It’s RRSP Season! Are you taking advantage?
This RRSP season, consider a last-minute contribution to get the most out of your tax return.
If you didn’t get the chance to set up a monthly RRSP contribution in 2023, not to worry! Take advantage of RRSP season by investing a lump sum of money before the deadline (February 29, 2024). A last-minute RRSP contribution can prove quite valuable when tax time rolls around, and it’s a great way to save for your future. (RRSP has the word ”retirement” in its name for a reason.)
Take advantage of RRSP season to get most out of your tax return
If you know you’re going to owe money on your income tax return, an RRSP contribution can help reduce the amount you’ll have to hand over this year. And if you typically get money back, making an RRSP contribution at some point during the tax year can mean getting more back than anticipated. Just make sure to make a final deposit before the February 29th deadline.
While a one-time bulk contribution during RRSP season may not be a practical option for everyone, it can be a great way to invest that extra money you received over the holidays. If smaller contributions over a longer period of time work better with your budget, why not set up monthly contributions (via direct deposit) for the 2024 tax season? You’ll thank yourself later.
What about TFSAs?
A Tax-Free Savings Account (TFSA) is not tax-deductible (i.e., it won’t affect money owed or received when filing your personal income taxes). Not to mention, you will never be taxed on interest earned like you would with an RRSP. So if you find yourself in a position where you’ve already maximized your RRSP contributions, a TFSA is a good way to save additional money and enjoy the benefits of tax-free growth and withdrawals.
Just remember that a TFSA is not specifically designed as a retirement savings account, but can still nicely complement an RRSP.
RRSP vs TFSA: What’s the difference?
To make it simple, we’ve created a Tax Planning Summary that highlights a few important differences between these two savings options.
| RRSP | TFSA | |
|---|---|---|
| Age (Eligibility) | None* | 18 |
| Annual Contribution limit | 18% of previous year’s earned income, (maximum limits apply), less pension adjustments | $7,000 PLUS amounts withdrawn in previous years |
| Contributions | Tax-deductible | Not tax-deductible |
| Unused contribution room | Carried forward | Carried forward (since 2009) |
| Growth | Tax-deferred | Tax-free |
| Withdrawals | Taxable: affects federal income-tested government benefits such as Old Age Security Contribution room is lost for amounts you withdraw | Tax-free: does not affect federal income-tested government benefits such as Old Age Security Added to contribution room in future years |
| Primary purpose | Retirement savings | Saving for any purpose |
| Plan maturity | End of year when you turn 71 | None; no maximum age limit on contributions |
| Spousal plan | You can contribute directly to a spousal RRSP | You can give your spouse money to contribute to their TFSA |
*An individual must have employment or business income to earn contribution room; some financial institutions may require the individual to be at the age of majority
If you’re still wondering which of these two very common savings tools is best for your unique situation, speak with the experts. Book a no-obligation call with an advisor at Serenia Life to review your budget, financial goals, and more.
A different way to invest this RRSP season
Want to reap the benefits of some last-minute RRSP contributions and boost your savings while you’re at it? Consider investing in a Guaranteed Interest Annuity (GIA) – it’s like a GIC with a twist!
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