution room left.

Each child beneficiary can collect up to $500 per year from the Canada Education Savings Grant (CESG) program to a maximum of $7,200 over the life of the RESP. That’s an automatic 20% return on your investment! The simplest way to achieve this is to set up a convenient pre-authorized contribution of about $208 a month. And the earlier you start, the more you take advantage of accumulated growth.

Tax-Free Savings Account (TFSA)

Tax-Free Savings Accounts (TFSA) were introduced in the 2008 Federal Budget effective January 1, 2009 to help us save and invest for our future. Canadians who are 18 years of age or older may contribute up to $10,000 per year to a TFSA. TFSAs are great because the earnings are tax-free. In Canada, only your principal residence and your TFSA are true tax-free investments.

Your TFSA contribution can go to a wide array of savings or investments, such as a savings account, GICs, Mutual Funds, etc. The unused contribution room can be carried forward, so if you can’t make the full $10,000 contribution one year, you can catch up in a subsequent year. Withdrawals are tax free and the earnings are too.Unlike RRSPs, if you make a withdrawal from your TFSA one year, it creates new room. You can, therefore, put the amount withdrawn back into the plan in a subsequent year.

Permanent Cash Value Life Insurance

Whereas temporary life insurance covers a variety of short term risks, such as providing mortgage protection or income replacement, permanent life insurance not only covers risks but also acts as an important vehicle to maximize estate and retirement planning as well as business succession planning.

Beyond the pure insurance aspect, most policies provide the owner with the option of contributing more money into the policy than is necessary to pay for the cost of insurance (COI). This additional money is invested and grows tax-sheltered, similar to an RRSP. The policy holder is limited by certain government guidelines for how much extra money they can contribute, but this amount can be substantial.

Although the extra funds contributed are not tax-deductible, they do grow tax-sheltered, and, if not withdrawn, will pay out tax-free to the insured’s estate. It is one of the few outright, tax-free, intergenerational transfers allowed by the CRA. In addition to the tax-free death benefit, the policy owner can access the funds for other purposes prior to death, for example, to pay off a mortgage or supplement retirement income.

The benefits of tax sheltering and eventual tax-free payout of the invested funds become even more valuable in Corporate Planning, where other tax-advantaged plans such as RRSP’s and TFSA’s are not available, graded tax categories do not apply, and all passive investment assets are taxed slightly above the higher marginal personal tax rate.

Contact us today to explore the options that are right for you.

Mutual funds and/or approved exempt market products are offered through Investia Financial Services Inc.
Insurance products are provided through multiple insurance carriers.