L.S. Smith and Associates
  • HOME
  • ABOUT
    • ABOUT
    • CAREER OPPORTUNITIES
    • SUPPLIERS
    • PRIVACY & TERMS OF USE
  • SERVICES
    • LIFE STAGES
      • FINANCIAL ADVICE
      • STARTING YOUR CAREER
      • GROWING FAMILIES
      • MATURING FAMILIES
      • PREPARING FOR RETIREMENT
      • RETIREES
      • ESTATE PLANNING
    • BUSINESS
      • FINANCIAL ADVICE FOR BUSINESS OWNERS
      • BUSINESS CONTINUATION
      • BUSINESS SUCCESSION
      • EXECUTIVE BENEFITS
    • EMPLOYEE BENEFITS
    • INSURANCE PLANNING
      • LIFE INSURANCE
      • MORTGAGE INSURANCE
      • CRITICAL ILLNESS INSURANCE
    • RETIREMENT PLANNING
      • TAX FREE SAVINGS ACCOUNT
      • REGISTERED EDUCATION SAVINGS PLAN
      • REGISTERED RETIREMENT SAVINGS PLAN
      • REGISTERED RETIREMENT INCOME FUND
    • BANKING SERVICES
    • TAX SERVICES
    • LIBERTY TAX SERVICES
  • RESOURCES
    • INVESTOR LOGIN
    • RESOURCES
    • CALCULATORS
  • BLOG
  • CONTACT
  • Search
  • Menu Menu

    TFSA vs RRSP 2025

    February 6, 2025/in Blog, Investment, rrsp, Tax Free Savings Account /by LS Smith & Associates

    When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. To assist you in understanding the distinctions, we will compare the following:

    • The differences in deposits between TFSAs and RRSPs
    • The differences in withdrawals between TFSAs and RRSPs
    brandableContent

    TFSA versus RRSP – Difference in deposits 

    When comparing deposit differences between TFSAs and RRSPs, there are several key considerations: 

    • The amount of contribution room available
    • The ability to carry forward unused contributions
    • The tax deductibility of contributions
    • The tax treatment of growth in the account


    How much contribution room do I have? 

    If you have never contributed to a TFSA since 2009, you can contribute up to $102,000 today. This table outlines the contribution amount you are allowed each year since TFSAs were created, including this year: 

    Regarding RRSPs, the limit for tax deductions is 18% of your pre-tax earned income from the previous year, with a maximum limit of $32,490. To illustrate, if your pre-tax income in 2024 was $60,000, your deduction limit for 2024 would be $10,800 (18% x $60,000). If your pre-tax income was $200,000, the maximum limit of $32,490 would apply. 

    How much contribution room can I carry forward? 

    Suppose you opt not to contribute to your TFSA each year or do not contribute the maximum amount. In that case, you can carry forward your unused contribution room indefinitely, provided you are a Canadian resident, over 18 years of age, and have a valid social insurance number. If you make a withdrawal, the amount withdrawn will be added to your annual contribution room for the next calendar year. 

    In contrast, for an RRSP, you can carry forward your unused contribution room until age 71. Once you reach 71, you are required to convert your RRSP into an RRIF. Withdrawals from an RRSP do not create additional contribution room.

    The tax deductibility of contributions

    Your TFSA contributions are not tax-deductible and are made with after-tax dollars. 

    Your RRSP contributions are tax-deductible and made with pre-tax dollars. 

    Tax Treatment of Growth 

    It is essential to contribute to both RRSP and TFSA because of the different tax treatment of the growth within them. 

    A TFSA is ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free. When withdrawing from your TFSA, you will not have to pay any income tax on the amount withdrawn. On the other hand, the growth within an RRSP is tax-deferred. This means you will not pay taxes on your RRSP gains until age 71, at which point you convert the RRSP into an RRIF and start withdrawing money. 

    RRSPs are more suitable for long-term goals such as retirement because, in retirement, you will have a lower income and be in a lower tax bracket, resulting in less tax on your RRIF income.

    brandableContent

    TFSA versus RRSP – Differences in withdrawals 

    There are several areas to focus on when comparing differences in withdrawal: 

    • Conversion Requirements 
    • Tax Treatment 
    • Government Benefits 
    • Contribution Room 

    Conversion Requirements 

    For a TFSA, there are never any conversion requirements as there is no maximum age for a TFSA. 

    For an RRSP, you must convert it to a Registered Retirement Income Fund (RRIF) if you turn 71 by December 31st, 2025. 

    Tax Treatment of Withdrawals 

    One of the most attractive things about a TFSA is that all your withdrawals are tax-free! Therefore, they are recommended for short-term goals; you don’t have to worry about taxes when you take money out to pay for a house or a dream vacation. 

    With an RRSP, if you make a withdrawal, it will be taxed as income except in two cases: 

    • The Home Buyers Plan lets you withdraw up to $60,000 tax-free, but you must pay it back within fifteen years. 
    • The Lifelong Learning Plan lets you withdraw up to $20,000 ($10,000 maximum per year) tax-free, but you must pay it back within ten years. 

