Which one is right for you?

 

As we near the end of January, it's time to think about taxes and how to decrease the amount we are paying. One way to do this is to ensure you have contributed enough to your RRSP to bring your income down to a lower tax brackets. You have until March 1, 2018 to make a contribution against your 2017 income. Your RRSP limit is calculated as 18% of your earned income in 2017 to a maximum of $26,010. The limit is increased by inflation each year so the 2018 limit is $26,230. To take full advantage of the tax deferred growth, consider making your 2018 RRSP contribution at the beginning of the year instead of at the end. 

 

The other great tool the government gives each Canadian over 18 is the TFSA. You can contribute $5500/year to a lifetime maximum of $57,500 however, that limit may be higher if you have withdrawn from your TFSA in previous years and not paid it back. There is no requirement to pay back any withdrawals but it does increase your limit of what can be put into the account the following year.  You can check with CRA to confirm the exact amount you can contribute to your TFSA. 

 

The RRSP will give you a tax deduction in the year you make the contribution but the withdrawals are fully taxable as income however the TFSA is funded with after tax money (no tax deduction when the contribution is made) but all growth and withdrawals are tax free. Consider using the TFSA to supplement your retirement income as any money earned in the TFSA will not affect other sources of retirement income such as OAS. 

 

Not sure which one is right for you? Give us a call to help you decide! Todd can be reached at 613-566-4582 and Corrie can be reached at 613-566-2032.