Don’t rule out RRSPs
Sponsored Content - Jan 07 - Think Local

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Tax-Free savings accounts—those investment accounts that give you a certain amount of contribution room and allow you to grow your investment tax free—are becoming the investing vehicle of choice for many savvy savers.

Jill Diemer is a Certified Financial Planner at Prospera Credit Union’s Kelowna Mission Park branch. She often recommends that individuals set up a tax-free savings account, because it’s such a powerful and flexible investment tool.

“Even though it’s called a savings account, it’s not just a savings account—you can invest in stocks, mutual funds, and a whole lot more,” she explains. “In a lot of cases it makes sense to grow those investments in the tax-free savings account because then everything is tax free.”

But while the promise of ever-increasing tax avoidance is a tantalizing one, you may be able to save even more by strategically deploying an old-school investment vehicle: the RRSP. She says in certain circumstances, with careful planning, a Registered Retirement Savings Plan can compliment (and even enhance) financial plans.

An RRSP allows you to put money away today and avoid paying taxes on it until you’re ready to use it. Traditionally, it’s been a tool for people who have a higher income today than they will in retirement.

Diemer admits the uses of a RRSP are not as flexible as a TFSA, but says they can do wonders for people trying to achieve specific goals.

By strategically moving money from a TSFA into an RRSP, keyed-in savers can take advantage of lucrative government programs aimed at encouraging things like home ownership and continuing education.

The government’s Home Buyers Plan, for example, allows people purchasing their first home to take as much as $25,000 out of their RRSP—tax free—to put towards the purchase.

Meanwhile, the Lifelong Learning program allows adults returning to school to take as much as $20,000 out to use towards their or their spouse’s post-secondary education.

According to Diemer, making these kinds of moves can have a significant impact on your financial future. She points to one of her clients, Jacob, who is going back to school next year to upgrade his education.

Jacob makes decent money, so Diemer helped him funnel some of his savings from his TFSA into an RRSP to take advantage of the Lifelong Learning program.

“He’s going to make an RRSP contribution and receive a tax credit while he has a high income, and pull it out next year to support himself while he goes to school,” Diemer explains.

That means he’ll be able to use his RRSP contribution to get money back on his taxes this year, but still be able to use that money when he’s in school next year.

“It’s not easy knowing the ins and outs of various government programs, and the websites aren’t always friendly to navigate, so I recommend finding an advisor you trust, and you love, and who will help you achieve your goals,” Diemer says.

In Jacob’s case, he was doing a great job saving in his tax-free savings account, but now he’ll get several thousands back on a tax refund that will help him achieve that goal further.

“Your advisor will just help you navigate the waters.”

To contact an advisor, or for more information on RRSPs and TFSAs, contact Prospera Credit Union.

Right now, Prospera is offering special rates on flexible TFSA and RRSP options – including a 30-month term deposit at 2.5%, with the option to rewrite if rates go up. This investment provides peace of mind that if rates change, you’re still getting great value for money.

This article is written by or on behalf of the sponsoring client and does not necessarily reflect the views of Okanagan Edge.


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