One of the most common investment questions Canadians ask themselves today is, “Which is better, TFSA or RRSP”?
Here’s the good news – it doesn’t have to be an either or choice. Why not do both? Below are the features of both plans to help you understand the differences.
Tax Free Savings Account (TFSA)
- Any Canadian resident age 18 or over may open a TFSA. Contribution is not based on earned income. There is no maximum age for contribution.
The majority of Canadians work hard to accumulate a retirement fund and many are averse to exposing savings to unnecessary market risk after they retire.
In today’s prolonged low interest rate environment, immediate annuities are often dismissed or overlooked as a viable vehicle for providing retirement income. Perhaps they shouldn’t be.
An annuity is an investment that provides a guaranteed income stream for a set period of time or for the lifetime of the annuitant. While annuities may not be for everyone, for those trying to find a way to guarantee income in retirement Immediate Annuities may be the answer.
3 Retirement Risks to Avoid
Outliving Your Savings
No one wants to outlive their retirement fund or leave their surviving spouse without resources. An immediate life annuity either on a single life or a joint life basis could be the answer for those looking to ensure that their monthly living expenses are taken care of for the rest of their lives. Read more
Available until January 1, 2017
A New Approach
A new method of structuring an insured annuity has restored its favourable results. The new approach involves combining the prescribed annuity with a Universal Life policy.
- The UL policy is funded with a single deposit to provide lifetime coverage.
- The remaining capital is then used to purchase the prescribed life annuity.
- On the death of the insured/annuitant, the annuity income ceases
- The Universal Life policy now returns the full amount of the capital to the intended beneficiaries.
The new rules governing CPP were introduced in 2012 and they take full effect in 2016. The earliest you can take your CPP Pension is age 60, the latest is 70. The standard question regarding CPP remains the same – should I take it early or wait?
While you can elect to start receiving CPP at age 60, the discount rate under the new rules has increased. Starting in 2016, your CPP income will be reduced by 0.6% each month you receive your benefit prior to age 65. In other words, electing to take your CPP at age 60 will provide an income of 36% less than if you waited until age 65.
CPP benefits may also be delayed until age 70 so conversely, as of 2016, delaying your CPP benefits after age 65 will result in an increased income of 0.7% for each month of deferral. At age 70, the retiree would have additional monthly income of 42% over that what he or she would have had at 65 and approximately 120% more than taking the benefit at age 60. The question now becomes, “how long do you think you will live?” Read more