Tag Archives: RRSP


The savings ladder

Here’s a strategy to maximize your savings that requires minimal effort over a two- to three-year cycle.

Sophie Sylvain recommends using the savings ladder, a strategy to maximize your savings that requires minimal effort over a two- to three-year cycle.

Here’s an example based on an annual income of $55,000. You can do the same thing with a smaller amount.

  • 2013: You invest $3,000 in Capital régional et coopératif Desjardins (CRCD).
  • 2014: You put your $1,350 provincial tax credit in your RRSP (45% credit) right away.
  • 2015: Your RRSP contribution gets you a tax refund of about $518, which you put into your TFSA.

Result: The $3,000 investment is now worth $4,868, not counting the return on your investments.

CRCD shares too risky for you?


Start building your ladder with a $3,000 contribution to your RRSP, then put the tax refund ($1,151) in your TFSA. In two years you will have $4,151.

Slight variation: Instead of contributing to your TFSA, put it all in an RESP to take advantage of government grants.

To find out more about savings, visit https://www.desjardins.com/ca/personal/savings-investment/.

Gilles Drouin | Journalist

Photos: iStock

Should you pay down your mortgage or contribute to your RRSP?

It’s usually best to find a balance between paying your mortgage and contributing to your RRSP. Here’s why.

In a perfect world, paying off your mortgage before contributing to your RRSP would be a good thing to do. But that would call for extreme discipline.

After your last mortgage payment, you would have to keep putting the same monthly amount aside for your retirement. That’s not very realistic.

Shutterstock (Desjardins)
Shutterstock (Desjardins)

Another possibility is to make substantial contributions to your RRSP before buying a home. However, a home is more than a financial investment; it’s a life choice that you don’t want to put off for too long. The RRSP that you started early could help make you a homeowner more quickly through the Home Buyers’ Plan.

That’s why it’s usually best to find a balance between paying your mortgage and contributing to your RRSP, even when RRSP returns are lower than mortgage interest rates. Continue reading

RRSP or TFSA: Which one is best for you?

The Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA) are two savings products that each have their own objectives and advantages. Which one is best for you?


When should you choose an RRSP?

The RRSP is most often used to build savings, tax free, for use at retirement. Tax on earnings is deferred until the funds are withdrawn from the plan, generally at retirement age. This is an excellent way to defer a portion of your salary in order to make up for any shortfall in your income after you retire. Also, RRSP contributions can be deducted from your taxable income, which may lead to tax refunds.

RRSPs are especially beneficial if the amount withdrawn is taxed at a lower rate than the rate in effect when the amount was initially deposited. This is the case for most people because their income at retirement is usually lower than when they were working. RRSPs also open the door to other related programs, such as the Home Buyer’s Plan (HBP).

When should you choose a TFSA?

The TFSA will allow you to invest up to $5,500 in 2015 for various projects, without being taxed on the investment income earned. As with an RRSP, when funds are withdrawn from the account, the capital and income are not taxed. The difference, however, is that TFSA contributions are not deductible from taxable income.

TFSAs can be advantageous for a number of short-term or medium-term projects, and are ideal for setting aside an emergency fund. The TFSA can also be beneficial in the long term for:

  • people who expect their tax rate to be higher when they withdraw funds from an RRSP than when they contribute to an RRSP
  • people who have already maximized their RRSP contributions and still have funds to invest outside a registered plan
  • retirees age 71 or older who can no longer contribute to an RRSP
  • low-income earners, such as students (18 or older) and people who have access to Guaranteed Income Supplements (GIS), who manage to save some money

Both RRSPs and TFSAs allow investors to choose from a wide range of financial products. The following table will give you a quick overview of their distinguishing features.

Contribution room1 2015: $24,930
2014: $24,270
(up to 18% of income earned)
2015: $5,500
2014: $5,500
(no matter the income earned)(indexed according to the CPI and rounded to the nearest $500)
Contribution tax-deductible Yes No
Unused contribution room carried forward Annually Annually
Creation of new contribution room if withdrawal No Yes, effective the following year
Tax on income No No
Tax on withdrawals Yes No
Plan maturity The year of the 71st birthday of the contributor None
Spousal contributions Yes No
Although you cannot contribute to your spouse’s TFSA, funds can be transferred to him/her so he/she can contribute to his/her account, and the income generated will not be subject to the income attribution rules.2
Use as collateral No Yes
Mandatory minimum withdrawal Yes (once the RRSP has been transformed into a RRIF*) No

*RRIF: Registered Retirement Income Fund

Still undecided?

Get in touch with your dedicated Business Development Manager, who will be pleased to refer you to an expert for advice adapted to your situation and your projects.

  1. For RRSPs and TFSAs, certain penalties may apply if you exceed the eligible contribution limit.
  2. Attribution rules are a tax mechanism whereby an individual who transfers assets to a third party must include the income earned from these assets in his or her own income.

The information in this article is not exhaustive and is for information purposes only. For financial advice or any question concerning your investment options, please consult your National Bank advisor or a professional (accountant, tax specialist, lawyer, etc.).

© 2015 National Bank of Canada. All rights reserved. Any reproduction in whole or in part is strictly forbidden without prior written consent from National Bank of Canada.

Is it time for you to become a homeowner?

You’ve been thinking about it for a few years, but you wanted to make sure you were well prepared before making such a major investment. If you’re ready to become a homeowner, you have several options. For first-time home buyers or those who have gone more than five years without owning a home,[1] one option is the Home Buyers’ Plan (HBP).

What is the Home Buyers’ Plan (HBP)?

The Home Buyers’ Plan (HBP) is an attractive solution for assembling a down payment. This federal government program lets you withdraw money from your registered retirement savings plans (RRSPs) for the sole purpose of buying or building a home for yourself or for a relative with a disability, whether they are your spouse, child, or other member of your family. The program allows you to withdraw up to $25,000.


What happens next? Continue reading