    How will my government benefits be impacted? 

    If you are withdrawing from your TFSA or RRSP, it’s essential to know how that will affect any benefits you receive from the government. 

    Since TFSA withdrawals are not considered taxable income, they will not impact your eligibility for income-tested government benefits. 

    RRSP withdrawals are considered taxable income and can affect the following: 

    • Income-tested tax credits such as Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit, and the Age Credit. 
    • Government benefits including Old Age Security, Guaranteed Income Supplement and Employment Insurance. 

    How will a withdrawal impact my contribution room? 

    If you withdraw from your TFSA, the amount you withdrew will be added on top of your annual contribution room for the following calendar year. If you withdraw from your RRSP, you do not open any additional contribution room. 

    The Takeaway 

    RRSPs and TFSAs can both be great savings vehicles. However, there are significant differences between them which can affect your finances. If you need help navigating these differences, please do not hesitate to contact us. We’re here to help.

    Sources:

    • https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/registered-retirement-savings-plan-rrsp.html
    • https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html

    https://lssmith.ca/wp-content/uploads/2025/02/TFSA-vs-RRSP-2025-1.png 300 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2025-02-06 06:09:412025-02-06 06:09:52TFSA vs RRSP 2025

    TFSA vs RRSP 2025

    February 1, 2025/in Blog, Investment, rrsp, Tax Free Savings Account /by LS Smith & Associates

    When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. To assist you in understanding the distinctions, we will compare the following:

    • The differences in deposits between TFSAs and RRSPs
    • The differences in withdrawals between TFSAs and RRSPs
    brandableContent

    TFSA versus RRSP – Difference in deposits 

    When comparing deposit differences between TFSAs and RRSPs, there are several key considerations: 

    • The amount of contribution room available
    • The ability to carry forward unused contributions
    • The tax deductibility of contributions
    • The tax treatment of growth in the account


    How much contribution room do I have? 

    If you have never contributed to a TFSA since 2009, you can contribute up to $102,000 today. This table outlines the contribution amount you are allowed each year since TFSAs were created, including this year: 

    Regarding RRSPs, the limit for tax deductions is 18% of your pre-tax earned income from the previous year, with a maximum limit of $32,490. To illustrate, if your pre-tax income in 2024 was $60,000, your deduction limit for 2024 would be $10,800 (18% x $60,000). If your pre-tax income was $200,000, the maximum limit of $32,490 would apply. 

    How much contribution room can I carry forward? 

    Suppose you opt not to contribute to your TFSA each year or do not contribute the maximum amount. In that case, you can carry forward your unused contribution room indefinitely, provided you are a Canadian resident, over 18 years of age, and have a valid social insurance number. If you make a withdrawal, the amount withdrawn will be added to your annual contribution room for the next calendar year. 

    In contrast, for an RRSP, you can carry forward your unused contribution room until age 71. Once you reach 71, you are required to convert your RRSP into an RRIF. Withdrawals from an RRSP do not create additional contribution room.

    The tax deductibility of contributions

    Your TFSA contributions are not tax-deductible and are made with after-tax dollars. 

    Your RRSP contributions are tax-deductible and made with pre-tax dollars. 

    Tax Treatment of Growth 

    It is essential to contribute to both RRSP and TFSA because of the different tax treatment of the growth within them. 

    A TFSA is ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free. When withdrawing from your TFSA, you will not have to pay any income tax on the amount withdrawn. On the other hand, the growth within an RRSP is tax-deferred. This means you will not pay taxes on your RRSP gains until age 71, at which point you convert the RRSP into an RRIF and start withdrawing money. 

    RRSPs are more suitable for long-term goals such as retirement because, in retirement, you will have a lower income and be in a lower tax bracket, resulting in less tax on your RRIF income.

    brandableContent

    TFSA versus RRSP – Differences in withdrawals 

    There are several areas to focus on when comparing differences in withdrawal: 

    • Conversion Requirements 
    • Tax Treatment 
    • Government Benefits 
    • Contribution Room 

    Conversion Requirements 

    For a TFSA, there are never any conversion requirements as there is no maximum age for a TFSA. 

    For an RRSP, you must convert it to a Registered Retirement Income Fund (RRIF) if you turn 71 by December 31st, 2025. 

    Tax Treatment of Withdrawals 

    One of the most attractive things about a TFSA is that all your withdrawals are tax-free! Therefore, they are recommended for short-term goals; you don’t have to worry about taxes when you take money out to pay for a house or a dream vacation. 

    With an RRSP, if you make a withdrawal, it will be taxed as income except in two cases: 

    • The Home Buyers Plan lets you withdraw up to $60,000 tax-free, but you must pay it back within fifteen years. 
    • The Lifelong Learning Plan lets you withdraw up to $20,000 ($10,000 maximum per year) tax-free, but you must pay it back within ten years. 

    How will my government benefits be impacted? 

    If you are withdrawing from your TFSA or RRSP, it’s essential to know how that will affect any benefits you receive from the government. 

