As the February 29 registered retirement savings plan (RRSP) deadline draws near, a new survey from Edward Jones Canada finds nearly half of Canadians expect to make a contribution against their 2023 income.
Whether an RRSP is the best choice for your retirement investments from a tax perspective depends on individual circumstances. In some cases contributing to a tax free savings account (TFSA) can bring bigger savings. For investors with a longer-term view to retirement, the right combination of both can work wonders.
RRSP: save now, pay later
Canadians love to get their RRSP tax refunds in the spring but not all refunds are equal. RRSPs deliver the biggest tax advantage for wealthy Canadians because contributions can be deducted at the highest marginal tax rates.
That means someone with an annual income over $250,000, who is taxed at a combined federal/provincial marginal rate of 50 per cent, will lower their tax bill by half of their contribution.
At the other end of the income scale, someone who makes less than $50,000, and is taxed at a rate of 15 per cent, will only lower their tax bill by 15 percent.
In dollar terms, tax savings on a $10,000 RRSP contribution from someone in the top income bracket will be $5,000 compared with $1,500 for someone in the lowest.
RRSP investments can grow tax-free until they are withdrawn; ideally at a lower marginal rate in retirement. That’s why it’s important to target contributions toward high-income years when tax savings are high and take a pass on contributing when income is low.
RRSPs aren’t all sunshine and roses for the rich. If their RRSPs grow too much they will eventually be forced to make minimum withdrawals at a higher tax rate and even risk Old Age Security (OAS) claw-backs.
TFSA: pay now, save later
You won’t have that problem with a TFSA because contributions are not tax exempt in the first place. You can’t deduct contributions from taxable income but any gains made on the investments inside a TFSA (aside from dividends on foreign equities) are not taxed – ever. Withdrawals can be made at any time with no tax consequences.
In most cases, diverting RRSP contributions or refunds to a TFSA makes more sense for Canadians taxed at a lower marginal rate. There are RRSP contribution limits, (18 per cent of 2023 income up to $31,560), but unused space can be carried forward to future years.
The TFSA was originally intended as a short-term savings tool when it was introduced in 2008 and contribution limits were low. In 2024, the TFSA contribution limit for those who were 18 years or older when the TFSA was launched in 2009 has grown to $88,000, but it can vary among individuals depending on withdrawals made over the years.
Total allowable space is expected to grow in future years, making the TFSA a potential retirement saving dynamo.
RRSP and TFSA: the best of both worlds
Investors can avoid the risk of an RRSP expanding to higher withdrawal tax rates and OAS claw-backs by strategically shifting contributions to their TFSAs well before retirement.
Banking up a significant amount of cash in a TFSA allows retirees to top up needed cash without tax consequences, while keeping RRSP withdrawals in the lowest tax bracket.
Just about any investment is permitted in both the RRSP and TFSA – stocks, bonds, mutual funds, exchange traded funds – which presents an opportunity to use both as a single investment portfolio.
Consolidating retirement investments helps temper overall risk by diversifying across sector and geographic lines, and splitting asset between equities and fixed income.
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
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.
