Registered Plans: Take advantage of tax shelters and government grants

The Canadian government, with a view to encourage Canadians to save more, has devised numerous registered plans for us. Some of these provide tax deferrals or tax shelters while others provide government grants. Take advantage of these to maximize your savings potential. We can show you which of these plans will make the biggest difference for you. Here is a brief description of some of the most popular plans:


  1. Registered Retirement Savings Plan (RRSP): Contributions to this plan are tax deductible, thus providing you with tax refunds. Further, your investments grow tax sheltered within the plan. The accumulated funds, if withdrawn when your income is lower, will result in tax savings. The plan also allows you to contribute money towards a Spousal RRSP which could be an effective income splitting strategy for many couples. For first time home buyers, the plan allows you to withdraw funds under the Home Buyers Plan (HBP) which may be a big help when cash is needed the most. For eg; an individual in a 40% tax bracket can make a $25,000 RRSP contribution, withdraw the full $25,000 after 90 days under HBP and could get a tax refund of $10,000 - additional money that could be put to good use in your new home ! 

  2. Registered Retirement Income Fund (RRIF): This can be treated as the next stage of your RRSP. The wealth you have accumulated in your RRSP is required to be converted to a RRIF at least by December 31st of the year you turn 71. There are mandatory withdrawal requirements from RRIF each year based on your age. The investments within RRIF continue to grow tax sheltered while the mandatory withdrawals are treated as taxable income.

  3. Registered Education Savings Plan (RESP): The post secondary education costs are skyrocketing. Spending upwards of $20,000 per year for university education is common when considering tuition, residence and food expenses. An RESP helps parents and grand parents to save for their children's education. Canada Education Savings Grant (CESG) of 20% of your contributions (up to $7,200 per child), Canada Learning Bond (for qualified families) and tax sheltered growth are some of the key features of this plan.

  4. Tax-Free Savings Account (TFSA): A program that began in 2009 to allow individuals to save money tax free, has evolved into a significant building block of the retirement plan for many families now. During early years, the contribution room was a mere $5,000 per year. In 2015, it was increased to $10,000. By saving the maximum of $10,000 each for the next 20 years, a couple can accumulate $400,000 in principal alone! When the growth also is factored in, this could be a nice pot of wealth from which families can draw money tax-free in their retirement years.

  5. Registered Disability Savings Plan (RDSP): While not applicable to many, since this plan is only for those with disabilities, it is worth noting that the government assistance through this plan is significant.  The Government may pay a matching Canada Disability Savings Grant of up to $3,500 a year on contributions. The Government may also pay a Canada Disability Savings Bond of up to $1,000 a year into the RDSPs of low-income and modest-income Canadians. The bond is paid into an RDSP even if no contributions were made to the plan. A Canadian resident who is eligible for Disability Tax Credit can apply before the end of the year that he / she turns 59.


Please contact us to discuss these plans in detail !