It’s time for the reminder for all individuals who are eligible for making RRSP contribution. For 2019 taxation year, the deadline is March 2,2020. Here are a few strategies that help you understand the benefit of RRSP contribution.
Strategy #1: Please make RRSP contribution. Some people say at the end of day, RRSP will include to your income and you have to pay tax. So, they don’t contribute RRSP. One thing is for sure that the taxes that you paid to the CRA is in the river of no return. YOU WILL NEVER GET IT BACK UNLESS YOU CLAIM RRSP DEDCUTION.
Strategy #2: Don’t wait till the deadline to make your contribution. The earlier that you put in your RRSP investment working, the more time that your investment will have to grow. Sometimes people wait till the last minute to find out RRSP contribution limit. Easily, you can find the answer from the previous year’s Notice of Assessment. If you are familiar with the CRA’s my account, you can simply log on to My Account to find out. Another aspect is that you can make RRSP contribution but not to use till you claim a deduction on your tax return.
Strategy #3: Put your money into RRSP dollars to TFSA before moving to RRSP account. This strategy helps you maximize the tax advantages of TFSA and RRSP vehicles. What you need to do is to contribute to your TFSA and wait till it grows. Before the RRSP deadline, you can transfer the appreciated investment to your RRSP. Under this strategy, you benefit from the asset appreciation as well as tax free saving account. However, one big assumption over here is that the investment is expected to appreciate.
Strategy #4: Take advantage of market movement. People used to say they don’t have enough knowledge about investment so that they behave very conservatively by putting their money in GICs or other safe money market funds. First of all, if your RRSP investment aims for your retirement, why not take advantage of what the market offers, ETFs, solid companies or even some companies that you deal with every day like Waste Management, Loblaws, Enbridge. I am sure those investment offers better than 1% of interest return.
Strategy #5: Please make sure beneficiary has been indicated in your RRSP investment. In some cases, beneficiary information is overlooked in RRSP investment. The consequence is that the person who passed away has to include all RRSP assets into his/her income. What it means is more taxes. So if you have named your spouse or a grown-up kid as the beneficiary of your RRSP on your plan documentation or in your Will, your RRSP assets can be transferred to them on a tax-deferred basis.
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