{"id":911,"date":"2016-01-13T14:40:29","date_gmt":"2016-01-13T14:40:29","guid":{"rendered":"http:\/\/wdsinvest.com\/?page_id=911"},"modified":"2016-01-20T20:58:53","modified_gmt":"2016-01-20T20:58:53","slug":"rrsp-or-tfsa-which-is-right-for-you","status":"publish","type":"page","link":"https:\/\/wdsinvest.com\/fr\/wds-resources\/quarterly-exchange\/rrsp-or-tfsa-which-is-right-for-you\/","title":{"rendered":"RRSP or TFSA: Which is right for you?"},"content":{"rendered":"
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January 2013<\/p>\n

In this edition\u2026<\/strong><\/h1>\n

Market Review \u2013 WDS Investment Perspectives<\/em><\/a><\/h1>\n

RRSP or TFSA: Which is right for you?<\/a><\/h1>\n

Ask & Answer \u2013 Get the benefits of a Disability Tax Credit Certificate<\/em><\/a><\/h1>\n

WDS Reads \u2013THE SUCCE$$ EQUATION by Michael J. Mauboussin<\/a><\/h1>\n

Suggestion Box<\/a><\/h1>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div><\/div>
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Market Review \u2013 WDS Investment Perspectives<\/span>
Tackling real, but still manageable challenges<\/span><\/p>\n\n

It was another roller-coaster year. Thankfully, investors finished off in better shape than the predominant doom-and-gloom predictions at the start of 2012 had anticipated. But there was no shortage of chills-n-thrills for political spectators and investors alike.<\/p>\n\t\t<\/div>\n\t<\/div>\n

Read Complete WDS Perspectives<\/a><\/div><\/div><\/div><\/div>
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RESULTS<\/span>\nat a glance<\/span><\/p>\n\n

The S&P\/TSX Composite Index* advanced in 2012, closing up 4.0 per cent to finish at 12,433. The U.S. S&P 500** was 13.4 per cent higher at 1,426. The MSCI EAFE** rose 13.6 per cent, while MSCI Emerging Markets** outpaced, up 15.2 per cent.<\/p>\n\n

Longer-term bond prices rose as yields declined further. The yield on the 10-year Canada benchmark fell to 1.8 per cent, while the yield on the U.S. 10-year benchmark closed at 1.78 per cent.<\/p>\n\n

The Canadian dollar held up against the U.S. dollar, closing above parity at $1.005 per USD. Weaker foreign currencies ($U, \u20ac & \u00a5) had a negative impact on returns in Canadian-dollar terms.<\/p>\n\n

In the energy sector, crude oil fell $7.01 (-7.09%) to close at U.S. $91.82\/bbl. Gold bullion finished at US $1,675, up $109 (+6.96%).<\/p>\n\n

*Returns based simply on price appreciation (dividends are excluded).
\n**Foreign equity indices based in USD.<\/em><\/p>\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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\nWhat matters in thinking about risk is the quality of the decisions we make in the face of uncertainty.\n<\/p><\/blockquote>\n

– Risk: The Hottest Four-Letter Word in Financial Markets<\/strong> by Peter L. Bernstein<\/em><\/p>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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RRSP OR TFSA:<\/span>\nWHICH IS RIGHT FOR YOU?<\/span><\/p>\n\n

Tax planning is easy to understand. One: Paying less tax is good. Two: Paying no taxes is better. With RRSPs and TFSAs, you have it both ways!<\/p>\n\n

These two plans are designed to do exactly what we want them to: help and encourage us to save money. Making the most of them can boost your personal net worth, so take a minute and figure out how best to use them in your wealth management strategy. Here are some refreshers.<\/p>\n
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RRSPs let you postpone<\/em> taxes<\/h4>\n\n

When you\u2019re earning income, you can contribute pre-tax income, and defer the income taxes that you\u2019d otherwise have to pay on that money. Basically, the Government of Canada subsidizes part of your retirement savings. But all good things come to an end. With a few exceptions, you pay tax on every dollar taken out of RRSPs. The trick is to reap tax deductions when you\u2019re paying high tax rates, and report it as income later when your rates are lower. The longer the money stays at work the better, too.<\/p>\n\n

PROS:<\/strong>
\nGreat tool for those with high taxable incomes
\nHarder to withdraw for those less-thrifty people<\/p>\n\n

CONS:<\/strong>
\nWithdrawals are taxable unless used for buying a home or education<\/br>\nContribution room does not<\/strong> replenish if money is taken out<\/p>\n
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TFSAs save after-tax<\/em> dollars<\/h4>\n\n

Since 2009, more room has accumulated in Tax Free Savings Accounts every year. TFSAs are available to individuals who are aged 18 and older in the calendar year in question. Everyone gets the same amount of savings room, earners and pensioners alike.<\/p>\n\n

There\u2019s no use it or loose it<\/em> rules, so unused TFSA room carries forward indefinitely without limits. In 2013, TFSAs are five years old. By now, a single individual has accumulated $25,500 of tax-free growth potential. Couples enjoy a $51,000 \u201ctax-free\u201d investment zone! When you withdraw funds, any money you\u2019ve made in the TFSA is not included in your income, ever. TFSAs can be replenished after a withdrawal, but \u2013 and this is a BIG \u201cbut\u201d \u2013 you must wait until the next calendar year to do so.<\/b><\/p>\n\n

PROS:<\/strong>
\nNo upper-limit age restrictions on making contributions
\nWithdrawals do not result in the permanent loss of contribution room<\/p>\n\n

CONS:<\/b>
\nMarketed as \u201csave & spend\u201d money, rather than long-term holdings<\/br>\nOver-contributions are penalized, if you break the rules<\/p>\n
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One for the ages<\/h4>\n

Ideally, you can maximize both your RRSP and TFSA contribution room, but sometimes you have to choose. The TFSA is perfect for short to medium-term goals, like saving for a car or a home down-payment. If you don\u2019t participate in a retirement savings plan at work, though, don\u2019t sacrifice your RRSP for too long. It\u2019s hard to play catch-up with retirement savings. Start earlier \u2013 even with small monthly contributions \u2013 and get the magic of compounding<\/em> working for you.<\/p>\n\n\t\t<\/div>\n\t<\/div>\n<\/div><\/div><\/div>

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ASK & ANSWER<\/span>\nGet the benefits of a Disability Tax Credit Certificate<\/em><\/span>

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ASK<\/strong>
\nI've heard that people who have special medical challenges may be eligible for various kinds of income tax relief. What sorts of disabilities are covered by these programs? How can I apply?<\/em><\/p>\n\n

ANSWER<\/strong>
\nThese days, the word \u201cdisabled\u201d doesn\u2019t just refer to physical handicaps, especially where seniors are concerned. The older we get, the greater the chances that we\u2019ll have to cope with impairments to basic activities of daily living. It\u2019s sad to say, but for many, those impairments relate to mental deterioration.<\/p>\n\n

Many of my clients are facing or living with these types of health challenges. So helping them and the people who care for them understand and take advantage of the Disability Tax Credit Certificate (DTC) is important.<\/p>\n\n

It\u2019s for those with serious health challenges.<\/b> To be eligible, you must have a severe and prolonged mental or physical impairment<\/em> that:<\/p>\n\n