The document discusses the importance of making regular contributions to Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) for Canadians. It emphasizes the tax benefits of RRSP contributions and highlights that TFSAs provide flexible access to funds without tax penalties. The document encourages individuals to maximize their contributions and consult with a financial advisor for tailored advice.

1. November 7, 2016
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What motivates you to contribute to your RRSP or
TFSA?
How do you contribute to your registered retirement savings plan (RRSP) and your tax-free
savings account (TFSA)? Do you make regular contributions through the year? Do you
contribute when a friend or family member nudges you? Do you remember to do so when your
professional advisor reminds you? Or do you want to make up for last year when you forgot to
invest in or top up your RRSP or TFSA?
It really doesn’t matter what motivates you to contribute to your RRSP or TFSA – what matters
is that you do make regular contributions. Here’s why:
Investment experts agree: An RRSP is the best retirement savings strategy for most
Canadians Your contributions and all the investment earnings that accumulate in your plan
are tax exempt until you start using the money in retirement. Add in the fact that your
contributions can be used to reduce taxes and the magic of compounding that enhances RRSP
growth over time and it’s easy to see why a registered plan makes such good financial sense.
To get the most in immediate tax savings and long-term growth from your RRSP, always make
your maximum contribution each year. For 2016 the maximum RRSP contribution is $25,370
(How much you can contribute can be found on your most recent notice of assessment from the
Canada Revenue Agency.) The RRSP contribution deadline for the 2016 tax year is March 1,
2017. If you have any unused contribution room left over from previous years, fill it up as quickly
as possible for maximum long-term tax-deferred growth and additional tax savings. Your RRSP
contribution tax deduction can be carried forward to future tax years, which can be useful if you
expect a jump in income in the next few years.
TFSAs are an excellent and flexible way to save You put your money into a TFSA and you
get your money back out – at any time, for any purpose. With a TFSA, there is no tax deduction
for your contributions but all TFSA investment earnings are totally tax-free and will not trigger
clawbacks on federal tax credits or benefits programs (such as the Guaranteed Income
Supplement, Old Age Security, Age Credit, GST Credit, or Canada Child Benefit). The current
annual maximum TFSA contribution is $5,500 plus the full amount of any previous year
withdrawals. If you don’t use all your contribution room right away, it accumulates year after
year – fill it up any time you want. By the way, your TFSA contributions do not affect your RRSP
contribution room.
There’s no doubt that regular contributions to a RRSP and TFSA are vital to your financial
future. Your professional advisor can help you get the most from a RRSP, a TFSA and every
other element of your overall financial plan.
This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services
Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information
only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your
circumstances. For more information on this topic please contact your Investors Group Consultant.