    Since TFSA withdrawals are not considered taxable income, they will not impact your eligibility for income-tested government benefits. 

    RRSP withdrawals are considered taxable income and can affect the following: 

    • Income-tested tax credits such as Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit, and the Age Credit. 
    • Government benefits including Old Age Security, Guaranteed Income Supplement and Employment Insurance. 

    How will a withdrawal impact my contribution room? 

    If you withdraw from your TFSA, the amount you withdrew will be added on top of your annual contribution room for the following calendar year. If you withdraw from your RRSP, you do not open any additional contribution room. 

    The Takeaway 

    RRSPs and TFSAs can both be great savings vehicles. However, there are significant differences between them which can affect your finances. If you need help navigating these differences, please do not hesitate to contact us. We’re here to help.

    https://lssmith.ca/wp-content/uploads/2025/02/TFSA-vs-RRSP-2025.png 300 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2025-02-01 06:00:522025-02-01 06:01:01TFSA vs RRSP 2025

    Retirement Planning for Business Owners

    January 14, 2025/in Blog, business owners, corporate, Retirees, rrsp, tax, Tax Free Savings Account /by LS Smith & Associates

    Retirement planning can be a complex process for us all, but if you are the owner of a small business it may can get even more complicated, due to the various factors and circumstances that you have to take into consideration. A common mistake made by small business owners is reinvesting extra money to grow their business, at the expense of putting it aside to save for their retirement.

    Although there is no magic formula for getting started on a retirement strategy for your business, there are some general principles which might help you to get a handle on the steps that you need to take. One of the key ideas is the consideration of both your business and your personal finances and how to structure and integrate the two in order to create a robust retirement financial strategy.

    Here are some tips on how to get started on a retirement plan.

    • Set aside time to plan for the future – It’s important to make retirement planning a priority, or you run the risk of never getting around to it. A professional financial planner can help you to assess your personal circumstances and create a personalized plan that suits you and your business, with the right balance between saving and reinvestment to help your business to grow.
    • Think about your future retirement income – Here are the main sources of retirement income that small business owners usually rely on:
    1. Equity held in your business – If your business is successful, you are likely to benefit from equity from it in your retirement. Selling your company is an option, particularly attractive to some as, in some cases, you could benefit from the lifetime capital gains exemption on the sale. Of course, finding the right person to run your business in the future is easier said than done. A clear succession plan, created in advance of your retirement, can help you to ensure that business continuity will be affected as little as possible and will give you peace of mind as you approach your retirement. You may also want to consider using the expertise of an accountant or mergers and acquisitions specialist to help you to value your business correctly and also look after your interests when liaising with potential purchasers.
    2. Alternatively, you may choose for your children to inherit your business, or you may decide to retain ownership of dividend-paying preferred shares in order to maintain an ongoing source of income.
    3. Registered plans – A Registered Retirement Savings Plan (RRSP) can offer personal tax deductions on your contributions, plus your savings will grow as tax-deferred whilst in the plan. In addition, tax-free savings accounts (TFSAs) can be a useful way to save tax-free in particular circumstances.
    • Consider offering a retirement savings plan to your employees – Paying your statutory contribution of the Canada Pension Plan is just the minimum – many small businesses choose to offer their employees enhanced pension contributions as an incentive or employee benefit. For example, you could match their RRSP contributions to a set limit, to help their retirement nest grow more quickly. Alternatively, you could offer a benefit plan with an investment contribution package from an insurance company, which can be a more straightforward and cost-effective choice.
    • Be sure to diversify – As a small business owner, you should avoid putting all of your eggs in one basket, financially speaking, as this could leave you vulnerable to changes in the market. Try to diversify your investments and spread your funds in order to protect yourself and engage the help of a professional where necessary to help you to do so.

    In summary, it’s important to remember that retirement planning is a process which is unique and personal to your own and your business’ circumstances and there is no uniform approach which works across the board. Take time to take stock of your current situation, as well as your goals for the future and this will help you to create a retirement plan that is right for your needs, both current and future.

    Contact us

    https://lssmith.ca/wp-content/uploads/2025/01/retirementPlanningBOFI.png 512 1024 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2025-01-14 05:05:422025-01-14 05:05:57Retirement Planning for Business Owners

    2025 Financial Calendar

    January 1, 2025/in Blog, Family, Financial Planning, personal finances, rrsp, tax, Tax Free Savings Account /by LS Smith & Associates

    brandableContent
    brandableContent
    brandableContent
    brandableContent
    brandableContent

    Welcome to our 2025 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don’t miss any important financial obligations.

    If you need help with your taxes, tax packages will be available starting February 2024. Don’t wait until the last minute to get started on your tax return – make an appointment with your accountant to ensure you’re ready to go when tax season arrives.

    Important 2024 Dates to Know

    On January 1, 2025, the contribution room for your Tax-Free Savings Account (TFSA) opens again. For those that are eligible, the contribution rooms for your Registered Retirement Savings Plan (RRSP), First Home Savings Account (FHSA), Registered Education Savings Plan (RESP), and Registered Disability Savings Plan (RDSP) will also be available.

