There are so many different investment types that it can make investing seem overwhelming. Here’s a high-level overview of what you need to know. Don’t forget, your financial advisor is here to understand your financial goals and guide you on a path to financial success.
Registered Retirement Savings Plan
The Canadian government offers various options to people who want to achieve particular saving goals through registered accounts, such as a Registered Retirement Savings Plan (RRSP). An RRSP is the government’s way of encouraging you to save for retirement by giving a tax deduction on the money that you save in this type of account. When you’re ready to retire, the funds you’ve accumulated can be converted into a steady stream of retirement income.
There are two major benefits to RRSP contributions – paying less income tax and tax-sheltered growth. Your RRSP contributions are deductible from your taxable income, which means you receive either a larger tax refund or a smaller tax bill when you file your taxes. While you will have to pay tax when you eventually withdraw the money from your RRSP at retirement, it will likely be at a lower rate because of your reduced income.
The second benefit is that an RRSP means your savings and interest grow sheltered from tax. You can gain a lot of financial momentum by contributing to your retirement plan early, in your 20s or 30s.
If you want to know more, The Co-operators has put together a simple explanation of what RRSPs are all about at cooperators.ca.
Tax-Free Savings Account
A second registered account you should have is a Tax-Free Savings Account (TFSA). Similar to an RRSP, a TFSA allows you to save money without incurring any taxes on gains you may receive through your investments or interest, up to the $6,000 annual contribution limit. Any Canadian aged 18 or over who has reached the age of majority in their province can open a TFSA.
Withdrawals from your TFSA are tax-free, your contribution room is restored the year after you make a withdrawal and income-tested credits and benefits, such as the GST credit, Employment Insurance and Old Age Security, are not affected by withdrawals from your TFSA.
Furthermore, Canadians aged 18 or older in 2019 who have not yet contributed have $69,500 of contribution room in 2020.
The Canada Revenue Agency will advise you each year of your current TFSA contribution room.
Registered Education Savings Plan
If you have kids or are interested in pursuing post-secondary education, a third registered investment account to consider is a Registered Education Savings Plan (RESP). This type of plan allows you to save for your child’s post-secondary education tax-free, with added funds contributed by the government.
There are two types of RESP – a family plan for any of your children who are under 21 years old, and an individual plan for anyone of any age, including yourself. For the family plan, contributions can be made until the beneficiary is 31 years old.
The main benefit of an RESP is that the account allows you to access government grants. The government will match up to 20 per cent of the funds that you put into your child’s RESP if they are under 17 years old, and there are additional benefit programs based on your income level and province.
Also, contributions to an RESP may qualify you for the Canada Education Savings Grant (CESG) until the year your child turns 17. Through the CESG, the federal government will contribute an additional 20 per cent of your annual RESP contribution to a maximum of $500 a child, per year. In addition to the CESG, you may also qualify for the Canada Learning Bond.
Another benefit of an RESP is tax-deferred investment growth, as contributions made to an RESP can accumulate and grow tax-free over the life of the plan. When you withdraw money to pay education-related expenses, only the additional earnings and grant portions of the plan are taxable. Because the child will likely be reporting a low level of income while attending school, the amount of tax they can expect to pay should be minimal.
Registered Retirement Income Fund
Registered Retirement Income Funds (RRIFs) are simply a continuation of your RRSPs. The only difference is that you must withdraw a minimum legislated amount of money each year.
The value of your retirement income fund and how long it will last depends on the investments you choose, how they perform and how much you withdraw each year.
The latest possible date to convert an RRSP to an RRIF is Dec. 31 of the year you turn 71. At The Co-operators, the minimum opening deposit for an income account is $10,000. You’ll enjoy drawing a steady income while continuing to accumulate interest and investment gains while deferring taxes on the invested portion.
Locked-in retirement income funds can differ by province, plan type, and withdrawal limits. Along with potential estate value in the event of premature death, the flexibility of withdrawal amounts and investment options have made retirement income funds a popular choice.
While RRIFs are by far the most popular, we also offer other options for retirement income funds if you have specific needs that a RRIF can’t fulfill. Ask your financial advisor for more details.
Life Income Fund
A Life Income Fund (LIF) is similar to a RRIF, except it’s specifically designed for locked-in pension funds. LIFs are only available in certain provinces for those with locked-In RRSPs, Locked-in Retirement Accounts (LIRAs), Registered Pension Plans (RPPs) and Locked-in Retirement Income Funds (LRIFs).
Non-registered Investments
A non-registered plan is an account that holds investments, which are taxable to you on an annual basis. If you’re saving for a vacation, a wedding or any other short-term goal, a non-registered plan is an excellent choice. It’s also a great way to increase your retirement savings if you’ve reached your RRSP contribution limit.
Although a non-registered plan does not offer the same tax advantages as an RRSP or TFSA, many benefits make a non-registered plan worth considering, such as fewer restrictions, more flexible age limits, contribution amounts and withdrawals.
Annuities
An annuity is an alternative for those who want guaranteed payments for their lifetime. An annuity will pay you a set amount per month based on a plan that we design together. We offer various types of annuities to fit your lifestyle.
While there is a lot to consider when it comes to investments and your financial future, The Co-operators’ financial advisors are able to help with every step of the way.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
