The following article was submitted by Karen Mason, Sooke’s independent financial planner.
Both registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) can be used effectively to accumulate more savings for retirement. With its potential for reducing taxes, you might consider how a TFSA could fit into your retirement planning strategy together with RRSPs. They complement each other as savings vehicles.
Q: Which plan should I contribute to first – RRSP or TFSA?
As a general rule, RRSPs are a good choice for longer-term goals such as retirement, while TFSAs work better for more immediate objectives, such as a home down payment. But because of its tax advantages, TFSAs should not be overlooked as a retirement savings vehicle. If you expect to be in a higher marginal tax rate in the future, it may be a good strategy to contribute to a TFSA now, when you’re paying less income tax and an RRSP later, when you’ll be subject to a higher marginal tax rate and your RRSP contribution will generate more income tax savings. Your financial security advisor can work with you to help determine an approach that suits your situation best.
Q: Where can I find my RRSP and TFSA contribution information?
Your RRSP deduction limit can be found on your notice of (re)assessment from Canada Revenue Agency. Your current year’s limit will appear on your notice from the previous year. Your TFSA contribution limit can be obtained by phone via the Tax Information Phone Service (TIPS) at 1-800-267-6999 or online via the Canada Revenue Agency My Account feature (http://www.cra-arc.gc.ca/myaccount/).
Please be aware of the 2015 RRSP contribution deadline. You have 60 days after the end of the year (usually until March 1, or February 29 in a leap year) to make your RRSP contribution for the previous year. For the 2015 tax year, February 29, 2016 is the deadline.
Q: What are the TFSA limits?
The TFSA limits are as follows:
For more information about TFSA’s please go to: http://bit.ly/1v3EmwN