    For your Registered Retirement Savings Plan contributions to be eligible for the 2024 income tax year, you must make them by March 3, 2025.

    GST/HST credit payments will be issued on:

    • January 3

    • April 4

    • July 4

    • October 3

    Canada Child Benefit payments will be issued on the following dates:

    • January 20

    • February 20

    • March 20

    • April 17

    • May 20

    • June 20

    • July 18

    • August 20

    • September 19

    • October 20

    • November 20

    • December 12

    The government will issue Canada Pension Plan and Old Age Security payments on the following dates:

    • January 29

    • February 26

    • March 27

    • April 28

    • May 28

    • June 26

    • July 29

    • August 27

    • September 25

    • October 29

    • November 26

    • December 22

    The Bank of Canada will make interest rate announcements on:

    • January 29

    • March 12

    • April 16

    • June 4

    • July 30

    • September 17

    • October 29

    • December 10

    April 30, 2025, is the last day to file your personal income taxes, and tax payments are due by this date. This is also the filing deadline for final returns if death occurred between January 1 and October 31, 2024.

    May 1 to June 30, 2025, would be the filing deadline for final tax returns if death occurred between November 1 and December 31, 2024. The due date for the final return is six months after the date of death.

    The tax deadline for all self-employment returns is June 16, 2025. Payments are due April 30, 2025.

    The final Tax-Free Savings Account, First Home Savings Account, Registered Education Savings Plan and Registered Disability Savings Plan contributions deadline is December 31, 2025.

    December 31, 2025 is also the deadline for 2025 charitable contributions.

    December 31, 2025 is also the deadline for individuals who turned 71 in 2025 to finish contributing to their RRSPs and convert them into RRIFs.

    Please reach out if you have any questions.

     

    Sources:

    https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/filing-deadlines.html

    https://www.canada.ca/en/revenue-agency/services/child-family-benefits/benefit-payment-dates.html

    https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/important-dates-rrsp-rrif-rdsp.html

    https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2024/planning-file-your-tax-return-on-paper-here-what-you-need-know.html

    https://www.bankofcanada.ca/2024/08/bank-canada-publishes-2025-schedule-policy-interest-rate-announcements-other-major-publications/

    https://www.canada.ca/content/dam/cra-arc/camp-promo/smll-bsnss-wk-e.pdf

    https://lssmith.ca/wp-content/uploads/2025/01/2025-Financial-Calendar.png 280 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2025-01-01 07:23:512025-01-01 07:23:592025 Financial Calendar

    2025 Financial Calendar

    December 31, 2024/in Blog, Family, Financial Planning, personal finances, rrsp, tax, Tax Free Savings Account /by LS Smith & Associates

    brandableContent
    brandableContent
    brandableContent
    brandableContent
    brandableContent

    Welcome to our 2025 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don’t miss any important financial obligations.

    If you need help with your taxes, tax packages will be available starting February 2024. Don’t wait until the last minute to get started on your tax return – make an appointment with your accountant to ensure you’re ready to go when tax season arrives.

    Important 2024 Dates to Know

    On January 1, 2025, the contribution room for your Tax-Free Savings Account (TFSA) opens again. For those that are eligible, the contribution rooms for your Registered Retirement Savings Plan (RRSP), First Home Savings Account (FHSA), Registered Education Savings Plan (RESP), and Registered Disability Savings Plan (RDSP) will also be available.

    For your Registered Retirement Savings Plan contributions to be eligible for the 2024 income tax year, you must make them by March 3, 2025.

    GST/HST credit payments will be issued on:

    • January 3
    • April 4
    • July 4
    • October 3

    Canada Child Benefit payments will be issued on the following dates:

    • January 20
    • February 20
    • March 20
    • April 17
    • May 20
    • June 20
    • July 18
    • August 20
    • September 19
    • October 20
    • November 20
    • December 12

    The government will issue Canada Pension Plan and Old Age Security payments on the following dates:

    • January 29
    • February 26
    • March 27
    • April 28
    • May 28
    • June 26
    • July 29
    • August 27
    • September 25
    • October 29
    • November 26
    • December 22

    The Bank of Canada will make interest rate announcements on:

    • January 29
    • March 12
    • April 16
    • June 4
    • July 30
    • September 17
    • October 29
    • December 10

    April 30, 2025, is the last day to file your personal income taxes, and tax payments are due by this date. This is also the filing deadline for final returns if death occurred between January 1 and October 31, 2024.

    May 1 to June 30, 2025, would be the filing deadline for final tax returns if death occurred between November 1 and December 31, 2024. The due date for the final return is six months after the date of death.

    The tax deadline for all self-employment returns is June 16, 2025. Payments are due April 30, 2025.

    The final Tax-Free Savings Account, First Home Savings Account, Registered Education Savings Plan and Registered Disability Savings Plan contributions deadline is December 31, 2025.

    December 31, 2025 is also the deadline for 2025 charitable contributions.

    December 31, 2025 is also the deadline for individuals who turned 71 in 2025 to finish contributing to their RRSPs and convert them into RRIFs.

