What should I use an RRSP or a TFSA? Earn 5% Guaranty every year TAX FREE !

January 29, 2016 at 2:41 pm Leave a comment

TFSA:

Lets you stash extra cash for just about anything — rainy-day savings, a new house or retirement — without paying any tax on the growth within the account or on withdrawals.

Start with a TFSA, when your income goes up add an RRSP...

rrspvstfsa

Confused by another set of letters? Don’t be. TFSAs, or Tax-Free Savings Accounts, are simply one more way to shelter your money from the taxman. The difference is that with RRSPs, you get a tax break when you contribute. When the money’s withdrawn, you’re taxed. For TFSAs, the process reverses. There’s no tax break up front, but the government can’t get its paws on your money when the funds are withdrawn.

So which is better? It all depends on how much money you make. Canadians earning less than $36,000 should use TFSAs, says Gordon Pape, author of The Ultimate TFSA Guide. The reason is that people with lower incomes can make more in retirement than they do when they are working, due to the government benefits you get at age 65. You always want to pay income taxes when your income is lower, so if you make less than $36,000 it’s better if the money is taxed before you put it in your retirement savings, as is the case with a TFSA. Plus, when you retire, the money you take from TFSAs isn’t considered income, so it won’t result in clawbacks to Old Age Security and the Guaranteed Income Supplement.

The same isn’t true for RRSPs.

If you’re just starting your career and earning in the $30,000 range, you could start with TFSAs and when your income goes up, you could switch to RRSPs. Not only will you get larger tax breaks, but you’ll have built up lots of extra RRSP contribution room from the years you were using a TFSA instead.

 

Need Help?

Earn 5% Guaranty every year TAX FREE !

visit http://www.ottawabroker.com

Call  Toll Freel 1-800-503-6140 ex 223

info@ottawabroker.com

email_icon2

 

Advertisements

Entry filed under: Uncategorized. Tags: .

What kind of life insurance is right for me – Permanent Insurance or Term Insurance? Qu’est-ce que votre banque ne vous dira pas à propos de l’assurance prêt hypothécaire !

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


wordpress com stats

%d bloggers like this: