RSP, TFSA, WHAT?????
Confused by all the lingo? Let us simplify it.
When it comes to talking about money, there is a lot of terminology floating around. In the financial world, these abbreviated monikers and acronyms are the norm. For the rest of us, it leaves us feeling confused, intimidated and simply uninformed to ask appropriate questions.
We understand that because at one point we had to learn the lingo too. We understand how complicated it can all seem. So, we’ve taken the most common and applied terms and have broken it down. We hope it helps!
RSP INVESTING
A Registered Savings Plan (RSP) allows you to save money for retirement or education while deferring taxes on the plan contributions and earnings. Our consultants can help you open your account and transfer your existing RSP to invest in one of our outstanding opportunities.
As a private corporation, Prime Funds partners with several government regulated Trust Companies such as Canadian Western Trust and Olympia Trust, to comply with the Income Tax Act guidelines regarding using registered accounts to invest in a private corporation. Among their many offerings, they service our clients by routing investments through their trust accounts.
*** All accounts are self-directed and empower you with control of your investment decisions and the tax-deferred benefits of a registered account. These government regulated trusts offer many investment options including publicly traded stocks, mutual funds, mortgage investments and, of course, private corporation investments.
Registered Plans ELIGIBILITY
The following is an overview of the types of Registered Savings Plans (RSPs) and accounts that are eligible for Prime Funds:
- Registered Retirement Savings Plan (RRSP)
An RRSP is registered with the government.
Each year, you can contribute 18% of your gross income to your RRSP up to a 2009 maximum of $21,000 & 2010 maximum of $22,000.
Monies in your RRSP grow tax-sheltered and the proceeds are not taxed until you begin to withdraw funds from the plan. You can deregister money from your RSP at anytime, however, a portion of tax will be withheld and you will receive a T4RSP slip at the end of the year. This will be considered income for the year it is withdrawn.
- Registered Retirement Income Fund (RRIF)
You cannot contribute to a Registered Retirement Income Fund (RRIF). Funds are transferred from your RRSP to a RRIF and remain tax-sheltered while continuing to earn tax deferred income. You must convert your RSP into a RRIF by December 31st in the year you turn age 71.
- Locked-In Retirement Accounts (LIRA)
A locked-in retirement account (LIRA) is a special registered retirement savings plan (RRSP) in which a person can transfer the amounts that are in a supplemental pension plan (RPP) or a life income fund (LIF).
Unlike a regular RRSP, the amounts in a LIRA are locked-in and can only be used for retirement income. Amounts cannot be withdrawn from an LIRA, except under certain circumstances, in which a refund is allowed.
- Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) is a special savings plan that can help you, your family, or your friends save for a child’s education after high school.
Although RESP contributions are not tax-deductible, they do allow savings to compound and grow tax-free until the child is ready to attend college, university, or another post-secondary educational institution, on a full time basis.
TFSA INVESTING
 Prime Funds is pleased to assist our clients in establishing their Tax-Free Savings Account (TFSA).
The TFSA is a registered savings account that allows taxpayers to earn investment income tax-free inside their account. Contributions to the account are not deductible for tax purposes, and withdrawals of contributions and earnings from the account are not taxable.
Although the 2009 contribution limit is $5000, your contribution room would be made up of three amounts:
- Each year you would be allocated and allowed to contribute at least $5,000 (this annual amount will be indexed to inflation and rounded to the nearest $500 on a yearly basis.)
- Any withdrawals made in the previous year would be added to the contribution room for the year.
- Any unused contribution room from the previous year would be added to the contribution room for the year.
Question: If I don’t have the money to invest in a given year, would I be able to use any unused contribution in a future year?
Answer: Yes, there is no limit on the number of years unused contribution room could be carried forward. |