    Please reach out if you have any questions.

     

    Sources:

    https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died/prepare-returns/filing-deadlines.html

    https://www.canada.ca/en/revenue-agency/services/child-family-benefits/benefit-payment-dates.html

    https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/important-dates-rrsp-rrif-rdsp.html

    https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2024/planning-file-your-tax-return-on-paper-here-what-you-need-know.html

    https://www.bankofcanada.ca/2024/08/bank-canada-publishes-2025-schedule-policy-interest-rate-announcements-other-major-publications/

    https://www.canada.ca/content/dam/cra-arc/camp-promo/smll-bsnss-wk-e.pdf

    https://lssmith.ca/wp-content/uploads/2024/12/2025-Financial-Calendar.png 280 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2024-12-31 10:15:072024-12-31 10:15:162025 Financial Calendar

    TFSA vs RRSP – 2024

    February 1, 2024/in 2024, Blog, business owners, Estate Planning, Family, financial advice, Financial Planning, individuals, Investment, personal finances, Professionals, retirement, rrsp, Tax Free Savings Account /by LS Smith & Associates

    Tax-Free Savings Account vs Registered Retirement Savings Plan

    When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. To assist you in understanding the distinctions, we will compare the following:

    • The differences in deposits between TFSAs and RRSPs

    • The differences in withdrawals between TFSAs and RRSPs

    TFSA versus RRSP – Difference in deposits 

    When comparing deposit differences between TFSAs and RRSPs, there are several key considerations: 

    • The amount of contribution room available

    • The ability to carry forward unused contributions

    • The tax deductibility of contributions

    • The tax treatment of growth in the account


    How much contribution room do I have? 

    If you have never contributed to a TFSA, you can contribute up to $95,000 today. This table outlines the contribution amount you are allowed each year since TFSAs were created, including this year:

    Regarding RRSPs, the limit for tax deductions is 18% of your pre-tax earned income from the previous year, with a maximum limit of $31,560. To illustrate, if your pre-tax income in 2023 was $60,000, your deduction limit for 2024 would be $10,800 (18% x $60,000). If your pre-tax income was $200,000, the maximum limit of $31,560 would apply. 

    How much contribution room can I carry forward? 

    Suppose you opt not to contribute to your TFSA each year or do not contribute the maximum amount. In that case, you can carry forward your unused contribution room indefinitely, provided you are a Canadian resident, over 18 years of age, and have a valid social insurance number. If you make a withdrawal, the amount withdrawn will be added to your annual contribution room for the next calendar year. 

    In contrast, for an RRSP, you can carry forward your unused contribution room until age 71. Once you reach 71, you are required to convert your RRSP into an RRIF. Withdrawals from an RRSP do not create additional contribution room.

    The tax deductibility of contributions

    Your TFSA contributions are not tax-deductible and are made with after-tax dollars. 

    Your RRSP contributions are tax-deductible and made with pre-tax dollars. 

    Tax Treatment of Growth 

    It is essential to contribute to both RRSP and TFSA because of the different tax treatment of the growth within them. 

    A TFSA is ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free. When withdrawing from your TFSA, you will not have to pay any income tax on the amount withdrawn. On the other hand, the growth within an RRSP is tax-deferred. This means you will not pay taxes on your RRSP gains until age 71, at which point you convert the RRSP into an RRIF and start withdrawing money. 

    RRSPs are more suitable for long-term goals such as retirement because, in retirement, you will have a lower income and be in a lower tax bracket, resulting in less tax on your RRIF income.

    TFSA versus RRSP – Differences in withdrawals 

    There are several areas to focus on when comparing differences in withdrawal: 

    • Conversion Requirements 

    • Tax Treatment 

    • Government Benefits 

    • Contribution Room 

    Conversion Requirements 

    For a TFSA, there are never any conversion requirements as there is no maximum age for a TFSA. 

    For an RRSP, you must convert it to a Registered Retirement Income Fund (RRIF) if you turn 71 by December 31st, 2024. 

    Tax Treatment of Withdrawals 

    One of the most attractive things about a TFSA is that all your withdrawals are tax-free! Therefore, they are recommended for short-term goals; you don’t have to worry about taxes when you take money out to pay for a house or a dream vacation. 

    With an RRSP, if you make a withdrawal, it will be taxed as income except in two cases: 

    • The Home Buyers Plan lets you withdraw up to $35,000 tax-free, but you must pay it back within fifteen years. 

    • The Lifelong Learning Plan lets you withdraw up to $20,000 ($10,000 maximum per year) tax-free, but you must pay it back within ten years. 

    How will my government benefits be impacted? 

    If you are withdrawing from your TFSA or RRSP, it’s essential to know how that will affect any benefits you receive from the government. 

    Since TFSA withdrawals are not considered taxable income, they will not impact your eligibility for income-tested government benefits. 

    RRSP withdrawals are considered taxable income and can affect the following: 

    • Income-tested tax credits such as Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit, and the Age Credit. 

    • Government benefits including Old Age Security, Guaranteed Income Supplement and Employment Insurance. 

    How will a withdrawal impact my contribution room? 

    If you withdraw from your TFSA, the amount you withdrew will be added on top of your annual contribution room for the following calendar year. If you withdraw from your RRSP, you do not open any additional contribution room. 

    The Takeaway 

    RRSPs and TFSAs can both be great savings vehicles. However, there are significant differences between them which can affect your finances. If you need help navigating these differences, please do not hesitate to contact us. We’re here to help.

    https://lssmith.ca/wp-content/uploads/2024/02/TFSA-vs-RRSP-2024.png 300 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2024-02-01 14:33:132024-02-01 14:33:16TFSA vs RRSP – 2024

    TFSA versus RRSP – What you need to know to make the most of them in 2023

    February 2, 2023/in 2023, Blog, rrsp, Tax Free Savings Account /by LS Smith & Associates

    When looking to save money in a tax-efficient manner, Tax-Free Savings Accounts (TFSA) and Registered Retirement Savings Plans (RRSP) can offer significant tax benefits. To assist you in understanding the distinctions, we will compare the following:

    • The differences in deposits between TFSAs and RRSPs

    • The differences in withdrawals between TFSAs and RRSPs

    TFSA versus RRSP – Difference in deposits

    When comparing deposit differences between TFSAs and RRSPs, there are several key considerations:

    • The amount of contribution room available

    • The ability to carry forward unused contributions

    • The tax deductibility of contributions

    • The tax treatment of growth in the account

    How much contribution room do I have?

    If you have never contributed to a TFSA, you can contribute up to $88,000 today. This table outlines the contribution amount you are allowed each year since TFSAs were created, including this year:

       
    Year   
       
    TFSA dollar limit   
       
    2023   
       
    $6,500   
       
    2022   
       
    $6,000   
       
    2021   
       
    $6,000   
       
    2020   
       
    $6,000   
       
    2019   
       
    $6,000   
       
    2018   
       
    $5,500   
       
    2017   
       
    $5,500   
       
    2016   
       
    $5,500   
       
    2015   
       
    $10,000   
       
    2014   
       
    $5,500   
       
    2013   
       
    $5,500   
       
    2012   
       
    $5,000   
       
    2011   
       
    $5,000   
       
    2010   
       
    $5,000   
       
    2009   
       
    $5,000   

    Regarding RRSPs, the limit for tax deductions is 18% of your pre-tax income from the previous year, with a maximum limit of $30,780. To illustrate, if your pre-tax income in 2022 was $60,000, your deduction limit for 2023 would be $10,800 (18% x $60,000). If your pre-tax income was $200,000, the maximum limit of $30,780 would apply.

    How much contribution room can I carry forward?

    Suppose you opt not to contribute to your TFSA each year or do not contribute the maximum amount. In that case, you can carry forward your unused contribution room indefinitely, provided you are a Canadian resident, over 18 years of age, and have a valid social insurance number. If you make a withdrawal, the amount withdrawn will be added to your annual contribution room for the next calendar year.

    In contrast, for an RRSP, you can carry forward your unused contribution room until age 71. Once you reach 71, you are required to convert your RRSP into an RRIF. Withdrawals from an RRSP do not create additional contribution room.

    The tax deductibility of contributions

    Your TFSA contributions are not tax-deductible and are made with after-tax dollars.

    Your RRSP contributions are tax-deductible and made with pre-tax dollars.

    Tax Treatment of Growth

    It is essential to contribute to both RRSP and TFSA because of the different tax treatment of the growth within them.

    A TFSA is ideal for short-term goals, such as saving for a down payment on a house or a vacation, as its growth is entirely tax-free. When withdrawing from your TFSA, you will not have to pay any income tax on the amount withdrawn. On the other hand, the growth within an RRSP is tax-deferred. This means you will not pay taxes on your RRSP gains until age 71, at which point you convert the RRSP into an RRIF and start withdrawing money.

    RRSPs are more suitable for long-term goals such as retirement because, in retirement, you will have a lower income and be in a lower tax bracket, resulting in less tax on your RRIF income.

    TFSA versus RRSP – Differences in withdrawals

    There are several areas to focus on when comparing differences in withdrawal:

    • Conversion Requirements

    • Tax Treatment

    • Government Benefits

    • Contribution Room

    Conversion Requirements

    For a TFSA, there are never any conversion requirements as there is no maximum age for a TFSA.

    For an RRSP, you must convert it to a Registered Retirement Income Fund (RRIF) if you turn 71 by December 31st, 2023.

    Tax Treatment of Withdrawals

    One of the most attractive things about a TFSA is that all your withdrawals are tax-free! Therefore, they are recommended for short-term goals; you don’t have to worry about taxes when you take money out to pay for a house or a dream vacation.

    With an RRSP, if you make a withdrawal, it will be taxed as income except in two cases:

    • The Home Buyers Plan lets you withdraw up to $35,000 tax-free, but you must pay it back within fifteen years.

