RSSCompare & Contrast with RRSP’s
The Tax-Free Savings Account (TFSA)
It was introduced in he 2008 Federal Budget, the tax-free savings account (TFSA) will be introduced January 1st, 2009. As the Date approaching many financial service firms and fund companies are releasing how the plan will be offered and implemented. Many Plan sponsors and individual investors are wondering if it should be part of their benefits program or part of their portfolio.
What is a TFSA?
A new savings vehicle, that begins January 1st, 2009. Canadians that are at least age 18 and have a SIN # are eligible to contribute. The Maximum Limit to contribute within a year is $5,000.
Comparing & Contrasting with a RRSP
Below are the similarities and differences between the new TFSA and a regular RRSP.
TFSA RRSP
|
Earned Income Requirement |
Can Contribute from Age 18 Money can come from any source |
Contribution based on earned income in last year or carry forward unused contribution room |
|
Taxes: Contributions |
Not tax Deductable |
Tax Deductable |
|
Taxes: Withdrawals |
TAX FREE! |
Added to income & taxed at current marginal rate |
|
Taxes: Investment Earnings |
Not subject to any taxation |
Sheltered from tax during accumulation period, but taxed when eventually begin taking as income or collapsed. |
|
Types of investments |
GIC’s, Mutual funds, Segregated Funds, stocks & bonds |
GIC’s, Mutual funds, Seg.Funds, stocks & bonds |
|
Contribution room and withdrawals |
If money is withdrawn, you get the contribution room back the following year |
Withdrawals have no effect on contribution room available |
|
Unused Contribution Rom |
Can be carried forward from year to year |
Can be carried forward from year to year |
|
Income Splitting |
Can contribute to spouse’s account |
Can contribute to spouse’s account |
|
Multiple accounts |
Yes, subject to contribution limit |
Yes, subject to contribution limit |
|
Income Tested Benefits |
Withdrawals will not affect these benefits |
Withdrawals qualify as income and can result in a reduction of these benefits |