Published by Harvest ETFs
Registered Retirement Savings Plans (RRSPs) and Tax
The difference between the two lies in their tax treatment, but they
The RRSP advantage
When you make an RRSP contribution, you get the deduction (42.5 cents per $1 at the average tax rate) and the investment grows tax-free. You pay tax when money is withdrawn, often beginning at age 71 when RRSPs must be converted to a Registered Retirement Income Fund (RRIF).
The TFSA advantage
A TFSA contribution is made with
TFSA’s were introduced in 2009 with a $5,000 limit that grows with inflation. On Jan. 1, 2019 the annual contribution room increased to $6,000. Someone who has never contributed will have a cumulative contribution room of $63,500 in 2019.
RRSP vs TFSA
Which one is better depends on your age, stage and investment
Here’s why: The Fraser Institute estimates says that the average Canadian pays 42.5% of income in taxes, so $1 earned is really only 57.5 cents in hand.
An RRSP lets the full $1 work for you, growing and compounding over a long period of time.
Of course, you pay tax when you take the money out, but you have also benefitted from a lot of growth over time.
So, if you lose money on an investment in an RRSP, you not only lose the capital, you also lose the compounding power because the sum is smaller.
The effect is similar
Harvest Portfolios Group CEO Michael Kovacs founded the company in 2009 with the principles of conservative growth and consistent income. Harvest funds are RRSP and TFSA eligible and offer steady growth of capital along with a dependable income stream in all business conditions. From a single fund Harvest now offers 12 ETFs, four structured funds and two mutual funds. -AM
Read more about Harvest Portfolios Group funds here.
The views and/or opinions expressed in the blog are of a general nature and are for informational purposes only. Blog contents should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage personal investment strategies. Investors should consult their investment advisor before making any investment decision.