    • The Lifelong Learning Plan lets you withdraw up to $20,000 ($10,000 maximum per year) tax-free, but you must pay it back within ten years.

    How will my government benefits be impacted?

    If you are withdrawing from your TFSA or RRSP, it’s essential to know how that will affect any benefits you receive from the government.

    Since TFSA withdrawals are not considered taxable income, they will not impact your eligibility for income-tested government benefits.

    RRSP withdrawals are considered taxable income and can affect the following:

    • Income-tested tax credits such as Canada Child Tax Benefit, the Working Income Tax Benefit, the Goods and Services Tax Credit, and the Age Credit.

    • Government benefits, including Old Age Security, Guaranteed Income Supplement and Employment Insurance.

    How will a withdrawal impact my contribution room?

    If you withdraw from your TFSA, the amount you withdrew will be added on top of your annual contribution room for the following calendar year. If you withdraw from your RRSP, you do not open any additional contribution room.

    The Takeaway

    RRSPs and TFSAs can both be great savings vehicles. However, there are significant differences between them which can affect your finances. If you need help navigating these differences, please do not hesitate to contact us. We’re here to help.

    https://lssmith.ca/wp-content/uploads/2023/02/TFSA-or-RRSP-2023-Featured-Image-500px.jpeg 292 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2023-02-02 17:13:002023-02-02 17:13:05TFSA versus RRSP – What you need to know to make the most of them in 2023

    2023 Financial Calendar

    January 2, 2023/in 2023, Blog, Financial Planning, retirement, rrsp, Tax Free Savings Account /by LS Smith & Associates

    Welcome to our 2023 financial calendar! This calendar is designed to help you keep track of important financial dates and deadlines, such as tax filing and government benefit distribution. You can bookmark this page for easy reference or add these dates to your personal calendar to ensure you don’t miss any important financial obligations.

    If you need help with your taxes, tax packages will be available starting February 2023. Don’t wait until the last minute to get started on your tax return – make an appointment with your accountant to ensure you’re ready to go when tax season arrives.

    https://lssmith.ca/wp-content/uploads/2023/01/2023-Financial-calendar.png 333 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2023-01-02 12:39:052023-01-03 12:58:022023 Financial Calendar

    Do you have enough for retirement?

    December 1, 2022/in Blog, pension plan, Retirees, retirement, rrsp, Tax Free Savings Account /by LS Smith & Associates

    Many of us dream of the day that we can retire and have the time to ourselves that we have dreamed of for so many years. But, to have a genuinely contented and relaxing retirement, you need to ensure that you have the means to afford it. So, now’s the best time to consider the three critical stages of retirement planning.

    Accumulation

    This is the stage you save for your retirement – essentially, the majority of your working life. So, naturally, if you start saving for your retirement early, you will have the ability to save a larger pension for the future, though this is not always achievable for young people or those on a low income.

    Pre-retirement

    At this point, you are making the final plans for your retirement. Although you are potentially making less money at this late stage of your career, it’s still a necessary time to continue saving and making sure that your investments are fit for purpose.

    Retirement

    Once you are no longer working, your retirement income will usually come from three key sources:

    • Government benefits: Canada Pension Plan or Old Age Security

    • Employer pension or retirement plan

    • Personal savings: Registered Retirement Savings Plan, Tax-Free Savings Account, Non-Registered Savings

    Your concern will be to ensure that your money lasts the length of your lifetime.

    Drawing up a retirement plan

    A retirement plan is a crucial process to undertake during your working life, as it will help you outline and achieve your financial goals for the future. However, making such a plan doesn’t have to be daunting – here are our key steps to success:

    • Work out how much income you’ll need in your retirement. This is a key starting point to ensure that you save enough to meet this need.

    • Start early. If you can, invest any spare money into your retirement fund and keep going. Small amounts grow over time and can help you create a savings fund to meet your needs in retirement.

    • Diversify as much as you can. The best way to reduce your risk and exposure to poor market performance is to spread your investments. We can help you create a strategy that focuses on your attitude to risk.

    • Contributing to a TFSA or RRSP is a great place to start. Contribute the maximum amounts you can, and don’t forget to contribute on a consistent basis.

    Talk to us today about your retirement goals.

    https://lssmith.ca/wp-content/uploads/2022/12/Do-you-have-enough-for-retirement.png 281 500 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2022-12-01 08:03:212022-12-01 08:03:27Do you have enough for retirement?

    Retirement Planning for Business Owners – Checklist

    April 1, 2022/in Blog, business owners, corporate, health benefits, life insurance, long term care, pension plan, rrsp, Tax Free Savings Account /by LS Smith & Associates

    As a business owner, one of your challenges is learning how to balance between reinvesting into the business and setting money aside for personal savings. Since there are no longer employer-sponsored pension plans and the knowledge that retirement will come eventually, it’s important to have a retirement plan in place.

    We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance to help you achieve your retirement dreams.

    Income Needs

    • Determine how much income you will need in retirement.

    • Make sure you account for inflation in your calculations.

    Debts

    • You should try to pay off your debts as soon as you can; preferably before you retire.

    Insurance

    • As you age, your insurance needs change. Review your insurance needs, in particular your medical and dental insurance because a lot of plans do not provide health plans to retirees.

    • Review your life insurance coverage because you may not necessarily need as much life insurance as when you had dependents and a mortgage, but you may still need to review your estate and final expense needs.

    • Prepare for the unexpected such as a critical illness or a need for long-term care.

    Government Benefits

    • Check what benefits are available for you upon retirement.

    • Canada Pension Plan- decide when would be the ideal time to apply and receive CPP payments. Business owners are in a unique position to control how much can be contributed to CPP by deciding to pay salary or dividends. (Dividends don’t trigger CPP contributions.)

    • Old Age Security- check pension amounts and see if there’s a possibility of clawback.

    • Guaranteed Income Supplement- if your income is low enough, you could apply for GIS.

    Income

    • Are you a candidate for an individual pension plan (IPP)? IPPs can provide higher contributions than typically permitted to an RRSP and the ability to create a lifelong pension.

    • Check if your business is a candidate for a group RRSP or company pension plan. This is a great way for you to build retirement savings and provide benefits for your employees and business too.

    • Make sure you are saving on a regular basis towards retirement- in an RRSP, TFSA, or non-registered. Since you can control how you get paid, salary or dividends, dividends are not considered eligible income to create RRSP room, therefore you should make sure you have the optimal mix of both to achieve your financial goals.

    • Ensure your investment mix makes sense for your situation.

    • Don’t forget to check if there are any other income sources.  (ex. rental income, side hustle income, etc.)

    Assets

    • The sale of your business can be part of your retirement nest egg. Therefore, you should make sure you know the valuation of your business and your plan to sell the business to your family, employees, partners or a third party. You should also know when you decide to sell your business too.

    • Are you planning to use the sale of your home or other assets to fund your retirement?

    • Will you be receiving an inheritance?

    One other consideration that’s not included in the checklist is divorce. This can be an uncomfortable question, however divorce amongst adults ages 50 and over is on the rise and this can be financially devastating for both parties.

    Next steps…

    • Contact Us about helping you get your retirement planning in order so your retirement dreams can be achieved.

    https://lssmith.ca/wp-content/uploads/2022/04/retirementPlanningBO.jpeg 810 1440 LS Smith & Associates https://lssmith.ca/wp-content/uploads/2018/05/lsSmithLogo.jpg LS Smith & Associates2022-04-01 06:41:312022-04-01 06:42:00Retirement Planning for Business Owners – Checklist
    Page 1 of 3123

    Book a Meeting

    Book a meeting

    Search Blog Posts

    Latest News

    • Insurance PlanningApril 30, 2025 - 4:54 am
    • Tax Tips for Filing Your 2024 Income Tax ReturnMarch 31, 2025 - 5:27 am
    • Bank of Canada Announces Interest Rate Cut Amid Economic UncertaintyMarch 12, 2025 - 1:00 pm

    Categories

    • 2019 Only
    • 2020
    • 2020 Only
    • 2021
    • 2022
    • 2022 Only
    • 2023
    • 2024
    • 2025
    • Accountants
    • Blog
    • Business Owners
    • business owners
    • buy sell
    • Charitable Gifting
    • Coronavirus
    • Coronavirus – Associates
    • Coronavirus – Practice Owners
    • Coronavirus – Retired
    • Coronavirus – Retiring
    • Coronavirus – Students
    • corporate
    • Critical Illness
    • Debt
    • dental benefits
    • disability
    • disability insurance
    • education
    • Estate Planning
    • Families
    • Family
    • financial advice
    • Financial Planning
    • Government Budget
    • Group Benefits
    • health benefits
    • incorporated professionals
    • individuals
    • Insurance
    • Investment
    • investments
    • life insurance
    • long term care
    • mortgage
    • pension plan
    • permanent insurance
    • personal finances
    • Professional Corporations
    • Professionals
    • rdsp
    • Registered Education Savings Plan
    • RESP
    • Retirees
    • retirement
    • rrsp
    • Savings
    • tax
    • Tax Free Savings Account
    • term insurance
    • travel insurance

    Get in Touch

    L.S. Smith & Associates
    Shayne Smith
    Insurance and Financial Advisor
    Tel: (204) 489-1022
    Toll Free: 1-877-489-1022
    Email: [email protected]

    7-549 Regent Avenue West
    Winnipeg, MB
    R2C 1R9

    Latest News

    • Insurance PlanningApril 30, 2025 - 4:54 am
    • Tax Tips for Filing Your 2024 Income Tax ReturnMarch 31, 2025 - 5:27 am
    • Bank of Canada Announces Interest Rate Cut Amid Economic UncertaintyMarch 12, 2025 - 1:00 pm

    Newsletter

    About

    I believe that financial planning is about more than just a piece of good advice or investment returns. It’s all about providing the guidance that people can trust on.

    Liberty Tax Services

    ©2018 Financial Tech Tools Inc. | Privacy Statement and Terms of Use
      Scroll to top